Mobile TeleSystems PJSC (MBT) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Mobile TeleSystems First Quarter 2009 Financial and Operating Results Conference Call on the 22nd of May, 2009. Throughout today's recorded 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.

Thank you, Pat. Good day, ladies and gentlemen, and welcome to MTS Conference Call to discuss the Company's first quarter 2009 financial operating results. Before beginning our discussion, I would like to remind everyone that except for historical information comments made during this call, it 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 or subscriber growth, syndicated loan facilities and their usage, legal actions or proceedings directed at the Company or its representatives, regulatory changes and their impact of the Company's operations in the market 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 invested capital, technical matters as they pertain to our mobile communications networks, including equipment, licensing and network technologies, capital expenditures and operating expenses and macroeconomic developments within our markets of operation.

Important factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements. These statements may include Company press releases, earnings presentations, MTS's annual report on 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 at the Company website at www.mtsgsm.com, or that of the United States Securities and Exchange Commission at www.sec.gov.

MTS disavows any obligation to update any previously made forward-looking statements either on this conference call or make any adjustments to previously made statements to reflect changes in risks. Copies of the presentation materials used and referenced in this conference call are available on our Company website.

I will now turn the call over to Mikhail Shamolin, President and Chief Executive Officer of MTS Group.

Good afternoon. Thank you for joining us today on the conference call to discuss MTS's first quarter 2009 financial and operating results. Joining me today are, as usual, Alexey Kornya, Acting Chief Financial Officer, Andrei Dubovskov, Head of Business Unit Ukraine, and Mark Burden, Finance Director, Business Unit Ukraine. We'll begin with a quick overview of our operating results and then discuss our outlook, given the significant changes that have taken place in our core markets.

Group's revenues were down 24% year-on-year to $1.8 billion. The primary driver for this loss was the depreciation of our core currencies as the Russian ruble declined year-on-year by 40% and the Ukrainian hryvnia by 52% versus the US dollar. In each of our markets of operation, we continued to see an impact on consumption patterns due to sustained global macroeconomic volatility, but overall usage and subscriber additions remain strong and in line with seasonal expectations.

Our Russian business delivered year-over-year growth of 7.5% in rubles, despite both the ruble volatility and increased competitiveness in the market. In general, consumption of higher-value products like roaming, long distance and mobile to fixed calling, was significantly lower in the beginning of the period due to an overall drop in business activities, but this figure stabilized during the last months.

As we mentioned in our last call, we do see migration trends to lower-value tariffs as customers are more cautious of their spending. Otherwise, we see usage trends in the future following seasonal patterns until the overall macroeconomic environment changes significantly.

In Ukraine, revenues fell 9% in Ukrainian hryvnia to UAH1.9 billion year-over-year. In Q4, Ukraine felt the greatest impact of global economic volatility and in turn, we did see a deterioration in the Ukrainian market. Total SIM cards in the market fell 1%, mirroring our own fall in subscribers. In revenue terms, however, our performance was slightly better than the market, which indicates that tour strategy of driving usage to support subscriber loyalty and quality is beginning to yield certain markets.

In our CIS markets, we do see evidence of the macroeconomic volatility, though through less overall activity. I'm sorry. In these developing markets, whoever, this manifests itself through slower growth. In Uzbekistan, revenue neared $102 million, a growth rate of 28% year-on-year. During Q1, we added over 320,000 subscribers and maintained our leadership with a subscriber market share of 46%.

Revenues in Turkmenistan rose year-on-year by 70% from TMT55 million to TMT93 million. We passed the 1 million subscriber milestone in February and we increased our customer base by close to 200,000 subscribers. On January 1st, 2009, Turkmenistan's government re-nominated the manat as the national currency at a rate of 5,000 to one. Adjusted historical, financial and operating results are available both in the information FAQ we distributed today and on our website.

Our Armenian operations continued to maintain our leadership position in the market. Revenues grew by 5% year-on-year to AMD17.8 billion as we increased our subscriber market share to 81%, adding 32,000 customers during the quarter. The local currency was negatively affected by the financial crisis, as in March alone it depreciated versus the US dollar by more than 20%.

I know ask Alexey Kornya to discuss group's profitability. Please, Alexey.

Thank you. For the period, Group OIBDA fell 29% year-over-year to $832 million, resulting in a margin of 46%. The depreciation of the Russian ruble, compounded by slow local currency revenue growth is the primary driver of slowing OIBDA. The increased competitiveness in the marketplace, namely consolidation in distribution channels, has compelled us to spend more than usual on advertising costs during this particular time period.

Likewise, the bankruptcy of six of the top 10 multi-brand cellular retailers has increased commissions on additions in absolute terms. We have been successful in mitigating foreign currency exposure in our operational costs, but remaining non-local currency costs still put pressure on our margins.

In addition, we have seen upward tariff adjustments on electricity rates and frequency costs. As we described in our last call, we are engaged in certain projects that have already yielded cost benefits. We realized about 90 basis points of savings on the margins through network traffic optimization through our build out of our long distance networks, as well as G&A savings by the [annual rating] agreements for insurance and consulting services.

