Q2 2021 VEON Ltd Earnings Call
To bring new opportunities.
So of the new experiences to bring it together with each other.
I encourage you.
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Yeah.
Good day, and thank you for calling by well come to go beyond Q2, 'twenty 'twenty. One results conference call. At this time all participants are in a listen only mode out there just to make a presentation that will be a question and answer session and to ask a question. During the session you will need to press star and one on you tell.
So please be advised that the base conference is being recorded I would now like to hand, the conference over to your speaker today, Nick Garceau. Thank you. Please go ahead.
Hi, good morning, and good afternoon, ladies and gentlemen, and welcome to the on second quarter results presentation on the crucial pianist guitarist of Investor Relations.
These two joined today bought con ugly <unk>, along with our group CFO is shaken Orca, Dan who will take you through the results presentation and also in the room with us.
As head of corporate strategy of communications and Investor Relations.
Today's presentation will begin with an operational overview of our second quarter results from corn, followed by the financial review from Citic, and well then hand, it back to Colin to discuss the hospital for the balance of the yet.
We are also joined on the call today are the individual country heads from all of our operations.
We want ensure there's ample time for your questions. We would ask that you say these are the very end of the presentation.
Before getting started I would like to remind you that we may make forward looking statements during today's presentation, which involves certain risks and uncertainties. These.
These statements relate in part to the company's anticipated performance and guidance for 2021, particularly in lots of the Covid pandemic.
Future market developments and training.
Operational and network development and network investment.
And the company's ability to realize its targets and commission and strategic initiatives, including current and future transactions.
Certain factors may cause extra 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 SEC.
The earnings release and earnings presentation, each of which includes reconciliations of non <unk> financial.
Financial measures presented today can be downloaded from our website with that let me hand over to Carl.
Thank you Nick good morning to all and welcome to the presentation of our second quarter results.
On a local currency basis in Q2 group revenue grew by 11, 3% year on year, bringing local currency growth for the first half to seven 6%.
Through the ongoing strong focus on cost control local currency EBITDA grew double digits in Q2 up 10, 7%.
And up seven 4% for the first stuff.
This strong performance was visible in reported currency as well where revenues grew nine 2% and EBITDA increased to eight 7% in U S dollars.
On a like for like basis, excluding our menu from our reported numbers in 2020, all revenue in U S dollars would have been 10% up and EBITDA growth would have been nine 3% up year on year.
It is important to note that these results are not just due to the COVID-19 impact, but the significant focus on network quality forging penetration increase customer experience and cost control.
This unprecedented era has been used in the most accretive way for our business.
In consideration of these robust results.
We are increasing our full year revenue guidance from mid single digits to high single digits.
And our EBITDA guidance from mid single digits to high to mid single digit to two hot from MIT.
From mid single digit to mid to high single digit year on year growth in local currency.
Moving on to slide six here.
He'll be giving you a country by country detail of our local currency performance, which shows revenue growth across all of our markets.
In Russia, the 6% revenue growth recorded in Q2 underscores our confidence in the underlying operational turnaround that is well underway.
We continue to see strong double digit growth in Pakistan, Kazakhstan, and Ukraine, both at the revenue and EBITDA level.
Let's move to the next slides.
All three business models that constitutes our overall group results are showing solid progress.
We are well advanced with the value crystallization of our 50000 tower assets across nine markets.
Our subscriber base has grown to $214 million up four 5% year on year.
93 million of these are for G subscribers up 13, 9% year on year.
Our <unk> penetration rate among our subscribers now reached 43%.
11 percentage point improvement year over year supporting the data revenue growth of 18, 7% in local currency.
Our target is to increase forging penetration to 70% over the medium term, providing a growing opportunity for our digital operator model and products and for normalizing our investment levels.
On the digital front the girl group recorded 45% year on year growth in customers using digital TV and music streaming services.
And 36% growth in our mobile financial services customers.
These applications.
Increases customer loyalty lowest churn at the level of one four for multiple customers in comparison to the total base.
We will talk more about our strategy and ambitions at the Investor Day in November and we will inform you about the logistical details too.
