Q3 2021 VEON Ltd Earnings Call
Revenues grew by 10, 2% and EBITDA increased by eight six.
In this quarter we.
We started the value crystallization of our infrastructure assets with the announced tower sale in Russia.
We accelerated the transformation of our operating companies into digital operators, expanding our multi play and double play <unk> base by 38%.
And we expanded the reach and scope of our digital services, including <unk> and trophy.
Given this better than anticipated performance, we are increasing our full year EBITDA guidance to minimum 8% local currency growth.
And maintaining our current revenue guidance at the high single digit local currency.
Moving on to slide six.
I want to give you a country by country detail of our local currency performance.
This shows revenue growth across all of our markets with double digit growth in five of our countries.
We saw positive.
We saw positive EBITDA trends across all of our markets other than in Pakistan, where the growth was impacted by a one off in the prior year.
Adjusting for this one off Pakistan EBITDA was up 24, 6% year on year.
For Crane, Pakistan, Kazakhstan, our core growth markets, all showed strong double digit underlying growth in both revenue and EBITDA.
Russia was eight 2% revenue growth in Q3 was the largest nominal contributor to our group revenue increase.
Let me now take you through the individual performances of our largest markets during the quarter and I'll start with Russia.
<unk> recorded another quarter of accelerating growth with total revenues rising eight 2% year on year.
This quarter. We also saw mobile service revenue growth of 545% and this is the second consecutive quarter of growth.
It was good to see continued acceleration in revenues through the quarters.
With total revenues up 10, 2% and mobile service revenues growing five 3% in the month of September as we closed the quarter.
<unk> users are now at $25 4 million up 17% year on year with growth rate of nearly 30% over the past two years there.
They now account for more than half of our total customers in Russia supporting net promoter scores getting higher ARPA.
<unk> growing and churn Laurie.
In Moscow, where we invested heavily to improve customer experience, we have seen year over year improvement in net promoter score of eight points year over year, while our competitors NPS scores declined over the same periods.
Going forward, we expect similar improvements in other regions, where we are actively investing.
We have also seen encouraging trends in mobile number portability a gain in Moscow year to date, there has been a more than doubling of net fourteens.
And in Russia, as a whole we have seen a 90% reduction in net portage.
Let us now turn to Crane <unk> delivered another quarter of strong performance with double digit growth in both revenue and EBITDA.
Revenues grew by 12% year on year in Q3, showing consistent growth over the past two years.
This has been supported by equally strong and consistent rise in <unk> penetration across our subscriber base.
Thats $2 8 million <unk> subscribers year on year, and $5 $3 million over the past two years corresponding to an 84% growth.
It is supported by our continued focus on network improvements, including better coverage on mobile and fixed networks and additional focus on coverage on the main highways of the country.
When you take a look at Pakistan on slide nine just delivered 13% growth in revenue EBITDA after adjusting for the one off item in the prior year grew 24, 6%.
<unk> has accelerated strongly over the past year enabled by the more than 50% in <unk> subscribers.
<unk> penetration has now reached 47%.
Customer who use at least one of judges digital applications, such as Jess cash on top of voice and <unk> now represent 27% of our one month active customer base and they account for half of our subscriber revenues.
It shows the revenue generation potential of this strategic segments.
On slide 10, we will offer a recap of Kazakhstan.
<unk> delivered another period of outstanding performance revenue was up 25, 5% in Q3 as our subscriber base on <unk> grew 27% year on year, reaching 62% of penetration of our total subscriber base subscriber base the highest in our portfolio.
Our data revenue growth was an impressive 40% with ARPA growth of $22 seven.
Revenue growth has accelerated over the past 12 months supported by the growth in data revenues, which in turn is enabled by the high <unk> penetration of our subscriber base.
Fixed mobile convergent products.
<unk> to contribute to this success with 23% of the broadband base also using our mobile services.
And now Bangladesh on slide 11.
Despite the challenges in Bangladesh, including partial and full lockdowns during the quarter Bank.
<unk> delivered seven 2% revenue growth.
32% growth in data revenues.
61% <unk> subscriber base expansion as we continue to gain market share in this critical market.
Engagement rates are for our digital services continued to trend higher and the double play <unk> and multi play customer base grew 89% year on year.
Our entertainment platform Trophy now has $6 3 million monthly active users an increase of $1 3 million during the past quarter.
