Mobile TeleSystems PJSC (MBT) 2007 Q1 法說會逐字稿

Ladies and gentlemen, thank you for holding and welcome to the First Quarter 2007 Financial and Operating Results Conference Call. Throughout today's presentation, all participants will be in a listen-only mode. After the presentation, there will be an opportunity to ask questions. [OPERATOR INSTRUCTIONS].

I will now hand the conference over to Mr. Andrei Terebenin. Thank you, sir. Please go ahead.

Good day, ladies and gentlemen, and welcome to MTS conference call to discuss the company's first quarter 2007 financial and operating results. Before beginning our discussion, I would like to remind everyone that except for historical information, comments made during this call may constitute forward-looking statements which may involve certain risks. These statements may relate to one of the following issues; the strategic development of MTS's business activities both in Russia and abroad; revenue and/or subscriber growth; syndicated loan facilities and their usage; legal actions or proceedings directed at the company or its representatives; regulatory changes and the impact on company saturation into markets in which we operate; financial indicators such as operating income before depreciation and amortization, average revenue per user, cash flow projections and/or return on [investment] capital; technical methods as they could sustain to our mobile communication network including equipment, licensing for network technologies and capital expenditures and operating expenses.

Important factors could cause actual results to differ materially from those contained in our projections or forward-looking statements. These statements might include company press releases, earnings presentations, MTS's Annual Report and Form 20-F as well as other public filings made by the company with the United States Securities and Exchange Commission, all of which are available on the company website at www1.mtsgsm.com or that of the US Securities and Exchange Commission at www.sec.gov.

MTS disavows any obligations to update any previously made forward-looking statements, uttered on this conference call or make any adjustments to previously made statements to reflect changes in risks. Copies of the presentations and materials used in references in this conference call are available on our company website.

Participating on the call today are Leonid Melamed, President and Chief Executive Officer, Vsevolod Rozanov, Chief Financial Officer, Mikhail Shamolin, Head of Business Unit, Russia, and Mark Burden, Finance Director of MTS Ukraine.

I'll pass the chair now to Leonid Melamed, President and Chief Executive Officer.

Ladies and gentlemen, thank you for joining us. I'm pleased to report another quarter of growth and profitability as we continue to pursue our 3+1 strategy. Revenues for the group grew 35% year-on-year on the strength of our Russian operations where present price stability in the marketplace enabled us to see the full impact of the steps we took in 2006 to enhance our brand and transition to the new tariff structure.

Most of this find is the fact -- is the right revenue theme with lower spending. Q1 is normally a slow quarter due to seasonality. Having introduced eight new tariffs in Russia in the second half of 2006, we decided to limit our promotions, select the new tariff, and get some traction in the marketplace. The rate of marketing spend OIBDA for the group reached 51.9%, while our Russian operations came in at 52.1%, a 5.5% year-on-year improvement.

Important topic for us is Ukraine. In general, I have to say that we consider Ukraine is quite healthy business. In spite of increased competition on the market, revenue growth came to 11% year-on-year. A record number of subscriber additions in Q4 combined with seasonal usage strengths lowered our ARPU to 5.7. However, retaining our market share has been important for us and our subscriber share in the market held at 40%, a key (inaudible) for us as it will put us in a far more competitive position when the market stabilizes.

As we have previously discussed, the Ukrainian markets has become increasingly competitive at the interest of two operators and the aggressive pricing of our competitors, who have led to slowing overall revenue growth in the market. At the intermediary steps, we have had to respond by bringing low-priced products to market including our low-field Equitel brands.

Now the performance of Equitel, like our hopes, we don't feel our future in Ukraine lies in catering to low-value users. Given our strong portrait in corporate customers and subscriber base, we have a strong financial interest in reversing the market trend and pushing for stabilization.

In the past year we have worked hard to increase coverage, distribution and capacity having now achieved parity with any other network in the market. Our research indicates that we have made impressive strides in network quality while we are now moving forward to bring mobile broadband to the market through our CDMA 400 3G offering and [disposing] our fixed line assets.

With all the two complete, we will be coming to market with a new approach in the coming months. Now you will see both one of the most recognized brands in the region, we believe that launch of the MTS brand can be a catalyst in the market with first step towards ARPU stabilization and eventually growth. And like Russia in 2006, this will be the moment when we redefine our tariffs, bringing product to market and reenergize our employees and customers with an added emphasis on value, quality and service.

In Uzbekistan, we continue to develop our networks and build upon our markets and revenue shares, more profitably leveraging our scales. Subscriber growth of 18% overcame the seasonal drop in usage leading to total revenues of nearly $50 million. Those can primarily be attributed to our introduction of tariff plan Pervyi, a clear validation of our transition to our group structure and the uniform approach we are employing in our markets.

A testimony of this is our OIBDA of nearly 63.7% clear evidence of our working towards profitable growth in each of our markets of operation. Recently, we were awarded licenses in Uzbekistan for 3G frequency. While we are not yet in a position to elaborate in great detail on our plans, we do intend to begin offering mobile broadband services to take advantage of low fixed lines penetration and opportunities to increase capacity in major urban centers.

In Turkmenistan, we continue our profitable growth with attractive markets as revenues reached $35 million. OIBDA improvement reflects our dominant position in the market, as we retained our 83% share. The reach of our Central Asian operation fully branded and operating under our norms, we expect both of these business units to continue to gain visibility in our group results and performance.

And I will pass the call to Vsevolod Rozanov.

Thank you, Leonid. In our results, we continue to see the benefits of our corporate transitioning problems improving our operating and bottom line performance. OIBDA grew 67% in Russia from Q1 2006, outpacing our 40% growth in sales. In Ukraine, OIBDA grew 17%, a nearly 3 percentage improvement year-over-year, while in Uzbekistan, we grew at nearly 64 OIBDA margin, signs that our strategic growth of course was excellent and cost optimization [had here] improved throughout our operations.

Likewise, we have seen positive developments in our bottom line. Unlike last year, where we were forced to recognize certain one-off items [in expense], our bottom line dynamics proved effective financial management. Our refinancing of debt in April 2006 has allowed us to reduce our interest expenses while with over $500 million in free cash flow, we have also earned late interest income.

In addition, the growth in our earnings from Belarus and contribution from Uzbekistan brings us to the [inaudible] improvement of our net income margin compared to the same period last year. CapEx spending for the quarter came in low at $224 million. Roughly, half of this spend came in Ukraine, where we have aggressively been making capacity and quality improvements in anticipation of our re-branding. Spending in Russia was came down a bit as we awaited results of the 3G license tender held in April more of which Leonid will discuss.