Let me now take you through the individual performances of our largest markets during the quarter.
Slide eight is about Russia.
Beeline recorded another quarter of growth with total revenues rising six 2% year on year.
And this quarter. We also saw service revenues returned to full quarter growth of two 7%.
This is the eighth month in a row, we have seen that month over month improvements in our subscriber base, which is now at $51 million.
Our forging user base now accounts for more than half of our total customers in Russia growing from 18 million in Q2 of 19 to 20.1 million in Q2 of 'twenty and to $26.0 million in Q2 of 2021 and nice acceleration over the period.
Which drives higher promoter net promoter scores higher our pool and lower churn.
Beeline self care application penetration remains to be a key priority, we said, 13% year over year increase.
We continue to gain market share in fixed line and b to be businesses with growth rates of eight 6% and nine 2% respectively.
Our 170% growth in ethic will further be enhanced with the acquisition of O T M, which will also be supporting got opportunities in other key markets.
Let's talk about credit.
He have star continues to deliver one of the strongest operating performance in our group.
Revenues grew by 18% year on year in Q2, driven by an impressive growth in our <unk> customer base, which now comprises 40% of our total subscribers.
As shown on the slide double in multi play forging customers account for 40, 52% of our subscriber revenue share and their increased penetration contributed to an ARPA increase of 16% year on year.
Fixed line revenues grew by 19% year on year supported by ongoing fiber rollout.
The new digital business support system deployed during the quarter ensures that we are able to serve our customers with the very best experiences now and in the future.
I haven't looked to Pakistan.
Just delivered revenue growth of 22% during Q2, serving 70 million customers up from 63 million. This time last year with an ARPA growth of 8%.
Our forging user base grew 61%, reaching 44% of the total subscriber base up 14 percentage points from a year ago.
Customers, who use at least one of jazz as digital applications, such as Jess cash on top of what we sell <unk> data now represent 24% of our active customer base and produced 47% of our subscriber revenues.
Including the ongoing investments in just cash and other digital assets, our business achieved year on year EBITDA growth of 14, and a half per cent.
Okay.
A recap of Kazakhstan, Kazakhstan continues to be our fastest growing markets.
The 27% revenue growth in Q2 is driven by a 59% penetration of our <unk> customer base, which grew 36% year over year.
Our data growth was an impressive 40% we've done ARPA growth of 24%.
We continue to win market share in the fixed line business, where revenues were up 25% during the year one out of four fixed line customers now enjoys converged services up 49%.
Our joint partnership with Kodak Telecom to bring mobile Internet to rural areas has connected 92000 people across 157 settlements in the first six months of 2021.
About Bangladesh on Slide 12, operating in one of the hardest and longest it's countries by Covid Lockdowns bundling still managed to deliver six 9% year on year growth with 68% for G customer base expansion and 15% growth in data.
This is the third successive periods the old glass speak that's awarded bunk living as the fastest network in the country.
Our customers Love Us, where we exist and we will be there where we are not today.
Engagement rates for our digital services are increasing as well.
Use of bundling self care applications rose by 93% year on year during the quarter.
Our entertainment platform Toffee now has 5 million monthly active users an increase of one 7 million during the last quarters.
60% of Toffee users are non Bulgarian customers the ones, who are our customers consume.
4.8 times more data have two two times higher output and they churn three five times less than the average customer.
Finally, let me turn to our smaller markets, which are summarized here on slide 13.
Growth in our <unk> customer base in these markets has increased significantly ranging from 21% to 32% and the data revenue growth from 9% to 34.
In early July.
And also that we had exercised our put option to sell our stake in Jersey in Algeria.
<unk> is now underway to determine the fair market value at which this transaction should take place.
This underscores our commitment to streamline our portfolio of businesses and enhance our long term focus on viable regulatory environments to sustained shareholder value.
Let's look into some of our digital products.
From a fintech perspective, just cash has increased its active user base by 61% year on year, serving $14.0 million customers and now also having 82000 merchants in place.