Finally on Slide 12, let me turn to our other markets, which are summarized here on the slides.
Growth in our <unk> subscriber base in these markets continues to increase as population coverage ranges from 61% to 93%.
It has contributed to an encouraging increase in data usage growth ranging from 26% to 33% and a corresponding growth in data revenues ranges from <unk> to 'twenty four.
In early July we announced that we had exercised our put option to sell our stake in Jersey and Algeria.
The process to determine the fair market value at which this transaction should take place is continuing.
<unk> does not contribute to operational consolidated results due to being accounting accounted for as a discontinued.
<unk> operation.
We continue to manage <unk> on a standalone basis and recorded a growth in revenues of three 6% and EBITDA and.
Six, 3% and EBITDA and <unk> subscriber base grew by 29%.
Let us now look into some of our digital products.
Just cash has increased its active user base by 44% serving 14 million customers.
In addition to consumer customers now it is also serving 89000 merchants tripling over the past year.
A new service simply in Kazakhstan reached 455000 users following its launch in June 2021.
Bunglings Entertainment platform Trophy reached $6 3 million users and over 70% of <unk> users are non bank lending customers.
Toffee subscribers, who are also bundling customers using our <unk> services have nearly three times higher ARPA.
Quarter of the churn rate of the total subscriber base, while consuming six times the average data.
Lastly, big data at take revenues across Russia, Kazakhstan, and Ukraine more than doubled year on year recording two three times to two times and two six times growth respectively. In these countries.
Slide 14 shows and summarizes how our digital products on the back and on the top of our <unk> network are driving higher levels of customer engagements.
The double play and multiply <unk> customers are demonstrating materially higher engagement across our book.
Churn rates data usage and minutes of use.
Our multi play and double play <unk> user base across the group reached 34% of our active one month's subscriber base and it is accounting for 61% of our subscriber revenues.
Let me pause here and hand, the call over to silicon to discuss our third quarter financial results in more detail circa.
Thanks, Carl and good morning, and good afternoon to all participants in.
In the coming slides I will elaborate on our financial results for the third quarter in more detail.
Before turning to the numbers summarized here on slide 16.
It is important to note a number of one off items that impact year over year comparisons with the third quarter of last year.
These are set out in the appendix of this presentation deck, but to summarize there are some key items to bear in mind.
In Q3 last year, there were two items both impacting EBITDA.
First reversal of a provision of 52 million U S dollar in Pakistan.
And second recording a tax provision of $15 million annual Blackstone.
In Q3 this year there are three items to note.
We recorded a government grant of <unk> on radio frequency fees of $6 million above EBITDA in Kazakhstan.
Second triggered by the court decision our export license in Pakistan is not capitalized as an intangible asset and is now amortize above EBITDA.
The previously reported as an operating cost above EBITDA.
This uncertainty around the accounting for this chesnut finally being resolved.
Lastly, our Algerian business is now accounted for as a discontinued operation given the ongoing sale process.
I shouldn't explain how these impact certainly reported numbers as you look at revenues and EBITA in detail in the following slides.
Setting. These aside Q3 was another quarter with strong results for the group.
Revenue rose by 10, 2% year over year on a reported basis.
11, 2% in local currency terms.
Given by an acceleration of growth in Russia, and double digit growth rates in all of our other key markets.
The results of our investment in Fujian networks, it's clear in another strong quarter for data revenue.
Which grew by 18, 8% year over year in local currency terms and supported local currency service revenue growth of nine 4%.
Group EBIT increased by nine 1% in local currency terms and eight 6% reported.
And corresponded to a reported EBITA margin of 44, 4%.
The year over year decline of 60 basis points is largely due to the provision reversal in Pakistan recorded last year as I mentioned earlier.
Operational Capex rose by 17, 1% as we continued with our network investment program.
This results in last 12 months Capex intensity ratio of 25, 2% for the group.
If Algeria was included.
12 months Capex intensity would have been around 24, 4%.
The group reported 195 million U S. Dollar in net income in Q3 versus a net loss same quarter last year.
Finally on this slide equity free cash flow was $308 million for the quarter supported by double digit revenue growth.
And in turn stronger EBITA.
Looking at revenue in more detail on slide 17.
The quarter was strong across all of our markets with particularly the high growth rates in Kazakhstan as a consequence of <unk> subscriber growth and then encouraging performance from Beeline, Russia, we have positive momentum continues.
