Q2 2021 Mobil'nye Telesistemy PAO Earnings Call
[music].
Please standby.
Good day, everyone and welcome to the mobile Telesystem P. J S. A second quarter 2021 financial and operating results announcement and conference call. Today's conference is being recorded and at this time I'd like to turn the conference over to Paulina remove our director of Investor Relations. Please go ahead.
Welcome everybody. This is a race event to discuss second quarter, 2021 financial and operational results.
Before we start I must remind you that except for historical information any comments made during the school maker features for Google statements important factors could cause our actual results could differ materially from those contained in our projections or forward looking statements. These ensure implies certain risks and more thorough discussion.
I really believe in our annual report and form 20-F or the materials distributed today.
MTS disavows any obligation to update any previously made forward looking statements spoken on this conference call or make any adjustments to previously made statements reflect changes in risks.
I would also like to flag that would have added if you ex that or flights to the presentation. So if you have dialed in by phone. We encourage you also to go into the webcast.
Our supplemental presentation materials.
The level on our website following the school.
Today's presenters are.
Slava Nikolai residents and feel well it does have a bit of a vice president Phil ecosystem development and marketing in Mercer Galaxy, one unless she was vice president for telecommunications and he actually lots of life's president for financial services and heal of MTS Bank and somebody come in ski Vice Presidents will finance.
So with that let me turn it over to slava to kick us off.
Thank you Paul and thanks to everyone joining the call.
Overall, we had a very strong headline results in the second quarter, we entered a double digit growth territory for both revenue and adjusted OIBDA. Moreover, we increased our revenue grew 6% year over year. Despite the ongoing challenges from the pandemic, while retail had an artificially low based you do so.
Store closures in 2020, all other segments saw a solid performance on a like for like basis.
Together non telecom segments contributed well over half of the group's supply.
[noise].
This further demonstrates the progress we're making in diversifying beyond connectivity.
Our topline results resonated in operating income Fintech was the largest loop that driver reaffirming the role of MTS Bank has begun to play for us as a key profit center. We also saw a slight tailwind from roaming which mostly reflected improved roaming terms with four no brainers.
In retail we experienced some we'd be pressured due to margin compression and COVID-19 related opex savings in the year ago quarter. Looking ahead, we see significant headroom for OIBDA.
Assertion from both roaming restoration and retail optimization.
So overall strong performance in telecom and even stronger in other areas.
Due to popular demand and the increasing importance of our ecosystem verticals will be gradually increasing transparency in our segment reporting.
On this slide you can see the scale of our businesses for the first half of the year as well as revenue dynamics for the last 12 months.
In Q2, Standalone revenue grew more than 20% a year.
Year over year in retail more than 30% and media more than 40% in Fintech and speaking of rapid growth will reach nearly 50% year over year growth in cloud and digital solutions.
Turning to strategy.
Over the past several months the MTS management team has conducted a comprehensive review of the company, we've taken a deep dive into each of our businesses as well as to look closely at the market perception of our valuation multiples in different sectors. We have reached the conclusion that many of our businesses are not appropriately valued by the market.
We are taking several steps to address that.
First and foremost is improving the way we run the company by ensuring each business has not only a fit for purpose business model, but also the right management structure and level of market visibility in terms of organizational structure are on the one hand, our consumer facing ecosystem verticals a fintech media.
And retail are already relatively clearly defined when the other half we have extensive infrastructure assets that remain fully embedded within MTS.
Therefore, and in consultation with the board of directors. The MTS management has initiated a restructuring process, whereby we will propose to the board.
Separation of our tower and certain digital infrastructure assets.
Into this thing wholly owned legal entities.
We are targeting legal separation of both power and network assets to be completed by early 2022 subject to board approval and subsequent approval at the general meeting of shareholders. We.