Recently launched smart money in new Crane has grown 11% quarter over quarter to almost 300000 users.
And fresh out of the all of them simply in Kazakhstan reached 69000 users at the end of June and 400000 as of yesterday.
India Entertainment space bundling, leading entertainment platform Toffee reached an average watch time of 23 minutes 5 million active users.
Beeline, TV demonstrated 23% year over year growth and give start TV increased its use it bites two three times.
Alright Tech business is also making a strong contribution to our revenue growth growing 61% in Russia.
Over three times in Kazakhstan, and four times in Ukraine.
As we continued developing our digital operator strategy, we are peaking first class partners in all markets, including also bank X five visa Mastercard pioneer and Microsoft.
Yeah.
Next slide please the principles of sustainable business have never been more important to us.
I'm pleased to see that our progress in ESG is recognized by MSCI in their recent assessment of deal.
In which they upgraded the group's ESG rating from a triple B to single a.
This upgrade was driven by tangible and material improvements in our governance, while on data security and privacy. We also outperformed our peer group.
On the environmental side in 2020, we secured a reduction in the group's carbon emissions per unit of data transmitters. This number was down by 38% versus 2019.
On the social sites are operating companies improved social inclusion with a wide range of local initiatives designed to foster digital entrepreneurship and improved digital skills and literacy.
We will continue to evolve our ESG strategy through engagement with our shareholders and other stakeholders in the months to come.
Let me pause there and hand, the call over to circle, our CFO to discuss our second quarter financial results in more detail.
Sorry.
Thanks, Scott Good morning, and good afternoon to all participants in the coming slides I will elaborate on our financial results for the second quarter in more detail.
Okay.
Moving to slide 17, as you heard from cause overview of Q2 was operationally a strong quarter for the group as our business is contained to the recovery that started in the last second half of 2020 and gained momentum in Q1 yeah.
Yeah, well costs for this recovery and the results are higher than expectations group.
Group revenue and EBITA rebounded strongly from the depressed levels in the second quarter of 2020, when the impact of Lockdowns was at its peak.
Revenue rose by nine 2% year over year on a reported basis and 11, 3% in local currency terms driven by an acceleration of growth in Pakistan, Ukraine, Kazakhstan, Bangladesh is if it is a further improvement in revenue trends in Russia, which delivered local currency growth of six two person.
Continued expansion over 400 customer base contributed on a reported basis, so solid service revenue growth of seven 4%.
Underpinned by strong data revenue growth of 16, 7%.
On a local currency basis underlying growth was even more impressive.
Group service and data revenues growing by nine five and 18, 7% respectively.
Our continued focus on costs supported our EBITDA margin for the quarter at 42, 6%.
EBITDA growing by eight 7% on a reported basis and by 10, 7% in local currency terms.
On the backhaul or afford your expansion plan.
To invest in our networks throughout the quarter, which is reflected in the two 5% rising operational capex on a reported basis or four 6% in local currency terms. This equates to a rolling 12 months Capex intensity ratio of 24, 3% for the group.
Reported net income was 127 million U S dollar for the quarter and year.
On your decrease of 27.1%. Although this primarily reflects the impact of non operating gains amounting to $14.0 million you're a seller. They reported we recorded in Q2 last year.
Finally on this slide the group generated equity free cash flow of 63 million U S. Dollar for the quarter, which compares favorably to the minus $36 million reported in the second quarter of last year.
Looking at revenue in more detail on slide 18.
All of them are main reporting segments contributed positively to group revenue performance in the quarter with Pakistan, Ukraine, and Kazakhstan, each posting very impressive double digit local currency growth rates in.
Fortunately in Russia is not back to growth also on the service revenue basis, which is an important positive indication of the ongoing turnaround there.
The dominant operational team driving the group's financial performance is our success in growing about 40 customer base, which has in turn yielding the benefits and data growth in ARPA, which can't described earlier.
We expect this trend to continue in the coming quarters as you sort of as we invest further in our forging networks and attract additional customers. So the growing range of digital services available.
On slide 19, we take a closer look at group profitability.