Our cash position is strong with over $500 million in hand at the end of the quarter. As our Board of Directors have recently authorized $747 million in dividend, which represents $1.87 through ADR and 69% of net income. It is safe to assume that our cash will be used to make this payment.

Consistent with the continuous focus to be one of the best companies in the corporate governance practices, we recently introduced a dividend policy which was adopted by our Board of Directors. The policy provision is a minimum of 50% of net income to be allocated for dividend payments.

While we feel that we are still a growth-oriented company, our low debt levels, combined with the adequate cash flows innovated by our Russian operations provide ample financial resources to grow our business, continue M&A opportunities and undertake capital investment projects to satisfy our technology strategies.

In Q1, we made no purchases through our share repurchase program as we kept the cash balance for our general corporate purposes. However, the program continues to be operational.

In conclusion, let me address yesterday's announcement over amendment of our 2006 financial results. As we have previously disclosed, individual shareholders of (inaudible) Sistema agreed to cover any future losses including our ongoing dispute with past owners of the Kyrgyz GSM operator of Bitel.

Despite the guarantee and after additional considerations provided by our auditors and attorneys, we recorded a charge and include [there] to our financial statements for the year ended December 31, 2006. It does not in anyway lessen our results and opportunity now in the Q, [inaudible] and we are employing our full resources to this matter favorable for our (inaudible) shareholders.

Thank you and I am passing over to Leonid.

Thank you, Vsevolod. In April, we were awarded a 3G license for the whole of Russia. While 3G worldwide has been met by the market with mixed feeling, we believe that the opportunity is right to introduce new technology to our customers.

Customer experience is critical to the introduction of new technologies, and here we are at an advantage. Considering our strong base of corporate and high daily usage, often considered to be bellied up with new technology products. The 3G customer experience will enable us to provide a broader array of incentives to encourage the adoption plus the royalty and generate great affinity among our customers.

With over 500 3G devices available for sale, over 200 TCO which are HSDPA ready, there will be ample equipment available for customers to connect to our network. While our European and Asian peers, however have to manage the UMTS technological buildup, offering slower speed, we are jumping right to true mobile broadband allowing customers to get a richer, more compelling experience.

3G for MTS represents a natural evolution of our networks. Worldwide over 150 million subscribers, now make connections on 3G wide CDMA network. And the industry, as a whole is moving to a future governed by high speed [circuit access].

As our 2G network, now is running at high utilization levels, we have opportunity to improve our network capacity with new 3G equipment. As 3G base station consumes significantly more capacity than comparable 2G equipment, and the price is significantly less, than when 3G equipment was first launched, [electronics] are working in our favor [throughout] the equipment.

Overall, we also feel that costs will be manageable. Through 2009, capital expenditures of 3G could climb near $1 billion, which includes cost for frequency clearance, and our minimum license requirements for coverage. Add to this, an estimated drawback in 2G spending of approximately 200 to $250 million, the results will be worth it; a broad efficient, high speed network covering, as many as 43 of Russia's top urban centers.

And encouraging such a network will develop a competitive advantage in bringing to the market innovative services, developing convergent products and delivering a wide variety of communications services in the face of competing technology.

Nevertheless, we remain true to our strategy, delivering exceptional returns on invested capitals. While (inaudible) deliberated on ways, in which we have crafted our organizational ability to deliver maximum revenue to our shareholders through our financial strategies. We remain committed to growth in our market.

As such, given the results we have seen in Q1, we feel it prudent to raise our guidance on group revenues to a minimum of 22% for the year. The past year, has allowed us to align the organization to lay the foundation needed for sustained growth, strengthening our brand for our customers, improved efficiencies and profitability to the organization, and soon the new technologies for our networks. We aim to leverage all these strengths, as we further develop our business.

And now we will -- now we would be happy to take your questions. Thank you.

[OPERATOR INSTRUCTIONS]. The first question comes from Mr. Alex Kazbegi. Please state your company name followed by your question.

Yes good evening. Alex Kazbegi from Renaissance. I was wondering if you can give us a bit more color on Ukraine and the reasons why still ARPU fell quite considerably, especially given that Kiev's ARPU fell 14% I think quarter-on-quarter. I generally don't like obviously contrasting you, but it would be very helpful if you could give us maybe some details and some color on that. And also if you can maybe tell us what's the situation currently and when do you think will be more price stabilization coming into the market? Thank you.

Could you please -- Alex, could you please repeat the question regarding ARPU in Ukraine, because it's -- we didn't hear it well enough?

Sorry. I was just trying to contrast, we've seen the -- Kiev's ARPU falling quarter-on-quarter and about 14%, and clearly what I was wondering that probably given the similar subscriber base, you'd have roughly the same type of performance. And given that your ARPU fell by 22%, I was just wondering if you can give us a bit more color on exactly the reason for that kind of performance? And secondly, what is the situation currently whether the trend on the pricing pressure is still continuing and when do you think it's going to be a reversal in the current situation?

Thank you. That's clear. Regarding ARPU situation in Ukraine. So, we have witnessed relatively respected growth in the postpaid ARPU in Q1 combined with the big decrease in ARPU in prepaid -- with prepaid customers in Ukraine. The reason for this is the following; so the postpaid customers are usually loyal to our company and they value the quality of the network that we have elaborated and they are quite -- their disposable income is growing and they have pursued an active usage and actually our marketing activities were not oriented to somehow retain these postpaid customer base in Ukraine, since the customer base is stable.

The major activities -- marketing activities took place in the prepaid sector, where we have marketing difficulties since year and a half, or two years ago, the quality of the UMTS network fell down and it didn't have big -- let's say, this quarter it doesn't have significant reputation among the prepaid customers. And from another sense, there are -- and this reputation is lower than with the Kyivstar. From another sense, there are attractive financial propositions by two newcomers, who also then have -- I believe the perception of the excellent network quality. But, if they could aggressively promote new tariff plans.

So, our prepaid segment is like somehow between those two slots. And we have had to react aggressively to prevent huge churn and loss of that market share in prepaid segment. For that reason, we issued the tariff plan Equitel under new brand Equitel, and with the quite low prices on that. And this very fact, together with the fact that newly -- the customers that joined us in the end of Q4 and the beginning of Q1, are as usually all of the newcomers, far lower speakers, [drill up to] the significant dilution of the ARPU in prepaid segment.