We firmly believe this change will help further improve business execution by delegating decision, making authority and enhancing management accountability. Moreover, formalizing cross business relationships may help us improve how we measure ecosystem synergies and benchmark intergroup services against the market lost improving Fisher efficiency.
Sharpening the focus of each leadership team.
Over the longer term the steps also have the potential to unlock significant value for shareholders. Ultimately, we see that multiple MTS businesses are reaching sufficient scale to directly answer the capital markets, given MTS bank growth trajectory and successful track record Fintech could be one of the first candidates for these for.
Consideration.
A few more words on infrastructure on the passive side, we believe the market has been getting closer to parity in terms of scale of coverage and there are signals. It maybe move towards consolidation in this environment. We think it makes sense to be opportunistic regarding our tower assets.
On the equity side, the proposed infrastructure separation would.
With combined together, our fixed line data center and cloud assets into a 100% wholly owned entity MTS Web services. We think this approach has multiple potential benefits first in the context of the future of the development of edge cloud solutions, a standalone business that can be.
<unk> extensive network infrastructure with advanced cloud data capabilities could occupy an exceptionally advantaged market position.
Second speed speeding up our time to market and development in developing cloud the business solutions third incentivizing management to pursue certain growth opportunities.
Fourth driving cost optimization for more efficient infrastructure management and fifth creating a pure play standalone provider of infrastructure services with long term optionality for value crystallization.
If approved by our board and shareholders, we would target and double yes to begin business operations in the early 20th ready to at the same time. The company has spectrum licenses and overall traditional telecom business, including subscriber and customer relationships will remain with MTS.
Ultimately, we believe MTS web services can become Russia is leading private provider of next generation cloud and network solutions.
I also wanted to be clear that at this stage. This is a management proposal all of these plants are subject to board of shareholder approval.
Moreover from customer point of view nothing would change MTS will remain the core client facing service provider and looking ahead, our digital ecosystem remains our key strategic focus as we seek to drive overall customer lifetime value.
I know that note, let me hand, it all because he Barbara for an ecosystem update.
That was just a lot of that.
Yeah.
So solid performance across the ecosystem.
Michelle just a few of the play right now.
No.
What do you think the southern system.
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Doug Lyons.
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Seven four media.
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I thought he was doing.
So do you see them MTS products or services.
Yeah.
That's product just last summer.
Do you want that each 1414 and then.
Watching video.
The landfills with MTS.
But actually if you go to the full circle.
Quarter falling shift.
All of them all of them.
Yeah.
I also see you don't even see a little bit.
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Program.
Most importantly, our cause.
Yes.
Isn't that.
With a full customer lifetime value for example at.
Both MTS.
MTS cashback.
I N D S.
And H over time slowly cure illnesses ecosystem class.
He lived here, yes. It continues to do this but it's just what it is sitting in the use of that.
Any time, you order here and to be on Dania, What's production income is.
Is that what you want.
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For most of what choice once its a lot for them.
Susan.
Well, it's had in Iowa.
That's been flat for them.
As much as it is.
He is experienced in that sustaining capital.
It's something that they don't.
It is five times year over year, MTS and externally, we have lunch subscribe to a subscription based pilots, but larger deals yes. It gets a little slow in Israel.
This is bill.
They said, yes I know.
Is it at least in the past.
Let's go for it.
The update.
Thank you Elena.
Mobile service revenue in Russia grew five 3% year over year in Q2, reflecting continued growth in data consumption as well as the overall tariff dynamics. Moreover, our subscriber base continues increasing reaching a level last seen in 2019 at the same time international roaming revenue remains.
More than 60% below Q2 2019.
Even then you a virus that and I'm going to travel restriction, we expect full year revenue from international or Omi to remain well below the roughly 10 billion rubles released in 2019.
Looks like with some very robust growth in B to C X telephony of around 12%, although roughly one third over the Delta came from inorganic impact due to the sensitization of acquired wireline businesses Hicks.
Excluding that factor. It takes one visits your revenue ex telephony grew eight 4% year over year organically.
