Mobile TeleSystems PJSC (MBT) 2004 Q4 法說會逐字稿

Ladies and gentlemen, welcome to the MTS fourth-quarter and full-year 2004 conference call. I would now like to hand the conference over to Mr. Andrey Braginski. Please go ahead, sir.

Thank you and welcome to MTS's fourth-quarter and full-year 2004 results announcement. Please note that statements made during this conference call reflect the opinion of management as of the date of this call. Future developments may render the statements outdated. However, we do not intend to update the guidance provided today prior to our next quarterly conference call.

Reconciliation of operating income before depreciation and amortization to operating income can be found on the Company's website. By now you should have received a copy of our press release by email. If not, the press release can be found on our website at MTSgsm.com in the investor relations financial reports section. I also recommend that you download from the website the presentation regarding this conference call as indicated in the invitations sent to you.

Our presentation team today consists of Vassily Sidorov, MTS President and CEO, and Nikolai Tsekhomsky, the Company's Chief Financial Officer. Following the presentation we will conclude with a question-and-answer session. Now I would like to hand the call over to Mr. Sidorov. Vassily?

Thank you, Andrey. Good evening and good afternoon, ladies and gentlemen. Thank you for joining us for the MTS fourth-quarter and full-year 2004 conference call. The past year was one of phenomenal mobile penetration growth in our key markets, Russia and the Ukraine that exceeded the most bullish expectations. Penetration in Russia increased from 25 to 51% and from 14 to 21% in Ukraine.

MTS, with its investments in (indiscernible) and subscriber acquisition, has been the main driving force of this growth. Penetration growth accelerated during the seasonally strong fourth quarter of 2004, when our quarterly subscriber additions in Russia and Ukraine doubled compared to the previous quarter.

During the fourth quarter we launched several innovative marketing campaign aimed at securing our leading market positions, market share, and new subscriber additions for the period. As a result, in 2004 our consolidated subscriber base increased twofold, by 17.5 million, of which 7.5 million were added in the fourth quarter alone, to reach a total of 34.2 million.

Our key marketing campaigns and promotions in the fourth quarter included the Jeans-Minute offer, that withdraws (ph) until the end of February this year. Subscribers signing up for this offer at Editone (ph) pay for 1 minute of their outgoing calls to other MTS customers, regardless of call duration. The offer had to attract many new customers and had a neutral effect on ARPU, as the activation fee largely compensated for the loss in airtime revenues.

We also nested into (ph) subscriber acquisition by presenting a Jeans prepaid teleplan subscription with $5 worth of free airtime to customers who signed up the Turkmentia (ph) fare plans. Approximately 500,000 such gift subscriptions were handed out in our proprietary offices. In addition, dealers that bought the Jeans (indiscernible) from us for approximately $10 were issuing gift subscriptions to customers using their sales offices.

But as far as to accurately estimate a total of gift subscriptions issued during December and January by a dealer -- and we certainly expect that some of the customers who receive these gift packages will end there subscriptions when they spend their free airtime, however a large number of them will remain with us for a longer period of time.

Also during the previous 2005 New Year holiday season, MTS in Russia provided up to 2005 seconds of free airtime for customers who signed up to Jeans, worth approximately $8. Around 1 (ph) million such Jeans packages were distributed. All of the above-mentioned promotions ended during the first two months of the year. These promotions accelerated MTS's subscriber growth and helped to retain our lead positions in Moscow and Russia as a whole.

We expect mobile penetration to continue to grow, reaching high 70s percentage points in Russia and high 40s in Ukraine by the end 2005. As with many other markets, when penetration exceeds half the total population, further growth is at least partially a result of low usage customers signing up for the service and existing customers acquiring their second or third SIM cards. Therefore our focus on core customer retention becomes even more critical.

In this respect value-added services are becoming an increasingly important factor in generating additional returns from our core subscribers. This year we're planning to launch the i-mode service under an exclusive agreement with DoCoMo of Japan. We will start with the two largest regional markets, Moscow and St. Petersburg, and gradually expand into other regions in Russia and the other countries in which we operate.

Last year we significantly improved our regional presence in Russia, having increased it from 60 regions at the beginning of 2004 to 77 at year-end. Most of the expansion was through developing greenfield operations in regions by which we received license (inaudible). In addition, we acquired a number of local market leaders in order to leapfrog to the number one position in their respective regional markets. We extended our operations to these (indiscernible) markets by purchasing a majority stake in the country's leading cellular provider.

Our growth strategy for Uzbekistan for 2005 includes a prepaid (indiscernible) launch by the end of the year, and (indiscernible) to metro (ph) buildout, improvization (ph) of a new billing platform, as well as further development of distribution channels.

2004 yielded many positive surprises for our business, not only in Russia but also in Ukraine, that comprises around 20% of our revenue. Our operations in Ukraine grew faster than in Russia, both in terms of revenues and subscribers, underlining our ability to successfully leverage positive economic trends in this country.

The recent political development in Ukraine offers additional optimism in terms of further growth in this market. Last week I attended the Russian business leaders meeting with the newly elected president, Mr. Yushchenko, and I was impressed by his determination to develop Ukraine into a democratic and prosperous European country.

MT (ph) should further benefit from the receipt of international and domestic long-distance licenses at the end of last year. These licenses should provide for additional revenue streams and substantially lower the cost of our international and long distance interconnect, positively affecting the margins of our Ukrainian operation.

(indiscernible) operations in Belarus last year are yet another example of our ability to leverage our Russian experience and scale it to another market. Our joint venture in Belarus added 750,000 new customers, overtaking the leading position from the incumbent operator. Unfortunately so far there has been no support from the Belarussian government of our proposal to buy the controlling stake in the joint venture from the state.

The success of our operations outside of Russia underlines the rationale for our further expansion plans. This year we will continue to look for acquisition opportunities in the countries of the former Soviet Union.

Significant increase in our subscriber base translates into greater than 50% growth in the Company's revenue year-on-year, and we had doubling in our net income. At the same time in the fourth quarter, which is seasonally the weakest quarter in terms of top-line dynamics, our consolidated revenues declined by 0.6% compared to the third quarter. The key factors to this negative dynamic was the fourth-quarter seasonal decline in roaming revenues. The other seasonal effect of the fourth quarter was that the bulk of new subscriber additions took place towards the end of the quarter, resulting in a limited contribution to the Company's top line by year-end. In addition the free airtime given to our customers in Russia as part of the New Year promotions discussed earlier had a negative effect on the revenue dynamic. We expect the Company to return to top-line growth during the first quarter of 2005.