That is why we think that our re-branding can deal with all of the activities that go into the re-branding that would drive to the -- lets say we believe to -- lets say higher valuation by the customers of the quality of MTS services, would allow us to change the situation in the prepaid segment and to enforce our market position in the postpaid sector. And that is why we think it's very logical to launch re-branding exactly in the end of Q2. And that gives us the idea that this activity of ours can create a significant step in market civilization in Ukraine in general and will definitely mean some serious changes in the market between the MTS and the Ukrainian market.

Does it mean that until the end of the Q2, it's very unlikely that the situation will change then?

Currently the situation in Ukraine is stable in accordance to the results of the early spring, on the levels of the beginning of the spring.

Okay, if I can just ask also maybe if you can give us the postpaid and prepaid ARPU between Q4 last year and the Q1, would be very helpful?

I will ask Mark Burden, to provide you with the numbers.

Thank you.

Hi, Alex. Okay, in terms of postpaid ARPU, there were $33.2 in Q4 of '06 and $30.3 in Q1 of '07. Prepaid ARPU for Q4 '06 was $4.9 and in Q1 '07 it was $3.7. That was the question you were asking?

Yes, correct. Thank you very much.

Thank you. The next question comes from Mr. Sean Gardiner. Please state your company name followed by your question.

Yes, Morgan Stanley. Just on the change in revenue growth to 22%. Can you go back to the guidance you gave at the end of January? And just talk about what you see for ARPU, for both Russia and Ukraine now versus what you saw then?

And secondly, on the cost side, can you talk a bit about your selling and marketing costs in Russia, I think it came at around about 6% of revenues or in that range. Are you seeing any pressure to raise that in the second quarter or in the coming quarters? Or do you think that you've hit a new level with your scale? Thanks.

Thank you for the question. So, usually we don't give the guidance for ARPU for the business units of the company. So, we can say that in Russia it would be, at a level at around -- we consider to be at the level around 8.6%. And in -- and, yes, with [$8 and $6], and for Ukraine, we would not give the guidance as we usually don't give it in general.

I think for the Analyst Day, you said, you expected obviously Ukraine to be $7 for 2007. I'm just trying to work out where the increase is coming from in your guidance. Clearly, Ukraine is under pressure, so?

Right now, I would like to withdraw myself and see [inaudible] if I may to give the guidance for ARPU in Ukraine. But we hope and we will undertake the measures to increase this ARPU for MTS. And we believe the market trends would support us on this.

Maybe another one, just on that ARPU question then. How much of your 22% revenue growth guidance, how reliant is that revenue growth on a inflection point on Ukrainian market, you're talking about with your re-branding and your tariffs helping to improve your position there? Please talk about that.

Well 22% growth, we've forecast for the whole group. So, the share of revenues in Q1 for Ukraine has reduced compared to the one we had in the previous year by like 4%. So, I think it increased; [I really do hope] that at the end of the year, there would be some increase of the Ukrainian share in our revenue. But, I actually won't be able to give the complete guidance for Ukraine revenues for the end of the year. The only thing I'd like to say is that we hope it would -- its share in revenues, will [aright].

Yes, thanks. And on the cost side, just on the selling and marketing in Russia?

Yes, on the sales and marketing. On the dealer commission, we continued to pursue our strategy for our dealer commissions being based on revenue sharing. And this is -- in the first quarter, was different from our competitors who pursued not only revenue sharing scheme but also one of bonus payment to dealers which somewhat increased their dealer commissions as compared to ours. And we remained sort of loyal to our policy. And the reason it was done, that is because we believe that the first quarter is not the best quarter in terms of sales and excessive stimulation of dealer network typically results in a very low quality subscribers which we did not consider economically beneficial for us.

The first quarter is that, you know, very cold in Russia, people don't tend to go out shopping a lot and therefore it's a -- for sales a lower key to quarter and the same sort of approach reflected itself from the advertising expenses. This of course will be changing in some what in summer quarters because it's more active sales activity and therefore you will probably see a slight increase in both dealer and advertising expenses.

Okay. Thank you very much.

Thanks.

Thank you. The next question comes from Mr. Taras Shumelda. Please state your company name followed by your question.

Hi, this is Taras Shumelda from American Century. I would like to ask a follow-up question on Ukraine and the question is as follows. If I understood you correctly, you mentioned that one of the problems in Ukraine has been the perception or the actual lack of quality of UMC's network relative to competitors. Can you just talk a little bit more about that exactly where you lack this quality, is this the capacity issue, what you are doing to resolve it? When do you expect to resolve it? And how much it's going to cost? Thank you.

Yes, thank you for this question. You understood it quite correctly that, one of the problems for the marketing position of UMC brand is the perfection of this brand -- like the brand that lost its quality like two years ago. And this was exactly due to some news forecast of MTS for the speed of growth of penetration in the Ukrainian market, like about one year and a half ago, we recognized that the market is growing very quickly and we've revised our plans on capital investments and creation of our network. And so the last year, we've increased our amount of base stations in Ukraine in two times, and this allowed us along with some other activities to bring our network quality to the level of the best standards in Ukraine and then generally in MTS Group. That's why, technically speaking, for a time being, we don't see quality problems with our Ukrainian networks, though we as long as the amount of subscribers grow, we will proceed investments and like in Q1 2007 our capital investments in Ukraine were like 63% higher than in the same period of the year 2006. So, now we need to proceed from the stage of improving of the quality through the stage of changing the perception of this quality. And this is why the re-branding going to be a big help to us, as we hope.

Thank you. May I ask one more question? On GSM, can you talk a little bit about when exactly you plan to roll it out? What it's going to cost and any other information you can share on that respect? Thank you. Not on GSM on 3G, I am sorry.

Thank you. And you mean in Russia?

In Russia or [any place else]?

Sorry -- we have been granted the license for UMTS in Russia about a week ago. And about a month and a half ago, we've been granted this license in Uzbekistan. Today, we are in position to comment, as we promised before, that in the Q1 disclosure, we will comment on the basic numbers [of our] -- this business case of 3G development in Russia.

And on page 11 of our presentation, we gave some guidelines on this topic where we underlined that in the next coming three years we intend to spend about $1 billion for creating the UMTS HSDPA network in almost 43 urban centers of Russian Federation. And we anticipate by the year of 2011, to have up to 11 million 3G subscribers and the incremental revenues of 3G services up to $2.5 billion.