In the medium and long term, we see opportunities for savings in areas related to personnel, call center optimization and now IT systems. In addition, our initial investments in our monobrand retail network and handset sales had another 130 basis points impact on our margin. This includes the steps we have announced, including the acquisition of Telefon.Ru in February, Eldorado in late March and conclusion of management agreement to receive our employee development and additional investments in our appropriated network.

We also witnessed negative earnings for the period as the ruble, our functional currency for the group, depreciated 24% versus the fourth quarter. This resulted in a non-cash FOREX loss on the value of our USD and euro-denominated debt of $460 million. Excluding this FOREX loss, we would have seen net income equal roughly $405 million.

At the end of the period, we also held approximately $980 million of cash. CapEx for the quarter was high at $646 million, due to carryover projects from 2008. Our total debt fell slightly to just about $4 billion and our net debt towards 12-months OIBDA remained low at a level of 0.6. Though currency pressure will impact our forward OIBDA, which will result in this ratio rising, we are well within our tolerance limits on our total debt amount.

Taking advantage of a recent thawing credit markets earlier this month, we placed an additional RUB15 billion bond with a five-year maturity and a yield of 16.75%, which is at the lower end of the market. The bond has a two-year put option as well. More recently, we were successful in placing a new facility to restructure our $630 million syndicate due this month. We enlisted 14 banks to participate in the syndicate, which has a maturity of three years and a yield of LIBOR plus 6.2, which is in fact lower than our current Eurobond yield, which trades with the same tenure. We believe this was the first marketable syndication deal in Russia since last fall.

Both of these placements are a testament of the strong financial position of MTS and our positive outlook. Our goal in attracting extra financing is simple. In order to continue investments in our business with our obligation and realize our dividend policy, we are maintaining as much liquidity as possible, given the volatile environment.

Thank you, Alexey. Turning our attention to the current period, as has been well documented, we have withdrawn from Euroset, the largest of the Russian retail networks. Since control of this channel passed to our competitor, we have seen both the number of gross additions fall and the quality of those additions decrease. As we once received up to 25% of our gross additions through this channel, we have had to compensate by investing in other marketing areas, like advertising.

At the same time, economic pressures have caused six of the top 10 retailers to declare bankruptcy, which has allowed the surviving channels, including regional networks, to charge more for commission. As Alexey discussed, this results in short-term margin pressure, as we are simultaneously investing to bring our monobrand retail network up to speed. By making positive strides in our development of our proprietary monobrand network, which will add further pressure to our margins.

As of now, we are currently developing 2,600 MTS owned points of sales, including recently acquired Telefon.Ru and Eldorado. The sum of these efforts in the medium and long term will be to stimulate revenues and lower churn. In the shorter term, there is limited risk to our market share from Euroset's presence in major cities with high concentration of both population and storefronts. This will require greater short-term spending on advertising and commissions, but we feel these costs are manageable.

However, customers we acquire through proprietary distribution are more valuable, more loyal and more profitable. These new storefronts will not only be customer service centers, but full-fledged points of sale for the latest handsets and MTS products. As an example, we just launched BlackBerry services for mass-market employees, a product more complicated than existing products and one that requires both a larger channel for sales and more intensive customer service and business processes.

Likewise, we have a few deals in the pipeline that will provide MTS with exclusive rights to new devices on a national scale. With the right product mix and most innovative management practices, we are confident that we can fully monetize our retail channels by the beginning of 2010 and begin seeing a positive material impact on key financial and operating indicators.

In other news, we announced today that we have submitted an application to the Federal Antimonopoly Service to receive approval for the acquisition of up to 100% of Comstar-UTS. We have spoken before about the strategic rationale for such an opportunity. I want to reemphasize here that our interest in fixed-line services is primarily about growth. Regional broadband is an attractive growth area and considering our investments in 3G and transport networks, it makes perfect sense that MTS should fully monetize our fiber investments in the region.

In our view, Comstar represents a logical match, given its command of the Moscow markets, our footprints match more effectively, and it possesses the expertise we need to further develop our own fixed-broadband products. Our interest in fixed-line services has evolved to the point where MTS has established a special committee of its three independent directors, who are overseeing the operations of MTS's working group exploring this transaction.

Under Europe stock exchange rules, the acquisition involving Sistema, a majority shareholder of MTS, must be reviewed and evaluated by an appropriate group within MTS. This requirement is deemed satisfied if independent directors review and oversee the transactions. MTS's management in the special committee have retained independent deal advisers through a competitive standard process who will advise on valuation, financial due diligence and legal assessments.

As this committee is now beginning to work, it is too early for us to speculate on the size, scope or structure of a potential transaction. There are many options open to MTS in such a deal, but the goal of the committee is to ensure that the deal works best for MTS and all of MTS's shareholders.

