Mobile TeleSystems PJSC (MBT) 2021 Q2 法說會逐字稿

Good day, everyone, and welcome to the Mobile TeleSystems PJSC 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 Polina Ugryumova, Director of Investor Relations. Please go ahead.

Welcome, everybody, to today's event to discuss MTS's second quarter 2021 financial and operating results. Before we start, I must remind you that except for historical information, any comments made during this call may constitute forward-looking statements. Important factors could cause our actual results to differ materially from those contained in our projections or forward-looking statements. This, in turn, implies certain risks and also discussions which are available in our annual report and Form 20-F or the materials we have 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 to reflect changes in risks.

I would also like to flag that we have added a few extra slides to the presentation. So if you have dialed in by phone, we encourage you to also tune in to the webcast. The supplemental presentation materials will be made available on our website following this call.

Today's presenters are: Slava Nikolaev, President and CEO; Olga Ziborova, Vice President for Ecosystem Development & Marketing; Inessa Galaktionova, First Vice President for Telecommunications; Ilya Filatov, Vice President for Financial Services and CEO of MTS Bank; and Andrey Kamensky, Vice President for Finance.

So with that, let me turn it over to Slava to kick us off.

Thank you, Polina, and thanks to everyone joining the call. Overall, we had a very strong headline results in the second quarter. We entered double-digit growth territory for both revenue and adjusted OIBDA. Overall, we increased revenue 10.6% year-over-year despite the ongoing challenges from the pandemic. While retail had an artificial low base due to store closures in 2020, all other segments saw solid performance on a like-for-like basis. Together, nontelecom segment contributed well over half of the group's supply upside. This further demonstrates the progress we are making in diversifying beyond connectivity.

Our top line results resonated in operating income. Fintech was the largest OIBDA driver, reaffirming the role 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 foreign operators.

In retail, we experienced some OIBDA pressure due to margin compression and COVID-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, we will be gradually increasing transparency in 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, stand-alone revenue grew more than 20% year-over-year in Retail, more than 30% in Media, more than 40% in Fintech. And speaking of rapid growth, we reached 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 look closely at the market perception of valuation multiples in different sectors. We've 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 the level of market visibility.

In terms of organization structure, on the one hand, our consumer-facing ecosystem verticals, Fintech, Media and Retail, are already relatively clearly defined. On the other hand, 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'll propose to the Board the separation of our tower and certain digital infrastructure assets into distinct wholly owned legal entities. We are targeting legal separation of both tower and network assets to be completed by early 2022, subject to Board approval and subsequent approval at the General Meeting of Shareholders.

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, plus improving efficiency by sharpening the focus of each leadership team.

Over the longer term, these steps also have the potential to unlock significant value for shareholders. Ultimately, we see that multiple MTS businesses are reaching sufficient scale to directly enter the capital markets. Given MTS Bank's growth trajectory and successful track record, Fintech could be one of the first candidates for this -- 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 may be moving towards consolidation. In this environment, we think it makes sense to be opportunistic regarding our tower assets.

On the active side, the proposed infrastructure separation would combine 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 development of edge cloud solutions, a stand-alone business that combines extensive network infrastructure with advanced cloud data capabilities, could occupy an exceptional advantageous market position; second, speeding up our time to market in development -- in developing cloud business solutions; third, incentivizing management to pursue external growth opportunities; fourth, driving cost optimization from more efficient infrastructure management; and fifth, creating a pure-play, stand-alone provider of infrastructure services with long-term optionality for value crystallization.

If approved by our Board and shareholders, we would target MWS to begin business operations in early 2022. At the same time, the company's 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's leading private provider of next-generation cloud and network solutions.

I also want to be clear that at this stage, this is a management proposal. All of these plans are subject to Board and shareholder approval. Moreover, from a 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. And on that note, let me hand it to Olga Ziborova for an ecosystem update.

Thank you, Slava. I'm happy to report in Q2, we saw solid performance across the ecosystem. Let me share just a few of the highlights. Noncore revenue grew 27% year-over-year, reaching around 25% on consolidated group revenue. Ecosystem clients increased by 14% quarter-on-quarter, reaching 7.4 million. We defined ecosystem clients as customers who are actively and deliberately using at least 2 different MTS products or services.

