Mobile TeleSystems PJSC (MBT) 2003 Q1 法說會逐字稿

Welcome to the Mobile Telesystems first quarter results 2003 conference call on the 26th of June, 2003. Throughout today's presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. If any participant has difficulty hearing the presentation, please press the star followed by the zero on your telephone. I will now hand the conference over to Mr. Andrey Braginski.

Thank you and welcome to MTS' first quarter 2003 financial results announcement. The forward-looking statements made during the conference call reflect the opinions of management as of the date of this call. Please be advised that developments subsequent to this call are likely to cause these statements to become outdated with the passage of time. We do not intend, however, to update the guidance provided today prior to our next quarterly conference call.

By now you should have received by e-mail a copy of our first quarter 2003 financial results press release. I encourage you also to download the presentation that will be guiding this conference call, as indicated in the invitation sent to you yesterday. The presentation is available on the company's corporate website at www.mtsgsm.com in the investor relations section.

Our presentation team consists today of Mikhail Smirnov, the President of MTS; Mikhail Smirnov, First Vice President; Tatianev Tsuchenkava [ph], Vice President of the company; and Wim Van Bommel, the company's Chief Financial Officer. Following the presentation, we'll conclude with a question-and-answer session and you will be welcome to address any question you may have to the MTS presentation team. Now I would like to hand over to Mikhail Smirnov, the president of the company.

[through translator] Thank you and hello, ladies and gentlemen. It's a great pleasure to open today's conference call announcing first quarter results.

The first quarter was marked by a significant event for our corporate history. MTS became the owner of a controlling stake in Ukrainian Mobile Communications, one of the market leaders in the Ukrainian mobile market. The acquisition of UMC gives us access to a low penetrated market with great potential for growth.

Currently the company serves approximately 2 million subscribers and we will be consolidating operational financial results into our financial reports starting March 1st and we are quite pleased with UMC's contribution into our operations.

Net revenues in March were $29.9m and net income was $1.5m. UMC's EBITDA margin was 55% and we do hope that in the future we will see dynamic and stable development of our operations in the Ukraine.

During 2003, MTS continued its strategy of developing the business in the Russian regions that are most significant interest. In March, MTS received a GSM license to operate in the Samara region and the Samara license become an important extension to MTS portfolio in a strategically important area, the Volga region. We are planning to initiate operations in Samara this fall.

We have also been persistent in the strategy of acquiring companies in the regions where we have no license or where we have no way of obtaining the license. In particular, this spring MTS has acquired a controlling stake in the leading operator of Tartarstan, TAIF-TELKOM, with a subscriber of 230,000.

The rapid development of the Russian cellular market is continuing. From the beginning of the year, the number of mobile users in Russia increased by 6 million to around 23.5 million. MTS maintains its market share and today services around [9.32] million users in Russia and about 2 million in the Ukraine.

I would also like to note the growth of operations of the joint venture in Belarus. In Belarus the subscriber base increased to 165,000 compared to 43,000 at the beginning of the year and our strategy will further be aimed at maintaining the company's leadership in the markets where we have an established presence.

The guiding principles of financial and operational transparency and respect of minority shareholders' rights have been once again confirmed. Standard & Poor's has recently reconfirmed MTS' corporate government score of 7.4, which is the highest level for a Russian company.

This month, “Business Week” has published another of its Info Tech 100 ratings. That is the sixth time that the rating has been published and it includes companies that take the leading position in the world of technology. This year MTS holds the honorable 15th place in the Info Tech 100 ratings. The “Business Week” rating once again demonstrates that our strategy, which is aimed at regional development and technology advancement, has put us amongst the leading companies in the world.

To conclude, let me highlight MTS' financial results for the first quarter. Revenues were $446.1m, which is a growth of 80.2%, as compared to the same period last year. EBITDA margin was 50.4% and net income grew by 87.3% to $80.2m. MTS' management is further committed to following the policy of tight cost control and maintaining a high profitability level.