In 2004, we were still a record high annual OIBDA margin of 54%, in line with the management guideline of (indiscernible) 50 OIBDA margin level for the year. The margin weakness in the fourth quarter was due to the top-line weakness; increased dealer commission costs, resulting from higher subscriber additions in the quarter; as well as upfront OpEx in the new regions that were launched during the quarter.

Q4's quarter-on-quarter margin weakness is not dissimilar to the pattern seen in previous years. We do expect a margin recovery in the first quarter of 2005, and our full-year 2005 OIBDA margin level guidance is low to mid 50s.

On (indiscernible) governance front, November (ph) 2004 was marked by an important development for our Company as T-Mobile decreased its ownership to 10%, placing 15% of its MTS shares in (indiscernible) Russian corporate equity placement in the market. This reduction increased the Company's free float (ph) by 37.5%. By virtue of an agreement with MTS controlling shareholder Titiema (ph), T-Mobile is restricted from selling more of its shares in the market until mid-August of this year.

On a final note, the MTS Board of Directors meeting on April 16 will consider dividend payments for 2004, to be approved at the shareholders' meeting in June. MTS's strong financial performance should allow us to recommend to the Board that around one-third of net earnings for the year be paid out as dividends. I would like now to pass it forward to Nikolai Tsekhomsky, MTS's Chief Financial Officer, to discuss the Company's financial performance in more detail. Nikolai?

Thank you, Vassily. Our 2004 financial results indeed prove our strategy to expand our business by increasing our subscriber base via organic growth and strategic acquisitions, as well as our continuous focus on the Company's underlying business processes and integration of acquired companies.

2004 resulted in another year of significant growth for the Company, with a year-on-year 53% increase in net revenues and 57% increase in OIBDA. Our net income from operations 2004 reached over $1 billion, a 98% increase year-on-year. Our business in Ukraine outperformed the growth of Russian operations. Revenue was increased by 73% in Ukraine and 41% in Russia. Contributions to our consolidated revenues from our business in Uzbekistan for 2004 was not significant, amounting to less than 0.5% of the consolidated annual revenues.

Commenting (ph) the year-end balance sheet position and cash flow dynamics, I would like to point out that we had positive annual cash flow excluding acquisitions in the amount of $356 million, and practically breakeven when acquisitions are included. Looking at our leverage, we see a positive dynamic in net debt toward (ph) down, that improved from 0.99 at the end of 2003 to 0.76 at the end of 2004.

Our average cost of borrowing also shows an overall positive annual dynamic; it decreased from 9.5% at the beginning of the year to 7.4% at year-end. This positive trend is mainly due to the favorable terms that our syndicated loan attracted in the new fourth quarter and repayment of high interest rates during Eurobonds (ph). However we continue to have negative net working capital at the end of 2004, our consolidated working capital position improved year-on-year by 59%.

Overall, we've seen a continuous increase in all fundamental business metrics during the year, and we have also seen seasonal trends consistent with those in previous years. Historically, our revenues are seasonally high in quarter 3, driven by increases in roaming revenues. This increase is usually followed by a slowdown in quarter 4, with a reduction in roaming revenues.

Increasing costs from more aggressive marketing campaigns and indirectly linked increase in dealer commission also occurred toward the end of (indiscernible) year. As Vassily mentioned, we, like our competitors, were very focused on aggressive acquisition of new subscribers towards the end of the year, launching a number of New Year increasement (ph) promotions during December. The financial effect of this campaign has been realized in the form of discount (indiscernible), thus effectively leading to a temporary reduction in quarter 4 revenues in absolute terms. We estimate that the value of this discount is approximately $10 million or 2% of MTS Russia airtime revenues in quarter 4. We will also see a lesser effect of these actions carried forward to quarter 1 2005.

Looking at the rating (ph) expenses of the business, we see the increase in advertising and telecommunication expenses that amounted to 55 million or 51% quarter-on-quarter. As discussed already, this increase was really driven by year-end campaigns and the significant number of attracted new subscribers in the region, where (indiscernible) commission (indiscernible) have renewed on a prepaid basis, compared to the revenue sharing basis in Moscow announced in February 2004.

Overall, our SAC per additional subscriber for quarter 4 in Russia decreased when compared to quarter 3 by $2 or almost 10%. In Ukraine, we experienced a reduction in SAC in absolute terms of $6 or almost 29%. We attribute this change in Russia to the effect of the so-called free Jeans promotions whereby we effectively acquired new subscribers without direct subscriber acquisition costs.

At the same time, mainly due to the seasonal factors as well as the year-end promotional activities, we see increase in subscriber acquisition costs as a percentage to revenue from third quarter to fourth quarter. This increase in Russia was 6.1% or almost $50 million, and in Ukraine 2.8%. In order to eliminate quarter 4's temporary seasonal effect compared with quarter 3, it makes sense to compare free SAC OIBDA margins with those of previous periods.

Having said that, while our consolidated core subscriber acquisition cost to OIBDA decreased in quarter 4 by 12.3% compared to quarter 3 2004, our consolidated free SAC OIBDA was only down by 7.2% for the same period. This represents a more normalized trend in our business and provides a better perspective on margins in 2005.

Our general and administrative expense in quarter 4 compared to quarter 3 2004 as a percentage to sales increased by 4.5% or $48 million. This increase was driven by a number of factors. Among those are approximately 1% increase related to network repair and maintenance; the increase in payroll and related tax costs that amounted to $8 million or approximately 0.8% of the revenues; and historically high year-end consulting expenses in quarter 4 compared to quarter 3, which results in an additional 0.5% increase.

Also and finally, due to the political instability in Ukraine we experienced some higher than usual bad debt costs in quarter 4, which return to normal in quarter 1 2005. In addition, based on our estimates, the Ruble tax expenses of Russian operations accounted for approximately 25% overall total operating expenses. The ruble appreciation for the (indiscernible) had insignificant effect on our fourth-quarter (indiscernible) expenses.

In quarter 4 gains some ForEx gains were reflected in our consolidated statements of operations. These gains are primarily attributable to the movement in our consolidated ruble-denominated assets and liabilities position at the end of the year and appreciation of the Russian ruble against the U.S. dollar in quarter 4 versus quarter 3 by approximately 5%.

