Mobile TeleSystems PJSC (MBT) 2020 Q1 法說會逐字稿

Dear ladies and gentlemen, welcome to the conference call of MTS. At our customers' request, this conference will be recorded. (Operator Instructions)

May I now hand you over to Polina Ugryumova, Director of Investor Relations, who will lead you through this conference. Please go ahead.

Welcome, everybody, to today's event to discuss MTS first quarter 2020 financial and operating results. As usual, I must remind everyone that except for historical information, any comments made during this call may constitute forward-looking statements. Important factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This, in turn, imply certain risks and more thorough discussion of 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. You can find copies of the presentations and materials used and referenced in this conference call on our Investor Relations website.

Today's presenters are Alexey Kornya, President and CEO; Slava Nikolaev, First Vice President for Customer Experience and Marketing and Ecosystem Development; Inessa Galaktionova, First Vice President for Telecommunications; and Andrey Kamensky, Vice President for Finance. Now it's my pleasure to introduce Alexey to kick us off.

Welcome, everyone, and thank you for joining us. I would like to begin by saying that our thoughts are with all of those affected by the global coronavirus pandemic. This is an unprecedented time that is impacting billions of people around the world, including millions of our customers and thousands of our employees. Connectivity has never been more critical, and we are proud to be helping our customers stay in touch with their friends and family as well as colleagues and classmates. While the agenda of this call is our first quarter results, the focus of much of the discussion today will be understandably the ongoing impact from COVID-19. As the scale of the situation became clear in February, we activated our continuity protocols and established a task force to coordinate our response.

Let me go over a few of the steps we have taken. First and foremost, our highest priority is the health and safety of MTS team. We have now transitioned over 30,000 employees to remote work. At the same time, many of our workers has mission-critical jobs in stores and in the field that cannot be done from home. To help protect them, we have put in place extensive sanitation measures such as temperature screening, face masks and cleaning protocols. In line with local, regional and national guidelines. Second, we have launched multiple initiatives to help those being impacted. For health care workers, we are providing free connectivity for doctors fighting COVID-19 in many Russian regions. For customers, we are providing restricted access to essential resources at 0 cost, including free calls and traffic to official hotlines and websites.

And for society, we are supporting multiple public initiatives to help the most impacted. In addition, the senior management team has pledged to donate at least 10% of our salaries to charity. And we have launched an internal crowd-funding campaign to encourage employees to follow the same. While our business is resilient, we are not immune. Our core focus has been to keep society connected while moving swiftly to adopt how we engage with our customers. On the network side, we boosted capacity and reallocated resources, and we have successfully handled a dramatic rise in traffic with minimal disruption. On the sales side, we are strengthening online channels, diversifying SIM distribution and doubling down on digital customer care. And on the product side, we've launched new offers and content to help better meet changing customer needs. Slava will talk more about those efforts.

Overall, I am encouraged by how rapidly we have adapted to the situation. As a digital-first company, we were already embracing best practices, including open feedback, rapid streams and lean development. And we are now successfully applying those principles to remote collaboration. I would like to thank the entire MTS team for their dedication and professionalism in the challenging time. While we cannot predict all of those impacts from COVID-19, one thing is clear: digital transformation is now spinning ahead. At MTS, we continue to move forward at full force across of all our verticals. And in the first quarter, we had a number of notable developments. In telecom, we refined our tariffs, took a stake in the regional fixed line operator and launched the first industrial 5G zone in Russia. In FinTech, we launched the completely revamped mobile banking app and saw strong growth in our customer base. That said, looking ahead, we are now anticipating some negative impacts, which Andrey will go over in more details.

In media, we embarked on the new partnership projects, including JV with Channel One and new initiatives in producing content. And in B2B, we saw exceptional performance in promising areas, including triple-digit growth, line growth, in cloud and colocation services. And we expanded our offerings in new product lines. I also wanted to highlight that last week, we announced new candidates for the Board of Directors who have a deep bench of expertise across retail, media and digital transformation. These competencies are complementary to our growth strategy and I hope to welcome the new members of the Board following the AGM in June.