Oh, well the fixed line subscriber base, it ticked up to $4 million and aggregate revenue was up just under 4% year over ear.
Turning to get to me.
Our cloud and digital solutions businesses is firing on all cylinders.
Revenue growing nearly 50% year over ear in kitchen.
Like why is performing well subscribed as devices increased more than a quarter versus the year ago period.
All of the mentioned marketing as a service revenue was up an exceptional five times year over year.
Additionally, <unk> fixed line revenue for social important facilities was up 20% year over year.
We continue to make good progress in commercial private LTE.
I also wanted to highlight that in Q2 looked lost 100% of most of the regional trends of Telecom MTT operates Russia's largest platform for telecom office, which integrated into customer software products and services. This is a key strategic acquisition that greatly enhance our expo.
Sure. So hi, Bruce just like you call and writing paid at the global level Unified Communications is a major growth segment for the telecom industry and MTS is now the market leader in that space in Russia, and well positioned to capture incremental revenue going forward.
With that let me hand, it to you for final update.
Thank you for that.
I am pleased to report.
In Q2 MTS limpkin.
NIM continued overall delivered very strong performance successfully going forward.
Our forward momentum from pure.
In terms of headline itself for the hills.
Yeah.
MTS Bank net flows at speech 3.4 billion rubles, but agent income before you.
Before I leave them increase.
50% all right.
East of Us.
80%.
I'd also like.
3% developments.
Sure.
In my MTS Bank issue and baby bonds of 5 billion rubles.
It was more than full time.
Well that's right.
Second we have now reached a level three digital channel accounts for the majority of William.
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Joy in this.
The link for blockchain trade finance platform is will explain.
That's the service, we can pull for them to be to be coins.
But equal MTS.
If I could do it.
Why change on it.
So our growth right.
They they will follow a prudent.
60% year over here and in Q2 before Prady.
Well keep you posted.
52% year over year in PS in net interest income.
Six months of the year.
Marvel.
Let's see in commission income in the first half over the year more than double year over year to reach 6 billion almost because.
Ladies and 40% of auto breaking income.
Operator.
Of course to see what they say it won't pull it decreased the SEC.
Screening year over year from <unk>.
15%, 5%.
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In Q2.
A little also reflect the AP.
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Portfolio growth, because we've grown zinc significantly all of them.
The little studies.
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In addition, both do that come with that do you mean, what is the comfortable level.
And the shape and built.
Bill.
To date, they are important but so.
If there's a book supports the Bengals citizenship.
In the second quarter and the additional capital injection.
Well you're building renewables was good at MTS.
The capital adequacy ratio increased.
The main thing.
Specifically both.
Both it will be pretty.
Pretty good.
Overdue.
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The profit.
Felipe.
Yeah.
Yeah.
As a whole.
Hum.
The spirit of transparency, we also wanted to provide a bit more color on our media and retail businesses. Looking ahead. Our core focus is getting those for long term profitability in retail that's mostly in Opex is exercise while the media. It's also about carefully calibrating content investment, which we are keeping well under <unk>.
Troll as you could could have seen on slide seven.
When we showed it.
In media, we are successful in gaining traction following the launch of our exempt Q on platform in April in Q2, or three months OTT viewers were up more than 11% quarter over quarter revenue and OIBDA, Likewise, so healthy growth well into double digits year over year.
In retail we saw very robust sales of handsets and accessories in the reporting period.
This in part reflected at a low base from the year ago quarter. When many of our stores were closed in line with public health guidelines.
Pandemic.
We're also seeing some wage pressure due to shifting brand mix in device sales consumers are increasingly shifting towards more premium brands, which have slimmer gross margins.
Q2, retail EBITDA after lease expenses and cost to obtain contracts amounted to minus $1.4 billion rubles equivalent to an annual run rate of negative $5.5 billion rubles. We believe there is room for improvement there.