We definitely will start the commercial operations and the main features of the country with a population over 1 million. And some parts of our networks will be technically prepared for the commercial usage, even in the end of this year beginning of the year 2008. But the start of commercial use is very much dependent on the frequency clearance and this is where we are dependent on the decisions of the other sides including governmental institutions and that could -- the decisions could little bit change the -- our existing plan of commercial -- start of the commercial usage of the network. We will not delay also the creation and -- of this network in the cities where the population is less than 1 million because we can catch up the opportunity there to offer broadband access to Internet to the customers who simply don't have it right now, neither through mobile nor through fixed line access. And so this is it. And about Uzbekistan, we are not in the position to comment now. But we will be prepared to do that on the [Q3] disclosure.

Thank you.

Thank you. The next question comes from Mr. Sergei Arsenyev. Please state your company name followed by your question.

Good afternoon. This is Sergei Arsenyev from Goldman Sachs. Can I also continue the Ukrainian theme? I am just trying to understand what's happening with your advertising and marketing expenses and you sort of explained that, but I'm just trying to think for the coming quarters, your advertising and marketing, the gross adds basically doubled from the fourth quarter in '06 to the first quarter of '07. Is this the kind of level that we should expect into the coming quarters, especially given that you are not really seeing an improvement in the top line in the ARPU in the second quarter, and presumably the cost of re-branding will come on top of that in Ukraine? So, if you can just talk about that dynamic that will be great.

And my second question is on the share buyback program. Did I understand correctly that you have not repurchased any ADRs in the first quarter of 2007? And can you just give us the number, the overall number of the ADRs that you have repurchased since you have announced the program? Thank you.

The first question, I'll pass to Mark, please.

This is Mark. Basically what you are looking at is, in terms of the mathematics of SAC, if you look at the absolute value of money spent on advertising and marketing during Q1, it's slightly under the level of Q4. It's the math in terms of SAC of having a record number of gross adds during the period. So, I think, we then have some indicator of how the future might go in terms of advertising and marketing spend given that we have rebranding this year.

Vsevolod?

Thank you, Sergei. Yes, we would like to confirm that we have not bought any ADRs over the course of Q1, this year 2007, which basically means that the number of ADRs we have on the balance sheet is same as I told you as of December 31st, that is 2.7 in ADRs. Thank you.

And can you tell whether you've bought any ADRs in the second quarter? You are not allowed to do that.

Yes, it is correct. We are not allowed to discuss the current situation, and we will be ready to disclose the number of ADRs on the balance sheet during the future results' calls.

Okay. Thank you.

Thank you. The next question comes from Mr. Konstantin Belov. Please go ahead with your question, sir.

Thank you. This is Konstantin Belov from URALSIB Capital. I have a couple of more questions if I may. My first question relates to your income statement. I wondered if you could shed a bit more light on the other income item in your income statement, which amounts to $27 million? And my second question relates to the restatement of 2006 net profit, which was announced yesterday. I wonder if there is any chance of a revision of dividend numbers, which were announced earlier this year with regard to this? Thank you.

Excuse me. Can you please repeat the first question?

Sir, it's about other income item in your income statement for this quarter, where I see there $27 million income -- it is under your total other expenses, so could you maybe elaborate a bit on where this comes from?

Well, usually the other expenses would be a different [reality] of the accounting reallocation. So, basically there are no any particular large items there. And nothing basically has happened there over the course of the last quarter, except for this experience, which had on the Bitel we had last quarter.

Okay. Thank you.

And the second question was -- excuse me.

And the second question relates to the dividend for 2006, which was preliminarily announced by the BoD, could it restated or not with regard to the restatement of your net income numbers for 2006?

All right. As you might know, the Board of Directors have recommended through our regional shareholder meeting to pay dividends. And the recommendation was done in absolute numbers, i.e., rubles to ADR, on the rubles for ADR basis, and this recommendation is definitely in force, and there are no intentions to change that. And according to the Russian corporate law, it is actually related to -- it's not possible to change.

Okay. Thank you.

Thank you.

Thank you. The next question comes from Mr. Alexei Yakovitsky. Please state your company name followed by your question.

Yes, good evening. This is Alexei Yakovitsky from Deutsche Bank/UFG. You've raised your revenue forecast for the year quite substantially without a change in the guidance for full year EBITDA margin. I think this is the second time you do it without change in the profitability guidance. Would you agree -- will you say that, this is becoming an increasingly conservative guidance for the profitability given again that you expect, well presumably extra $400 million in consolidated revenues this year? That's the first question.

And the second on CapEx, on 3G CapEx. I am looking at page 11 of your presentation, where you show this fancy graph with 3G CapEx evolution. Am I reading it correctly that effectively your full year '07 CapEx plan, which I think was around 1.8, as you previously suggested, is not going to change much as a result of 3G because you are going to save 250 in '07 or this 250 relates to the entire three-year period of '07 and '08 and '09, if you could clarify that? I am assuming you have made no change to plan according to the newswires from your press conference, but if you could just confirm that? Thank you very much.

Okay. Thank you, Alexei. Our CapEx guidance for the year 2007 including our 3G expenditures is around $2 billion, on top of $1.8 billion that we have given as our guidance for 2G development in our country at the present. For this year, we had $200 million on top as the initial investments in the creation of the UMTS network in Russia.

If -- to come to your third question to comment on the OIBDA guidance, I would say that, we understand that the competition in the market of our presence like in Russia and what is also important, Ukraine, will probably guide us to the necessity to have significant expenditures and those expenditures can, let's say, cannot probably allow us to increase our bottom line regards, at least this -- on the forecast basis or for the sake of the forecast that will be changed. From another stand, we -- it's not only competition that drives us there, but there are also opportunities. You see the market is growing in Russia like [35%] on a year-on-year basis, and there is still growth in -- double digit growth in Ukraine as well, and we should do our best to accumulate the usage and to catch all of the opportunities of growth of the various under markets and some expenditures to generate customers usage behavior would be -- from our side thought to be reasonable and that's why coming from opportunities from one hand and market necessities from another hand, that probably will not change for the time being, our guidance and OIBDA for 2007.

Okay. Just to clarify on the CapEx issue. Your chart on page 11 is suggesting -- again I may be reading it incorrectly that you are going to reduce your 2G CapEx by 250. If you are going to spend the billing for the total group, that means you are going to spend about 40% to 50% of the total $1 billion, slated for 3G in the course of 2007. Is that a correct way of looking at it that you are going to spend lets say $400 million on 3G alone this year?