Once again this performance was supported by strong <unk> adoption and customer growth with a further increase in data usage.
Mirror, the increasing demand we are seeing for our growing range of digital services.
Slide 18 sets out our EBITDA performance in greater detail.
Is that mentioned earlier, Pakistan year over year EBITDA growth rate is impacted by last year's provision reversal.
Excluding this Pakistan normalized EBITDA growth would be 24, 6%.
Also the large youre rising newsmakers than EBITDA, primarily reflects the one off tax provision we recorded in Q3 last year.
Adjusting for this <unk> EBITDA still grew by an impressive 31% year over year.
In addition, Kazakhstan EBITDA this quarter is boosted by $6 million due to a government grant on radio frequency fees.
Adjusting for these one off items in both years, our EBITDA margin would have expanded year over year, rather than the 60 basis point decline we reported.
A key element in this underlying improvement is the contribution now being made by project optimum.
To remind you of our ambition here.
Aim to achieve a one to two percentage point improvement in group cost intensity ratio by financial year 2023.
The greatest impact to project optimum is likely to be seen in 2022.
Our continued success in reducing our corporate overhead also made a positive contribution to group profitability this quarter.
<unk> corporate overhead further decline by 13, 9% year over year to only $26 million in Q3.
Over the past two years the reduction has been an impressive 65%.
Looking now at Capex and operational cash flow on slide 19.
<unk> network investments remains a top priority for group expenditure during the quarter.
This is reflected in the 17, 1% rise in the reported capex to $381 million.
This corresponds to a reported last 12 months capex intensity ratio of 25, 2%.
So on a year to date basis the ratio is 22%.
Russia was again the primary focus of this investment accounting for around 60% of our operational and Capex. The same proportion as we reported in the second quarter.
Continued investments in our digital capabilities and services remains a key strategic focus throughout the quarter and help us to grow our digital users significantly.
Operational cash flow continued to strengthen in Q3, reflecting the strong EBITDA performance in our markets.
For the quarter as a whole operational cash flow amounted to 509 million U S. Dollar.
Significant rise from the $374 million reported in Q2.
Russia, Ukraine, and Pakistan accounting for around 80% of this.
Turning now to grouped up in equity free cash flow slide on.
On slide 20.
At the group level net debt was around 6% lower than in Q2 at 815 billion U S dollars, which primarily reflects the appreciation of the ruble against the us dollar during the quarter.
Although our leverage ratio was two five times, which is lower than two seven times in Q2. After the impact of Jerry's accounted for and is in line with our internal level of comfort.
We made a further dropdown under our global medium term note program during the quarter issuing 20 billion rubles in five year notes, which is our third ruble bond issue under the program is it continued to focus on diversifying our debt while managing risks.
This resulted in a small 20 basis point year over year rise in our average cost of debt to six 3%.
However, we also extended our average debt maturity to 3.2 years.
Yes.
Group liquidity remains strong with total cash and committed credit lines credit facilities.
<unk>, two 3 billion U S dollar.
All cash inflows from our tower transactions.
And the sale of Algeria will be used to reduce group debt.
Okay.
Turning now to equity free cash flow, which is summarized on the right hand chart of this slide.
The group recorded a strong result of <unk> 8 million U S dollar equity free cash flow in the quarter.
This reflects our strong EBITDA performance as well as lower operational capex than last quarter and an improvement in working capital management.
This improvement leaves equity free cash flow at $321 million for the first nine months of the year.
This brings us to slide 21, and our financial guidance for the full year 2021.
With the operational momentum that has been building throughout the year. We have continued to perform ahead of our guidance.
As a consequence, we believe it is appropriate to revise our 2020, one financial guidance once more to reflect the likelihood over stronger EBITA performance.
We are therefore, raising our group EBITA guidance from mid to high single digit growth to a minimum of 8% local currency growth.
Our group revenue and Capex intensity guidance remain unchanged.
With regards to dividends our dividend policy remains unchanged. This is at least 50% of equity free cash flow after licenses.
While at the same time, ensuring group leverage is managed within two five to four times.
With that let's say a prospect to come for closing remarks, before we turn the call over to your questions.
Thank you Satcom, let me close our presentation with a reminder of our priorities for 2021 and our progress to date.
One we.
We are progressing well on the path to increase our <unk> subscriber penetration with.