Now turning to our results. In a relatively normal environment in the first quarter, we saw solid overall performance in the first 3 months of the year. Group revenue increased nearly 9% year-over-year to reach around RUB 120 billion on the back of positive contribution from all of our 4 verticals. Most impressively, around half of the top line growth came from adjacent segments beyond connectivity. We have been making steady progress in our transformation, and that's how being reflected -- and now being reflected in our figures. Group adjusted OIBDA was up 1.6% to reach RUB 51.5 billion, driven by growth in core services, which Inessa will talk about in more detail. At the same time, we were constrained by a high base due to positive one-off in first quarter 2019. And excluding this effect, adjusted OIBDA saw a solid 5.6% underlying growth year-over-year. Overall, I'm happy to say that we delivered yet another strong quarter of solid results.

With that, I will hand it over to Slava to give customer experience and marketing updates.

Thank you, Alexey. As you all know that the world is facing unprecedented challenges and disruption, but as always, change also brings opportunities. And we firmly believe that those who adapt fastest today will be best positioned for tomorrow. In the current environment, our guiding principle is providing compressive and consistent support for our customers. As we do this, our focus is on strengthening long-term relationships and not short-term monetization. This not only makes good business sense, but it's the right thing to do. As Alexey mentioned, we have launched a number of CSR initiatives to support those who are most impacted. I particularly wanted to highlight the work we have done to provide connectivity for doctors fighting the virus. We have launched a new tariff with 3 free months of connectivity, which we have offered to thousands of health care workers. This was the first project of its kind in Russia, and we hope it's a help to those on the frontlines.

We have also been seeing changes to consumer behavior as people migrated to working, studying and socializing from home. More and more of our daily lives is happening through digital channels, and we are moving decisively to offer new solutions for new lifestyles. For example, we launched a state home bundle of digital services that packages together MTS TV, music library, fitness and telemedicine via our SmartMed application. We are also providing extra rewards within our loyalty program for online purchases of much needed goods, such as grocery and food delivery. And in live entertainment, we have shifted gears towards online programming, launching a series of virtual concerts with some of Russia's top-performing artists. Viewers can watch a free stream via MTS Live, with the option for an immersive experience with a VR headset. To date, over 30 million people have tuned in, and we have a packed event lineup ahead of us.

Given where we are in the business cycle, as we execute on those initiatives, we're taking cautious approach in terms of OpEx. But ultimately, this is an investment in the future. Beyond the recovery phase, we think many changes to consumer behavior will likely persist. That's why we think now is a good time to begin disclosing additional metrics around our ecosystem development. In Q1, we continue to see growing adoption of MTS apps. A good example is the MTS Bank application, with users up more than 70% year-over-year breaking the 1 million mark for the first time. Additionally, our flagship self-care hub, My MTS, reached nearly 22 million active users. Although going forward, we expect that number to plateau given that we have already attracted our most digital cyber users to the platform. But we're staying ahead of the curve and now shifting our focus toward expanded functionality, in particular, by aiming to deepen FinTech-based features and capabilities. We've set up a joint team with MTS Bank to do just that, and we have some exciting developments in the pipeline. As regards with the bank, we continue to see robust growth in the customer base in Q1, reaching nearly 2.5 million bank clients, over half of which are in our key audience of high-frequency daily banking users.

And lastly, in media, we have stable foundation of 4.6 million pay TV viewers, with promising prospects to add new customers by leveraging bundle offers and the exclusive content. Overall, we've made steady progress in cultivating our ecosystem and those efforts are beginning to bear fruit. Now let me hand it over to Inessa for a telecom business update.

Thank you, Slava. As Alexey mentioned, connectivity is now more important than ever. Over the past 2.5 months, we have successfully adopted our strategy through unprecedented challenges. Operationally, this has required tremendous efforts from redirecting call centers and redesigning sales channels to reassign employees to remote work. We executed at lightning speed, and despite disruption, successfully maintained overall high-service quality as well as healthy sales dynamics.

Turning to Q1 results. Let me begin with mobile in Russia. Overall, we saw solid top line performance with year-over-year mobile service revenue growth in Russia accelerating nearly 7% to reach around RUB 80 billion. This is part reflected in the impact of tariff adjustments towards the beginning of the year. In addition, there was a low base effect due to pricing moves going into effect relatively late in 2019. We also continue to actively fine-tune our tariff structure. For example, new subscribers of our flagship tariff are now presented with an additional paid option to activate unlimited data above 25 gigabit. As we're really blocked due to travel restrictions, we have seen a step falloff in roaming revenue. We expect this to materially impact our results in Q2 and potentially into the second half of the year.