And we are targeting to bring that to a breakeven level by year end 'twenty 'twenty two.
We recently appointed a new leader, but he'd come off from desk I'm here to help us sharpen our focus on retail efficiency now.
Now, let me hand, it to Andre for a financial update.
Thank you soph.
Group net profit for the quarter increased to 46, 5% year over year to $17.2 billion rubles.
Income growth was supported by higher profitability at the at MTS Bank core operating performance as well as little where financing costs.
In addition, there was a significant positive impact from the fix and derivatives the derivatives operations, reflecting the relative currency dynamics in Q2 2021 versus Q2 previous year.
Now a few words on Capex and cash.
Our capex run rate remains on target with the guidance, we provided earlier in the year.
Free cash flow in the first half of the year amounted to $16.8 billion rubles.
The decline versus the first half of the previous year reflects multiple factors, including a significant negative year over year impact from acquisitions in 2021 and proceeds from the sale of associates in 2020.
Combined those two factors add up to a delta of around negative 7 billion rubles.
In addition, historically our Congress is skewed towards the second half of the year and violent in 2021, we have budgeted investment to be spread more evenly between quarters.
These factors into account, we expect underlying cash generation to remain at a healthy level for the full year.
Turning to the balance sheet, our gross weighted average interest rate slightly increased to 6.6%, which reflects the impact of the CBR key rate hikes and I were floating debt instruments.
At the same time, we feel very comfortable in terms of our overall debt position in terms of leverage and repayment schedule now I will hand, it back to slab for his closing comments.
Thank you Andre.
Sure.
Given those solid results I'm happy to report that we are upgrading our 2021 outlook to upper single digit growth in revenue and more than 5% growth in adjusted for Leap day.
While reaffirming our capex guidance of around 100 or 210 billion rubles.
Finally on shareholder returns.
We completed full year, 'twenty 'twenty dividend payments and in July the board recommended a first half 2021 semi annual dividend combined expected talk total regular dividend payout in calendar year 'twenty 'twenty. One comes to a 37.06 roubles per ordinary share. We feel that this is a reflection of our robust performance.
As well as our confidence in our outlook going forward, so with that let me hand, it back to paulino for the Q&A.
Thank you Trevor and thank you to the rest of it.
As we speak.
Questions. Please be aware there may be a slight delay for cancellation hotel agent was this was this let's open up the line for questions.
Thank you he would like to ask a question on the phone lines today. Please press star one on your telephone keypad. If you are on a speaker phone. Please make sure. Your mute option is turned off to allow your signal to reach our equipment. Once again that is star one on your telephone.
We will take our first question from Ivan Kim with <unk> capital.
Good afternoon, two questions from me. Please I'm sorry, if I missed that but can you elaborate on the margin pressure in retail you mentioned the shift in the.
The mix, which isn't an understandable factor but.
There should be more than that since the margin was just one 6% in the quarter. So I was just wondering whether it will continue a.
Or is more of a one off thing and then secondly can you. Please elaborate on what drove MTS ecosystem clients. So much quarter on quarter. Thank you very much.
On the first question.
Oh Wow.
It was a great question.
The thing that is more than that but but majorly. It is mix of a real change of mix of AR devices.
If you ask whether it's going to change or what's going to keep.
The pressure on the margin.
With our outlook on targets that I've mentioned are towards.
Our retail.
Believe that a we are going to be able to change the mix and to improve our margins in retail too.
The positive area, even in the old OIBDA.
Yeah on the second I'm sorry on the second question is about both okay I'll take it to.
It's actually a mix of.
Different factors one of them is a very.
Good uptake of our premium service. The other one is the increased activity in CRM and where we are.
A lot of our clients to get more for less and at the same time, we see.
Better connections to Nevada, which was also almost by Bud Bud light.
Our multi product solutions, so, but but neither of these is a single solution that is it's a combination of factors.
Alright, thank you.