In addition, average products per customers [idly] increased in both Q1 and Q2, reaching 1.4 at the end of the reporting period. The number of paid MTS Premium subscribers roughly doubled during the second quarter, following a shift to a paid-only model early this year. We also see a healthy dynamic in MTS Cashback, our loyalty and rewards program.

Most importantly, ecosystem engagement is driving leading indicators for lifetime value. For example, users of both MTS Premium and MTS Cashback has a 3x higher NPS and 18x lower churn versus non-ecosystem clients.

In Media, viewership continues to climb. This active OTT streaming users are up nearly 3x year-over-year. And we are gaining good traction in content with our KION originals took 10 of the top 15 spot for most-watched shows on the platform. (inaudible) best offering.

Our SME advertising platform, MTS Marketer, is experiencing robust sustained growth. Ad campaign revenue increased 5x year-over-year in Q2. And externally, we have launched subscriber -- subscription-based pilot projects to get additional fuel in fuel retail as well as Daichi in residential (inaudible).

With that, let me pass it to Inessa for telecom and B2B update.

Thank you, Olga. In mobile, service revenue in Russia grew 5.3% year-over-year in Q2, reflecting continued growth of data consumption as well as overall tariff dynamics. Moreover, our subscriber base continues increasing, reaching a level as seen in 2019. At the same time, international roaming revenue remained more than 60% below Q2 2019.

Given the new virus variants and ongoing travel restrictions, we expect full year revenue from international roaming to remain well below the roughly RUB 10 billion we released in 2019. In fixed line, we saw very robust growth in B2C ex telephony of around 12%, although roughly 1/3 of the delta came from an inorganic impact due to the consolidation of acquired wireline businesses.

Excluding that factor, fixed line B2C revenue ex telephony grew 8.4% year-over-year organically. Overall, the fixed line subscriber base ticked up to 4 million and aggregate revenue was up just under 4% year-over-year.

Turning to B2B. Our cloud and digital solution businesses is firing on all cylinders with revenue growing nearly 50% year-over-year in Q2. IoT likewise is performing well. Subscribers devices increased more than a 1/4 versus the year-ago period. As Olga mentioned, Marketing-as-a-Service revenue was up an exceptional 5x year-over-year. Additionally, B2G fixed-line revenue for social important facilities was up 20% year-over-year, and we are continuing to make good progress in commercial private OT.

I also wanted to highlight that in Q2, we closed a 100% purchase of Multiregional TransitTelecom. 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 enhanced our exposure to high-growth tech sector like e-com and ride-hailing.

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. So with that, let me hand it to Ilya for a Fintech update.

Thank you, Inessa. I am happy to report that in Q2, MTS Bank continue overall delivered very strong performance, successfully carrying forward our forward momentum from Q1. In terms of headline result for the first half of the year, MTS Bank net profit reached RUB 3.4 billion. Operating income before provision increased by 50% or lower reached over 80%.

I'd also like to highlight [Fintech] developments. First, in May, MTS Bank issued a debit bond of RUB 5 billion, and the book was more than 4 times oversubscribed. Second, we have now reached a level 3 digital channel account for the majority of volume of personal loans and card [usage]. And third, in July, we invested in Factorin, a leading blockchain trade finance platform, with -- will (inaudible) the financial service we can offer to B2B clients, in particular in receivable Factorin and supply chain finance.

Turning to our growth driver. The core retail loan portfolio grew nearly 60% year-over-year in Q2 before (inaudible) or contribute to the (inaudible) year-over-year increase in net interest income for the 6 months of the year. Moreover, net fee and commission income in first half of the year more than doubled year-over-year to reach [RUB 7 billion], contributing 14% of overall operating income before provision.

Cost of risk for the (inaudible) full decreased significantly year-over-year from 13% to 5% to the 7.3% in Q2. What level also reflected a deep base of portfolio growth with retail cost of risk exist on being significantly below at the level (inaudible) on renewals.

In addition, positive accounts remain of the comfortable level and the shape of NPL to detail decline to reach 7.5%. MTS book supports to the bank growth strategy. In the second quarter, an additional capital injection [RUB 4 billion] was carried out. MTS Bank capital equity ratio increased and maintained (inaudible).