Turning to subscriber dynamics. In Q1, our mobile customer business in Russia was up just under 1 million subscribers year-over-year. At this same time, given the retail situation in Q2, we began seeing a significant impact on ads and outflow. The situation is evolving and the impact is hard to forecast. That said, we expect a reduction in churn will only partly compensate for lower ask, translating into net decline in subscribers. However, we think the biggest dynamic is in the low-value segment, such as stores, guest workers and secondary SIM users. Altogether, this represents a small share of total revenue. In contrast, we are seeing greater resilience among our high-value customers who continue to be our strategic focus and target audience for upselling digital services. So while we do expect some impact, we continue to see long-term opportunities for ARPU attrition. In fixed line in Russia, we saw positive revenue growth of 1.4% year-over-year in Q1 to reach RUB 15.3 billion. Notably, we saw solid performance in consumer broadband and TV more than offsetting declines in lending phones. Excluding telephony, B2C fixed revenue were up over 5%. More recently, new ads and bandwidth upgrades are higher than forecasted, particularly in Moscow, as people are working, studying and relaxing more at home.

Turning now to retail. In the first quarter, we saw a solid 6.1% year-over-year growth of sales of handsets and accessories, reversing the dynamics we saw in Q4. That said, we believe this is part reflected a temporary, I believe, due to foreign exchange volatility. In particular, as the ruble weakened, consumers have -- may have accelerated purchases of imported devices ahead of expected price increases. In Q1, we also continued to execute on our optimization program, and we were on track to hit our target of up to 400 net closures this year. However, the mood has now changed, and retail is one of the most impacted sectors. As an essential business, many of our stores have remained open during the crisis. Although stores in shopping malls have had to close in line with local health guidelines. Given self-isolation measures, we have also seen a significant decline in food traffic. Altogether, we anticipated to lose a major share of retail revenue in Q2, but we're not standing still. We are moving swiftly to adopt our approach to the current environment. We have expanded contactless SIM delivery to hundreds of Russian cities, and we have added thousands of new SIM distribution points in essential retail outlets, including post offices, grocery stores and pharmacies. In addition, we have received regulatory approvals for self-registration of SIM cards and have already fully put this into commercial operation with an app-based identified verification process.

Looking ahead, we plan to prioritize this channel as the key level to lower subscriber acquisition costs. We're also broadening our FinTech satisfaction tracking across all of our sales channels. We want to make sure customers have a great experience during each and every touch point, whether in stores, online or at their door. At the end of the day, our telecom strategy is simple: best brand, best network, best customer base. We had a strong start to this year, and despite challenges, I'm confident we're on the right track.

With that, let me hand it to Andrey.

Thank you, Inessa. As usual, I will start with an update on MTS Bank before circling back to group financials. Given the insulation from COVID-19 in Q1, the bank saw a continued strong performance in the first 3 months of the year. Net interest income rose 43% year-over-year to RUB 3.6 billion, driven by 50% growth in the gross loans versus the year ago quarter. Net profit for the bank amounted to more than RUB 200 million, which included a negative impact of about RUB 480 million as we proactively booked provision in response to the changing macro environment in Q2. In line with our consumer focus, portfolio growth was driven by retail loans, which were up 67% year-over-year to RUB 91.1 billion. Importantly, we saw a good mix of growth across general purpose loans and the card products, contributing to overall portfolio diversification. Shifting gears from Q1 to Q2. In contrast to connectivity, the banking sector is more sensitive to macro volatility, and we have begun to see significant shifts in the indicators we track. By early April, sales of new loans were down around 60%, partly reflecting the closure of retail branches, but also changing patterns in consumer spending and savings. We have also seen an increase in request for loan restructuring. Given these signals, we are carrying out a deep and comprehensive assessment of the portfolio, and we are modeling a variety of forward-looking scenarios. While the full impact remains difficult to estimate, we are taking a cautious approach. We currently envisage cost of further increase in Q2. That will likely require additional provisions that would be recorded in future reporting periods, which we expect to put pressure on the banks for EBITDA and net income.

Nonetheless, we are confident we will overcome the speed band. Moreover, recent developments have only further reaffirmed the logic behind our strategy. Now more than ever, consumers are shifting to digital-first banking, from online customer service to virtual cards and contactless payments.