Yeah.
Yeah.
Alright, well take our next question from Henrik Herbst with Morgan Stanley.
Yeah. Thanks, Thanks, very much I had I had two pretty quick questions. The first one was just in terms of your separation of infrastructure did I hear correct that I was one at one tower company in one.
For Ko with data centers, what did one with all your telco infrastructure basically and the other thing was did.
Did you say that you are you just ship spitz setting it up in a in a separate legal entity or are you actually looking to get to kind of investors or looking at opportunities to IPO or something like that.
And then the second question.
On Capex, which is not the best obviously this year versus just sort of run rate previous years, maybe it's too early but should we think about 2021 capex sort of at a peak and a return to more normal levels from 2022, thanks very much.
Okay I'll take the first.
Sure.
I'll hand over to Andre on infrastructure separation once again, it's two companies one company is our towers only.
The second company is infrastructure plus our data centers.
So I believe these are separate legal entities two separate legal entities.
We'll see how it goes for all the all the main idea is to focus do you have to have more opportunities on the tower side, because we see this as a major trend.
And on the infrastructure company.
We see the main idea is to focus its development from now we don't know our kind of telecom and technical work is.
Considered to be kind of you know.
No.
Very traditional.
Structure, and we see that this could really transform into the most modern edge cloud solutions and we have all these.
Oh, all the parts that when put together.
That could bring us to a very good market position on that so that again, we will probably be looking for different opportunities, but so far the idea is to create this company.
This question I guess I will take the last question on the Capex I would just reconfirm. What we said is that this year that Oh youre, absolutely right, we see and we consider this a topic. This year has a certain peak.
As a temporary ramp up as we invest in our future Northern Europe, Northern Europe right. So we presume that he will come back to more or less comparable.
<unk> that we've seen before.
Brilliant thank you very much.
Yeah.
Our next question comes from Lager, Victor <unk> with Goldman Sachs.
Yeah. Thank you very much for the presentation a couple of questions. So firstly, what would be your current thinking over the longer term leverage levels are for MTS are you aiming to stay at broadly caught on a net debt to EBITDA level. So I'm looking for certain moved here.
And secondly, probably also have full off on what their doctors available utilization.
What would be your long term considerations you currently have in mind with regards to them.
Maximization on the portfolio.
The separation is it that you can see those in the long term potential partner.
You can see the partial sale of the business. So you can see that 100% the vast them until the sale of a controlling stake.
Or are you optimistic youll currently out opportunistically across all of their options. Thank you.
Yeah I'll take the first question in terms of our leverage levels as we said before.
We see it.
Two as a quite comfortable our ratio of net debt to EBITDA currently stands at a level of one six.
But are the covenants that we have is much higher than the levels that I mentioned, so we are in a pretty comfortable situation at the moment.
Okay.
Oh.
On the second question is.
To generalists.
Is it a very much depends on the company.
Uh huh.
But in general levels, but actually.
Actually we are looking at different opportunities now and we don't want to tie ourselves to two two and half of them but of course the.
What I want to say that is that the safety of our men, but main business is one of the things that we're considering most importance here.
Okay.
Okay. Thank you so much.
Our next question comes from Alexander <unk> Renaissance capital.
Oh, yes, good afternoon, a couple of questions from my side.
So first on the we launch the old U T V. Your.
Service last quarter.
Are you satisfied with the general went completely resolved launch it seemed that the overall increase help the users who are on mcgraw once probably not that impressive and the good old funds will be comparable with the previous quarters. So I'm just wondering whether.
You see that in a factory and whether you plan maybe to increase the spend on the content.
So marine and then on a related question here. So you you showed that they.
Media services.
Can you please remind us on then it counts in Uh huh.
Content spending more than our media services segment, whether you capitalize it and depreciate are well.
Over at the time and if that's the case.
You, please roughly sure resource and that kind of stuff.
You know the share of the Capex in first half 'twenty one.