Overall, we have successfully achieved increased growth rates in 2021 as the bank has repeatedly (inaudible) up. The fee income increased to the level that it is now material, contributing to the profitability of growth as a whole.

Supporting this period of transparency, we also wanted to provide a bit more color on our Media and Retail businesses. Looking ahead, our core focus is gearing those for long-term profitability. In Retail, that's mostly an OpEx exercise. While in Media, it's also about carefully calibrating content investment, which we are keeping well under control as you could have seen on Slide 7, when we showed it.

In Media, we are successfully gaining traction following the launch of our revamped Q1 platform in April. In Q2, 3 months OTT viewers were up more than 11% quarter-on-quarter. Revenue and OIBDA likewise saw 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 a low base from the year-ago quarter when many of our stores were closed in line with public health guidelines amid the pandemic. We're also seeing some OIBDA pressure due to shifting brand mix in device sales. Consumers are increasingly shifting towards more premium brands, which have slimmer gross margins.

In Q2, Retail OIBDA after lease expenses and costs to obtain contracts amounted to minus RUB 1.4 billion, equivalent to an annual run rate of negative RUB 5.5 billion. We believe there is room for improvement there. And we are targeting to bring that to a breakeven level by year-end 2022.

We recently appointed a new leader, Farid Kamalov, from Detsky Mir to help us sharpen our focus on retail and efficiency. Now let me hand it to Andrey for a financial update.

Thank you, Slava. Group net profit for the quarter increased 46.5% year-over-year to RUB 17.2 billion. Net income growth was supported by higher profitability at MTS Bank, core operating performance as well as lower financing costs. In addition, there was a significant positive impact from the fixed and derivative 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 RUB 16.8 billion. The decline versus 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 sales of associates in 2020. Combined, those 2 factors add up to a delta of around negative RUB 7 billion. In addition, historically, our CapEx is skewed towards the second half of the year, while in 2021, we have budgeted investment to be spread more evenly between quarters.

Taking 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 on our 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 Slava for his closing comments.

Thank you, Andrey. I will be really short. 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 OIBDA, while reaffirming our CapEx guidance of around RUB 100 billion to RUB 110 billion.

Finally, on shareholder returns. Last week, we completed full year 2020 dividend payments. And in July, the Board recommended a first half 2021 semiannual dividend. Combined, the expected total regular dividend payout in calendar year 2021 comes to RUB 37.06 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 Polina for the Q&A.

Thank you, Slava, and thank you to the rest of the speakers. As we take questions, please be aware there may be a slight delay for translation. Operator, with that, let's open up the line for questions.

(Operator Instructions) We'll take our first question from Ivan Kim with Xtellus Capital.

Two questions from me, please. Sorry if I missed that, but can you elaborate on the margin pressure in retail? You mentioned the shift of the mix, which is an understandable factor, but there should be more than that since the margin was just 1.6% in the quarter. So I was just wondering whether it will continue 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?

On the first question, well, that is a great question. I want to think that it's more than that, but majorly it is a mix of -- really change of mix of devices. If you ask whether it's going to change or is going to keep the pressure on the margin with our outlook and target that I've mentioned towards our retail, I believe that we are going to be able to change that mix and to improve our margins in retail to a positive area even in old OIBDA.

Yes, on the -- sorry, on the second question, I'll take it too. It's actually a mix of different factors. One of them is a very good uptake of our premium service. The other one is increased activity in CRM and where we allow our clients to get more for less. And at the same time, we see better connections to new tariff, which is also almost by definition (inaudible) products solution. So -- but neither of this is a single solution. It's a combination of factors.

We'll take our next question from Henrik Herbst with Morgan Stanley.

Yes. I had 2 pretty quick questions. The first one was just in terms of your separation of infrastructure. Did I hear it correct that it was one -- you did one tower company and one InfraCo with data centers or was it one with all your telco infrastructure basically? And the other thing was, did you say that you -- are you just setting it up in a separate legal entity? Or are you actually looking to get co-investors or looking at opportunity to IPO or something like that?