Thank you for your attention now and I'd like to give the floor to MTS' First Vice President, Mikhail Susov [ph], to discuss our marketing development. Thank you.

[through translator] Thank you. Dear ladies and gentlemen, as you can see from the first quarter results, the company has retained this year, also, the high growth rates and has been successful in implementing the business development strategy on the Russian and neighboring cellular markets. Overall subscriber base for the period grew by 2.77 million and reached the number of 9.32 million.

Let me point out here that MTS' efforts aimed at improving the level of services and strengthening of the company's position, combined with the success of the MTS new tariff system, led to an increase of market share for the company and at present MTS' share is 37%.

In the first quarter MTS has maintained leadership in Moscow net additions by adding 458,000 new subscribers. The number of MTS Moscow subscribers at quarter end was 3.54 million and at present it is around 4.1 million. MTS' Moscow market share is estimated at 46% at the end of the quarter and at the year end it was 43%. The company will work further on maintaining and increasing the market share in the important regions.

The company has also been very successful in promoting its Jeans prepaid products. The number of Jeans subscribers is currently over a million. Jeans accounts for 23% of net additions.

In the first quarter we saw an increase of churn in Russia and we saw an increase to 11.6%. This is primarily due to the factors of seasonality and increasing competition in the regional and Moscow markets.

In line with the market trends, MTS ARPU in Russia in the first quarter decreased as compared to the last quarter and was $18.50 and ARPU of Jeans subscribers was $10.30 for the quarter. MTS' value-added service revenue share was 6.5% and depending on the market situation, we are further committed to promoting and developing the value-added services.

We at MTS are proud of the brand and the popularity it enjoys in the country's regions and in line with our policy of transferring companies to the unified MTS brand, we have successfully completed the transfer of our brand name to two regional operators, [inaudible] Telekom [ph] and [inaudible] GSM [ph]. The level of services, technology and customer care fully comply with MTS' highest standards.

To close my speech, I'd like to say that further on we will continue to focus on maintaining our leadership. Thank you.

Before Wim starts I would like to mention that definition of EBITDA and EBITDA margin and reconciliation of both financial measures are available on the company's corporate website. Wim, please?

Good evening, ladies and gentlemen. We show revenues of $446m. If we eliminate the UMC March revenues of $30m, we still an organic growth of 2%, quarter on quarter. Traditionally, the first quarter is the worst quarter of the year, minutes-of-use-wise and revenue-wise.

ARPU for Russia shows $18.50, down from $21.20 in the fourth quarter. This shows the impact of our Jeans tariffs, addressing the prepaid mass market, and the seasonal effect. EBITDA for the quarter shows $225m and a margin of 50%, in line with our full year 2002 margin.

In the operational expenses we show a provision for doubtful accounts of $50m, which more than doubles the full-year provision of 2002. We detected a fraud scheme on domestic and international long distance calls for which we put in an extra provision of $11m. We have installed preventive measures to exclude continuing fraud of this nature.

Net income comes out at $80m, down from $85m in the fourth quarter. This decrease was mainly driven by a higher tax charge, in part due to a higher tax rate in the Ukraine where UMC operates. Also there was a higher interest charge due to the issue of a $400m Eurobond in February.

SAC shows a further downwards trend to 30, thanks to lower commissions on our Jeans products. Subscriber base at quarter end was 9.4 million; 5.9 million of those were outside the Moscow region. 1.82 million were in Ukraine, which we acquired with 1.79 million subs at the end of February. All other numbers exclude our Belarus joint venture where we showed 83,000 subscribers at the end of March.

Minutes of use are down to 148 from 175 in the fourth quarter. Besides the seasonal impact, also this reduction is driven by, on average, lower usage of our Jeans clients.

First quarter CAPEXCAPEX was $130m, including UMC. We spent $151m on the acquisition of UMC. Tangible assets or PPE CAPEXCAPEX was $99m, also including UMC.