You will remember that during our last earnings call. We introduced our new efficiency program project optimum, which aims to cultivate the mindset of continuous cost improvements across the group.
Although there will likely be some variance quarter by quarter ever ambition here to achieve a one to two percentage point improvement in group cost intensity ratio by the end of 'twenty two 'twenty three.
We aim to achieve this by optimizing rather than simply reducing the cost base.
Cost base of our faster growing markets to ensure that the culture of cost discipline nature of the support during the more difficult times Levered zone, one results improved and our market presents expense.
At the same time, we will tailor the cost base or lower growth markets to ensure that there's no sense of toward their arms or complacency develops and that they operate without diluting overall group profitability.
The goals of political optimum had been cascaded throughout the group.
And its targets are fully embedded into the incentive plans all of our senior managers in all of our operating markets. We're also embedding long term cost optimization optimization targets in all of our business planning process as well.
The white house to cultivating the culture of course continuous cost improvement.
The essence of political optimum success.
Looking now at Capex and operational cash flow on slide 20.
We maintained our focus on investing in our forging networks throughout the second quarter, which now reach over three quarters of the population of our operating markets as a consequence quarter. The accretion of the Capex increase the 505 million your stellar which corresponds to capex intensity, all 24, 3% when they're rolling 12 months.
Basis. This compares with 425 million you are still there we reported in the first quarter of this year.
Once again, Russia was the primary focus of this investment accounting for around 60% of our operational Capex.
Across the group the improvement is really in EBITDA during the second quarter enabled each of our core markets to deliver positive operational cash flow, which at the group level amounted to 374 million U S dollars.
Turning now to free cash flow and net debt on slide 21.
At the group level net debt was slightly higher than Q1 at $13.0 billion U S dollar, which primarily reflects the appreciation in the ruble against the U S. Dollar during the quarter given the increase in EBITDA, our leverage ratio remained flat at two four times in line with our internal level of comfort.
In line with our strategy to increase debt in local currencies and increased tender. We are proud that while our business in Pakistan was successful in securing the largest and the longest maturity syndicated credit facility of its kind and are provided to the telecom sector in Pakistan.
The value of around 320 million U S dollar and a 10 year tenor.
I would also point out that at the group level.
Average cost of debt ended the quarter 30 basis points lower than the same period last year.
This reflects the various refined those things that we have undertaken in recent quarters is you reduce the cost and extend the maturity of our borrowings which also improved in tenor by around five months year on year to average over 3.2 years.
Group liquidity also remains very strong with total cash and Unutilized committed.
Committed credit facilities amounting to two 8 billion U S dollar at the end of the quarter.
Turning now to free cash flow, which is summarized on the right hand chart on this slide.
Despite elevated capex levels. The group recorded positive they could to free cash flow of 63 million you are still there for the quarter.
Which led to cumulative it could be a precursor or 50 million U S dollar towards the first half of the year.
This compares with $36 million minus for Q2 last year and reflects the strong rebound in EBITDA as well as lower license payments and the reduction in group financing costs in line with the fault in our cost of debt.
This brings us to slide 22, and our outlook for financial year 2021.
In consideration of the significant operational and financial improvements that our group has secured this quarter, which exceeded our expectations. We are pleased to inform you that we are not raising our guidance for the full year.
Group revenues from mid single digit to high single digit.
Growth in local currency.
Group EBITDA from mid single digit to mid to high single digit growth in local currency.
We have upgraded our group revenues and EBIT expectations measured on a constant currency basis, we are keeping our capex intensity guidance unchanged.
Absolute terms second house group Capex should be broadly equivalent to what we have been listed in the first half of this year.
That's enough prospect to come for closing remarks, before we turn the call over to your questions.
So let me close our presentation with a reminder of our priorities for 2021 and our progress to date.
First we are progressing well on the path to increase our <unk> subscriber penetration with an increase of 11 percentage points year on year. We are now at 43% and our targets over the next three years is to reach 70%.
Second returning Russia to growth has been an important achievement maintaining this a top priority in the months ahead as we strengthen our market position.