And then the second question is around CapEx, which is up a bit, obviously, this year versus the sort of run rate previous year. Maybe it's too early, but should we think about 2021 CapEx as sort of a (inaudible) and a return to more normal levels from 2022?

Okay. I'll take the first 2 questions, and then I'll hand over to Andrey. On infrastructure separation, once again, it's 2 companies. One company is towers only. The second company is infrastructure plus data centers. So these are separate legal entities, 2 separate legal entities, and we'll see how it goes. So now the main idea is to focus, 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 our kind of telecom and technical block is considered to be a very traditional structure. And we see that this could really transform into the most modern edge cloud solutions. And we have all the -- all the parts that when put together that could bring us to a very good market position on that. So on that, again, we will probably be looking for different opportunities. But so far, the idea is to create this company. Andrey, the question on CapEx?

Yes, I will take the last question. On CapEx, I will just reconfirm what we said earlier this year that you are absolutely right, we see and we consider this CapEx this year as a certain peak as a temporary ramp-up as we invest in our future, not in new run rate. So we presume that we will come back to more or less comparable levels that we've seen before.

Our next question comes from Slava Degtyarev with Goldman Sachs.

A couple of questions. So firstly, what would be your current thinking over the long-term leverage levels for MTS? Are you aiming to stay at broadly current net debt-to-EBITDA level, so looking for a certain move here?

And secondly, probably also a follow-up with regard to the value crystallization. What would be your long-term considerations you currently have in mind with regards to the maximization on the portfolio separation. Is it that you can see a long-term potential partner. You can see the partial sale of the business. So you may consider 100% divestment or the sale of the controlling stake or it's your optimistic -- you currently are opportunistic across all of the options?

Yes, I will take the first question in terms of leverage levels. As we said before, we see 2 as a quite comfortable ratio of net debt-to-EBITDA currently stands at the level of 1.6. But the covenant that we have is much higher than the levels that I mentioned. So we are in a pretty comfortable situation at the moment.

On the second question, I would say, it's too generalistic because it very much depends on the company. And general level. But actually, we are looking at different opportunities now, and we don't want to tie ourselves to any of them. But of course, the -- what I want to say is that safety of our main business is one of the things that we are considering most important here.

Our next question comes from Alexander Vengranovich with Renaissance Capital.

A couple of questions from my side. So first, on the relaunch of the OTT video service last quarter. Are you satisfied with the, in general, with the results of the launch. I've seen that the overall increase of the users quarter-over-quarter was probably not that impressive and the growth was really comparable with the previous quarters. So I'm just wondering whether you see that satisfactory and whether you plan maybe to increase the spending on the content to accelerate it.

Then a related question here. So you showed the profitability of the media services. Can you please remind us on the accounting of content spending for the media services segment, whether you capitalize it and depreciate over the time? And if that's the case, can you please roughly share with us kind of the share of the CapEx in first half '21, which was maybe related to the media services segment? So that's probably from my side.

Okay. Let me start with the first question. We're never satisfied with the results. So I think we can do better. But we have to understand one thing. Q1, on the one hand is deliberately launched under a new brand, and we think it's a very right thing going forward. But at the same time, it takes time to get brand to be recognized by the client. We see that we have very good reception of our originals. We took -- I think we took the right way of doing that. And I expect this to grow faster than was shown in the second quarter.

On the second question, I didn't -- maybe you would probably help me to somehow understand it because yes, we capitalize our content production, and we've shown the amount of this production on the second -- seventh slide of this presentation, and this is it. So maybe if you want to -- some more details, you could...

Yes, I found it. Sorry for that. So I found the cash CapEx number on the seventh slide, so that's okay. So I just wanted to confirm that, that is capitalized. Okay, good. And maybe like a sort of follow-up question.

When we look at the number of the monthly service of said clients in the second quarter, I think there was a minor quarter-over-quarter reduction of the active users. So I'm just wondering whether it has any grounds behind it or you feel that the overall number of the users is kind of close to the saturation and it's probably the maximum level you're expecting it to be overall in the future?

I can tell -- I think I got to tell you, you got me worried for a second, but where did you find the...