The UMC purchase price allocation has been taken into our financials at best estimate. The final allocation is still under discussion with the appraisal company, but the suggested re-classes, if any, will not generate a significant impact on the P&L numbers.

I guess I'm giving it back to Braginski.

Thank you, Wim, and now we are ready to take questions from the audience. Stephen [ph]? Operator?

Thank you, sir. If any participant would like to ask a question, please press the star followed by the one on your telephone. If you wish to cancel this request, please press the star followed by the two. Your questions will be polled in the order that they are received. There will be a short pause whilst participants register for questions.

The first question comes from Mr. Alex Kasbecki [ph] Please state your company name, followed by your question.

Yes. Good evening, gentlemen. Alex Kasbecki from Renaissance Capital. Two questions, if I may. First one involves the Ukraine. Could you please give us some more details why there is such a high EBITDA margin? Net income was quite low. The margin, I believe was about 6%. And also with regard of that, if I'm not mistaken I think your CAPEX for Ukraine was about-- in about $100m-$150m for this full year and I think you only had about $6m spent in the first quarter. Could you give us some guidance on what happens on the CAPEXCAPEX side?

The second question would be about your bad debt. I understand that you have already tackled this problem. Could I ask you what was the main reason? Was it the billing system or was it something else and how certain you are that this issue will not repeat?

And secondly, if you also adjust for the bad debt your operating expenses then the operating expenses in the first quarter fell quite considerably. Is that sustainable? Can we use this as a guidance for the next couple of quarters? Thank you.

Alex, thank you for your question. Give us a minute to translate it.

Sure.

Mr. Smirnov will start with the second question, which was on bad debt provisions in the first quarter of the year.

[through translator] Unfortunately, in the first quarter we experienced an -- let me use this word -- ``attack'' of an organized fraud group which organized a fraud on long distance international and domestic calls. We had to take a whole set of administrative programs-- long-term measures and administrative measures. In April we managed to decrease two-fold due to results of the fraud and a large group of the financial control department and the billing department are working to set up some schemes to securitize the company from the fraud. Thank you.

And the second question was on UMC financials--

Andrey, also the operating expenses, which after deducting the bad debt, looked like it fell, quarter on quarter, quite considerably. Is that sustainable as well?

What's that, Alex?

That was after you deduct the bad debt expenses from your operating expenditures for the quarter, if you take out that as a one-off, then your operating expenditures, expenses, came off quite considerably in the first quarter compared to the fourth and I was just wondering whether that is sustainable in the future?

OK. Wim will answer your question, then.

Yeah, thank you.

Hello, Alex. The UMC income, $1.5m, and EBITDA line of 55% is explained by a higher tax rate in the Ukraine, the minority interest charge and we are looking purely at March there. Does that answer your question?

Well, minority interest should be incurred on the MTS line rather than the UMC line, correct? So it would have been either a very high tax or something else, which we don't know. So that's my impression.

High taxes is certainly a factor and there is also a rather high interest charge in Ukraine, which is below the line.

That is because of the high debt--

Shareholders' loans, yes.

Oh, I see. OK. And the-- and with regard to the CAPEX in Ukraine, is it going to pick up in the next quarters?

That will certainly pick up. They were very pressed for cash in the first quarter, but now they have access to the MTS money pouch.

So the guidance for the year is, again, between $100m and $150m in Ukraine only?

Even up to $200m is what we said in the fourth quarter conference call.

Up to $200m? OK. And sorry to go back to this operating expenses, I mean, is that, I guess, sustainable to have low operating expenses, overall, for Russia, going forward?

Let's say when you compare it to the fourth quarter, the fourth quarter was extremely high. The third quarter-- the first quarter is more in line with what we are used to.

Thank you. OK. Thank you very much.

OK.

The next question comes from Mr. Nick Barnes [ph]. Please state your company name, followed by your question.