Coming back to the group. In Q1, group net profit came in at RUB 17.7 billion, largely flat year-over-year. On top of support from core operating performance, net profit also saw a significant positive impact from depreciation of the ruble, which -- with losses from a fixed effect, more than offset by changes to the fair value of the derivative instruments. In addition, a decline in finance income versus the year ago quarter was largely offset by lower financing costs, reflecting our ongoing efforts to optimize our debt portfolio. At the same time, net profit faced headwinds from a relatively high base in discontinued operations in the first quarter of the previous year, in particular, from MTS former Ukrainian operations as well as the reassessment of the reserve related to Uzbekistan. Excluding discontinued operations, in the first quarter of this year, net profit from continuing operations increased 33.8% year-over-year to reach RUB 17.3 billion.

Turning to CapEx and cash flow. Capital spending for the first 3 months of the year increased by RUB 3.6 billion as we continue to actively invest in improving capacity and coverage. When excluding the payment related to Uzbekistan in the first quarter of 2019, free cash flow in the first quarter of 2020 declined RUB 6.7 billion year-over-year and totaled RUB 17.5 billion, largely driven by the 2 factors. First, higher CapEx intensity this year due to the acquisition of a stake in the regional fixed business; and second, a high base from the divestment of our stake in Ozon in the year ago quarter.

Turning to the balance sheet. This year, we are continuing to take timely steps aimed at optimizing our debt portfolio. In the reporting period, we issued RUB 15 billion in exchange-traded bonds with a maturity of 7 years and the component rate of 6.6%. We also raised 2 loans with a maturity of 5 and 6 years totaling RUB 75 billion. By the end of March, our gross debt FX exposure had been reduced to just 2%. Total group debt at the end of the quarter stood at RUB 423.4 billion, with the weighted average interest rate decreasing nearly 30 basis points from the end of last year to 7.4%.

Our net debt to last 12 months adjusted to EBITDA ratio stood at 1.6 at the end of the quarter, excluding the effects of IFRS 15 and 16. And we find this level very comfortable in the current environment. Now I will hand it back to Alexey for his closing remarks.

Thank you, Andrey. Since first quarter, the world has changed and so has our outlook for 2020. In the interest of transparency, I wanted to share some of the operational indicators we track internally to give a sense of what we are seeing. Importantly, some of the biggest impacts we saw in April are now starting to reverse in May. In connectivity, roaming is at near 0, while local traffic remains elevated, particularly in fixed line. Although the early spike in top-ups and add-ons has now getting on to baseline. In retail, many of our outlets that were temporarily closed in March have begun reopening, and we are seeing gross adds and sales of goods trending in line. In FinTech, our retail bank operations have fully resumed. In addition, virtual card adds are up more than 1/3, despite a sharp decline in overall card issuance. But as Andrey mentioned, we are expecting an impact from economic headwinds. Finally, in digital, we are seeing breakneck growth in new users. In April, My MTS adoption was up 2.5x, and ads in SmartMed and Smart University were up at an explosive 10x. That's a powerful catalyst for our ventures in telemedicine and our online education. Taking these trends together, as well considering the increased uncertainty for the remainder of the year, we are revising our 2020 guidance downward to flat to 3% growth in revenue, minus 2% to flat in adjusted OIBDA, OIBDA; and maintaining our CapEx outlook at around RUB 90 billion. Despite this revision, we are confident in the relative resilience of our core business as well as our solid liquidity position and sustained cash generation ability.

In terms of shareholder remuneration, we remain fully committed to fulfilling our dividend policy in 2020. Furthermore, this year, we have already paid a special dividend in the first quarter. As well as launched the repurchase program to buy back up to RUB 15 billion of our shares. Finally, the Board has also recommended the full year 2019 dividend of RUB 20.57 per ordinary share for approval at the AGM in June, which, by the way, we will be conducting remotely for the first time. We will be webcasting the event, and we have an action-pack lineup. I hope you will join us remotely.

So to sum up, we had a solid first quarter. We are navigating second quarter, and we are continuing to move forward on laying a strong foundation for the future of MTS. Thank you, and let's open up line for the questions.

Operator, we are ready to take questions now.

(Operator Instructions)

The first question we've received is from Cesar Tiron of Bank of America.

And congrats on the numbers. I have 2, please, 2 questions. So the first one is really on the traffic. If you can please share again the data trends in May and how those compares to April? And then the second question would be really on the guidance. It's a downgrade, but it looks more like an upgrade to the underlying business, I guess. Can you please tell us what you have assumed in terms of affirming for the full year? Have you assumed that there's no, I mean, revenue for all of the remainder of 2020? And then what type of provisions have you assumed for MTS Bank going forward?