Yes. So when I look at the, I think, in the first quarter, the number of the MyMTS app monthly active users was roughly around 24.6 million customers, if I'm correct. And in this quarter, it was roughly around 24.5 million. So I'm just wondering whether it has any ground behind it? So that was -- if I'm correct.

Yes, I see. So it's generally flat. But frankly speaking, the most important part here is that when we've been discussing MyMTS numbers several quarters ago and even years, 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 people who use smartphones, they already have MyMTS. And you have to understand that if people use several SIM cards, they usually use MyMTS on one of their devices. So in these terms, this could be multiple. We have multiusers. We don't count them as multi-MyMTS users. So in these terms, we're pretty happy with our current amount of users, but I see that with the development of content of this application, we are going to see additional growth.

For example, we have 2 teams working on fintech part of MyMTS, and we expect more clients for this -- from this side in the following quarters, too. So it's going to grow further, but I don't see anything ominous in those figures. And I see that our subscribers are very happy with MyMTS, which is usually shown in NPS.

Okay, good. So based on what you say, I'm reading that in a way that this like roughly 25 million MyMTS users probably represent the majority where they were close to 100% of the smartphone users on MTS kind of a true unique smartphone users on MTS network, right?

That's not what I said. Sorry.

Our next question comes from Ondrej Cabejšek with UBS.

I've got 2 questions and 2 follow-ups, please. So first question on the bank. First of all, you mentioned last quarter that there may be a need for some kind of equity injection potentially next year. With the bank doing so much better now, is that still a potential consideration? And then also, is there any space you think for potentially reversing some of the provisions that you made last year at the bank?

Second question would be, you mentioned a couple of minutes ago that in terms of margin improvement, that could be done via ongoing retail optimization. But I believe, in the previous quarter, your comments around retail was that you don't actually see in the short term so much space for doing that. So if you could please clarify where we are. And I'll leave the follow-ups for later.

Yes, I will 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 at the bank and the level of risk that remains at the very comfortable levels. So as a shareholder, we are ready to support. We already did it in the first half of the year, and we are ready to actually support the bank and its growth further. So that would be our position.

Well, and also, just as a follow-up of this first question, in terms of reversal of the provisions, actually, we see a very positive dynamics in terms of provisions, but the provision that have been made actually, we do not estimate any substantial reversal of them, but provide the current policy of the bank and the regulations impact on us.

Again, on retail, we see that margin improvement could be reached even on the current amount of stores. We are planning to optimize not the number of stores, but their positioning and product mix within the stores and services within the service, including, of course, not only on the hardware provision. But generally, as we put this before, we are -- they are in a very competitive market. And we were always ready and we're still ready to go down.

We don't -- but we don't see 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 is a different direction. But frankly, I'm very confident that we can reach the goals that I've already mentioned regarding retail.

And the follow-ups that I had for the previous questions, with first one with respect to the leverage, you keep mentioning 2x. It seems -- and correct me if I'm wrong, that it is becoming more of a target than a comfort level?

Not actually. The question was actually what kind of a comfortable level that we see, and that was the answer for that. We don't see it as a target. No, you can see the current levels.

Okay. Okay. And second 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, talking specifically about the towers, I guess, because the -- I think you made it clear that the fintech and the infrastructure are businesses that you see more of potentially as IPO and value on those targets.

But in terms of the towers, if you could create a list of preferences between completely selling them on the one end and on the opposite end, sharing both active and positive elements of the towers with one of your competitors, for example, and all of them are going through similar reviews, what would be the preference of the management today?

No. The point is that as we started in general discussion because we are taking the opportunistic position here. We're looking at different options. There are many of them. And I wouldn't say that we had a list of preferences. I don't know. It would be very theoretical and could be perceived wrong. So I wouldn't be able to answer this question with preset list of preferences.

(Operator Instructions) And we'll take a follow-up question from Ivan Kim with Xtellus Capital.

Just 2 more questions. On MTT acquisition, can you maybe give us some color on what sort of growth you expect from MTT and probably generally from your virtual PBX business. That's the first question.

The second question -- sorry to dwell on leverage, but so your pre-IFRS leverage is now 2x, including the dividend payments that you're going to make this year. Your leverage, including lease is 2.5x. So I'm just wondering, do you perceive that as an issue at all? Or you will be kind of comfortable to move to 2x based on your leverage definition, which is 1.6x currently?