The company is Thames River Capital. It's actually Martin Taylor. My question was relating to seasonal trends and the current quarter and given the first quarter is always weak in terms of minutes of usage, have you seen the normal seasonal uptick in minutes of usage in the second quarter? And also, in terms of ARPU, could you comment on that?

[through translator] You are right in thinking that this is, unfortunately, a purely seasonal tendency. We see a decrease in MOU in the first quarter of every year. This is due to the fact that, seasonally, the subscribers are less active and February has less days. And in the second quarter we are experiencing a steady growth of MOU.

And is that sort of growth similar to the-- I mean, in percentage terms, similar to what we saw in 2002?

[through translator] Yes, the seasonal tendencies are similar and we see now growth which is similar to the MOUs in second quarter last year.

Right. Thank you very much.

The next question comes from Mr. Herve Drouet. Please state your company name, followed by your question.

Yes, good afternoon. This is Herve Drouet from HSBC. Two questions, as well. The first one is kind you give us an update on what is happening in St. Petersburg and your market share has evolved, especially since the entrance of new operators? And secondly, again to come back on this EBITDA margin guidance where I'm a little bit confused, now, the-- can you explain what costs had highly decreased compared with Q4 that explain the jump in EBITDA margin? Thank you.

Mr. Susov will start with the first question, which was on St. Petersburg subscriber development.

Thank you.

[through translator] The subscriber base in the Northwestern Region is 1.2 million and this is around-- approximately 35% of the market. The third entrant, [inaudible], has not really changed the market shares, but, in any case, we are analyzing our competitors and we'll be-- we'll try to sustain the market share or increase it.

OK. And for the second question, please, which elements of the cost have been reduced dramatically compared with fourth quarter?

Wim Van Bommel will answer your second question.

Thank you.

OK, the fourth quarter operational expenses we showed higher marketing-- higher marketing part, a higher technology charge and high consultancy fees due to the [inaudible]

Now I remember in the previous-- in the previous conference call you were more hinting towards, you know, I mean, an EBITDA margin not really recovering from fourth quarter. I mean is it something now you think is-- something is-- you are more optimistic and you see more-- an EBITDA margin more in the high 40s now or is it-- i.e., do you-- looking forwards during the year, do you anticipate that marketing costs will not increase significantly?

[through translator] We estimate the EBITDA margin will remain between 45% and 50% for the year.

OK. Thank you.

Thank you.

The next question comes from Mr. Andrew Velpus [ph]. Please state your company name, followed by your question.

Yeah, Pioneer Investments. Can you give us some more details about the Jeans products, particularly ARPU, SAC and what kind of churn you're seeing? Hello?

Mr. Susov will answer your question.

[through translator] ARPU in Jeans subscribers is $3.30 and it's a stable figure; it wasn't decreasing or increasing for the last few months. We have over 1.150 million on the Jeans product. The share of total shares is 23%-- new additions, sorry, and the churn is in line with the overall churn rate for the company. We are not separating the SAC for Jeans products separately as we have a unified promotion and we are promoting all of our products in a unified way.

And we can say that there was no churn on Jeans in first quarter because-- because we introduced the products in November and they were not churning subscribers at that time and the total SAC lowered to $30 compared to $34.

Thank you.

Thank you.

The next question comes from Mr. Stephen Pettifer [ph]. Please state your company name, followed by your question.

Yeah, hi. It's Stephen Pettifer from Merrill Lynch. Two questions, please. First of all, you very helpfully provided the Jeans prepaid ARPU number. Do you have an MOU attached to that, please? And secondly, could you give us your expectation for UMC's tax rate for the full year? Thanks.

[through translator] On average, the MOU on Jeans is a bit lower than overall for the company and it's a bit over 100 minutes per month. And, again, ARPU is $10.30.

Van Bommel-- Wim Van Bommel will answer your question on UMC tax effective rate.

The real income tax rate is 30. The effective tax rate in March was 35. The rate will be down to 25-- the income tax rate will be down to 25 in 2004. The law has been signed, so I expect an effective tax rate in 2004 of about 30.