Third well Crane, Pakistan, and Kazakhstan continued to deliver double digit growth as they are forging penetration levels you won't.
For our digital operator strategy is being executed through an increased number of digital services in all markets impacting our pool and churn in the positive way.
Fifth we maintain our discipline in managing our portfolio as shown by the recent put option exercise for the sale of our Algeria business.
Effective hedging strategies through local currency borrowing extended maturities matching our investment cycles and lowering the cost of funding remain priorities for us.
Sixth we remain ambitious on costs and continue to improve group's cost efficiency on their project optimal both at the country level and that's our headquarters.
Finally, we remain committed to realizing the value of our considerable infrastructure portfolio.
Russia, Ukraine, and Pakistan have already established separate tower entities, and we are progressing with strategic alternatives to crystallize their value.
With that I would like to thank you for your attention and turn the call over to the operator for your questions.
Thank you.
And as a reminder to ask a question you will need to press star and one in your telephone until we Joel Your question. Please press the pound key and your first question comes from the line Slava <unk> from Goldman Sachs. Your line is open. Please ask your question.
Thank you very much for the presentation a couple of questions. So firstly, you mentioned that and he has improvement in Russia.
How would you qualitatively.
You are currently on the Q&A over recovery because the device level.
Let's say, 10% to 25% so maybe half of the journey in terms of them MTF to recovery in the country.
And the same progression is on topics in Russia and income from the network investments Oh.
The peak levels, our operating income for their network investments in Russia in order to catch up profit that does that level from the market leader.
And.
Secondly.
And pension are to monetize power's, obviously across all markets at the beginning of it.
Here.
But in relative terms of which markets. You think are currently more photographs.
And the way the market isn't ready for them power sharing can give you. Thank you.
Thank you slower so with regard to the NPS improvements we are comfortable with the M. P. S improvements in the cities that we have prioritized our investments in late August 19, 4039.
And we are seeing statistically reliable M. P. S results showing that our customers are actually appreciating the new service levels. This is seen both in terms of lower churn, but also.
Mobile network portability numbers.
With regard to relative MTS in terms of the gap in between the number one in US. We are also seeing significant statistically significant reductions as we move along and we continue that to continue.
With regard to your question about network investments.
We are satisfied with the pace, we had prioritized model starting with certain priority cities and we will continue our plan.
And as I mentioned before our pets for this level of continued investments also in Russia will continue until we reach 70% forging penetration, which again, we are happy with the progress to the level that is no.
In terms of monetization of towers, we are active in every country that we operate.
From a priority perspective and level of progress you are most progress in Russia, Pakistan, Bangladesh, Ukraine and in that order.
And we are looking and exploring this utilization opportunities in every country, depending on market dynamics and different type of players what I can tell you that in all the markets that you're active it.
The independent tower company potential has not been fully tapped and remains to be very attractive.
Thank you okay. Thank you so much.
And next question comes from the line of <unk> Kim from copies of all your line is open. Please ask your question.
Hi, Thank you for that return share mask you. So firstly on the dividend so given that the first half equity free cash flow was about 15 million doors.
How would you think about if we should be able to over the doing the resumption of next year.
Secondly on the mobile service revenue growth trend in Russia, what was it in July August.
And then lastly, what happens in the consumer business in Russia is consumer mobile revenue stalling because you sort of are saying that the small center and by Peter Thank you very much.
So let me answer the question is on the mobile service and B to C and I will leave the question for the dividend circle in terms of our mobile services revenues in Russia. We have seen is solid across the quarter infusion of one 6%.
What is important is as I mentioned this is the eighth quarter in a row of sustained subscriber traction and growth as well it.
It is impossible to differentiate sometimes our FMC converged services dynamics need to be dynamics in deep to see dynamics in a clear way, but I'm overall happy with the progress that we are showing on all these three domains.
Further progress happen yes.
Let's be driven by further expansion of our network apart from Russia, and some Petersburg of course, so that's what I would like to sell and I think last quarter in the last month of March we have seen a b to C numbers swing positive territory and this quarter. It is for the full quarter of visa.