Okay. Ivan. I will take the first question on MTT. So then we were close in that deal. So definitely, we have actually a strategy once the part of the strategy was based on the basic products, virtual and EPS, which is actually growing organically, and we do expect some single or in a good period on a good forecast, it would be double-digit figures.

But the main actually strategy behind buying this asset was to have very big growth on telecom app. And here, we do expect a very big growth. It will depend how quick we will be in the -- introducing the new products on the market and using their well-established B2B channels to bring that product on the market and to our clients. And here, we actually expect very big growth. So we'll definitely keep informed in our next reporting, yes.

Yes, Ivan, and the second -- your second question, of course, just to clarify, I mentioned our current definition of the leverage, which is 1.6%. So in these terms, I said that the comfortable level is around 2%.

All right, we'll take a next follow-up from Alexander Vengranovich with Renaissance Capital.

Yes. So in your presentation, you mentioned that ecosystem clients, and those clients which use multiple services, have a multiple of lower churn against the average client of MTS. So I'm just wondering how big maybe if you can do it and provide any color, how big is the overall churn reduction year-over-year in the 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, from the churn reduction year-over-year? I mean a matter of reduction of the new SIM cards sold, probably some optimization of the stuff, anything which you can share how this churn reduction from the existing client can help you to save on the selling expenses level would be helpful.

We are not calculating it actually all the time because it's a very -- I think, I've tried to explain it in the -- when we reported results of the first quarter that it is a very tricky figure because when you connect them to another service, you see that the churn is going down and you can attribute it to a new service or to telecom increase.

But generally, what I want to say is that, first of all, the major impact could be seen in telecom growth results, which we should show separately to you. And you can see that it's kind of now traditionally better than many of our competitors. But there is no exact figure. We calculated, I think, in the first quarter, we calculated that more than 50% of telecom growth was attributed to multi-products and ecosystem client effects. So this is generally it. But again, this is a very, very vague figure. I wouldn't put a pin on it.

Okay. And we will take our next question from Evgeny Annenkov with Bank of America.

I have just one. Could you please provide some updates on regulation? First, on 5G potential spectrum allocation and rollout model, if any update with consortium model or a stand-alone basis? And the second one also on -- for this spectrum, licenses renewals in Russia that are expiring and potential requirements, it could be linked to it like rural coverage of the federal rules coverage. If you could please provide any update on the discussions with regulators.

Okay. On 5G, nothing major really happened during the last 3 months. And except for the news that you probably heard about localization, but we've expected them. And in this terms on consortium model, let put it this way. I am optimistic. As I said, that I always believe that this problem could be solved only with mutual -- with the help of mutual efforts, and I'm optimistic that this is being solved in the right way.

On the second part, we'll see how officially put forward. But I think there will be some links, yes. And it's -- I think it's already published. I don't see this as the major news. But again, according to the way it's being discussed, I don't think it would put any major pressure on our CapEx or cash flows. It's reasonable. It's 10 years license agreements. So it looks very recent.

So any potential KPIs and spending from your side would be also potentially spread over -- by 2030, something like that? Not immediately in the 2, 3 years?

And in addition to that, I can tell you that the government actually expects us to -- us, operators, to cooperate on this in this matter, and they're really looking -- and I 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 in the next 10 years.

And there are no further questions. I'd like to turn the call back over to Polina for any additional or closing remarks.

Thank you. We have 1 question coming from the journalists, which is about our plans related to potential additional buybacks. If you have any plans to launch a new buyback before the end of this year.

Yes. I will answer. For this year, we actually finalized the buyback program that we run, and we don't have any plans to have another program until the end of this year.

Operator, do we have any other questions online?

No, there are no further questions at this time.

Okay. Thank you very much, ladies and gentlemen, for listening in this call. As usual, we will make a replay of this call available on our IR web page in the near future. If you have any further questions, please do not hesitate to reach out to MTS Investor Relations at any time. Our inboxes and phone lines are open. In the meantime, we appreciate your interest in MTS and wish everyone a pleasant day. Thank you.

And that does conclude today's presentation. Thank you for your participation. You may now disconnect.