A 10 percentage point increase year on year, we have now reached 46%.
Our targets over the medium term is to reach 70% penetration.
Two.
We remain focused on delivering growth in Russia, as we accelerated total revenue growth with further progress on subscriber growth most notably in <unk>.
Maintaining this is a top priority in the months ahead as we strengthen our market position.
Three.
For Crane, Pakistan, Kazakhstan continued to deliver double digit growth. We are also encouraged to see the good revenue trends in Bangladesh, a market, which offers good structural growth opportunity.
For.
Our digital operator strategy is being executed through a deepening customer relationship with our subscribers supported by the growth of multi play base.
With the encouraging growth rates in just cash and trophy crystallization of value for these products remains an important focus.
We maintain our discipline in managing our portfolio.
Position of minority shares in Georgia.
And restructuring of the ownership of <unk> <unk> are examples of two quarters.
We remain ambitious on costs and continue to improve group's cost efficiency under project optimal both at a country level and in our headquarters.
Finally, we remain committed to realizing the value of our considerable infrastructure portfolio.
We announced the sale of Russian towers, and we have established separate our entities in Ukraine and Pakistan.
In Bangladesh, we are considering various options to crystallize the value from our infrastructure.
On December seven we will be hosting our capital markets day, where we will discuss our strategic priorities and high level financial outlook for 2022.
With that I would like to thank you for your attention and turn the call over to the operator for your questions.
Operator.
Thank you and I'll show you mine just to ask a question when they need the process and.
And then one on your telephone and so Joe Your question. Please press the pound operator.
Any questions from.
Yes. Our first question comes from the line of holiday cards from Morgan Stanley.
Please ask your question.
Great. Thanks, Thanks, very much and congratulations on the turnaround in Russia I was just wondering if I could just ask around Russia and in the logical question is coming from the system.
The operator is not operating.
[laughter].
Can we get the question setup, yes.
Yes.
Please go ahead Sir.
Okay.
Can you hear me.
Hello.
Hi.
Please continue.
Yeah, Jack in Miami.
So when we set up.
Okay.
Just bear with US one moment peaceful sorts of soft now policies.
Hong Kong.
Counterbalance.
Thanks, Alex.
Mexico and bear with us as we explore what's happening with your operator I hope you are able to sell.
Our voice to yourselves.
Okay.
We're demonstrating that.
Okay.
Yes.
Yeah.
Yes.
Yeah.
Jaime Katz.
Yes, now we can.
Okay.
Thank you.
Can you hear me.
We can hear you.
Great. Thank you very much and congrats again.
Strong set of results.
Can I ask about the margin progression.
In Russia, and how we should think about the.
Much slower EBITDA growth I guess that service revenue growth. So I know I know that you've had.
Sort of prioritized network investment in turning the top line around in Russia, but I was just wondering if you could talk a little bit about what youre investing opex in at the moment and as we go into 2022.
Should we see the.
GAAP between service revenue growth.
And EBITDA growth closing, we'd hopefully EBITDA growth picking up I guess.
That was the first question and then the second question I guess is just if you can talk a little bit spurt Brandy <unk> crossing in Russia as well it seems like ARPA growth is slowing although you're seeing very impressive 10, chemo for GE and as you pointed out the <unk> customers.
It's a lot better so just your thoughts around that high gas and then where we are in terms of potentially adjusting prices upwards.
Thanks, so much.
Thank you thank you and.
I guess with electric Turbo Cogs on the call as well I will give the.
To him and I share my thoughts on our first of all I'm extremely satisfied.
But the team is doing in Russia executing our turnaround.
It's been really remarkable HQ and I get your question about EBITDA and why the EBITDA growth is less as I have mentioned numerous times.
Some quarters. This year was a critical year for us.
Each of our network management functions.
And I visited actually euro slow our technological accomplished last week Friday and I saw that.
Yes.
95% completed.
With excellent results in terms of.
That you can provide to our customers.
Of course this is <unk>.
But.
Our cost base.
On the second side, let's not.
As we expand our network and that.
Silicon match, you have allocated to almost 60% of our cup exploration is that every single engineering and construction team and Russia is running out with loan growth.
A stations of course.
In addition to <unk>.
<unk>.
Run rate.
Now you also asked about the ARPA growth.
Yes.
Of the situation in terms of network quality pricing and the NPS, we are coming from.