Finally, I want to emphasize that we are not making these efforts without attention towards the financial health of MTS or the value that we generate for our shareholders. As Alexey explained, MTS's strong balance sheet allows us to invest in our business, examine new platforms for growth and provide a generous shareholder return.

Recently, we announced our dividend for financial year 2008. In line with our policy, we will pay out 60% of our net income for a total of RUB39.4 billion or roughly $1.2 billion. This year, we will also not pay dividends to those shares repurchased through our mandatory buyback offer in August 2008. This equals roughly 1.9% of total shares outstanding. This will in turn increase the dividend yield by about 15 basis points.

This translates to a greater shareholder benefit from our share buyback programs. Balancing growth and shareholder returns is a cornerstone of our financial and operating strategy. This is a clear differentiator for MTS as an investment. Our recent actions, relatively modest investments in proprietary distribution, tapping local credit markets and successfully refinancing our existing debt, are aimed to both ensure growth and sustain profitability, both of which allow us to make substantial returns to shareholders, both now and in the future.

Thank you for listening, and we will now take your questions.

Thank you, sir. (Operator Instructions).

And the first question today comes from Herve Drouet from HSBC. Please go ahead with your question.

Yes, good afternoon. My first question is regarding minutes of use, especially in Russia. It looks like there's been a drop in Q1 in terms of traffic and minutes of use. Just wondering if you think it's just a one-off or is it you think a medium-term trend we may see in Russia, looking forward? And secondly, just on Comstar, I was wondering if you can share with us if you see, in your view, any synergies with Comstar and how much you will value those synergies. Thank you.

For the first question, we attribute a drop in MOU in the first quarter mainly due to the -- due to lower usage of roaming, international and inter-city products, which also consists parts of the MOU and clearly we saw a drop in the first quarter, and as a result of overall I'd say panic that was on the market and reduced business activity.

However, MOU year-on-year was up and looking at how the second quarter now develops, we see that MOU is not declining anymore and is on the sort of slow growth path. And we believe that looking at the Ukrainian market, for instance, where we do see MOUs of over 400 minutes, we believe there is a potential for MOU growth in Russia and once the situation stabilizes and comes out, hopefully, of the crisis, we will see MOU going up.

As far as Comstar, we at this point do not comment on specific synergies as we are in the process of assessing exactly these synergies and related financial matters to this potential transaction. Once we are ready to discuss those synergies, we'll be happy to make an announcement.

Okay, thank you.

Thank you. And the next question comes from Tibor Bokor from OTKRITIE. Please go ahead with your question.

Hi. Basically, follow-up questions to the previous one. Can you provide us with MOU month-by-month, let's say for the first four months this year? And -- yes, can you do that?

Yes, this information unfortunately we do not disclose, so we cannot give you. We can only indicate that in Q2 the MOU is up and not down.

Okay, and secondly, I understand that you want to comment on Comstar as little as possible, but one question perhaps you might reveal a little bit. In terms of the shareholder structure in Comstar, it looks quite complicated. And my question is whether it makes sense from MTS point of view to purchase a 51% stake, or whether it makes sense only to purchase the whole company.

Yes, on this one I will say that we have invited very qualified and experienced advisers, both on the IB side and the legal side and we are considering various deal structures and we're making assessments exactly of the issues that you're talking about. We don't have an answer yet. Once we have analyzed all of those options and understood pluses and minuses, then we would be able to come out with a recommendation. We don't have an answer yet.

And in terms of the financing of the acquisition, I understand there is quite a lot of treasury shares. Can you comment on that, in terms of how much cash is available for acquisitions and how much treasury shares?

Yes, that's the same thing, and unfortunately cannot tell you much about this, because it's also a part of a potential transaction. We will have to build up a financial model of how we are going to go about it and there are different options. At this point, we don't have any clear recommendation on what we want to do.

Okay, maybe one more question on this. When do you expect the Antimonopoly Office to make its decision?

Typically, I think it takes around 30 days for them to reach a conclusion.

Thank you.

It may come faster, but I don't know.

Thank you, sir. And the next question comes from Josephine Shea from Hartford Investment Management. Please go ahead with your question.

Good morning for us. I'm in the US. Good afternoon. About the dividend, could you tell us when you intend to pay the dividend, how you are going to fund this?

Yes, Alexey Kornya will take this question.

According to our dividend policy, we have to pay our dividends until the end of the year in which they are announced. So, we will meet our obligations under this dividend policy. So until the end of 2009, all dividends to be paid out.

Yes, and in terms of how we intend to pay, we -- as you know, we continue to be a cash-generating business with a positive cash flow. We have restructured our syndicated loans. It's taken -- we've placed RUB15 billion bond, we are financing our CapEx program mostly out of vendor financing, so we have a sufficient amount of cash to safely meet those dividend requirements.

Okay, perhaps could you also share with us your upcoming maturities per quarter, so in every coming quarter what your maturities are?

Alexey?

Yes. In the second quarter, where we are right now, we are due to pay $760 million, in the third quarter, slightly above $100 million and in the fourth quarter we are due to pay $240 million. You can find this information in more detail in our management presentation.