Looking forward while we expect our OpEx to continue (indiscernible) increase in 2004 in absolute terms, we are very focused on keeping it a stable level as a percentage of revenues. The effective tax rate, consistent with trends seen in previous years and also our expectations, it increased to 31.1% in quarter 4 compared to 23.5% in quarter 3. The increase in fourth-quarter effective tax rate was driven by an increase in taxable ForEx gains which realized in quarter 4, as well as putting in (ph) differences driven by nondeductible tax expenses.

Overall for the year and consistent with our expectation, the consolidated effective tax rate is at 25.8%. While we will expect some fluctuations quarter-on-quarter in our consolidated effective tax rate moving forward, we do believe that our 2004 annual tax rate will continue to be a valid benchmark for 2005.

Finally, overall penetration levels in Russia reached over 50% and in the most developed regions, like Moscow and St. Petersburg, topping over 100%. We do expect yet another year of growth potential in regional markets, as well as development of various value-added services.

Thank you, Nikolai. Now we would like to take the questions from the audience, please.

Anna? We are prepared to take the questions here, thank you.

Olga Zhilinskaya.

I have two questions, if I may. The first question is, what margins do you expect for first quarter, assuming heavy promotions plus losses until mid-January 2005? The second question is, could you please comment on the market competitive landscape and its potential impact on ARPU and profitability going forward, as well as whether you plan any rebranding (inaudible). Thank you.

I will try to answer your question. We do expect margins to normalize in Q1 of this year. We believe they will be somewhat lower than our expected average for 2005. But we will be significantly healthier than what we said in Q4 of the previous year.

As far as the campaigns, some of the campaigns were indeed ongoing. Jeans-Minute was ongoing all the way through to the end of February. Jeans gift packages campaign was ongoing through January 15. (inaudible) campaign (indiscernible) ongoing through January 15 as well; that is for the Moscow region. Our motivational campaign geared at dealer loyalty, called peak-on-billing (ph) was ongoing through February of this year. Those campaigns will translate into some aspects of the top line as well as margins, so margins should get even more normalized beginning from Q2 of this year.

As far as the landscape going forward, we believe there is a genuine understanding on the part of (indiscernible) largest carriers (ph) that competing on price will not yield positive (indiscernible) results for anybody to offset the detrimental effects of losing for the market, by passing on the revenue that could have otherwise been collected. Of course some of the competition will be less predictable, especially (inaudible) . And there will be some price aggression coming from their side. But in general, the overall landscape, at least at the three main competitors will be shifting more towards the quality of the acquisition campaigns and the retention campaigns. (inaudible) retention as we progress into the year.

That implies that we will be sending signals to some of the other competitors (indiscernible) retention; downsize (ph) that we will be considering different alternatives on the vending side. That being said, we will be very careful in not compromising (ph) unnecessarily the goodwill and the attributes that have been associated with the MTS brand and the (indiscernible) that have been created and some of the qualities that allowed us to sometimes price our services at a premium to our competition. So we will consider that; but we will take it very, very carefully.

Thank you.

Alexei Yakovitsky.

This is Alexei Yakovitsky from UFG. I have one question. Can you talk quantify one-off operating expenses, which are related to new networks that you launched in the quarter? I understand you launched a total of 14 networks in the fourth quarter. Thank you.

You're right in saying that we did launch a record number of networks. If relating to a particular quarter, in Q4 we did launch 10 greenfields. The effect? Obviously with those being greenfield launches, we are in negative OIBDA territory. The effect on Q4 was fairly limited. It was less than a percentage point on the overall margin.

We will be filing (ph) more material in Q1 since those regions are going to shoot up in terms of us needing to scale the expenses and the structures to the growth of the business. No doubt (ph) sufficient offset from the revenues, because as we are the entrant, when you have to -- in those regions -- build up a presence by pricing at a slight discount to the competition.

Okay, thank you.

Vladimir Postolovsky.

Two questions from me. The first one is obviously on margins. Frankly when we were expecting weakness in margins this quarter, we were thinking more about subscriber acquisition cost. Whereas if you look at the results, the really weak items from our prospective are gross margin, which was about 2 percentage points lower than expected. That is the first time the gross margin dropped over the last three years or so quarter-on-quarter. (indiscernible) trends have been up; now it is down by about 2 percentage points. So if you could explain what this was about.

The second item which was significantly above expectations was the other operating expenses. I know Nikolai already went through the exceptional items in Q4. But because they were about 50 million or so higher than we expected maybe you can explain; maybe you could go through them again and just give us an indication whether those are genuinely oneoffs or we should expect them going forward. So that is the first question on margins.

The second one is on pricing. If you look at the effective yield to minute, I know this measure might not be particularly meaningful given the number of promotions that you have run. But still quarter-on-quarter there was a drop in effective yield to minute of about 16%. Is there anything to that? Was there significant pricing pressure in Q4? You mentioned that going forward you hoped that pricing pressure will slow down. But was 16% -- is that a meaningful number? Or is it primarily because of some promotion? Thank you.

If I may, let me start with the second part. We obviously on the part (ph) per minute, yield per minutes side, we are affected by the competition, and by the promotions, and by effectively free traffic that we handed out as bonuses to our subscribers. It was somewhat of an accelerated dynamic in Q4, as the competition were, quote unquote, really -- the leadership position (ph) describe it as (indiscernible) heating up.

I do not think we should expect -- again assuming that our presumption of competition becoming more reasonable in fact materializes, and proves the test correct (ph) -- but, one, we should not see similar patterns of price reductions going forward. Nikolai, could you answer the first one?

Yes, regarding your first question, I believe that -- I think there is two questions in one. First of all you are asking about reductions in gross margins. Obviously, there is first of all -- and then secondly you asked about oneoffs in operating expenses.

I guess what is important to say that, first of all, certain slight reductions in revenues -- and I think both Vassily and myself were speaking about this, about 3 minutes which were given to subscribers -- obviously were driving certain reductions in total revenues. Obviously this impacting both OpEx and of course cost of services as a percentage of revenues up (ph).

Obviously if you talk about cost of services, it's important to mention handsets and handset subsidies, which were quite substantial in the fourth quarter, especially in Ukraine. Obviously in Ukraine. (inaudible) there were certain increases in total direct cost because of certain traffic increases in total.