Until late July.
Have deliberately stayed away from making upward price adjustments, which the market actually is quite justified to make work.
And you will see us more active on that site may I ask is if <unk>.
<unk> Alexander Sasha is available towards taking the calls.
Third providing further color.
Okay.
Yeah.
At Cvs.
I just wonder if you.
Can be Unmeet Alexander Alexander Turbo car. He is our general manager in Russia <unk> line.
Okay.
While we can for our exon me by cannot couple of her about margin because you hear you ask about the long term maybe EBITDA.
Rejected.
I would I would suggest to look at EBITDA in absolute numbers going forward and especially in Russia.
I'm, saying this because first of all the revenue composition is transforming in Russia.
In each and every revenue bucket, we have different margin analysis.
And on top of that with the closure of this Russia power deal starting from next year cost structure will also be transformed to a different model.
Both of them will impact March EBITDA margins so.
Probably the margin margins will not be apples to apples comparable next year to this year. So I would suggest in the long term.
Keep an eye on the EBITDA in absolute terms, rather than margins EBITDA margins.
Specifically for Russia.
Thank you Anne.
Sorry, it looks like we have difficulty in meeting Alexander but I want to use this opportunity to congratulate Alexander on the successful rebranding of our operations will be in line with the new logo.
Customer value proposition, saying, we are on your side. Thank you Alexandra.
Let's take the second question.
Thank you.
From the line of <unk> <unk> from Bank of America, I think you asked a question.
Yes, hi, everyone. Thanks for the call and for taking my question. So I'll go with the first one going back again to the to the Russian Opex I think there were in the past some.
Different layers.
That you did mentioned to improve the efficiency of that business and that would have included for example closing down more stores is that still.
Is that still.
On the cards right.
Right now.
Thanks, a lot for the question, we are continuously optimize our distribution network.
We have almost reached thousands in terms of store closures in terms of the kitchen solutions, but as we do that we really look into the business and as well.
And look to ways of how franchisees works, how digital channels works and I will note. Your question and I will definitely ensure first of all its under control in the next quarterly call and we will give you further color on these issues as well.
Great.
Thanks, you so much I just wanted to ask a second one if that if that's okay.
I understand on the on the.
Central unlock of the of the balance sheet telematics, obviously, we've seen the Russian tower deal.
Are you guys also looking to to.
Monetize towers in in other countries and what progress have you made on this team. Thanks.
Thanks, a lot as I mentioned.
At times I think there is there is no telco in the world.
Optionally to have exclusive towers in <unk>.
Network sharing is a must and then it will of course start with the passive side of the equation. So our true commitment to slides as well as our tower assets across our portfolio is remained strong we have already established standalone entities in Pakistan and Ukraine in Bangladesh the regulation doesn't build.
Lowest loan at our company and we are in various different strategic alternatives talks with independence.
<unk> there as well. So this objective continues but please keep in mind that our the way we are going to crystallize the value with towers and unlock the value from the balance sheet. This is not only a sales and leaseback transaction. When we look to tower deals, we look to a sustainable operational cost.
<unk> opex reductions as well as a healthy portion of future multi tenancy.
Revenues coming our way that's how we managed to secure a very good deal in Russia.
If you look from an upfront consideration perspective, probably the new currencies. It is now slightly above $1 billion, but in terms of the net present value that this operation will bring to our company in terms of Capex opex savings and the ability to upfront share future tenancy increases has been remarkable.
And we are very satisfied with that.
Great. Thank you. Thank you so much.
Thank you Sir Thank you and our next question comes from July if Andreas <unk> from UBS. Your line is open. Please ask your question.
Hi, Thanks for the presentation and congratulations on the good news.
Right.
Just a follow up in terms of Russia can you break down for us.
We're kind of fortunate for US you are putting in Russia.
And how you see that the share of the <unk> subscribers going forward I believe they are kind of behind some of the market leaders in terms of that.
The ratio, even though that's a growing quite fast. So can you maybe elaborate a bit on what are the structural reasons.
Your ratio was a bit lower than the market leaders and how fast do you think you can catch up.
And then in terms of free cash flow a couple of questions. Please.
Are you you mentioned the Pakistan situations.
Can you give us maybe some less there are risk kind of.
Our spending in terms of one offs.
But typically spectrum going over the next four to six quarters.
Then what is the outlook for working capital.