And so for this year we should look more towards 30?

Thirty-five. Yeah, anywhere between 32 and 35.

OK. Thank you.

The next question comes from Mr. Igor Ribikov [ph]. Please state your company name, followed by your question.

Yes. This is Igor Ribikov from Stromberg [ph]. With-- in regards to your ARPU, could you dwell a little bit on the developments within Moscow and the regions? Was there any significant decline of the average revenue per user in the regions outside of Moscow and if this was the case, was it an impact of, once again, seasonality or was there any other factor?

Give us a second to translate the question, please.

[through translator] We would not want to analyze separately ARPU in Moscow and the regions. All the regions are-- you know, present rather a mixed picture and some of the regions have been launched a long time ago and they give revenue, some of them have been launched just recently. And the living standards in all of the regions vary. That's why we decided not to analyze ARPU separately by region because, you know, there is no-- there is the [inaudible] figure.

OK, thanks.

The next question comes from Mr. Vladimir Posalovsky [ph]. Please state your company name, followed by your question.

The company name is [inaudible]. I have three questions, if I may. First one is on your Moscow business. Clearly, subscriber growth has been very strong and surprised everyone. My question is, according to your markets-- according to your estimates and according to your market intelligence, how much of a potential do you think there is for subscriber growth in Moscow at this time? People expected it to slow down, but it's still growing very, very rapidly.

The second question is on Byelorussia. Could you give us an idea of where the ARPUs are at this point in time? Subscriber growth there is very strong and what the subscriber growth does-- just give us the level of, let's say, ARPU in the first quarter if you could, please.

And finally, kind of a general question on the Russian mobile market and if you look at St. Petersburg, I think the key -- surprisingly, maybe -- the key competitor at this point in time seems to be [inaudible], which is increasing its market share, unexpectedly for everyone. My question would be, do you expect much of a threat from CDMA(ph) players and/or other potential players in Russia?

Because I think everybody assumes that Russia sooner or later will become a three player market, but looking at what's happening in St. Petersburg, particularly with Teletwo [ph] climbing in, perhaps it's going to be four or five player market. It seems to be very profitable and it seems to be able to accommodate more than players. So what is your view on that in your internal models? Do you expect the market to be three-four player or more than that?

[through translator] We think that there is still potential for growth for the Moscow market and forecast a penetration of not less than 70%-80%, but there is a possibility that the penetration rate will be even higher. This is due to the fact that some subscribers are inclined to use the service of two or more operators. That's why we experience potential churn in the Moscow market. That is the, you know, un-loyal side of the subscriber base which switches windows between subscribers or between the operators.

Now the penetration rate is at 57%. The overall population is around 15 million. That's why we do have room for growth.

There are some estimates, by the way, that the population could be higher than 15 million. I think [inaudible] in a previous conference call said that it's-- there are some estimates that it could be as high as 17 million. Can you comment anything on that? Do you believe that it might be underestimated, the population?

[through translator] We take, you know, the pessimistic-- the pessimistic percentage because there is no official data published yet after the census. Then we also include, you know, the number of the people coming to Moscow who also do use mobile communications.

Thank you. Byelorussia -- what the ARPU is? Could you tell us?

Mr. Smirnov will start with CDMA question and then later we'll answer your question on ARPU.

Thank you.

[through translator] Of course, we are closely following the market developments on the CDMA front. There is a fragment of the network [inaudible]. If there are no significant changes in the legislation on the mobile communications, then we could really speak about the excellence of the standards on the Russian mobile market next year. Thank you.

The next question comes from Ms. Delgora Usapova [ph]. Please state your company name, followed by your question.

Hello. Delgora Usapova, Merrill Lynch [inaudible] markets credit research. I just wanted to double check two things, gentlemen. As of now, what exactly is your total debt position, number one? And number two, going forward, what are your financing plans in terms of coming to the market, whether it's a debt or equity issue? Thanks.