As about oneoffs in operating expenses, besides obviously certain seasonal high advertising and obviously dealer commissions which we were talking about, then I would say all the elements of the general and administrative expenses grew normally as in any quarter in MTS. About oneoffs there I would mention certain, again, increases in bad debt provision, which again I was talking about; and that related mainly to Ukraine. In the Ukraine situation at the end of the year, certain dealers were not able to pay to UMC and became bankrupt.

Roughly how much was that?

That was around $5 million roughly. Then there are certain increases in repair and maintenance costs, again roughly 1%. The reason for that was obviously certain inventory accounts at the end of the year, stock-take (ph) counts and the rising of certain materials at the warehouse; again --

Nikolai, that is 1% of sales.

Yes, sorry; 1% of sales. I guess these are the main items. Again talking about seasonality, if you are talking about taxes which are related to -- other than income taxes -- we can mention seasonally higher taxes due to obviously certain elements on advertising tax and an element of obviously increase in property tax at the end of the year. But these are more sustainable than obviously certain seasonality effects in this.

Thanks.

Tom Furda.

I just had a question in terms of your indication that you would be focusing more towards customer retention going forward. I am just wondering what this would entail. Are you for example looking to introduce potential subsidization of handsets into the Russian market, for example? Just your general customer retention strategy would be quite interesting to get a view on.

Secondly, on Ukraine, if you could give us an insight into the competitive landscape. Has that changed materially from the beginning of the year with the launch of the third GSM player there, DCC/Turkcell? Thank you very much.

On the customer retention side, we are not planning handset subsidies to become part of that effort. It is a fairly detailed plan for this year, that should include some run-up campaigns across different regions, as well as some technological, sort of back-office changes that are being made within or being executed within the Company.

We would probably not want to go into much detail on those, because some of them are fairly commercial (ph) sensitive. But as I said, they do not include handset subsidies. As far as the reach (ph) is concerned we expect four divisions (ph) to become part of the overall CRM (ph) campaign program if you will in Russia by mid-August; and by the end of the year all divisions are going to become part of the CRM campaign program.

And Ukraine?

As far as the competition in the Ukraine, we have seen the third entrant coming in. We have not seen that, from what we could tell, not seen that (indiscernible) dynamic in terms of subscriber additions; although they are becoming a presence, and therefore are eating into both sides of the market share of the two incumbents. We seen (indiscernible) very much behind us in terms of coverage, and therefore the quality that they can offer to their customers, which forces them to price their services at a discount, which they are doing.

It is going to be (ph) somewhat less aggressive than the -- their pricing is somewhat less aggressive than we had earlier expected. Nevertheless, they are obviously gearing their marketing campaigns primarily at the lower end of the market; and therefore we feel comfortable with those customers as part of the regular churn or regular set of experimentation, experimenting with a new provider and then coming back to us based on clarity, quality, (indiscernible) of price (indiscernible).

Where do you expect the penetration to be in Ukraine at the end of this year?

We expect it to be up in the high 30s at year-end.

Thank you. Could I just follow-up on Vlad's earlier question? Regarding the advertising and real estate taxes that have been introduced, could you just give us a little bit more detail on that, just so that we have that? Thanks.

That was not a new tax. This tax obviously was there. But obviously with the growth of our infrastructure, with a substantial investment in the fourth quarter into CapEx, obviously, as I said, this a seasonal effect. But this is a sustainable change. This property tax was there always. The same with the advertising tax; it is also linked to the advertising expenses.

Thank you.

(OPERATOR INSTRUCTIONS) Jean-Charles Lemardeley.

A couple questions. First, could you give us an update on your estimate of how many SIM cards to actual subscribers there are in Russia? Or how many actual subscribers (indiscernible) the SIM card in circulation there are in the country? The second question is on your reported MOUs. Are those bills, or are those total MOUs? Finally, what is your share of on-net traffic?

As far as the SIM cards to actual subscribers statistic is concerned, obviously there are no hard data unfortunately available. At the same time, by looking at the connectivity rates we can derive that throughout 2004 we had approximately a 20% penetration of double or triple SIM cards. It must have increased; we will see the effects of that shortly as a result of the active marketing campaigns of Q4 of last year.

(indiscernible) should have given you the exact difference between SIM card penetration and actual penetration. But (inaudible) SIM should not exceed -- the difference should not exceed 25 to 30%.

So a ratio of 125 to 1.3 would be reasonable?

2-5 to 3-0, right; 25 to 30%.

Okay.

As far as MOUs, we are referring to the two total (ph) MOUs. On the traffic, it was about 58% of total in Q4 Russia. That is for Russia.

58% of the total?

58, 5-8, right.

Thank you very much.

Rizwan Ali.

My question is regarding -- I have two questions. One is regarding the ARPU. It appears that you expect the ARPU to improve in the first quarter and then improve further in the second quarter. Obviously it will probably never go back to $14 where it was in the third quarter, but do you expect it to be somewhere between where it is right now in the fourth quarter and the first quarter? Or closer to the third-quarter $14 ARPU this year?

Second question is in regards to your commission structure in the regions. You said that the commission structure is a bit different than in Moscow. Can you please further explain that?

We unfortunately do not expect ARPUs to go up to $13, $14 for the year. We believe that the average ARPU for the year in Russia would be in the vicinity of $10. Average for Ukraine should be in the vicinity of $10.50 to $11. We obviously should see some strengthening of ARPU, on the one hand, on the back of people starting to contribute. The (indiscernible) Jeans is probably starting to contribute to our top line.

But at the same time you have another dynamic, which is that the additional subscribers, incremental subscribers, are diluting our overall ARPU figures, as they are usually the ones with minimal (ph) ARPUs; and this (inaudible) effect of minimalize to a certain extent to effect of these additional subscribers that we obtained in Q4 starting to move and contribute to our top line.

As far as dealer commissions are concerned, the difference between Moscow and the rest of the country is that in the Moscow region, which has accounted for the bulk of our commission payments and where commission payments in general were the highest of all the regions, we at some point introduced a different scheme of how we pay our commissions; whereby we basically locked card dealers into a revenue-sharing scheme. We pay half of the commission up front, and half would be deferred over a certain period of time in which we would pay the commission based on 50% of the revenues that we would receive from the customer, up to -- and this builds (ph) up to their regular commission. Okay? After that, obviously there would be no revenue sharing, once we have put out their commission. Which locked them into a loyalty-elemented scheme, revenue-sharing scheme.