Over the short to medium term and at what kind of minimum free cash flow to equity levels.
Towards the end of the year would you be happy.
Considering proposing a dividend thank you.
Andre. Thank you very much let me take the <unk> question and I will leave the free cash flow question to sell down to answer.
First of all the choices that has been made in the past. It's I don't think it's productive to go back and analyze why we were so late in picking up to <unk>.
Penetration solo in 24 months, what I can tell you is we moved the <unk> penetration among our subscriber base from 'twenty two to 46 and the part that I like the most in the last three months every single month, we increase this with one four percentage points. So it means that youll year accelerate.
On catching up with the 70% now.
This is very critical because if you look to actually presentation page 14 as customers move from being a single play customer, meaning that they only consume one service from us either being data wearables versus a customer being double play.
And being double play on <unk> versus <unk>.
There is an incredible uplift impact.
And it is not only visible in the ARPA off list, but it is also visible in the churn reduction even visible in minutes of use.
So the more smartphones the more forging consume actually even usage of normal voice services has a positive impact up to two times. So this is why we are critically looking into this and the other issue why it's so critical is now that we are at almost 50%.
In terms of <unk> penetration do real accelerated part of our strategy is going to come into play.
And Thats as a digital operator, and making sure that we go you move away from selling number of minutes number of SMS as number of gigabytes to selling digital lifecycle bundles.
Every operator, who has done this transition has been able to increase their growth rates by a further.
Teens, and that's really what we're focused on now that we are in the territory of <unk> getting stronger and stronger you will see us moving into the digital operator strategy at various speeds in different countries.
Maybe circle for you Andre.
As far as I can for a quick follow up you asked three questions actually is Congress artists that maybe someone else and then free cash flow and then dividends.
So I will try to follow the same sequence.
First Pakistan.
As I mentioned in the presentation. There there are one offs, both last year and this year.
<unk>. This is the one off is more important than last year, because last year towards the one time, but this year since we have clarified the accounting of this.
Renewal right export license.
And that will be an ongoing.
Positive boost for the EBITDA and in Pakistan, because going forward amortization of EBITDA. So.
Amortization of the license will go below a butane amortization line, so definitely give a core to the boost to Pakistan EBITDA, depending on the ethics of course $5 million to $6 million per quarter.
So that's a permanent advantage there that we're going to benefit and in Pakistan.
Having said that.
I look at the numbers in Q3 and in Q3, we generated roughly $60 million EBITDA.
$60 million $115 million.
Free cash flow in Pakistan.
When did this a very strong number.
I'm going for what we believe that despite there are lots of investments coming in Pakistan. We can contain this free cash flow generation in the coming quarters as well.
It's about Pakistan the second one.
Overall <unk> expectations in Q4 and going forward of course Q3 was a remarkably strong in terms of <unk>.
Have generated more than $300 million cash in one quarter or almost more than $100 million per month.
Historically Q4 is not as strong as Q3, because it's end of the year everybody is trying to close the accounts.
And also vendor payments are probably increased compared to Q3 and also the capitalization of projects Capex projects.
And making them life will increase towards the end of the year. So we are not expecting as strong as Q3, yes, yes, but it won't be as because Q1 and Q2. This year. So it would be somewhere in between.
Opinion, so we will close the year with a strong <unk> number.
Just with the good results in Q4 as well.
Linking this to dividend.
As I mentioned, our dividend policy unchanged.
Minimum 50% of <unk> after license payments.
And we need to keep an eye on our leverage ratio, which is maximum two four times. So that's what we're trying to do and in Q3 it was.
Two five times.
But having said that we are expecting to close supplier.
Before the end of the year.
And by closing this project, we will get the proceeds as Carl mentioned, hopefully more than $1 billion.
With the help of the appreciation of ruble nowadays so we want to see the closure of the project. That's one and second we want to see where we are going to end in terms of leverage because the intention is that we will use those proceeds proceeds to deleverage the balance sheet. So we want to see.
The outcome of these two actions and of course, there is also Q4, but having said that even without any further yes self generation and in Q4, we are positive to this.
Dividends based on 'twenty one numbers.
But we will see it in the first quarter of the next year hopefully.
It was alone.
It.
Thank you if I may just two quick follow ups in terms of the one offs I was specifically asking about what is in the pipeline for spectrum, what visibility do you have especially in some of the markets such as Pakistan, and Bangladesh, where we've been seeing headlines around potential auctions in the short term do you have any visibility on those one offs.