Thank you for your questions. On data traffic trends in May, we see that still the fixed line, the traffic is quite elevated. And overall, over those few months, we saw a much high-impact coming from -- on the -- in terms of capacity stretch on the fixed line rather than on mobile. So in mobile, the traffic is up from the pre-pandemic period, about 10%. While fixed line is about 30%, 40%. And in Moscow, even it is above that. So in the same, we see some reduction of the stretch in May versus April in fixed line, but overall, the situation is staying as such. And as far as guidance is concerned, we would taking the uncertainty and relatively low visibility of how things develop, we would refrain from maybe getting as particular contributions from business lines into this guidance. We think that with all variety of the businesses, we took into account certain recovery, both in terms of isolation requirements in some other aspects starting from summer. But generally, we think that this is quite a strong guidance. I agree here with you that's quite a strong guidance taking the overall macroeconomic situation and the strong roaming effect which we saw in the second quarter.

Okay. Just to make sure you have assumed -- it's in the press release, I guess, but you have assumed further provisions at MTS Bank into the next quarters into the guidance, right?

Yes, yes. We assumed significant provision, which we will probably see in the second quarter in our financial segments.

Very clear.

It is important to say that our risk policy is quite sober in financial segment and always was as such. We showed our cost of risk. And we even started expecting some slowdown in 2020 already in 2019. We started putting a more strict risk requirements towards B2C loan portfolio in the bank, and that will have a positive impact on our provisioning this year. So we've been quite cautious and started taking relevant measures early enough.

The next question is from Ivan Kim of Exelis Capital.

Just a follow-up on the previous question. So you don't want to share how much you planned for provisions at MTS Bank for the second quarter, just to make sure? And my 2 questions are first on retail footprint. Do you see the opportunity to accelerate the closure of the stores? And how do you see that market evolving throughout the year? And my second question is on the acceleration in the massive mobile service revenues, excluding roaming. In the second quarter, you saw a 40% increase in demand for voice and data packages in April. Some return to baseline in May, of course, but even that 40% increase is quite significant. So do you expect the acceleration in domestic mobile service revenue in the second quarter and how significant that's going to be?

I'll take the provision, and the next 2 will answer Inessa. On provision, I would like to specify 2 important aspects. Firstly, it's too early to indicate because the ultimate provision for the first quarter will depend on certain consumer behavior, and in particular, the (inaudible) which we will see upon completion of the second quarter. So in this sense, we wouldn't be even able to indicate the -- to give you any guidance in this respect because it's too early, firstly. And secondly, just to stress once again, we have been quite sober in terms of our risk policies. We start early enough. Yet in the -- starting from the end of 2019, a more disciplined risk approach. And that also allows us to limit the potential additional provisions, as we think we'll see in the second quarter.

Regarding the retail footprint. As we promised for 2020, we plan to close around 400 shops. So in first quarter, we closed around 170 shops. And actually, we are planning to close the rest up to September. But due to the quarantine, we are forced to close much higher number in April and May. So -- and we will follow on the situation on the market, and we'll see how many shops we will open at the end of Q2. At the moment, we don't plan to close more than 400, but we'll definitely review the situation on the market and we will take further actions based on Q2 results. This is on retail footprint.

Regarding the acceleration of roaming and effect on Q2. We once again, we'll mention that in Q1, it was effect on the pricing and on the low base -- sub-base in Q1. So we don't expect an effect continue in Q2.

The next question is from Ondrej Cabejšek of UBS.

I have a follow-up on the guidance in the previous questions, more related to revenue trends and the data trends per se. Can I just understand -- or if you could give us more color because you indicated that the trends are stabilizing and improving already in May? Could you give us just an idea of what happened to service revenue trends in mobile in April? And then in terms of the guidance going forward, would you be able to give us an indication in terms of what the assumptions regarding mobile service revenues are for the updated guidance, please?

I will take this question. This is Slava Nikolaev. I can tell you that service revenue, when we're talking about service revenue, the major impact on service revenue we had was roaming. And given that we've got most of this impact already in April, I can tell you that in these terms, the trends in May seems better. Nothing on news in addition to that.

So no number that you're willing to give us, for example, April. But what the trough of the trends look like?