However this was not implemented in the regions. We believe there is certain room for pricing enhancement for us (inaudible) in the regions. We (indiscernible) scaled this program, a similar type of revenue-sharing scheme in some of the key regions.

Could you also break down your subscriber additions in the fourth quarter between Moscow and the regions?

In Q4, total additions -- (multiple speakers). So in Russia we added 5.7 million customers, which in the regions outside of Moscow, and since this is (indiscernible), it's 4.6 million customers. So Moscow was 0.8 million, St. Petersburg was around 0.2 million, of net additions in the fourth quarter of the year.

Thank you very much.

Taras Shumelda.

Good afternoon. I have two questions, and both of them are something that you've already touched upon. I just wanted more details. With respect to the customer additions and behavior -- competitive behavior, yours and your competitors in the market, when I look at the fourth quarter, some of the previous indications that we received from you as well as your competitors was that the market would be developing in a more orderly fashion, and we have 7.5 million net adds.

So the question is, to what extent was the fourth quarter prompted by your own strategic considerations, and to what extent was it prompted by Sistemo's desire to present itself as the number one player during the IPO? That is question number one. What should we expect going forward?

Okay. I think all of us, all the players, have learned something about not necessarily trying to be overly aggressive on the back of a (inaudible), be it overtaking the number one position or another one. We have seen, unfortunately -- to the extent that we can interpret this, and I think that our interpretation is (indiscernible) correct -- that it is difficult to compete on the subscriber KPI with a player whose (indiscernible) KPI become subscribers. In fact, there was much more (indiscernible) about money, revenues, and ARPU and profitability.

That being said, we obviously have seen a fairly dramatic deterioration in the revenue dynamic, although it would have come. The deceleration in the revenue growth would have come sooner or later. We did it going forward (ph) on the back of more aggressive pricing, all of us, all the players. It was driven by the impairments (ph) that was part of the discussions with the Board of Directors and between the (indiscernible) of the company that was there throughout the year. It did not appear there on the back of Sistemo's IPO plans. It has been there actually for some time.

The second question is, when I try to look more into why some of your competitors have had more luck in the regions, the answer that came back was -- in terms of net adds -- the answer that came back was their method of relations with their dealers. What are they doing differently from you that you would say explains some of this discrepancy in the dynamics of net additions between you and your competitors?

I think a major driver to the potential (ph) in the competitive dynamic and in the market share dynamic on the region specifically has been that we are somewhat later in our entry into those markets. This later entry was due to the fact that we did not have licenses for some of those very key regions such as (indiscernible) and a few other (indiscernible) region. Once we obtained those rights, we immediately started to launch the pre-launch activity and launch them on time, on schedule.

At the same time, in some of the regions where we are present (indiscernible) or had been present for some time. As we have mentioned before, we did tend to price ourselves somewhat high. This is driven in part by the attributes of our band and in many cases by the quality of our method, which we believe deserves premium pricing. Again, (indiscernible) during what period of time that is actually sustainable is a question to be considered; and obviously in some cases we have to deal with this premium pricing and bring it down in line with the competition. (indiscernible) we are, and the advantages of our technology are being depleted by a fairly aggressive buildup by all the federal (ph) players.

As far as dealers are concerned, I don't think we are necessarily different in how we interact with dealers. Certainly this year has been fairly, what I would say, a fairly breakthrough year for us. We have seen our dealer points, (inaudible) serves, grow by 65% to just under 19,000 points of servings (ph). We have seen our (indiscernible) of payments receipts grow by 77%. So I think we have really become during 2004 a lot closer to the dealer community and a lot more friendly and accessible to them, which was a significant shift. So the things that could have been construed as negatives are on a (indiscernible) basis in the beginning of 2004 are fairly (indiscernible) by year-end.

Thank you.

Andre Bobanos (ph).

I have two questions, if I may. Just want to clarify really. In Nikolai Tsekhomsky's presentation, I just heard that he said that the proportion of OpEx to revenues will be stable during this year. Is this correct? Or I misheard what (ph) was said?

Second question was not really with regards to Q4 actually; it is a more general one. Do you hear anything about these reductions of CBP system (ph) in Russia, which we heard for quite sometime from the regulatory authorities here; and if you do hear anything that it will be implemented, what do you think should be the impact on your business going forward? Thank you.

I am going to start with the second question. As far as CBP is concerned, we do believe that it is likely the methodological authority (ph) should be prepared fairly soon. There are some problems with the implementation of this system, since not all of the operators with whom we (inaudible) to interconnect and settle are fully prepared on the billing side, on the back-office side. So if some of them are capable of (inaudible) billing, not all of them -- far from all of them -- are tuned into (ph) that. But even going beyond that, almost none of them (indiscernible) second billing. So there are some technological issues which we defer the actual (indiscernible) of CBP.

We have seen some indications (ph) in Ukraine. We have seen a pickup in usage. We have seen a pickup in revenues on the back of this. (indiscernible) because of additional interconnect payments, and depending on the regime of these interconnect payments, which we are not privy to at this stage, if (inaudible) the margins theoretically. We will have to wait and see what the actual formula is going to be, based on which we will have to settle.

Andre, as to the point of my speech, I was referring to the full-year general and administrative expenses as a percentage of sales. If you look at 2003 full-year expenses you will see that the percentage of sales 2003 or (ph) 2004 we don't seen any change. So I believe that in 2005 we will be still consistent as a percentage of sales. That was my message.

Thank you.

Olga Zhilinskaya.

Two follow-up questions if I may. The first one is, could you please provide us the share of active subscribers in total 4Q net additions, taking into account that the majority of subscribers -- as far as I understand -- signed in December were silent. Just didn't have time to generate revenues for you. The second question is, can you please provide us with incremental ARPU for the fourth quarter? Thank you.

Okay. As far as activity is concerned, none of those subscribers would have become part of our subscriber base calculation if they had not activated their usage of or utilization of our services. So to qualify as an active subscriber they needed to effect at least one action which would qualify as activity. So I would say that it is probably early to differentiate between active and inactive ones, of the ones that we obtained, acquired, rather, in Q4. As far as (indiscernible) incremental ARPU is concerned, we are in the $6 to $7 category. We used to be in the $67 incremental ARPU category in Q4 in Russia.

Sorry; how much?

$6 to $7 income on the ARPU for Q4.

Okay, thank you.

Anna Bossong.