This 200 (inaudible) savings we expect to have to the next coming two years and a half, like almost three years. So, it would not affect our CapEx this year. Especially take into consideration that we would see a significant increase in revenues and we change our forecast on revenues and we need to create a proper network to create a proper quality for this network. So we don't change -- the results of those savings to some extent. Savings that we can achieve with the help of 3G equipment is -- as we said, that we don't change our -- with the CapEx forecast in the year 2007 in 2G area. If not for 3G, with increase of the revenue, forecast, I would be in the position to offer different CapEx for 2G. But we don't give it.

Okay. Then that's clear now. Thank you.

Thank you. The next question comes from Mr. Alex Kuznetsov. Please state your company name followed by your question.

Good afternoon. It's Alex Kuznetsov from Bear Stearns. Most of my questions have been answered, but I have a couple of last questions. First of all, I have noted that churn rates in Russia and Ukraine showed different trend. In Russia they increased, while in Ukraine they continued declining. Could you probably comment on this trend, especially it's surprising; in Ukraine since they have increasing competition and increasing competition usually results in higher churn rates. Also, I recall you provided some guidance on the 3G -- benefits from 3G. But you were talking about benefits in a far away perspective, as far as 2011. Could you probably comment on potential revenue and EBITDA growth in -- for the next three years, or maybe for the next year?

Okay. Thank you very much. I would have -- to comment on the churn rate trends, Mr. Shamolin; and in Russia and Ukraine trends for Mark.

I mean, the churn rates in Russia remain quite stable staying out of the ordinary. If you compare it to the Q1 of 2006, the churn was actually lower. If you compare it to Q4 of 2005 -- sorry Q4 of 2006, the churn was a bit higher. But this is sort of a seasonal churn that you typically see. So we don't see any inadequacies in churn development.

This is Mark. Yes, actually I would agree with the same comment for Ukraine, this is a seasonal trend and if you take a look back over 2006 by quarter, then you would expect a similar kind of trend as last year.

Thank you.

Alex, regarding the question and the guidance on OIBDA for the next coming three years, we unfortunately didn't issue any kind of guidance or such perspective. Though, I would say that our pickup on strategy, if I may address you to those, says that we have to be -- ROIC on levels higher than 25% a year in the next coming 5-year perspective. And it's also said in the strategy that we would like to be -- in the next coming five years, the [OIBDA] margin somewhere around 60%. Though it's not our guidance for [those] years, but let's (inaudible) the statement from the strategy that was discussed with you and the other industry's analytics last year.

Thank you very much.

Thank you the next question comes from Ms. Elena Bazhenova. Please state your company name followed by your question.

Good evening, this is Elena Bazhenova from MDM Bank. First question is regarding effective tariff. In Russia it was down 4% quarter-on-quarter, what dynamic do you observe in the second quarter? In particular if you comment on impact on tariff from [risks introduced] greater tariff plans. And the second question would be how much more interconnect revenues in Russia in the first quarter? Thanks.

Excuse me Elena. You have -- the first question was about the new adds or --?

No it was about effective -- an effective tariff in Russia; if we divide -- your effective tariff in Russia was down in first quarter?

Tariff or effective tax rate? I am sorry for the confusion.

Tariff.

Do you want us to comment on our APPM in Russia?

I just mentioned that your effective tariff in Russia was $0.061 in first quarter versus $0.064 in fourth quarter, I just wanted to know if we should -- should we expect the same tariff level in second quarter of this year or do you observe tariff increase in the second quarter in particular, because of an introduction -- because of introduction of credit tariff plan. So the question is, is your effective tariff in Russia is going to pick up in the second quarter?

Yes, this is Mikhail Shamolin here; I will answer the first question. Our APPM level in Q1 was just slightly lower than the APPM level in Q3 -- Q4 sorry, because we had been running a marketing campaign targeted on the retention of the existing customers. That was a campaign which gave 25% discount to existing customers, who wanted to switch on to a New Year offer and that -- because of the promotion, we had a very slight APPM decrease and, of course, this decrease will somewhat disappear in the second quarter.

And the second question, Vsevolod, how much was interconnect trading use in Russia in second quarter?

The interconnect trading in Russia was just about $142 million. Thank you.

$142 million?

Yes.

Thanks. Thank you very much.

Thank you. The next question comes from Mr. Will Milner. Please state your company name followed by your question.

Thanks. It's Will Milner from Arete Research in London. Just looking at your -- in Russia, I'm just looking at your usage growth year-over-year and obviously there is a very healthy trend there. I guess, the question I have is really to what extent you feel that the future growth of usage is held back by capacity constraints in Russia? And as sort of follow on to that, as you start bring on 3G capacity, your existing usage level seems to have kind of plateaued around the 130-135 minutes. I mean -- internally where are you hoping to drive usage to -- within Russia. So that's the first question.

And the second question just very quickly, internally what assumptions are you making on inflation in Russia going forward? Thanks.

Okay, Mikhail Shamolin here. I am going to start with answering the first question on the Russian usage. We -- right now, the usage is not constrained by capacity per say, it is somewhat constrained by the coverage because not all of the smaller towns and villages are yet covered. So, there is potential there to pick up new customers and get some more usage although, it would be, at first, therefore a low usage because we are talking about low income customers in most cases.

As far as the capacity is concerned, it is of course tightly connected with the price quality in the market. To give you an example, we have an average usage in Moscow of 150 minutes and an average usage in the macro-region in south of 350 minutes. But of course, the APPM level in Moscow is about -- is above $0.10 and in the macro-region south it is about $0.03. So, that gives you an idea of the price elasticity and how the usage could grow, if the prices decrease. But of course, we all calculate economics and we try to balance our revenues on such a way that we have adequate pricing and also the network, which is filled with traffic.

To give you a trend, I believe that the usage in Russia is going -- continue to grow and we will see sort of double-digit ARPU figures by the year 2011, 12.

Sorry, just to recap it double-digit usage growth until 11, 12 is that what you are saying?

No, the usage I said double-digit ARPU growth by 2011, 2012 and usage, we believe that the potential would be around -- above 300 minutes, let's put it this way. And as to when it will happen, I would probably refrain from making assumptions.

Okay. Thank you.

And then the second question, we use the Ministry of Economic Development guidance was up, guidance on inflation or assumptions of inflation, which up single digits [7 to 9], basically, percent. Thank you.