No, no particular numbers. You probably can know our revenue streams in roaming, we've disclosed that many times. So actually, we expect them to come back at some point. In other revenues, we -- again, we don't see any decline in mobile revenues.

Okay. And second question, if I may. You finished the acquisition of the regional broadband provider. Can I understand clearly, there is more demand for fixed broadband in Russia? It's still an underpenetrated market. Is this potentially, given that the current increase in demand for fixed broadband, a first of several acquisitions that we may expect from MTS in this space?

Well, it's -- I don't think that the particular growth in broadband demand is improving valuation approaches or the price of the assets, either downwards nor upwards. So I wouldn't say that it principally changes our approach. So we do look at the opportunities in the market. We continue to monitor. And it is part of our strategy to grow nonorganically in our fixed line presence in the regions to the extent it is possible and economically viable. So they -- we'll continue with this approach.

The next question is from Herve Drouet of HSBC.

Yes. A couple of questions as well. The first one is, could you share with us maybe the NPL or bad debt you have experienced in April or beginning of may or maybe in terms of trend to give us a bit of an idea on how the provisions may look for MTS Bank. The second question is regarding your CapEx, I mean, we've seen there is much more traffic in fixed line. I was wondering, are you starting to shift a bit more CapEx, more towards fixed or digital, as there is an acceleration of digital adoptions versus purely mobile? Or do you stay with your current plan as planned at the end of last year? And out of this CapEx, how much for this year out of the RUB 90 billion is for the Yarovaya law, is my second question? And just finally, just a comment. Do you believe there could be a very good opportunity to drastically reduce your point of sales, in terms of retail shops, especially as the online retail has increased quite significantly. And do you believe your competitors may gradually move more towards that route rather than just physical outlet?

Okay. Let me once again take the bank question on NPL and provisions. We showed the figures on our NPL and cost of risk as of effect up to April '20 in our slide deck, so in terms of like being more new vertical. So we didn't see much of the growth in NPL, and there is some growth in cost of risk on the back of macroeconomic development with additional provisions to come, but just to reiterate what I said to give a more detailed or more specific indication will be premature. We think that we have a sober risk policy approach, and we yet have to see how the situation develops towards the end of second quarter. We give guidance with taking into account the additional provisions required for MTS Bank.

Yes. I'll take the second question about CapEx. As we reiterated our forecast for this year, for the same amount as we said before, you should bear in mind, actually, if you compare our CapEx versus previous year, that we are spending a bit more if you take out the Ukraine operations out. And this increase -- that's specifically has to do with more CapEx that we're spending on fixed business, because it's growing, and it is a part of our strategy. We are focusing on converging products, more and more. And of course, digital products, which became a part of our strategy and actually our operations.

Okay. I will repeat the answer regarding the retail footprint. So first of all, we don't need a radical optimization in retail, first of all, because our retail change generates very quality sales. And secondly, we had plans to close this year around 400 shops. In Q1, we closed 170, and the rest, 150, we were planning to close in Q2. And as you know, and as it's mentioned in 18 slide. In April, it was closed due to quarantine -- due to coronavirus around 50% of our chain, and in May, around 25%. So actually, at the end of the day, so it was -- the big part of our retail chain was closed. So at the moment, we don't plan to close more than 400 shops this year, but we'll navigate, we will see the situation on the market. And if it will require and if we see some additional proof that we need to optimize certain number of shops, we will definitely announce that. But at the moment, we stick to our plans to close 400 shops this year.

All right. Okay. And maybe just a follow-up on the CapEx. How much for this year is going to be spend for the Yarovaya law or in data storage out of the a RUB 90 billion?

Actually, we do not disclose the parts of the CapEx. We are also referring to the total amount.

All right. Okay.

You're asking about Yarovaya?

Yes.

Yes. Yarovaya, just for this year, out of the RUB 90 million spend this year.

Yes, yes. Look, we -- our guidance is RUB 50 billion over the 5-year period. And we are saying that we'll be trending a little bit towards the beginning or the start of those -- of implementation of Yarovaya law. So you can assume that we will be around -- if you divide 50 by 5. That's a rough indication.

The next question is from Alexander Vengranovich, Renaissance Capital.