Okay, and combine that with the dividend, how -- do you already have a strategy how you're going to fund this, or does this rollover, mainly?

We will fund it through cash which is available right now in our accounts, plus free cash flow, which we will generate during the second half of the year. This is our usual practice over the previous periods.

Okay, thank you very much.

Thank you. And the next question comes from Will Milner from Arete Research. Please go ahead with your question.

Thanks very much. Just a couple of questions. I understand you don't want to talk too much about the financial details behind Comstar, but it does look like a business that I guess is growing less fast than MTS, also has lower margins and does require fairly hefty investments to expand broadband into the Russian regions. So against that background, it very much looks, given the cost of financing, like it's going to be quite dilutive for MTS shareholders.

So, I wonder if you can just talk in quite a bit more detail about the commercial logic behind the deal, the offers that you intend to roll out, and exactly why it makes sense. And then, secondly, if you could talk -- are you still happy with the guidance for $1.5 billion of CapEx for the full year, given the spend in the first quarter? Thanks.

Yes, on the CapEx, we're still within our guidance of $1.5 billion, and we're looking into ways to optimize it. If you look at the first quarter payments, they were high, but they were high for a simple reason, because we postponed a lot of fourth quarter payments which came in the first quarter after the situation stabilized a little bit and we felt like we could make these payments without any risks to our cash flow.

As far as commercial logic behind the Comstar transaction, it's actually quite simple. Number one, we have a huge potential in fixed broadband growth in Russia, because fixed broadband penetration is very low at the levels of 5%, 7% and we expect it to go up to 50%, 60% in the next few years and we believe that a very large market is about to be created here.

Comstar is a number one player in Russia in fixed broadband and therefore, it's very well positioned for further expansion. The cost of this expansion is actually quite manageable, because Russia, differently from Europe and the US, is highly concentrated in cities and therefore you don't have a problem of huge territories of private households that you have to cover with the fiber, which is definitely costly.

Instead, you only have to bring fiber to an apartment building of 200, 300 apartments, so economically it makes a lot of sense. And we do need this platform for broadband expansion, because we believe that owning mobile data pipe and the fixed data pipe to the customer adds additional value, including additional value that we can derive from playing on the content fields and Internet fields overall, which in Russia we believe has large potential.

Of course, also, there are investment synergies on building infrastructure, cost saving synergies and so forth, but primarily it's about playing in the Internet broadband market, and we feel like the price that exists today in the market for Comstar could be actually very beneficial, and the moment could be good for that kind of transaction.

But again, we are analyzing all of these aspects and we would only move if we are absolutely firm that this transaction makes economic sense and there is a clear commercial logic for this. So, we -- in no way we foresee this transaction as being dilutive to MTS shareholders. We would not do a transaction which is dilutive to shareholders.

Okay, thanks, and just to -- if I can just follow-up, when you say dilutive, by what measure are you thinking about dilution there?

Well, I just think that we should only make a transaction which creates value for MTS in all the classical terms, in terms of EPS, revenue growth, higher cash flows, total shareholder return, whatever measure you take.

Okay, thank you very much.

The financial measures.

Thank you, sir. The next question comes from Alexander Balakhnin from Goldman Sachs. Please go ahead with your question.

Hi, this is Alexander Balakhnin from Goldman Sachs. Two questions, if I may. First is on your EBITDA margins, the dynamics. Can you please split the margins erosion into the contribution from the cost side? What is the contribution from cost of sales, general and administrative expenses and sales and marketing expenses because you say that it's partly because of higher sales expenses, but it seems that cost of sales and probably general and administrative expenses has contributed. So, it would be great if you can split this 400 basis points year-on-year margins erosion into these three items. It would be great.

And the second question is on this Comstar acquisition special committee with your Board of Directors. May I ask a question on basically when MTS will be deciding on the acquisition? Am I correct that the procedure will be like this special committee advises the Board and the final decision is made by the Board of Directors, not by the shareholder meeting? Thanks.

Thank you. Anticipating your first question, we included page eight in our presentation. If you have it in front of you, you can see the waterfall of OIBDA margin decline Q1 2008 compared to Q1 2009 and let me spell it out for you in case you don't have this presentation. 1.3 percentage points of margin, it was down because of inclusion of phone retail business into MTS business. This is telephone, our new Eldorado and basically mobile phone sales, with of course much lower margin than we typically have in our business.

Then, 0.8% was increase in payments for frequency and utilities. We had an increase in frequency cost payments that we made to the government last year, another 0.8% was increase in repair, maintenance and rent, costs due to inflation. 0.7% increase in advertising billed commissions and additional marketing expenses, and this is something that we had to do as a response to aggressive competitive moves in the distribution area.

0.5% of the margin was provision for bad debt, because we adopted a more conservative policy, expecting bad debt to increase due to the crisis and customers being less disciplined with their payments, and 0.2% is an increase in salary expenses. We have frozen salaries for this year, but of course we had some increases April of last year, and if you compare year-to-year, that gives you a slight impact. Now, on the opposite side, we had almost 1% of the margin brought back to us through our cost optimization program, which is ongoing. So, this is the kind of a dynamic that we have.