Okay. Thanks.

Thank you. The next question comes from Mr. Dalibor Vavruska. Please go ahead with your question sir.

Hello. Good evening. I have two questions or maybe request for clarifications if possible. First is on 3G, you mentioned there is $2.5 billion revenue target or a forecast for 2011. I am just wondering how do you define 3G revenues because some operator says it's difficult to distinguish what revenue actually is allocated to 3G because during one call you can switch from two different networks, for example. And maybe on that question I am just wondering how much of this 2.5 do you allocate to data versus voice and whether you can give some light on how the 3G may be not that far away from now, but maybe in next couple of years, how is it going to effect your GSM voice business that would be great.

And the second question is, how do you define market share because what appears to me right now is that the two of the three largest operator switch to this three months churn, definitions of the subscriber numbers are increasingly more difficult to compare and when I look at the revenue market share it seems to me that essentially the two leading players are rather equal at this moment. I am just wondering whether you rather look at the subscribers, or revenue market share in Russia, and also given the strategic priority for retaining the revenue leadership and I would -- it would be interesting to see whether you see some reversal of the previously declining market share trend versus VimpelCom for example? Thank you.

Thank you for the question. So, when we mentioned in our presentation $2.5 billion revenues on 3G, it's really important to explain, we mean like the [delta-k]. So, if we would not deploy the network, or we would deploy it on a minimum level, we would have point incrementally $2.5 billion less revenue than with this network, that is actually the course of number that we've mentioned in the presentation, because I agree with you, we technologically almost cannot stipulate the income we will receive from the 2G network and 3G network?

And would it be possible for you to review the total revenue forecast for that year, so that we can see in addition to the increment what in terms of percentage what the increment means?

So, actually -- unfortunately, I am not in the position to give long boring statements and actually this is not in accordance with our practice and we are not in the position now to change it. With respect to your question, first of all, we have -- we have the six month strong policy. We understand the advantages and disadvantages of this approach. We are not in the position to change it shortly. We will take into considerations the current trends on the markets. And also take into consideration the comments by investors' analysis on this topic. And probably, we'll make a decision later, but definitely not now.

Regarding the question whether we're looking for the revenue leadership and/or subscriber leadership? We are looking -- our 3+1 strategy as we are looking for a good bottom line and higher returns in the investments of our shareholders. That's been our key point of our strategy that we've announced last year and we are not in the position to change it in the next coming years. We understand, we need to generate revenue and we want to do that and I believe we effectively achieved this hopefully [at the beginning] of the last year.

This is very important and equal to generate profits for the investments of our shareholders. And that is why we look for new opportunities to do that. And that is why, for example 3G project is offered for your attention today. We are, revenue-wise, the biggest mobile operator in the territory of CIS and we observe our self like a group. We also look for the local markets with the attentions and the necessity to generate profitable growth.

We would not by all means drop our attention to profitability in favor of reaching lets say, special tasks on the top-line side. But, as long as our bottom-line have been improved and as long as we have significant improvements in the profitability of operation and we have advantageous control on our expenses. We should use this, I will say, achievements and advantage to stimulate and make some expenditures that would stimulate in the usage by our customers and by that we'll stimulate the growth of revenue.

Just to answer your consideration question, we are concerned with the fact that our market share and revenues is growing [royalties] bit decreasing until last year it was definitely due to the special phase that the company found itself and I understand that, we will know actually what have been the most important topics like 12 months ago for the company and they were definitely not in the area of like revenue stimulation, but they were mostly in the area of fixing claims and lets say sort of rising with the situation.

Now, 12 months later let's say, yes, we wanted to increase the speed of growth of the company and we want to grow not less aggressively than our competitors do. This is our concern throughout and we will try to undertake necessary methods to perform business. Thank you.

May I just ask a very quick follow-up question? If you say that, you want to grow as your competitors. Do you have any threshold, let's say, if you follow your market share versus your competitors, do you have any threshold at which point you would become more aggressive in case if you don't reverse this trend or is it not the way that you are approaching it?

Pardon me. Would you please repeat this question?

Well, for example, when you measure your market share -- revenue market share in Russia compared to VimpelCom, and it's -- I mean, I must say in the last couple of quarters you actually reduced the speed of decline of this market share, which I think is quite noticeable and can I say whatever developments, nonetheless, there is still some decline. So, I was just wondering if you have some threshold for this number which determines your marketing aggressiveness or for example if your revenue market share drops -- sorry -- if your revenue drops to say 95% of that of VimpelCom, would you become aggressive? I don't expect you to say the threshold but just whether it's the way that you are approaching it? Whether this number is important for you or whether maybe you say that you just look at the bottom line and the market share -- revenue market share is not that important.

I think I will probably manage to answer this question. We don't have a concrete task, as I think to gain a special result on the raise for revenues in either Russia or in Ukraine or in any other market that you have. Yes, we definitely look -- observe our market share and observe the trend, and we understand we have our tasks to change those all of the trends, but definitely our bottom line attention is our priority to us.

Okay. Thank you very much.

It is a very profitable and effective business in the long run. That's why we don't have any threshold to say that starting from a special point we'll go extremely aggressive like price wise or the [present] wise. But keeping in mind the necessity to keep our bottom line in order, we'll undertake marketing efforts and technological efforts to gain this speed of growth of our market share. And I really believe that we are now able to achieve this due to the activities -- a lot of activities that we have undertaken in the last 12 months.

Okay, thanks again. I appreciate it. Thank you.

Thank you. The next question comes from Ms. Nadejda Golubeva. Please state your company name followed by your question.

Good afternoon. This is Nadejda Golubeva from Aton. My first question is about your margin in Russia so though pretty healthy, it's slightly below than of VimpelCom. Do you think that this is just risen the some sort of seasonal fluctuations? And overall, on the full year basis, you should do a similar margins? In other words, do you think that your cost structure is already or you expect some further cost saving and we should forecast some room for the margin improvement in Russia, especially given that, as I think they are strong in the corporate segment with the -- which in my mind should not imply high margin for you compared to VimpelCom? This is the first question. And the second question, so it's about 3G. So first of all, could you possibly share with us your estimate on the cleanup cost, which you planned? And also, what happens after this $1 billion is invested should? Should we expect some sharp drop in 3G CapEx or it will be just steady decline? Thank you.

Yeah, thank you, Natalia -- Nadejda -- I beg your pardon.

It's okay.