Yes. This is Alexander Vengranovich from Renaissance Capital. Just 2 follow-ups, I think, from my side. So the first one is on rising data consumption in April and May. I'm just wondering how it's possible for you and to upsell your customers with higher speed data tariffs on fixed line and probably bigger packages on mobile. Do you think that it's feasible to do it in this environment, and you've already start to see that the customers are taking higher speed data tariffs or bigger packages on your mobile network? So I'm just trying to understand what sort of upsell opportunity is on your fixed line and mobile network. That's my first question. And the second question is also on your competitive environment in mobile. So you've done the price increase early in the first quarter '20. And I think most of your competitors did the same. Also in April, we've seen that Tele2 has started to quite substantially increase the prices for Internet tariffs in some of the regions. I'm just trying to understand if it's a major change to the competitive environment, I mean, that it's becoming even better because like everybody is trying to optimize its marketing proposition for the customers and there is no further disruptive activity from Tele2 anymore in the market. So do you see any changes after the first quarter with regards to the competitive environment?

Okay. With the first question, first of all, I want to try and stress that we see higher data consumption primarily in fixed line. Though overall trend that we see from the beginning of the year and including the time after COVID that people tend to get higher tariff plans, higher-priced tariff plans with bigger allowances. And you probably remember that component in February, we started to go away from pure unlimited tariff plans, making additional services for limited -- for separate price. So first, we see increase in tariff pricing with this. And second with -- we already told you that many, many times that environment -- competitive environment in Russia is improving. And I think that what you see in the first quarter is just the result of that. We've seen Tele2 following our moves for a long time now, and I'm completely not surprised that they're increasing their prices following our changes. So I wouldn't say that it's a major change of competitive environment. It's just something that led to a very stable increase of our mobile revenues in the end of last year and the beginning of this year. So I think it's just remaining the same for the last 9 to 12 months.

The next question is from Slava Degtyarev of Goldman Sachs.

Two questions. Firstly, on guidance. You haven't lowered your margin guidance for the full year despite the loss of the high-margin roaming revenues. Can you please talk a little bit about the mitigating factors that you're implementing across your business, maybe on the personnel side, marketing side, subscriber acquisition costs, et cetera? And secondly, a question on the B2B digital and cloud performance. Basically, can you elaborate how it performed in Q2 or whether there is an acceleration of growth there? Or you observe certain challenges?

Let me tell you on guidance. Actually, we do reduce our guidance by expanding the range. So we put the range in starting on OIBDA from minus 2 to flat. So that gives us certain -- gives you visibility and gives us certain better flexibility as we'll see how the situation develops towards the year-end. Of course, we are taking a number of initiatives in order to optimize our costs, starting from revising our roaming agreements, reducing our marketing budgets and many other initiatives, which will help us to catch up with our OIBDA current guidance. Saying that, we think -- and here I probably agree with you, it is a strong guidance on OIBDA, but we'll have to take certain efforts in order to deliver.

And on B2B digital, yes, we see double-digit growth in this segment, organically. If we look and we believe that the demand -- the strong demand will stay there. So we have very good infrastructure. We acquired, as you know, one of the top-leading data centers, commercial data centers, Avantazh. We shall now -- we will start filling in this year. So that gives us additional contribution to our revenue. So overall, we're quite positive for now data cloud and B2B business, digital development.

The next question is from Dilya Ibragimova of Citi.

I had a couple of questions, please. First is on -- just wanted to -- if you could share perhaps your thoughts on board nominations. You did mention strong candidates and specifically what your thoughts are? Whether you have any projects in mind on following the appointments and election post the AGM of (inaudible) and a very seeded check, I think, was (inaudible) background? And it sounds like they need to be. So that's my first question, or questions if you could share your thoughts there. The second question is on B2B -- or maybe let me refer a bit, whether you see your data center capacity as sufficient? Whether you plan to invest more considering the trend from demand for media and entertainment specifically, whether -- what you're thinking is in terms of network architecture? Whether you've asked 5G whenever that comes in or even with the 4G people stream content? Whether you need more localized presence of the data center cloud solutions to be able to offer good quality of services. And maybe last one on the media and entertainment vertical. Considering strong demand or strong viewership that you have seen in April and May, with all the events that you have been introducing. Do you see this vertical as an opportunity to drive customer loyalty only? Or do you think you could monetize this as well and a few new initiatives you've mentioned the JV with the -- or is there an offer the -- I think the new producer -- is there a new format that you're looking to produce? If you have any thoughts there.