Thank you for the question. Give us a second to translate it.

Tatianev Tsuchenkava will answer this question. MTS has different sorts of financing available. It has access to capital markets and, as we already announced, we have a plan to issue a ruble bond for 5 billion rubles, which is approximately $160m. And MTS also has access to different commercial banks in case we need some more money and I don't think that our shareholders would issue any stock or would like to sell equity finance [inaudible]

OK.

And our current debt is around $900m at the moment.

OK. Thanks a lot.

Delgora, thank you.

The next question comes from Mr. Charley Newington-Bridges [ph]. Please state your company name, followed by your question.

Hi. It's [inaudible]. I've got two questions. Firstly, on capital expenditure, could you talk about how you expect that to trend, both in absolute terms and also in terms of CAPEX per subscriber? And secondly, on M&A, will you be consolidating your current position and focusing on integrating recent acquisitions or can we expect further M&A activity? Thank you.

[through translator] The CAPEX part of the question -- as we have planned, the CAPEX for this year would be not more than half a billion for Russia. After first quarter, we had a little bit over $100m. This also [inaudible] seasonality of building out the network. We have been building intensely in the northern region [inaudible]. Of course, we will be more dynamic in building out in the summer months. But overall, it will not be more than $500m.

CAPEXCAPEX in Belarus will be a bit over $70m. In Ukraine, $200m. Thank you.

And CAPEX per subscriber -- [inaudible] Last year the number was about $180 per subscriber. We hope that this will be a bit lower this year.

And about the M&A activity of the company this year, I think that [inaudible] will be used for [inaudible]

I think we missed the question on average revenue per user in Byelorussia, so Mr. Smirnov will-- Mr. Susov will answer this question.

[through translator] ARPU of Byelorussia subscribers for the first quarter was $17.04. That's a bit lower than in fourth quarter. In the fourth quarter it was over $18.50. We experienced a growth for the next quarter.

Can we have the next question, please?

The next question comes from Vadim Korsakov [ph]. Please state your company name, followed by your question.

Good afternoon, gentlemen. Vadim Korsakov from Matwan Capital [ph]. Could you please explain why subscriber acquisition costs in Ukraine are so high at $51 and what's your guidance with regards to SAC in Ukraine, going forward? And also, will the company be able to sustain the current high EBITDA margin of 50%, I mean-- on a stand-alone basis? Thank you.

Thank you for the question. Give us a second to translate the introduction.

[through translator] The high acquisition in the Ukraine is due to the high competitive environment on the market and is really-- arises from the handset subsidies and large advertising budgets of all the market participants.

So in light of this high competition, do you think you will be able to sustain a high EBITDA margin of 50% in Ukraine?

[through translator] It's hard to estimate now as we have only been analyzing the results of one month. We forecast that the EBITDA margin will be somewhere between 45% and 50%.

OK. Thank you.

Thank you.

The next question comes from Mr. Andre Bogdanov [ph]. Please state your company name, followed by your question.

It's Andre Bogdanov from Alpha Bank [ph]. Two questions. One is with regards to your subscriber additions number. If I understand correctly the numbers which are provided by the various agencies, in Russia on a stand-alone basis more than half of new additions in the first quarter were from Moscow and less than half from regions. Does that mean that potentially it could create the risk of even sharper ARPU erosion going forward, given that the regional ARPU is lower and this number might change towards the regions? I mean that the regions will get more share of that addition for MTS in the next quarters. Could you please answer my first question?

[through translator] True, first quarter Moscow additions were leading, actually. This is attributed to the fact that we had actually made some marketing initiatives-- or came out with some marketing initiatives on the Moscow market which really increased the number of net additions. But after we introduce the unified tariff system in February, which is for the whole territory of MTS operations, net additions for regions are also-- are, once again, leading. Yeah and this is-- actually-- we have-- we experience the overall growth of subscribers.