And then in terms of the outlook, our specifically interested in working capital or do you think the the level correct and couple that you have today are kind of stable going forward or do you see some.
Major changes in the short term thank you.
Mr. Working in one sentence working kept them I will handover to come for spectrum working capital as we see that there are improvement areas and working capital. We can do better working capital management in the coming quarters, but probably Q4 will not be one of those because it's the end of the year, but if you take.
The longer trajectory, we can improve the capital further.
Thank you, Sir and with regard to the spectrum question.
You have probably noticed how disciplined we are when it comes to making spectrum investment decisions in Pakistan, we actually decided not to bid.
It was a principal decision, we will never make mistakes of making money in rupees. In fact goes in tengiz in rubles and investing in dollars to spectrum.
And basically that was the driving force now naturally in markets like Pakistan, and Bangladesh population and the opportunity. The population will bring we will always require additional spectrum.
We feel very comfortable in Pakistan for the next two years with also some reforming and shutting down the CG over the time.
To meet our needs but of course, if there are changes in regulatory environments, allowing local currency tenders. We will consider that next year, we are going to have a renewable folks.
License as well, which we are planning.
Financial projections with regard to Bangladesh, we have acquired additional spectrum this year.
We now hold 25% of the spectrum in Bangladesh and the.
The 25% spectrum compared to our current almost 18% market share shows actually the upside that the country represents to us and again looking to the potential we will always be looking for additional opportunities in this area as well.
Thank you so much.
Okay.
Thank you and your next question comes from the line of Ivan Kim from <unk> Capital. Your line is open. Please ask your question.
Yes. Good afternoon, two quick questions from me Firstly on Moscow, We think any further thoughts on that and then secondly.
On the Russia growth in 'twenty two.
So the recovery in the third quarter is definitely.
Better compared to the second so very sequential improvement.
I'm just wondering given the current LTE penetration runway.
What sort of growth, we should be expecting ballpark in Russia in 'twenty, two or do you think it's going to be a high single digit, but I think it's going to be mid single digits very roughly thank you.
So you on thanks, a lot for the questions. Let me start with duration 2022 outlook I think I made this comment in our last quarterly call as well.
My desire around this time next year to see high single digit double digit growth in Russia, I made a special disclosure on Cuzzi announcement, giving you a little bit of a glimpse of what's happened in September this quarter and in September <unk> reached a service revenue of five 3% growth year on year for the month.
And 10, 2% overall. So this is indicative lead tells you that you know what I'm, saying is not that far off from.
Possibility given the LTE penetration increases and this year, we will see more discipline inflationary pricing in a ratio of operation.
In terms of.
Moscow opening up for trading opportunities, we will keep you updated about the progress.
And as we have indicated that we are very focused on making sure that the expectations of our shareholders are missing in terms of wider coverage of different time zones and currencies and hopefully we will keep you informed over the next couple of weeks of debt purposes, Alethia I think you would like to absolutely yes on the.
General listings point of course.
We do appreciate that.
Investor desire to follow us and more from.
Relevant local markets, where we are active and of course from different time zones. So absolutely whenever we can do to facilitate the encourage.
Ed It's obviously our priority so as Cal mentioned, we'll keep you posted but we are extremely geared.
To any opportunity of the sky.
Okay.
Alright, thank you.
Sure.
Thank you and our next question comes from the line of Alexander <unk> from <unk>. Your line is open. Please ask your question.
Yes, good afternoon very quick clarification.
Question on the equity free cash flow.
You have generated over the first nine months, so basically before like a last quarter.
I think you showed before the deconsolidation of Algeria, you show roughly around 50 million dollar of equity free cash flow, which transformed into kind of a zero equity free cash flow. After the deconsolidation of our GDS towards the first half of 'twenty. One so I'm just wondering whether there's a difference.
Suddenly comes how module and the second question here, whether you will consider.
This equity free cash flow generated by Algerian operations.
When you will be.
<unk> deck with typically cash flow eligible for the dividend payments. This year. Thank you.
So.
Firstly.
The.
The contribution of Algeria to free cash was positive.
Overall, if you talk about ballpark figure it Joe generating roughly 100 million Laurie FTF every year. So we have excluded Algeria in our numbers. So this this impressive performance of FCS in Q3 is not coming from Algeria to genuinely.