And on the second question, when will the committee decide, we don't have a specific deadline for a special committee decision. I would expect it to happen in the next few months. As far as the process goes, the special committee advises to the Board of Directors, the Board of Directors decides. As far as the shareholder meeting, we are looking to our legal counsel to advise. My understanding is that it's not a requirement that the shareholder meeting votes on this.

As far as the valuation is concerned, we are going to get a fairness opinion from our investment advisers, or rather advisers to a special committee, because advisers are retained by a special committee, not by management. And therefore, we believe that we're going to be very clear and very fair on whatever purchase price we're going to offer to the sale side.

Thank you.

And the next question comes from Nadejda Golubeva from UniCredit. Please go ahead with your question.

Good afternoon. Just to all, could you please a bit clarify what does your cost accumulation program includes and does it primarily staff cuts or other issues, and in particular about staff cuts, could you remind me, do you plan some staff reductions for this year? And also, if you could talk about margin for this year, like that whether you feel you could be able to defend the margin at the level where we saw it in first quarter? Because you mentioned that you see some further risk of pressure on margin, or do you think you can grow it a bit from, again, the level of first quarter?

And my second question relates to your revenue side, so could you please tell us how much the consolidation of retail business contributed to the first quarter and also, if possible can you tell us how much of iPhones have you sold since the beginning of sales? Thank you.

Okay, Alexey Kornya will answer this question, at least the first one on the cost.

Yes, our cost optimization program includes a number of measures we are taking through all our cost lines. One of the best effects we reached so far is in our cost of sales side. That includes, as I mentioned already, our effects from buildup of long distance and international long distance network, savings from this and rent of channels.

We also have done some work on the optimization of the marginality of our value-added services, as well as some G&A cost optimization, including insurance, cost reduction and consulting cost cuts. This is what we have right now. Yes, we do consider different organizational optimizational measures which can increase our profitability. This includes IT infrastructure optimization, as well as call centers optimization and et cetera.

Yes, and do you plan staff cuts?

Yes, we will be having some. I wouldn't call it staff cuts. I'd call it optimization of the organizational structure, which will also result in some staff reductions.

And as for margin, I think that usually first quarter margin is the weakest over the year, so we think that this year we'll see the same dynamic.

In terms of revenue -- yes?

Yes, thank you. Good answer to the two first question.

In terms of revenue, the contribution of retail in Q1 was relatively insignificant. We were planning where we're considering reporting revenue from retail and basically all the financials of the retail separately at some point, once it establishes itself as a more or less clear business that we can analyze and report, because right now it's in the buildup stage. And iPhones, unfortunately, according to our terms and conditions with Apple, we cannot disclose the sales numbers, but I can say our iPhone sales were in line with other operators' sales.

Okay, thank you very much.

Thank you. And the next question comes from Victor Klimovich from VTB. Please go ahead with your question.

Good evening. Mikhail, in the beginning of the presentation you said that you see some stabilization of roaming, international calls and other expensive cost trends. Can you please explain what do you mean? Is this less drop in this traffic or it starts growing at some point?

Yes, thank you for the question. On page seven, we have a split of revenue decline comparing Q4 to Q1 of 2009 and basically you see that most of the factors that contributed to revenue decline are attributed to APPM. So essentially, all of that summed up to an APPM drop, and in the Q2 APPM has stabilized and we even see some potential for growth of APPM. What that means is that we see that the decline in usage of roaming, off-net and other traffic directions in where we see decline, that has stopped, hopefully for good, and we are sort of looking with the optimism further on.

Yes. And may have another follow-up question, probably to Alexey. So, you said that you have -- that some of the customers have shifted their calls from on-net to off-net and we actually expected that -- expected to see a bit more optimistic service costs, but it's 20% lower compared to25% lower -- I mean, in US dollar terms lower revenues. Can you explain a bit these trends?

I would say it's vice versa. We see that in the share cost in the structure of our traffic, the share of on-net traffic is growing due to migration of our subscribers to cheaper tariffs with the lower on-net price points. So, that is reflected also in our respective costs for termination on fixed and competitive networks.

So, do I understand right that probably other parts of service costs, like roaming or international calls, has increased, but again you said that this traffic also decreased. So, what was the --?

Yes, we have quite a significant effect from roaming costs, negative effect on our P&L. This is true and marginality of roaming services due to currency fluctuations decreased.

All right, thank you. Thank you very much.

Thank you. Your next question comes from Olga Bystrova from Credit Suisse. Please go ahead with your question.

Good evening, Olga Bystrova from Credit Suisse. My question is about some comments to the press about expectations for growth in Russia and I believe Ukraine as well. You're talking about single digits in 2009 in local currency in Russia, and I was wondering if you can sort of elaborate whether this is organic growth only of the mobile services business, or if it includes also your expansion in to retail on the top line as well? And also, I don't know if you could provide perhaps similar comments for the Ukrainian market growth in local currency.