I was wondering if you can just give us some information about Uzbekistan, the ARPUs there, and the minutes of use in the fourth quarter? Also, I wonder if you could perhaps give us some gross margin guidance for this year? In the sense that we had this big fall-off in the fourth quarter, and I am wondering if part of that is ongoing? I know part of it was due to your free minute giveaway.

Yes, as about the fourth-quarter ARPU in Uzbekistan, it was approximately $18.40.

MOU figure there as well?

The MOU was approximately 300 minutes. As far as the Q4 as compared to that we will see going forward, as we have said, we will see a minimization of our margins. We have seen a slowing down of revenue, against the backdrop of normal increases in certain core expense items, cost items, that were (indiscernible) to a growing revenue in Q1-Q2.

So we should consider Q4 as a bit of an abnormal quarter or atypical quarter in many respects. I think Nikolai has covered most of it, both on the -- primarily on the sales and marketing expenses; some on the cost of services.

As far as operating expense are concerned, I would agree that (indiscernible) oneoffs, what we will see the effect of is those expenses not growing as fast as our top-line growth in the coming quarter. So that should more than offset the negative trend that we saw in Q4. Of course a large part of the revenue sacrifice came on the back of our free bonuses in the (indiscernible) handed out to our subscribers.

Thank you very much.

To be more specific precise on the MOU, it is 260 for Uzbekistan.

Izben Matasov (ph).

Could you please tell us what is the underlying assumption for ruble cost inflation for wages and of course in advertising cost which underlie your margin guidance for 2005? Given that inflation still is in the double digits in Russia, and the appreciation of the ruble against the dollar, I would think that you will experience a significant dollar cost inflation (indiscernible). Secondly, could you just please repeat your (indiscernible) guidances for Russia and Ukraine? I'm terribly sorry; I missed those numbers.

As far as some of the expense (indiscernible) items are concerned, on salaries, all of our salaries as far as the Company are actually denominated in dollars. What we do is we occasionally bring them up as the dollar-denominated (indiscernible) lose their purchasing power on the back of dollar-to-ruble appreciation. We bring them up to real purchasing power, and we do that on a quarterly basis usually.

So the (indiscernible) there will be driven by the actual percentage, the real-life percentage of ruble-to-dollar appreciation that may or may not happen this year. There are obviously some cases where we are (indiscernible) inflation rate on salaries, particularly are forced by our competition to increase their salaries as in some cases our technical people, for example, get offered 10, 5% increase to whatever MTS pays them. (inaudible) That we take into account, but to a lesser extent than the rubles-to-dollars situation.

As far as are (indiscernible) are concerned, as the media part of the advertising expenses, it is not driven that much by the dollar-to-ruble situation as it is by the media inflation happening in the country generally. (inaudible) driven. The history has shown us that it usually has been in the vicinity of 25 to 30% per annum; and we don't think it's going to be any materially different this year.

Okay.

As to the guidance on the ARPUs, I would say that the guidance for Russia is -- again it very much depends on the penetration dynamics in 2005. And while our guidance is somewhere between 9 to $10, in terms of for Russia. Ukraine is somewhat above 10, so 10 to 10.5. (indiscernible) Uzbekistan between 15 and $16.

Thank you very much.

Vladimir Postolovsky.

Two more questions if I may. The first one is on CapEx. Your previous guidance for '04 was 1.4; and for '05 1.8 billion, assuming that you won't be able to spend about 200 million in 2004, and you will carry it forward into 2005. So effective '05 guidance was basically 1.6. Looking at your financials it looks like you have spent about, rounding it up, about 1.4 billion in 2004. Does it means that your capital guidance for '05 might be revised downwards? Or is it going to stay the same? Maybe as a related question, does your guidance actually include intangible assets or not?

The second one, going forward, are you planning to offer the similar tariff packages including free minutes that might affect gross service margins or not? Just to understand what the outlook for the gross service margin should be.

As far as capital expenditures, Vladimir, our 1.8 billion Eurodollars for this year remains the guidance that we would like to stick to. There is no particular ground for us to assume that we will go down in this number. At the same time we figured (ph), and I would like to repeat that, that we will also cap it, attempt to cap it, at not more than 35% of our sales. Whichever becomes the lesser figure will follows as the limit. This includes intangibles, indeed.

As far as offering similar telephones (ph), there will be some offers as promotions, but with a very strong impetus of not reducing the effect yield per minute. So the composition of those promotions will be different.

Okay, thanks very much.

Paulina Kourdiako (ph).

My question is on your CapEx funding plans for 2005. You said that your CapEx (inaudible) should be around 1.8 billion. So far, then, since you guys raised 400 million beginning of this year, and you have 400 million from the syndicated loan security which is still unused (inaudible). How much more are you planning to raise this year, just (inaudible) your CapEx?

Ex-acquisitions I think we are covered. As far as potential acquisitions are concerned, those do in fact drive the necessity to raise additional financing. At the same time, we are on an ongoing basis increasing our shareholders on the ECA side based on the CapEx -- within the implementation of our CapEx program and based on our agreements (inaudible) we may have with some of the banks to fund some of the procurements with ECA-backed loans. Those are obviously tied into a certain national ECA (inaudible). Tatiana, do you want to add something to that?

(multiple speakers) Mainly, the overall amount of ECAs will be around 500, $550 million.

(inaudible) ECA?

Yes.

Excellent. Just to double-check one thing, you said your 1.8 billion includes intangibles, right?

That does include intangibles, yes.

Thank you.

John Armitage (ph).

Two questions, please. Could you say how in March the market is in terms of a competition to acquire subscribers? Are promotional codes (ph) still running at the same level as in the fourth quarter, fee (ph) in terms of print (ph) and fee in terms of permanent discounts?

Also, could you just give us the numbers underlying the pre-subscriber OIBDA margins that you shared in the presentation? On that page, why did the OIBDA margin pre-subscriber acquisition costs for Ukraine drop so much in the fourth quarter?

Let me answer starting with the second part of your second question if I can, related to the drop in pre-sub margins in Ukraine. I believe the major impact of that was the certain slowdown in the end of the year as a result of certain political crises in Ukraine; and we believe it is a temporary impact. We believe this situation is now resolved, and operations in Ukraine are growing as normal.

What is the sort of normal level of pre-SAC OIBDA margins in Ukraine?

We tend to give a certain forecast on the (indiscernible) SAC margins, and we believe that in our pre -- again, we believe the pre-SAC margins will be quite stable with the full-year 2004.

In Ukraine?