Well, a few words on Board of Directors nominations. I think the new Board is strengthened in order to respond or to help the company with the new strategy, ecosystem strategy, and moving outside of pure talk product proposition. So we have Konstantin, the leading guru in mid -- in Russia. As you know, we signed an agreement with [Channel One], strategic partnership, in the sense to develop our media together. And in this sense, it is a logical addition to our Board taking our strategic partnership and his expertise and his knowledge. Nadia Shouraboura is a very experienced professional in building and developing ecosystems. And it seems we are facing a lot of eco-systematic challenges and questions. She will be helping us to give proper response or to develop. And in particular, in data center strategy development, she has also a very good experience with them as well. And Shaygan, he's very experienced both in telco and being a Technical -- Chief Technical in Verizon and in digital banking, being technical digital expertise in leading banks. And Mr. Alexander Galitsky is very -- has a very broad experience in different industries and with startups and with how you build up the business and how you develop businesses. So these are all very strong additions we believe to our Board. One can note that also we have a majority of Board Members are now independent. There is also very strong indication of strategic approach or strategic stance, which we'll get from the Board. Yes, that's probably some thoughts on -- in respect to the Board. With the data centers capacity utilization, we are not using that heavily for -- or we don't see it as a primary source for internal usage, in particular, when we talk about entertainment or media or something like that. These are just minority of our data capacity utilization, and the primary use, of course, is commercial, so we'll sell. Although we have internal internal use, but with the new data centers buildup, with the new development, of course, the primary goal will be -- is commercial to develop on that and to build a new revenue scale. And in this sense, we are -- we have a lot of capacity. We build and require significant capacity, which we will monetize in this year and next year and going forward.

On entertainment. Actually, you have asked a very interesting question. Because first, we realized when we were launching this -- the virtual conference, we realized that definitely not the time and place to monetize that heavily on subscriber base at the moment, but it was really great impact on our MH and on loyalty. We've got a lot of positive response. And in addition to that, I can tell you that the -- actually, the cost of contact in this endeavor is really great. It's one of the lowest in the history of such events. But at the same time, I think that coming back to normal, we will be able to monetize that because, first of all, we had already, for some time, we had an interesting VR project that maybe wasn't that popular in the pre-COVID times. But now as we see huge demand in online concerts currently in Russia, we believe that we'll be able to provide concerts still free of charge in normal capacity, normal quality but we'll charge for 4K, and we will charge also for VR 360 and other additional capabilities that we already have on our platform. So it's actually good in both ways.

The next question is from Mr. Igor Goncharov of Gazprombank.

Yes. Just 2 quick follow-up questions. One on the dividend, you mentioned in your presentation that you remain committed to the dividend payments during the year 2020. For some reasons, you mentioned the year 2020, specifically, does it mean that there is some -- do you see some flexibility in relation to the dividend payments in the year 2021, which is still included in the current dividend policy? That's question number one. Question number 2 related to the completed integration of Rostelecom and Tele2, do you see any changes in the competitive environment in recent months related to this integration? Do you see any additional pressure potentially on your business from this?

Yes. So the answer to the first question is very simple. We're going to stick to our dividend policy, which is, well, for 3 years. So there is no changes that we foresee for 2021 in terms of dividends.

Speaking on competitive environment, firstly, overall, as we already mentioned we think that it remains stable. We don't see any deterioration or need significant improvement in place. We think it is stable, and that gives us certain activism, I would put it that way. And in this sense, we don't see effects from consolidation of Rostelecom and Tele2, having any specific impact on our -- on the current competitive environment. I would rather say we encourage any consolidation in the market because they think that overall consolidation of the market is good and positive steps, and all leads to value -- certain value creation in the markets. So I think it's rather the move in the positive direction.

We now received a follow-up question of Ondrej Cabejšek of UBS.

A follow-up. I'm not really expecting an answer to it, but I'm going to try. Can you give us an indication of what amount or what part of your growth as is currently coming from beyond, as I'm really interested what part of your service revenue growth that is above market is driven by the losses that VEON is reporting?

Well, that we cannot say, sorry. It's a very specific question, and I don't think that this is necessarily the source of our growth. So I wouldn't really comment on our competitors or anything.

Thank you very much. There are no further questions. I would like to hand back to you.

Ladies and gentlemen, thank you very much for listening. If you have any further questions, we welcome you as usual to contact MTS Investor Relations at any time. A webcast of this discussion will be available soon on our website if you wish to replay the call. In the meantime, we appreciate your interest and wish everybody a happy and healthy day. Please, stay safe.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.