And the second question is on broadband business. It looks like broadband business is actually growing quite healthy in Russia in ruble terms, particularly data traffic. I was wondering, where does it come from? Is it accelerated sales of USB connections or is it handset traffic being used more? And perhaps if you can say how many mobile broadband subscribers you currently have and what are the approximate monthly net additions you're running currently. Thank you very much.

Thank you, Olga. On the expectations, of course, we have to be very careful here because we still don't know where we are in terms of crisis and whether we have reached the bottom, passed the bottom and what's going to happen with the oil price and with the unemployment in Russia and all those factors may impact in many different ways. And that was the reason why we didn't give an official guidance this year.

Our expectation from what we see today, as I said, is single-digit growth in rubles in our mobile business, excluding retail, in Russia. And it's very difficult to say anything beyond that, because, again, the volatility is still pretty high. And that comes, of course, from the mobile business being quite resilient in the mass markets, plus some optimism in the broadband business and value-added services, plus, of course, we are very active in customer retention and increasing customer loyalty.

And even though we don't expect usage to grow significantly this year, we still see that the voice penetration and the voice usage limits are not reached in Russia and there is still potential for growth, which of course this year is not too optimistic, but it still exists. In Ukraine, we don't expect growth, we expect a reduction in hryvnia revenues, and we also look at the single-digit reduction in hryvnia revenues in Ukraine. This is entirely due to the much worse economic situation in the Ukraine than it is in Russia.

And again, this is our expectation given what we saw in the first quarter and first half of the second quarter. How it will go throughout the year, it's very difficult to say. We may be more optimistic or more pessimistic. Right now, we sort of have a slight optimistic view.

On broadband, on broadband business, it's basically a combination of factors, also partial cannibalization of voice by value-added services, including SMS and Internet chats and so forth. It is also due to increased sales of USB modems, as you rightly pointed out. And because we are launching 3G networks in Russia, we are selling quite a lot of those modems on a monthly basis, in tens of thousands, I would say, so it's a pretty good number with pretty good ARPU.

In terms of smartphones, I wouldn't be able to give you an exact answer now, what is the percentage of smartphones now? What I know is the percentage, that the absolute volume of smartphone sales in Russia has not decreased, while the sales of other ordinary phones have decreased. So, the share of smartphones in the market has decreased, and we expect this sort of trend to continue.

Okay, great, thank you very much for a detailed answer. Just maybe one -- two quick follow-ups. One is, do you see any signs of unemployment lag. We obviously had a number of layoffs at the end of December, January and February across Russia. If you look at the regions which were particularly affected, do you see some lag in, say, people starting to use -- to migrate -- undertake tariff migrations after they were laid off, after two months they were laid off, et cetera?

So, any insight you have on that, that would be great. We have been seeing that in some other markets, so probably Russia is not an expectation in that. And also, if you can, of course, could you provide number of mobile broadband subscribers that you have currently, if that's possible, of course. Thank you.

In terms of unemployment, the volume of unemployment, per se, does not make huge impacts on our revenues. I think it's more of a general customer psychology and customer behavior. If you look at page seven of our presentation, you will see that our revenues declined by 2.3% because of tariff migration. This is people moving from more expensive tariffs to cheaper tariffs and customers in Russia, as we say, Russia is a marketing nightmare because it's a country with very smart people who are not very rich.

And therefore, people are being quite smart about finding the best tariff for themselves. And to some extent, we're actually helping them, because we've introduced a service called select your best tariff in the first quarter, which sort of helps our customers get the best tariff for them, given their traffic patterns, but that helps loyalty a lot, and that helps reduce churn as well, so it pays off at the end. And again, we see APPM sort of recovering in the second quarter. And the panic, I believe, is largely over, of the first quarter.

And the second question was about number of mobile subscribers?

Mobile broadband subscribers, so I could say maybe USB dongles or this, mainly, how many USB modems have you sold, et cetera?

Yes, it's very hard to define who are the broadband subscribers. You mean people who used 3G?

Yes, USB modems that you've been selling. Who -- how many subscription have you gotten on those products?

Yes, USB modem customers are sort of about 100,000. Mobile broadband customers are below 1 million.

Okay, great. Thank you very much.

Thank you. And the next question comes from William Kirby from Nevsky Capital. Please go ahead with your question.

Thank you. Yes, your cost of service line in your income statement grew less quickly than your revenues. And how much of that is due to your own long-distance network, which you mentioned, and how much is due to less off-net calling? And is there scope for further improvement in that through the year?

Alexey Kornya will answer this question.

The growth on cost of services is attributable -- there are two factors within this cost line. One is the roaming, which grew more than revenue. As I mentioned already, our marginality on roaming decreased over the first quarter on the back of currency devaluation. However, overall positive effect comes from our cost-saving initiatives. As I said, we saved on introduction of long-distance network. Such saving on interconnect costs on termination, plus we had some savings which about 90% of total savings coming from migration into our net traffic and a reduction of net traffic.