Maybe on a linked it to them.
I mean, yeah.
Services segment.
So that's probably it's on my side.
Okay.
Decided with the first question.
We're never satisfied with the results.
So I think we can do better, but we have to weigh up to us and one thing Q1 on the one on is deliberately launched under a new a new brand and we think it's a very right thing going forward, but at the same time that it takes time to.
You get a brand to be recognized by by the clients. We see that we have very good reception of our originals, which is I think we took the right way of doing that.
And I expect this to grow faster than our Iowa shown.
The second quarter.
On the second question and I didn't maybe you would hopefully help me.
To somehow.
Understand it because we will yes, we we capitalize our content production and we've shown.
The amount of this production on the.
Seven slides of this presentation.
The Zip so maybe if you want to some more details you could.
Oh, yes on the line from that so I found the cash opex.
Okay, Great and then on the South lines. So that's not that's okay. So I just wanted to confirm that.
And that is capitalized.
Okay. Good and then maybe like a sort of a follow up question.
When when we look at that number on my MTS services clients in the second quarter I think there was a minor quarter over quarter reduction of their active use.
Users.
I'm just wondering kind.
Kind of angle ground behind it or do you feel that the overall number would be users is kind of closer to the separation and its probably than maximum level.
You were expecting it.
To be overall overall in the future.
Okay.
I can tell you go to tell you you got me worried for a second.
Where do you find there.
Yeah, so when I when I look at the I think in the first quarter.
Number one there my MTS.
App monthly active users was roughly around 20.416 million customers.
And this quarter it was down from their homes.
24, 5 million. So I'm, just wondering whether that has any ground behind it.
So.
If I'm correct.
Yeah.
[noise], Yeah, I see so it's a generally flat.
But.
Frankly speaking.
The most important part here is that when we've been discussing my MTS numbers several quarters ago. We said that we were expecting it to plateau at some point I'm not sure that we got to that point, yet, but we see that the majority of our people.
Who use our smartphones they already have my MTS and you have to understand that if people use several sim cards, but usually they usually use my MTS on one of their devices. So in this terms this could be multiple half mile film also users, we don't count them as a multi.
My MTS users. So in these terms were pretty happy with the.
Our current amount of users, but I see that.
With the development of content of this application, we're going to see to see additional growth. For example, we have our two teams are working on Fintech.
Part of my MTS, and we expect more clients with this for from this site.
In the following quarters too so it is going to grow further, but I don't see anything.
Openness and those figures and I see that our.
Bruce are very happy with the my MTS, which are which is usually showing in NPS.
Okay. Good so based on what you've seen I'm, leaving that in a way that it would be like a roughly $25 million.
My MTS users probably represent the majority of them are close to 100%.
Smartphone users.
On MTS.
And it's truly unique smartphones reserves on MTS.
Yeah.
That's not what I said.
Sorry.
Okay.
Okay. Thank you.
Our next question.
It comes from Andre <unk> with UBS.
Hi, Thank you for the presentation I've got two questions two follow ups. Please so the first question on the bank.
First of all you mentioned last call I said that there may be a need for some kind of equity injection.
Essentially next year, what with the bank doing so much better now is that still a potential consideration and then also is there any space do you think for potentially reversing some of the provision provisions that you made last year at the bank.
Second question would be are you mentioned.
A couple of minutes ago.
In terms of margin improvement.
That could be done via ongoing retail optimization, but I believe in the previous quite there.
Your comments about retail is that you don't actually see in the chart 10, so much space for us for doing that so if you could please clarify where we are.
And I'll eat the Philips are correlated.
Yeah I'll take the first question because as a shareholder of the bank, we are quite comfortable and happy with the level of growth that we see in the bank and the level of cities.
It remains at very comfortable levels. So as a shareholder we are ready to support those really did this in the first half of the year and we are ready to actually support the bank and its growth.
So that would be our position.