<unk> performance in Q3 was much better than the personal for the year.
And the second part of the question, whether we will include or exclude Algeria Scf actual we have received dividends from Algeria from 'twenty to 'twenty results.
We received the cash from Argyria based on our <unk>.
Shareholding of course.
So when we assess the dividend distribution beginning of the year, we will take care to take into consideration the reported BSS numbers, which is 321 year to date September.
So we were at Q4 and take that into consideration.
Okay. Thank you that's clear.
Thank you and you do have follow up question from the line of Henrik Herbst from Morgan Stanley. Your line is open. Please ask your question.
Yeah. Thanks, Thanks, so much sorry, I wasn't I didn't really get sort of guess what do you mean that the revenue mix is shifting.
Common and Browns thinking about EBITDA in Russia in absolute terms, what do you mean without.
Does that mean that.
The revenue mix is worsening and we shouldn't expect much cross or.
If you can just clarify that and then I guess also wanted when it comes to the tower.
Disposal.
Shouldn't that the.
Positive for EBITA margins dependency.
I thought it wouldn't be much of a change to EBITDA.
Given that the underwriters are 16 of these calls are going outside of EBITDA.
Ah so yeah. If you could just clarify what you mean and maybe when you talk about high single digit double digit growth next year in Russia, I stopped topline or starting to talk more about it. Thank you very much.
Yes.
Well, let me start with the question about the double digit growth side I would expect that these would converge to each other bolt on mobile service revenue topline topline actual use of course is the revenue combination that second I was I think also will clarify, but as we enter into new markets, including.
More device sales driving our strategy more system integration type of project uptake projects upstream projects, which we will be answering these will be accretive in terms of nominal EBITDA, but it might come with less margins in some areas.
Definitely for devices.
So that's the clarification I would make.
Hey, Jim My mind might come onto us.
There is a kind of couple of developments in Russia, which will impact the EBITDA margin, both have revenue and cost sides limit to elaborate a little bit more.
As Scott mentioned, we have different different revenue streams in Russia, we have.
Traditional core telco revenues, we haven't device business, we have digital services and we look at them segment by segment and the growth rates in each and every segment is different from the others.
That's number one second.
The margin EBITDA margin for each segment is different as well. So there are some segments each of which we are driving high margins. Some segments. For example device segment, which you have single single digit margins. So the composition of this revenue will impact the EBITDA margin the second thing we.
Just specific for Russia, maybe the first part is it generic but the second thing is specific for Russia. After closing the tower sale deal.
The cost structure or Russia, we'd also change because of this tower tower deal. So that will also impact the EBITDA from margin perspective, if you look at long term perspective look at two to three years' time, So a combination of both.
You may not see yeah.
Stable trends in EBITDA margin and on top of this of course, we should take into consideration the seasonality as well so that was.
Well I was trying to explain but in any case since we don't have negative margin business in any case.
Yeah.
The trajectory in absolute amount in EBITDA.
Give us more more stable indication about the growth in the business.
Yeah.
Okay. Thank you.
Thank you very much.
Thank you Eric.
Thank you and we will also follow up question from the line of Andre Kubicek from UBS. Your line is authentic ask your question.
Yes. Thank you two follow ups from me. Please in terms of the towers again.
You've mentioned some of the impact on your margin.
These activities as well, which is not to the impact awful leverage off towers industrial. Please so I can get for for a bit at the group level. The the impact will be a slight the positive at the group level.
<unk> in leverage of course, depending on the fixed rate et cetera, and they believe that we kept deleverage the balance sheet around 350 million U S dollars.
White is less than 1 billion, because we have to book at least diabetes in our policy has been the closest transaction submitting that they believe that we can decrease the leverage by $350 million.
Thank you and in combination with the at the top left what what kind of impact would that have on the net that's at the dog to mention that to put into effect.
Yeah, human even less leverage multiple you mean it it it is there yes exactly.
0.10 0.2 times.
<unk> Okay. Thank you yes. Thank you.
Gotcha.
Thank you and can I actually get a survey to ask a question can you specify N y.
No more questions.
Okay. Thank you very much I need I appreciate your time rationale company and I'm looking forward to seeing you in London, India upcoming capital market say, thank you very much. Thank you very much Kevin. Thank you so much.
Alright.
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