Okay, thank you. And my second question was on the comments you made earlier. You said that MOU and APPM trends are improving. Does that mean that they're improving in the second quarter on the first quarter, or is the year-on-year comparison improving, because historically Q2 has been a better quarter for revenues?

That's the comment was on Q2 to Q1.

Okay, great. Thanks very much.

Thank you, and the next question comes from [Bita Nikolaevich] from UBS. Please go ahead with your question.

Yes, good afternoon. I have a question about distribution in Russia. Do you see any potential new acquisition targets? Do you think it makes sense maybe to also strengthen your distribution via this, or you want to now only focus on organic growth? And also looking at Ukraine and your subscriber acquisition cost breakdown, it seems that dealer commission increased very dramatically. I don't know whether it's a mistake or is there anything in particular happening in Ukraine in terms of commissions you have to pay?

And finally, on the revenue per minute, in Ukraine, which is going down very dramatically, what sort of do you expect going forward? Do you think that we're going to see some stabilization at some point going forward? Or you think you will continue dropping your tariffs in order, as you mentioned before, regain your market position?

Thank you, Bita. Sorry. Distribution in Russia, we are not looking to make any substantial new acquisitions, because there is quite frankly not much to acquire left in the Russian markets. We are looking at some regional networks, which are immaterial in terms of MTS size, which we may still acquire just to cherry pick in the best regions, but these are acquisitions of $10 million range, sort of maximum.

And other than that, we're planning to expand organically, and we have a good opportunity to do that, because of the existing federal retailers going bankrupt. We have retail space freeing up at an attractive cost, which we can pick out from the market and comfortably develop our retail.

And on Ukraine, I will turn questions to Mark and Andrei.

Thank you for your question, Bita. Andrei Dubovskov from this Ukraine. Speaking about dealer commission, I'm going to explain that it's only an effect of finalization of methodology of branding sharing. You know our spending for advertising and marketing was less than in previous periods and (inaudible - technical difficulty). Speaking about APPM in Ukraine, very clear question, because in comparison with previous period, it's to -- has a down trend. About APPM inside in third quarter, speaking about January, February or March, it's a very stable position and in my opinion, it's a good situation for us.

But overall, yes, if I look at --

That's it from my side. We will tend to stabilize APPM in Ukraine going further.

Okay, but overall what do you think -- because now, if I look at your revenue per minute compared to Kyivstar, for example, I can see that you charge something like one-fourth of what they do. So, yes, I don't think it's sort of a very sustainable situation. And do you see actually some movements on their side, but -- because, of course, you've mentioned that reduction of revenue per minute in your case, you hope that you regain some market share.

But if I look at like last two or three years data on a quarterly basis, there is actually no improvement. There is continued deterioration of your revenue market share in Ukraine. So, how is it possible that you are charging so much less than the main operator on the market, but still you are not able to sort of win customers, to improve this position?

Okay, this is -- thank you for the question. This is Mark Burden of MTS Ukraine. Actually, if you're comparing with Kyivstar on that basis, you're not comparing apples with apples. They have a different methodology for declaring minutes of use than ourselves.

Okay.

We won't comment exactly on their methodology, because we're not fully privy to their calculation. In terms of having value for money, which we've stated in previous quarters, our approach has been to give better value for money to our clients and what we see, as we've said, that in the materials that we now see that we're moving in line with the market, whereas we hadn't been moving in line with the market previously.

And we're in a position where we're taking advantage of the spending habits of consumers in a very difficult economic period. And actually what we do see, as seen in Russia an as Mikhail has commented, that people are now starting having adjusted their habits -- they're now starting to see some growth and that's true coming in the APPM in the more recent months, in the March and April period and beyond.

So, the bottom line is that you think that your difference in tariffs between you and Kyivstar is not so huge as it appears on the numbers?

That's correct.

Okay.

And also, I will add to that that it has a lot to do with the structure of the traffic. The structure of MTS traffic, almost 80% is on-net traffic, and on-net obviously is much cheaper than off-net, and that also drives APPM and customers are making a conscious decision to become MTS customers to stay on-net because of the preferential pricing there. But as the customer base grows, so will grow the number of net calls, as well, and that will drive up the APPM. If you look at the price points compared to Kyivstar, we are perhaps 15% to 20% less expensive than Kyivstar, but not a quarter of the price.

Okay, thank you very much.

Thank you. The next question comes from Stephen Pettyfer from Merrill Lynch. Please go ahead with your question.

Yes, hi, good afternoon. I have three questions, please. First is again looking at the relationship between usage and pricing, and I wondered if you could comment on what you're seeing more generally in the Russian market, as far as what your competitors are doing about perhaps driving usage with lower pricing or, indeed, the opposite.

A second question concerns your comments earlier on, again, the distribution side and the margin pressures you've seen for that. Given that you're, I guess now moving towards carrying on building by organic means, and I think you mentioned earlier some -- the cost pressures associated with that. Can you give us some more color about the costs you see, particularly in the next couple quarters, as you ramp up your distribution business?