Well also.
Just as a follow up of this first.
Question in terms of reversal of the provisions actually we see.
Very positive.
In terms of the provision, but the provision needs.
Actually just wanted to meet any substantial reversal of them.
The current policyholder Central bank and the regulations in betterment.
Yes again on the.
Retail we see that.
Margin improvement could be reached.
Even on the current amount of stores.
Our planning to optimize.
The number of stores, but.
Their positioning and product mix within the stores.
Services within the service.
Including of course not.
And all of the hardware provision, but Jenny.
Generally.
As we put this before we are.
They are on a very competitive market.
We were always ready and we are still ready to go down we don't but we don't see it.
Enough movement from other sites, we but.
I can tell you I would be very happy to move into this direction, but I don't see any signs of that and we so far we decided to go into.
The different directors direction, but.
Frankly, I am very confident that we can we can reach the goals that I've already mentioned regarding retail.
Thank you.
And the folks that I had.
The previous question.
First one with respect to the leverage.
You keep mentioning two times.
It seems.
Correct me, if I'm wrong, but it is becoming more of a target.
Concrete level.
Not actually the question was actually what kind of a comfortable level that we see him that was that was the answer for that we don't see it as a target.
You can see the current levels.
Yes.
Okay. Okay. Thank you and then second a follow up if I may just on the infrastructure I know you said you don't want to.
Close any avenues or talk about this in too much detail, but if you had all options open on the table.
Specifically about the powers I guess, because the I think you made it clear that the fintech on the infrastructure of our businesses that you see more potentially.
Oh in value on the targets, but in terms of the towers.
You could.
A quick create a list of preferences between.
Completely selling them on the one end on the opposite.
Sharing both the adjuvant.
Elements of the of the towers, but one of your competitors for example in all of them are going through similar reviews, what would be the preference of the management's today.
Okay.
Sure.
No the point is that.
We went in.
Sorry.
Internal discussion because.
We are taking.
Fortunate position here, we are we're looking at different options. There are many of them and I wouldn't say that you know we had to lift the preferences I don't know.
It would be very theoretical and.
Could be perceived wrong so.
I wouldn't be able to know too to address this question with a per say at least for at least the preferences.
Alright, Thank you very much.
As a reminder, everyone that is star one and we will take a follow up question from Ivan Kim with <unk> capital.
Thank you for that return to just two more questions on IMTT.
Acquisition can you maybe give us some color on what sort of growth you expect from them to tee and probably generally from your virtual could be it could be X business.
That's the first question on the second question is sorry to dwell on leverage.
So your <unk> leverage is now two times, including dividend payments that youre going to make this year, you'll leverage including leaves us two and a half times.
So I'm just wondering.
Do you perceive that as an issue at all or.
You will be kind of comfortable to move up.
Two two times based on your leverage definition, which is one six currently thank you.
Okay.
Take the first question on them to chip and Jo.
And then we were closing the deal so all differently.
Actually.
Once the bottom decided to do was based on the basic product.
And if.
It is wishes actually outgrow and out again in <unk> and we do expect some.
Some seem galore.
I would say that period, though and I look forward guidance it could be doubled your speakers, but demand actually strategy behind mine. This asset was to have among them.
Yeah.
The growth on Silicon IP and here what do you expect.
There'll be growth.
It will depend on the call quickly will be Ian.
Introducing the new products on the market and within that a well established BCB channels.
To bring that product on the on the AMA on the market them to our clients.
We actually expect Mehdi.
Gross.
So we will definitely keep you informed in our next reporting.
Sure.
In extra reporting yes.
Okay.
Yes.
The second your second question of course, just to clarify I mentioned.
Our current definition of the leverage which is the one six so in these terms I had said that the comfortable level is around two.
Thank you.
Alright, we will take our next follow up from Alexander <unk> of Itch with Renaissance capital.
Yes. Thanks, so in your presentation, you mentioned that the ecosystem clients.