<unk> seen the positive data there.
Second on dividends or afford the dividend, Phil let me, but I can a little bit it's a bit long. So that we can see all the aspects first of all our dividend policy. We have the same dividend policy. There's no change to the dividend policy, which is minimum of 50% to the free cash flow after license payments. So the dividend policy is still in place.
Second as we as we said last time.
It could be free cash flow is improving.
We generated minus seven -13 in Q1 and Q2, we generated plus 63. So cumulatively. We have now as you said $50 million positive free cash flow in the first half.
And we raised our revenues and EBITDA guidance as to the market was saying that we will have the same similar level of capex in the second half of the year.
Actually depending on certain.
Next from auctions, which it would be happening in the next couple of months, depending on the results of those spectrum auctions. They are expecting the second half of the year.
It could be free cash flow perspective.
That's all done first half of the year. This year, so from equity free cash flow perspective, as well we are expecting an improvement.
So having said that we have the same dividend policy, we had improving free cash flow, whether it be unknowns as well.
In certain markets, we see still see some.
Look down some restrictions coming from Covid. So I think it's too early to conclude on the dividend at this point in time, we have to monitor the developments in the coming months.
Having said that in the meantime, we are focused some of our investments we are focusing on increasing our revenue.
Cash flow.
This structure, we are improving we are focused on to improve our business in all aspects. So I believe that as a conclusion towards the end of the year when we see more than.
And then just have more clarity about the result.
Our board will assess the.
The final results and based on a recommendation or I believe that they will make a decision about the dividend, but all the indications.
As far as I can see are moving in the correct direction.
Thank you very much for this shut Alan Kohn Gunnar just can you comment on July August mobile service revenue growth in Russia or not thank you.
You haven't are you know.
Disclose that in our press release, so I will stay for them.
You will have a short time for it.
Yeah.
And your next question comes from the line of Henrik Herbst from Morgan Stanley. Your line's open. Please ask your question.
Yeah. Thanks, Thanks, very much and congratulations encouraging to see your revenue trends in non machine, it's all trending positive in Russia, but just.
To pull off enough I guess, it's a.
Whilst your service revenue mobile service revenue growth did improve and sort of improve in line with the market and I guess some of the larger players. How do you think about your ability to perhaps close to GAAP and core in line more in line with your competitors.
Are you quite happy with it.
A couple of percent service revenue growth or.
Do you think there's more to do keeps can be seen improvements from das and then secondly, as your service revenue could start to improve how should we think about your ability to drive EBITDA margin improvement in Russia.
I guess you had run in some sort of doubled network cost US you talked about.
Some of the maintenance in <unk>.
House win how should we be thinking about that sort of dropping out and your comps.
And.
What impact.
<unk>.
Yeah on your margins and then can I just confirm when you were talking about one to two percentage point improvement in.
Cost intensity for the group can I just double check that.
And that's basis seats basically the.
Let's say mass margin improvement by 2023 and.
Is 2020, the base year or 2021, thank you very much.
Alright, Thank you very much.
You know I will also ask the after by commence Alexander Turbo Who's on the line to comment as well about your question about Russia, specifically, but as you can imagine Eric or definition of success in Russia is not just to turn it off you just delivered on our promise to get back onto a growth in Russia in the first stuff.
It is not satisfactory for us to stay there and as you can imagine and these comments are not specific to Russia, but <unk> penetration is nuts also our ultimate objective.
We need to move from <unk> penetration to multiply customers, providing our customers a real lifestyle type of applications. So that we can further improve our ARPA further reduce our churn. So we are on the beginnings of this journey.
I'm happy with the progress that you have seen in Russia, I am happy with the fact that we were able to deliver on our published studies that's good growth.
But this is not the unresolved it is just the beginning.
Unfortunately, some of them well, okay, sorry, okay. So that's a I think number one the second issue is I have also in Q1 previously mentioned that we will go through a cycle.