Yes, if you take the full-year margins.

In Ukraine?

In Ukraine as well.

And in Russia?

And in Russia.

Thank you.

As far as March is concerned, March was not filled with any aggressive promotional campaigns. We have seen so many stable subscriber growth as (indiscernible) from the numbers given in our press release and in the presentation on the current subscriber dynamics. So we should seen -- again, as we near Q3 we should see increasingly normalizing margins.

Maria Tiero (ph).

Andrey, I'm having problems listening, with the reception. So I am going to ask you questions that you already answered about the dealer commissions. I could not hear whether Moscow was higher than the regions. If I remember well, there was a change in the commissions during the year that helped the improvement in the churn rates. I'm not sure whether it was across the board, including Moscow.

As far as Moscow commissions are concerned, they are indeed on average twice as high as those in the Russian regions.

Okay. The scheme is the same?

Excuse me?

Is it the same scheme?

No, they are using a different scheme. The point that we were making is that (indiscernible) the reduction in churn for Moscow (indiscernible) active market; and it's the market we where adding the most subscribers (indiscernible) the regional markets. The implementation of this less sort of loyalty-inducing scheme and scheme whereby we try (ph) dealers into a commonality of interest (indiscernible) significant churn reductions.

Now the measures utilized in the regions were somewhat different. This scheme was not replicated in many other Russian regions. But other sort of bonus-related schemes still attracted positively the way dealers participated in controlling churn.

Of the 70% guidance you have given in penetration for this year, what percentage do you think is (indiscernible) SIM cards? What is the ARPU that you expect from second and triple on the (indiscernible) cards?

We have said high 70s for Russia, and --.

Yes, but what percentage of that do you think is second (multiple speakers) or doubles in SIM cards?

As we said, with the current (ph) we still think that during 2003 to 2004 the average percentage of people holding multiple SIM cards, be it two or three, was (inaudible) our subscriber base. We believe --.

I'm sorry; can you say that again? How much?

20% (ph).

20%, okay, sorry. I can't hear you.

(inaudible) On the back of aggressive marketing campaigns in Q4 of last year, we do think this number is likely to go up. The increase should bring us to a number closer to 25 to 30%; that is (indiscernible) overall subscriber base.

What is the ARPU for the second SIM cards?

We said that we were adding incremental subscribers with an average ARPU of $6 to $7 in Q4 of last year. That includes everybody.

Did you think people are spending more on the second SIM card? Is it in addition to whatever they had? If you have an ARPU of -- I don't remember your contract ARPU -- the $6 is additional, or is it also by lowering your contract?

There are two points to (indiscernible) here. One is certainly if you think about an effectively lower penetration, the actual ARPU, the actual amount of money that people spend on mobile services on a pure, actual and regional basis, is higher than what you see transpiring from our ARPU figures, which are obviously calculated based on a mobile subscriber base.

On the other hand, and if you have seen some of the promotional campaigns, is that people would use second SIM cards as a substitute for using their regular, first SIM card on a temporary basis. So they would buy it as a purchase of X amount of minutes per (indiscernible). (inaudible). So some of that effect (indiscernible) also transpire in the increasing churn once we have -- when you have gone beyond the 6-month churn period.

Okay. Thanks a lot.

Sergei Arsenyev.

I just wanted to ask a question on churn, especially in Ukraine. You showed 1.7% in the fourth quarter, and it compares to the 6.5% in the fourth quarter of 2003. I just wonder if the 6.5% in the fourth quarter of last year is on the same basis as this quarter's number?

Secondly, on the Russian churn, there was a very nice trend down. Is this increasing in the first quarter, and by how much do you expect, given the December addition (inaudible)?

As far as the decrease in churn rate in Ukraine, obviously we would liked it to not be linked to a change in methodology of how we churn customers in Ukraine. But unfortunately it was linked to that. If it had been calculated based (inaudible) shifted from a 3-month churn policy to a 6-month churn policy, it then would align with how we do it for the Russian operation. Okay? If we had not done that, it would have been at a rate of 7.2% quarterly, which we (inaudible) churn of 23%.

Yes, but (inaudible) 6.5% churn in the fourth quarter of 2003, it's this 1.7%, or is this 7.2%?

7.2.

Okay. And on Russia, on the Russian trend?

We expect it to be closer to 30% annualized, based on the guidance that we are seeing from the current trend (inaudible) in Q1.

Thank you.

Nick Barnes.

I have got two questions. The first one is, your handset revenues last year for the full year were $87 million. I was wondering if you could split that down between Russia and Ukraine? My second question is related to overall market trends of ARPU. You guided to around $10 ARPU next year. Given the relatively low GDP per capita spend on mobile services in Russia, where do you think ARPUs will bottom out?

As far as ARPU is concerned, we have not reached any inflection point, unfortunately. As we said, we were adding $6 to $7 incremental ARPU customers in Q4 of last year. We will be adding lower, are likely to be adding lower incremental ARPU customers in Q1 and Q2 of this year. This should not be based on aggressive (indiscernible) pricing and therefore reduction in the yield per minute.

But we still feel that there is room for further declines in terms of the usage pattern, not so much in terms of the productivity of operators, in terms of bringing the price per minute down. But on the side of some customers really not willing to spend more than a certain amount of money on the first or second SIM cards.

At the same time, there is room for growth on all fronts. What we are doing at the end of April to fund that, to (indiscernible) that a little bit, is we are providing our Jeans customers with access to geographic (ph) services. That should be one of the contributing factors to growing our (indiscernible) value-added service to its component of our ARPU and our top line.

So answering your first question about breakdown of sales of handsets and accessories, approximately 15 million is the revenues from handsets, (indiscernible) handsets and accessories in Ukraine; and approximately 70 million in Russia. Of this, the bulk of the handset subsidies is in Ukraine, approximately 50 (ph) million.

Okay, that's great. Thanks.

Diana Onlon (ph).

This is Yelena Olman (ph). I just had two questions, one on Ukraine. Basically your change of definition of active subscribers from 3 to 6 months, does that essentially also change your number of subscribers and ARPU that you're reporting? Or does it not?

My second question was again on those promotions in December and early January, I presume all the new subscribers used up those free minutes that they had. I was wondering if you could give us any data points on their behavior after. Are they generating revenue now, or are they sort of silent? Thank you.