ARPU, at that, is rather stable and due to the fact that the company adds subscribers mainly on the mass market in Moscow, the rate of revenue of the Moscow market are really in line with the average rate of revenue in the regional markets.

Thank you. My second question is regarding Byelorussia. Is it possible that you will get a majority in the joint venture you have in Byelorussia? Because as far as I remember, you said that it was some significant improvement in your negotiations with the Byelorussian party in terms of buying 2%, I believe it was, additional shares in joint venture to get the majority as a result.

[through translator] There is only one thing to say, that we are continuing the negotiations.

Thank you.

Stephen, can we have the next question, please?

Once again, if you'd like to ask a question, please press the star followed by the one on your telephone. To cancel this request, please the star followed by the two. The next question comes from Ms. Olga Gilenska [ph]. Please state your company name, followed by your question.

Good evening, ladies and gentlemen. This is Olga Gilenska from Renaissance Capital. Can you please give us an update on what you think will be the trends in subscriber acquisition costs and what is your long-term target for it? Thank you.

[through translator] We are sure that we will experience a decreasing tendency further on.

And what is your long-term target?

[through translator] We would not want to give a guidance on this because they are very dependent on the competitive environment, but we are counting on maintaining the decreasing tendency.

Spasebaw.

Thank you. Can we have the next question, please?

Thank you. The next question comes from Ms. Anna Bosong [ph]. Please state your company name, followed by your question.

Yes, hello. It's Anna Bosong from CRIB [ph]. I have two questions. One is on the universal service obligation with the new telecoms act, if you have any views on how much this might be and how successful, perhaps, you might be in lobbying the government not to impose it or if you see that actually happening if there's lobbying taken on? And secondly, on the regional rollout, if you can give me an idea of where you're focusing this year and how many regions you'll be rolling out in 2003?

[through translator] As far the universal services, as far as we understand, the law was not adopted and we'll be placed to additional reading, primarily because of the controversial universal service. That's why it's too early to speak of the [inaudible] provisions, because it is not clear when and whether and in what quantity this will be accepted.

And in the meantime, in the near future we will be launching [inaudible], [inaudible] and Samara.

Is that it for the year or are you planning further launches later in the year?

[through translator] These are new networks which we are building from scratch. Most probably in the summer we will see [inaudible] and [inaudible] and Samara in fall.

Thanks very much.

The next question comes from Mr. Alex Kasbecki [ph]. Please go ahead, sir.

Yes, hi. I just wanted to clarify one thing about the UMC. Given that in 2002 the overall net margin was 22% and it dropped to 6% in the first quarter, and given that the tax effect doesn't seem to have changed a lot, it seems like there has been quite an increase in the shareholder loans, or at least-- or maybe they are very expensive. Do you think that situation will continue or do you plan to swap that into, for instance, the proceedings from the Eurobond, then you can finance the expansion differently there? Basically, should we expect the improvement on the margins there going forward? Thanks.

Thank you, sir. If there are no further questions, please continue with any other--

No, no. Stephen [ph], hold on, hold on. We're still in the process of answering the previous question.

About the UMC debt servicing to the previous shareholders, we plan to reduce the debt service and the interest payments of the company. [inaudible]

And it's also important that numbers, financial numbers, that we provided for UMC are for March only, not for the first quarter of the year.

No, no, sure. So the line was very bad. Could you repeat that? So the debt will be substituted?

We plan to substitute the debt, the previous shareholders debt by a new one in order to reduce those interest payments for debt servicing.

OK. Thank you.

Thank you, sir. There are no further questions. Please continue if you have any other points you wish to make.

If there are no further questions, let me conclude this conference call. Ladies and gentlemen, thank you for taking the time to join MTS' first quarter 2003 financial results conference call today. The replay of the call will be available for the next 10 days. Should you have any further questions, please do not hesitate to contact our investor relations department.

Thank you, once again, from all the team here. Goodbye.