In Russia, and we are exactly going through that cycle, you will see further improvements in Q3 and Q4 as we move up and I will leave the question of your last question about one 2% from project optimum is it net gross maybe you can clarify that again, maybe at two things that I want to mention first of all what do we mean by staying close to it.
Sensitive.
Maybe we should consider to be explained the four of them are better in the coming quarters as well.
We make certain adjustments in corporate income.
Sure.
We are removing handset revenues and hence of course, when you calculate cost inflation. So to just look at the operational cost intensity. So that's that's one thing that I want to mention but brought that you should see this improvement in the cost intensity to be reflected in the EBITDA margins broadly but not.
One to one.
Having said that I think that the 'twenty 'twenty numbers, a little bit distorted because of obvious reasons as we all know so if the base is Q1 this year.
So Q1 this year should be the base and as you as you can understand whatever we improve the first two impact this year was minimal because of the timing timing impact, but the full impact will start in 'twenty to 'twenty, two and whatever we improve in 2022, we'd have partially impacted.
22, and the full impact in 'twenty three that's why our ambition is by the end of 'twenty. Three so we have a two years, let's say perspective.
Yeah.
What about you ask also about the absolute number.
Assuming that we have let's say eight five to 9 billion U S. Dollar revenues. So if you take 1% you can say eight to 519 million U S. Dollar if you take 2% just multiply it by two so that that can be a range about the absolute number.
Thank you Eric for the question kind of thing. Thanks, so much. Thank you.
And your next question comes from the line of <unk> from Bank of America. Your line is open. Please ask your question.
Yes, hi, thanks for the call and you're approaching two questions I have three actually.
The first one relates to Russia again.
Can you please explain what needs to happen in your view to.
A further acceleration of our.
After with revenue growth in Russia, do you need to increase subscriber numbers do you need to get the existing base spend more GDP increases the for Japan. The accretion that that would be helpful. And then the second question also relates to Russia, just wanted to check what needs to happen as well for margins too.
That'd be nice and put this potentially increase from there and third would be on the on the mobile.
Our fintech business in Pakistan.
We didn't disclose any and any metrics.
A loss to us to have some view on on valuation for these business. Thank you.
So as I. Thank you very much and thanks, a lot for the questions in terms of the Russian especially service revenues business I think the further acceleration that you should be looking for enhancing our <unk> network footprint.
Across the major 12 cities, we are as I mentioned to you we have completed quite a heavy lifting in Moscow Oblast of Moscow as well as some Petersburg.
Slowly we are reaching the next 12 months.
As we do that.
To see a higher <unk> penetration.
M P S less churn and higher ARPA potential so that will be one of the major drivers of the further growth in Russia, but more importantly.
As we built our new digital operator bundles and come to market with additional digital applications as part of our core offerings. We will also have an impact on auto insurance and this will be a further catalyst.
I've mentioned in the last quarter as well, we have gone through a serious internalization of our management and support activities of our network from an outside vendors who internal.
Sources and as we are completing this process you're gonna be seeing also the stabilization of our cost base and as a circuit mentioned.
The ratio of course being 50% of our business is also a major contributor to project optimum and the savings that we're expecting.
From a fintech business in Pakistan, we have already achieved two important I think the all of our monthly active base has grown 61% to $14.0 million.
More importantly, he did very well in expanding our merchant acquisition network to 82000 and I think these are very strong indicators that our business is healthy progressing nicely and we will take on board your feedback about further kpis and metrics to be shared with yours.
So over the next quarters as we progress.
Yeah.
Thank you so much thank you jessa.
Thank you very much.
And your next question comes from the life Alexandre Ben Garner this SRAM brand in France.
Renaissance capital. Your line is open please ask your question.
Yes. Thank you so much.
Afternoon, Mike.
I think a couple of questions. So first.
Can we get an update on your thinking regarding the capital market strategy and optimal leasing structure I think it would have him discuss that issue since last year and I remember you were saying that the management was investigating different options available at that time, So I'm just trying to get an update.
There you are doing any any sort of them work in that direction, and one thing or thoughts on that potential new listing venues like London, where our Moscow.
Moscow, So that would be interesting and then second question on a kind of a two questions on just cash.