And those clients and you should not need machines multiple services.
And the multiple lower churn.
Again, the average client of MTS. So I'm just wondering how big maybe if you can provide.
Providing color how big is the overall churn reduction year over year in the second.
Second quarter and if you can can you please quantify.
Any financial impact for example on selling expenses.
Which you've already seen in the second quarter for example on the churn reduction.
Year over year.
No.
The matter of reduction of the new Sim cards sold probably some optimization on the staff, which you can share how this churn reduction.
Mobile and putting that help you save on the selling expenses that would be helpful. Thank you.
Okay.
Okay.
We're not calculating it back through the all the time because.
It's a very.
No.
I think I've tried to explain it and when we when we reported the results of the first quarter.
It is very tricky figure because when you connect them to to another.
Service you will see that.
Your line is going down and you can you can attribute it to a new service or two.
Telecom increase but generally what I wanted to say is that first of all the major the major impact could be seen in our telecom growth results, which were which were supposed to soldiers show separately and you can see that it's.
That's it.
It's kind of our traditional or better than many of them are welcome bettors, but.
There is no exact figure we calculated I think in the first quarter LOE calculated that more than 50% of telecom growth was attributed to mountain multi product and Alco system clients effects. So this is.
Generally, but again this is a very very big figure I wouldn't.
Put a pin on it.
Okay got it.
Okay, and we will take our next question from Jimmy <unk> with Bank of America.
Yes.
Hi, good evening and thank you for the presentation opportunity to ask a question I have just one.
Could you. Please provide some updates on the regulation first on five G.
So spectrum allocation and rollout model if any update.
It comes from consortium model.
Does it get us on a standalone basis and the second one also on <unk> spectrum.
Licenses from you Wilson garages, and expiring and potential requirements could be linked to it like Louisville cargo retrofit. Your overall coverage. If you could please provide any update on the discussions with regulators.
Okay.
Nothing major.
It happened during the last three months.
And except for venues that you've probably heard about localization, but we've expected them.
And in this terms on consortium model.
Let me put it this way I am optimistic.
Said that I always believe that the problem could be solved.
Only.
But with the mutual.
With the help of mutual efforts and I'm optimistic that this is this is being sold in the right way.
On the on the second part.
We'll see how it officially pulled forward but.
I think there will be some links yes, and it's I think it's already public so I don't see this as a.
The major news, but.
Again according to.
It's being discussed I don't think it would put any major pressure on our capex or our cash flows.
Okay.
I believe it's 10 years.
License.
Agreements so it's looks very.
Yes.
I think I saw any potential keep your eyes and spending from your side with bill some potentially spread or baidu and you've heard from folks that are not immediately in two three years.
And then in addition to that I can I can I can tell you that the government actually expect.
To us operators to cooperate on this in this matter and they really are.
Looking now to see if they put significant efforts to help us with that.
Including some negotiations with the energy companies and local governments. So it seems that.
This time it might be a positive thing and yes, it will be spread.
The next 10 years.
Thanks, so much.
And there are no further questions I would like to turn the call back over to paulino for any additional or closing remarks.
Okay.
Thank you we have.
One question coming from the journalists.
Which is about our plans.
Related to potential additional buybacks, if you have any plans to launch a.
When you buy land before the end of this year.
Yes ill answer for for this year, we actually finalize the buyback program that we run and we don't have any plans to have another program until the end of this year.
Operator, we're having at the.
Questions on line.
No there are no further questions at this time.
Okay.
Thank you very much ladies and gentlemen.
And in this call as usual, we will make a replay of this call available on our IR webpage in the near future. If you have any further questions. Please do not participate.
<unk> also inches from Mr relationship anytime.
Inbox system from the lines are open.
We appreciate your interest in MTS and wish everyone as Lindsey. Thank you.
And that does conclude todays presentation. Thank you for your participation you may now disconnect.
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