As far as the churn policies are concerned, obviously as we churn customers after a limited period of time you will see on a net basis an effect on the subscriber base. Okay? (inaudible) Ukraine only, obviously, because Russia has been before, previously, has been historically basing itself on the current methodology, and increase -- (inaudible) its own methodology in line with how we do it in Russia.

As far as the behavior patterns or usage patterns of the December subscribers, I would say that it is probably a bit too early to annualize that. I think we need to take a few months to see how much or how many or what percentage of the subscribers that we acquired in Q4 (inaudible) are becoming actually active.

As far as the current statistic is concerned, the inactivity rate of the subscribers that we acquired in December -- and again that is far from being a comprehensive statistic -- they still, from what we see right now in our database, are roughly 20% (inaudible), are in fact (inaudible) subscribers.

Did you say 10?

(inaudible) zero.

I could not hear. How many? What did you say the (indiscernible) subscribers?

(inaudible). In excess of the New Year (indiscernible) subscriptions.

Okay. Thank you.

Tom Azehed (ph).

Two questions. First off, can you give us some idea of the rooming revenues in Q3 and Q4? Second, how many of your Moscow subscribers have direct (indiscernible) Moscow numbers, please?

We have approximately 250 to 300,000 DX London (ph) capacity; (inaudible) alternative operators.

Okay.

Nikolai?

Roaming revenues as a percentage of sales, in the fourth quarter it was 9.6%; and in the third quarter it was 13.3%.

Thank you very much.

Tom, for the Greater (ph) Moscow region, the number of direct lines is closer to 0.5 million.

So you have got about 0.5 million (indiscernible) numbers.

Yes, half a million (inaudible) direct lines.

Thank you very much.

Can I please ask for the last, say, two questions?

Lena Gotyem (ph).

I have a couple of questions. The first one -- sorry to go back to this -- but it is just on the costs and your margins again. You provide in your press release the information which breaks down your costs between equipment, G&A, cost of services, sales and marketing. If we look at your margins before the sales and marketing, which were down about 5 percentage points for the fourth quarter year-on-year, what is the outlook we should expect for 2005? Again if we think of year-on-year trends, so excluding seasonality.

It sounded before as though some of these costs which are oneoff implied that perhaps this margin before sales and marketing would be higher than the 2004 level. That is the first question. I will come back to the others in a second.

Again, (inaudible) pre-SAC OIBDA, but I believe it would be a valid statement to say that we believe that pre-SAC OIBDA will be quite stable both in Russia and Ukraine compared to the full-year 2004 if you ignore the seasonal effect of the fourth quarter. So if you take the full year; and if you remember we were always guiding on the level of OIBDA of approximately mid-50s, which were actually delivered in the full year 2004. But in terms of pre-SAC, we believe it will be quite consistent next year.

Sorry. What are those levels that it should be stable with? What are those full-year 2004 pre-SAC margins in Russia and Ukraine that it should be stable with going forward? Roughly.

We are saying in total about, around 60-plus percent.

In both Russia and Ukraine?

Yes, that is right.

My other questions, I will just give these all at the same time. In terms of penetration, which is currently just above 50%, but as you have stayed before there is perhaps around 25% dual-SIM; so it implies that real penetration in Russia is around the mid-30s. To me that suggests there is still quite a bit of growth potential left in the market. Do you agree with? Where do you think penetration would mature for Russia?

The next question is just again on the incremental ARPU. You mentioned $6 to $7 for Russia in Q4. Is that also what you're seeing so far in Q1? Could you also tell us the incremental ARPU for Ukraine?

The last question is just regarding number portability, if you have any perhaps information regarding timing. And if you can comment on whether or not, given tariff differences with yourself and your competitors, (indiscernible) this would really be a negative or potentially a positive for you? Thank you.

We have said before that we should see (indiscernible) penetration in Russia at the end of this year. More than 35% penetration in Ukraine. I (inaudible) that the actual penetration, netting out the dual-triple SIM card ownership effect, is in fact lower. We should see additional growth coming in the market in terms of subscriber numbers.

But at the same time, that being said, we will say it very much correlated with the ARPUs, incremental ARPUs, and the price per minutes prevalent in the market, assuming that the price per minutes are going to stabilize and we will not see more dramatic (indiscernible) dynamic (indiscernible) the players. Additionally, economic growth in some of the more mature regions will be driven by the lighter segment of the market.

But you are right in assuming that the actual penetration should be higher; and I would say that we should probably see a significant deceleration (ph) in the growth pattern once we reach the Russia figure of 85 to 90% penetration. Ukraine tends to follow Russia with a bit of a lag, sometimes a year, sometimes a year and a half, in the overall market pattern. So that should not be that much different.

As far as mobile number portability is concerned, for our -- yet once again on this measure, on this novelty, similar to what we had with calling party (inaudible), some range of technical issues that needs still to be worked through by the Ministry. We are not sure how they are going to on the -- Hello?

I'm sorry about that. Sorry.

Okay, that (inaudible). There are some technical issue to grind through between the Ministry and the market players to fully realize how this is going to work. Because with the current regulatory set-up of how numbering (ph) capacity gets allocated, MNP simply cannot be utilized. So it would require significant changes in the regulatory landscape. So we will have to wait and see when and how this will be done.

One of the ways would be to use one of the long distance operators (inaudible) allocate this numbering capacity so that it can -- it (inaudible) providers' portability functionality (indiscernible). But again, this is something that has not been decided yet. It is difficult to estimate the timing of that. It is would affect potentially customers that are (indiscernible) to their numbers; and some of these customers do in fact belong to the higher-paying heavier segment of the customer base.

That being said, again, we believe that people are (indiscernible) to the (indiscernible) of their numbers, but increasing on the quality of service and the quality of coverage, on (indiscernible) related attributes; so that should -- if we build this properly -- increase and enhance (indiscernible), that should soften the negative effects of MNP for the heavier part of our usage.

Thank you. Just regarding the ARPU, about the incremental ARPU in Ukraine, and whether or not Russia is still around $6, $7 so far in Q1?

(inaudible) be going slightly lower, but really I think on average you could say that it is in the same vicinity. Ukraine is slightly higher; (inaudible) negative with the average ARPU and the prepaid ARPU; and the incremental would basically be approximately $1 higher than the Russian incremental ARPU.

Thank you very much.

Ladies and gentlemen, I would like to include this conference call. Thank you very much for your time. A replay of this 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. This concludes the MTS fourth-quarter and full-year 2004 conference call. Thank you for your participation.

Thank you.