Okay, so I'd like to take your attention on the dynamics of the OIBDA margins for MTS on an annual basis. So, the Q1 last year it was 46.7% and it went up for the Q1 2007 with 51.1%. So, take into consideration some of these seasonal affects that we have faced and that are to some extent special to MTS, since its special behavior while we played in customer base and our relatively big portion of postpaid, we understand that the trend is quite healthy, as you probably may think. And whether the cost structure will change, there would be some changes as Mikhail had stated already. In Q1, our marketing expenses were relatively low and they wouldn't be like that till the year end. And so, the SAC would grow and the marketing and advertising expense would increase. But we hope that the roaming business that is usually very high marginal for us would somehow help us to balance the expenses we need to undertake from marketing developments in Russia. So all in all, I would just repeat that we would take very effective control in our bottom line. We are not going to substitute it so high dramatically in favor of like aggressive revenue growth, but we need to spend some concrete expenses, especially in marketing and sales, and in the customer service area to create the ability for our customers to increase their usage and by the to grow our ARPU and by that to grow our revenues.

Okay. But [inaudible], is it correct that given that admittedly your better positions in the corporate subscriber segment in three years you should be doing a higher margin compared to VimpelCom or this is not that straight forward?

We actually don't disclose our margins in postpaid and prepaid customer base. Let's say, one can assume that with the much high ARPU in postpaid segment, the margins still are much healthier than with the prepaid. And -- but to certain extend it reflects the whole expenditure structure of the company since the major expenses, not all of them, the major expenses are just distributed among those two customer bases and we don't have just those separate businesses in postpaid and prepaid.

Okay. Okay, thank you.

And regarding the question on whether there will be additional expenditures like, after the three years, if I understand correctly maybe and the three-year period -- after the three-year period for 3G, it very much depends on the success of the businesses that we want to perform. And once we would really see the promising results, we would of course try to develop the network more aggressively and widely, and that could take us to the increase of the capital expenditures. But that would be we believe compensated by significant business growth over there, and this business growth could be the reason for this corporate growth.

Okay. Thank you very much. And my last question about the estimated system cleanup cost?

So, we're thinking, but we don't give those, which we -- and we cannot actually now give our forecast for the cleanup costs since it's very much dependent on the concrete decisions for concrete organizations, and we don't want to somehow alter or impact our negotiations with them. Where we have been understanding that we will try to share this cost with our competitors since that's going to be our mutual task and mutual [inaudible].

But roughly, are you talking about $100 million, $200 million, or much less?

We will not -- I am sorry -- we will not comment to this actually...

Okay. Thank you.

For commercial reasons.

Okay. Thank you very much.

Thank you. The next question comes from Mr. Alex Wright. Please state your company name followed by your question.

Yeah. Good evening. It's Alex Wright from UBS. I have two questions please. One, just further on the margins, you've obviously discussed the sales and marketing expenses already, and my question was really relating to the gross margin on your service revenues, which weakened 5 percentage points also in the first quarter compared to the previous couple of quarters. Could you just tell us please, what was behind that weakening? Was it just seasonal and would you expect that margin to pickup again in the second quarter, or is there anything else going on there?

And then the second question I have, just following up on an earlier question regarding your other income of $27 million. Could you tell us how much of that is from Belarus and whether you think that would be a representative number for the full year? Thank you.

Well thank you. Thank you for the question. Mikhail is going to take the first question into Russian operations about and then with Vsevolod.

Yeah, thank you. The reason for the -- the major reason for certain decline of our gross and services margin was the slight decrease in revenues relative to -- Q1 over Q4. Basically Q1 remained the same, the result was a slight increase in interconnect costs due to the overall usage growth. But generally speaking, we believe that this -- this change over the Q4 doesn't constitute any significant long-term trends.

So you would expect it to recover a little bit in the next couple of quarters as volumes pickup again?

Unfortunately -- can you please repeat the question again, we can hardly hear?

Yeah, sure. Sorry, I was just asking if you would expect the gross service margin to pickup again, to increase again in the next couple of quarters as the other seasonal revenue strength picks up?

Well actually, we developed -- guided on the development of the cost structure of the business. But basically we're doing that -- the trend that would likely to be -- overall trend and the cost structure would likely to be the trend of the last year.

Okay. Thank you.

Thank you. The next question...

Well, as far as we understand the second question, it was about the change in the other expense income, right. We struggle to hear you there. Excuse me. Operator?

Yes sir, sorry.

Operator can we take the next question, because it seems we have lost Alex.

Certainly. The next question is from Mr. Ben Joseph. Please go ahead with your question sir.

Hello, I just had one question, I think it's actually the same question that Alex is trying to ask. On the other income line, if it's made up of a variety of different components, can you at least pick out for us the element that relates to Belarus please?

Well, we do not disclose this line in detail, but basically there was a significant improvement in the Belarusian operations and there was a little bit of -- very positive development in the net income of our Belarusian operation. Looking at that, we [inaudible] at some write-offs in Q1 in the year 2006. That's where we see seasonal improvement on this line in this quarter.

So you can't disclose the element that relates to Belarus?

No, we don't disclose the financial data for Belarus operations. As we do not consolidate them. And we only discuss the operations of Belarus, which is presented in the presentation.

Okay. Can I just follow-up them? Just ask you about the using these levelers, other income is sustainable on a quarterly basis for the rest of the year and going forward. Whether there are some other items in there that are more one-off in nature?

Well, we do not forecast any strategic cost items and of course we do not forecast any one-offs over the next quarter and this is a simply item [inaudible] of that sort of nature, which would be an important part to our -- in our structure.

Okay. Thank you. And just another question on the size of marketing costs. You've given definitive information about -- this quarter was little bit larger. Got to be some rebinding costs I think in Q2 for Ukraine and that generally advertising spend will pickup? Are you able to provide any guidance in terms of -- as a percentage of sales -- that you expect sales and marketing costs to be for the full year on a group basis?

Yes, we're trying to give you that the, its historical trends related to the -- to this cost item are very important. They will remain for the next few quarters.

All right. Thank you very much.

Thank you.

Thank you. The next question comes from Ms. Olga Bystrova. Please state your company name followed by your question.

Good evening. A little of my questions were answered, but I just wanted to follow-up on a few. First of all, when you were talking about a longer term, I think Mr. Shamolin was talking about longer term ARPUs being double digit. Can I just clarify that the double digits, you mean above $10 or double-digit growth compared to lets say would you expect to have for 2006 of $8.6, as you were mentioning previously?