So yes, despite the really solid growth on the number of the users.
Year over year I've noticed that there was some sort of a decline of the active users quarter over quarter. So it was $22.0 million and wanted to go and it's a $14.0 million in this quarter can you explain the reasons for that volatility whether it's seasonality or is there anything else.
Find it.
And the second question regarding just cash.
Can you remind us.
Within the organizational structure is it now kind of a full these separate legal entity, which you might be a potentially.
Monetized in some way of Ah I had dinner with them or placement of this year or some of the capital markets like publicly warrant to potential.
Private.
Partner, so any thoughts on that whether whether the entities really ready for potential monetization.
Yeah.
Thank you very much and let me start with the question about the listing you know as we are getting.
Getting better.
As a results and for portfolio management decisions are attracting more investors from different parts of the world. We clearly see the need to take our stock easily accessible to them and we are supporting this nature of our religion.
Our robust Investor Relations program, we are taking bold steps, we can take this process. So we will.
Not really know to tell you when but it is clear for us that in order to optimize and facilitate the best access to investors through our stock. We are considering all the options I know that you have been very patient with us on that please allow us to come back to you when we already are.
In terms of our volatility of our monthly active users of Jessica.
Keep in mind that we just went over and even months an unprecedented COVID-19 related.
During this year due to specific campaigns or the flavor of the crisis of the day in any thought there might be a different type of activity levels, especially with digital applications. So the volatility you'll see is a direct result of our campaigns.
At certain.
Certain points.
It's like concrete and Pakistan, and we hope to do with the overall progress with 61% year on year.
Monthly active users in terms of readiness preparation in terms of tightened up or nation against what was to come back to the market when the right time, we please.
Is there.
Just want to make any comments on that yet, but we are happy with the progress of our business there in terms of our penetration levels.
Okay. Thank you. Thank you.
Thank you.
Our next question comes from the line of Alexander <unk> from <unk> Capital. Your line is open to your phosphate question.
Good afternoon, gentlemen, actually I had a question about leasing.
Most of them, but you had a radio station.
Thank you okay. Thank you very much Alexandre.
Okay.
And your next question comes from the line of credit by telephone from Alfa Bank Caroline's Saltburn through faster question.
Thank you very much good afternoon, I would like to ask a question regarding your upcoming sale over the.
Infrastructure.
In respect of how.
How would you like to structure, our search and see don't feel it seems tough connection so what's the what would be your priority to approach.
Find the buyer so I mean, whether you.
Are more looking also to gain the best price.
He he will function like an auction model or you will consider more.
Metrics of potential buyers.
So as far as I understand I like after the seal you really get to them.
Sort of associates maintenance infrastructure maintenance services from the buyer and so could you elaborate a bit on how you will find your best buy it for you at the phone with our infrastructure. Thank you.
Thank you Anna.
Thanks for asking the question, we have actually disclosed as.
Much as we can in our announcements and we have been following a very fair competitive process over the last couple of months, even you know more than actually five months on this method it.
It is important to understand that our tower monetization then.
This is not about just creating cash and funds.
But to create a sustainable environment to make sure that the right focus is placed and more productivity.
Productivity can come out of these assets. So it is not only about the price it's about the sustainability and the quality of the service we will get over time and it is all about you know capital expenditure decisions that will be also related to the future as well. So we are looking for a real value creation.
Model.
And I'm very happy with the progress so far Russia old though is.
Not big in terms of independent tower companies, we always had very strong relations and ongoing commercial relations with old independent tower operators in the country. We know them, we know their capabilities and we will of course inform the market when the right time comes in terms of our decision.
No.
Thank you pretty much for the comment.
Once again, if you wish to ask a question Please press star and one.
So there are no further question at this time please continue.
If there's no further questions I'd just like to thank everyone for dialing in this afternoon.
If you have any more questions. Please feel free to reach out to me and we'll be speaking to a number of you over the coming days. Thanks, very much everyone and have a good day.
Jess.
And this concludes today's conference call. Thank you for participating you may now disconnect.
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