And my second question on the 3G model that you probably already had some thoughts on giving 2.5 billion revenue guidance for 2011. First of all, does it mean that you expect the basic increment of 3G ARPU of about $20 per month from your subscribers and what it is based on? Is it based on what you see in Europe or you had some other analysis that has been perhaps done?

And the second thing, is this revenue opportunity include potential change in your business model towards 3G? Meaning are you planning -- are you considering 3G's subsidies in there or not? And my final question, I just want to clarify increased guidance. I know there were lot of questions were already asked on that, but does your change in revenue growth guidance include any change on your views on the exchange rate in Russia or it is purely based on the local currency? Thank you.

Double digit means around $20 within the timeframe specified.

$20?

Around by 2011-2012.

Okay

Let me actually -- few of my words here if I may. So, we gave last year the, kind of presentation on the strategy in CIS, where we said that we will see the ARPU in the next coming seven to eight years from 2006 to grow to the level of like $13. And we keep on -- keeping this track and we think that lets say, this is going to be -- be a prudent long-term focus for us. And we don't change our views on that, taking into consideration from one side the increase of usage that we anticipate, that the new technology like UMTS is going to be introduced and that would generate additional revenues we hope for that. From another hand, we understand that the competition will still guide us some APPM reduction and combined -- lets say, trend would definitely drive us to double-digit ARPU, but it would be like in -- on the level of around 13 in the next coming, from today, seven years. And that's how we see it.

When you ask about the ARPU -- if I listen correctly, about the ARPU for 3G. Like I have to -- would want you to clarify once again that when we say, 2.5 billion revenues in the year 2010, if that's the case, [inaudible] additional revenue once we would -- that we will generate compared to the scenario where we don't create significant 3G networks. So, that's why, when we say the long-term focus is like seven years $13 ARPU, it includes the revenues we will have out of the usage of the 3G network.

When we -- the question about inflation. We have -- especially in Russia we have overall tariffs right now and we don't have any specific guidance and we are not in a position to give any specific guidance on inflation rates, different to what is offered by the Russian official like Ministry of Economic.

Okay, great. Thank you very much.

Thank you. The next question comes from Mr. --

Is that all?

Yeah.

Thank you.

The next question comes from Mr. Stephen Pettyfer. Please state your company name followed by your question.

Hi, good evening. Stephen Pettyfer from Merrill Lynch. Just a quick question on Ukraine again, please. Could you tell us how many customers, if is it significant than Equitel has and whether or not you are seeing any internal churn on the back of that product launch? Thanks.

Mark, please.

We wouldn't normally disclose Equitel as a separate element. It's suffice to say that as we say in our presentation, we achieved what we expected to achieve by the end of the first quarter in terms of subscriber base. And as we said, the promotion and the pricing is done to encourage a family of users within the Equitel network.

In terms of any cannibalization, clearly any new offering will be an element, but we have different -- we believe we have differentiated it sufficiently from our existing offerings to allow us to grow the overall user base in Ukraine and the cannibalization is more from our competitors than from our own base.

Great. Thanks, Mark.

Thank you. The next question comes from Ms. Leila Ghachem. Please state your company name followed by your question.

Hi, Leila from Egerton. I had a couple of questions. The first one, could you please repeat the usage figures you mentioned for Moscow versus the south macro regions. I just want to make sure I heard those correctly along with the average price per minute figures, that's the first question I have.

Yes, the difference in MOU, it's been Moscow and I didn't say all the market regions. I made an example of one particular case, and the difference we would have felt and the difference was 150 something minutes in Moscow and around 350 minutes in the South.

350. And so which regions do you see much lower usage that takes down your blended average for Russia overall?

Yeah. I would not of course give you a specific region because we don't disclose this information but I could give you an overall trend, which is the usage is tied to -- directly tied to the pricing policy in a particular region and to the amount of local wealth. When we see a combination of relatively high wealth and relatively low price, we do see a very significant usage, which demonstrates to us that there is still an unsatisfied demand for Mobile voice and services.

And the price difference is $0.10 versus $0.03 on average in those two areas you talked about?

Around that. I didn't give you the exact figures, but the difference is around four times essentially.

Do you think, in some of the other regions where usage is much lower that we could start to see you mentioned in the future that we could even see levels of 300 may be on average for Russia as a hypothetical figure. Do you think some of the other regions, where there are levels much lower than today, it is possible despite the less local wealth and different pricing policy?

I believe that there is clear potential for growing usage in Russia. We see, as I said we see in the regions the various demand for our voice services. People would like to talk more, they are currently budget constraint and those budget constraints are being listed by the overall enrichment of the population over the coming years, and also by people getting more and more used to mobile phones as an integral part of their life.

Okay. And I am sorry. Can I just catch your name? I am sorry, because there are -- some voices are so similar, I am just missing out, who's speaking at the moment. Sorry.

Yeah my name is Mikhail Shamolin. I am Head of Business Unit, Russia.

Yeah, of course. Okay. And the last question I have, more general question, it's just how the last couple of months have been going both in Russia and Ukraine. I think Mr. Melamed you made a comment earlier about Ukraine being similar since the early spring, just to understand are you basically saying that we haven't seen any incremental price promotion activities since what we saw in the first quarter? And is the benign environment still continuing in Russia the last couple of months? Thank you.

This is Leonid Melamed. As long as we've mentioned in our discussion today several times the term seasonality, it means that we observed this effect in the financial data in the results of the company. So, there are some seasonal trends both in Ukraine and in Russia and historically if you observe them and by that to make some kind of forecast. But, of course, I cannot right now say anything more clear about Q2.

I mean, just very generally, has the very aggressive behavior we saw in Q1 continued or eased some what?

If I understand correctly, your question is most oriented towards Ukraine, and we just have to confirm that to the situation in Ukraine market as we see in MTS is relatively stable to about three months, since spring time. In Russia, it also doesn't generate and [both surprises] to us and we can't -- we discussed our--

Okay. Thank you very much.

[OPERATOR INSTRUCTIONS]. Thank you. The next question--

Thank you ladies and gentlemen, for your interest. And we welcome you at any time to contact our Investor Relation department for further queries. A webcast of this discussion will be available on our website if you wish to replay the call. In the mean time, we appreciate your interest again and wish you a very pleasant day.

Thank you.

Thank you ladies and gentlemen. This concludes the first quarter 2007 financial and operating results. Thank you for participating, you may now disconnect.