And finally, just on CapEx and then relating I guess to Bita's earlier question on the Ukraine specifically, given the tremendous growth that you've seen in usage, can you comment a little bit on how you envision CapEx supporting that and if indeed, when we'll be able to see a much more sort of normal, if I can use that word, CapEx to sales in that market? Thanks.

All right, thank you for your questions. On usage and pricing, if you look at the APPM dynamics in Russia, you'll see that APPM, even though it was declining in Q3 and Q4 of 2008, it did not really drive the usage anymore up and also the decline in APPM in Q1 in 2009 also did not drive usage up. So basically, the price elasticity effect that we saw in 2007 and early 2008 stopped playing at the end of 2008 and the beginning of 2009, of course mainly due to financial crisis, because people are optimizing their spend and they have no incentive to -- nothing can make them talk more, even the cheaper price.

And therefore, we don't see any price in further declining APPM because we don't believe it will stimulate growth of traffic. We see as our target to stop APPM decline, because we believe this APPM -- the stabilization and potential growth of APPM will bring us to stabilization and growth of ARPU without any further decline in MOUs.

For us, this is especially important since most of the migrations that are taking place in MTS are actually the migrations of the heavier customer base. This is the customer base which never thought about what kind of tariffs they were sitting on and how much money they were paying for mobile telephony up until the crisis hit in the second part of 2008.

And the behavior of these people changed and all of a sudden, they started to look at how much they spent and what tariff they were sitting on and started moving onto cheaper tariffs, happily within MTS. And what that means is that these people are not as price sensitive as the mass market and we can adjust tariffs, the new tariffs on which they moved, in such a way that we don't allow any more decline of APPM.

In Ukraine, the situation is a bit different, because obviously we were at a great disadvantage to Kyivstar. For a long time, we had a reputation of an operator with not so good quality and very high price, so we had to play a price game to first of all change the customer perception of sort of value for money kind of thing, price-quality ratio.

And in doing so and having cheaper rates on on-net, we have been able to drive usage to very high levels. And of course, in Ukraine the strategy is to continue with that kind of pricing policy until some time when we have sufficient market share in our customers, when we can start regulating prices more heavily and even starting the second quarter, we don't want to have any APPM decline in the Ukrainian market. But still, the strategy there is to gain the customer base and convince the customers of the value for money.

As far as investments in the Ukrainian market, because we had network built out in the last couple of years and this network was designed for a larger number of customers than we have today, this network can actually throughput all this traffic without any significant additional investments in 2009. And the kind of CapEx you see in Ukraine for 2009 is mostly leftovers from 2008. The new CapEx of 2009 in Ukraine is very, very small.

Okay, can I just go back on the question on -- the first question. It was really what you're seeing from your competitors. Are they following your rational strategy, or are they -- are you seeing prices falling still elsewhere? And then secondly, again, on the distribution side, can you give us some more color about sort of what more costs we can see there?

Yes. In Russia, we see a fairly benign behavior of all players on pricing. We don't see pricing going down in Russia, and at least one of our competitors is following suit in price adjustments. We don't know what exactly the second competitor is doing, but we believe there are some price adjustments happening there, as well. And, as I was saying in the last conference call, this is not across-the-board price increase. This is more of a revenue management type of tariff policy that makes sure that we make money on the customers who can pay, and we give to the customers who cannot pay the tariffs that we want, so we keep their loyalty. So, it's a bit of a sophisticated exercise.

As far as the retail strategy is concerned, the obvious impact on the margin is that since we are putting on our balance sheet the phone trading business, you buy 100 phones, you sell 100 phones, the margin is nearly zero and therefore it decreases the margins percentage wise. It should not, however, decrease the margin in absolute terms and therefore should not damage the core business.

Our target for our retail distribution network is to have it neutral in terms of net profit margin, which means that the retail business should generate enough operating margin to cover for the capital that's involved in this retail business and of course all the taxes and depreciation and costs and we were planning to have it neutral in terms of absolute margin, but mathematically, percentage wise, it will impact the percentage margin.

As far as a clear guidance for 2009, I would refrain from guiding it clearly, because we're still building the retail and we will be reporting it to you as soon as we have it sort of stabilized, which I expect will happen by the end of this year. But definitely we'll have to invest some margin and some cost in bringing this up to speed.

And finally, should we expect some working capital investment of any material nature?

Not at this point.

Okay, thanks very much.

Thank you, sir. The next question comes from Igor Semenov from Deutsche Bank. Please go ahead with your question.

Yes, hi, thank you. I just wanted to ask about the future growth potential in Russia in terms of usage and comparing it to Ukraine and usage patterns there. Just on Ukraine, specifically, usage is very high. Is it -- do you see that there is a significant degree of mobile substitution in Ukraine that already happened, and could that be one of the drivers -- future drivers of growth here in Russia? Thank you.

Well, in Ukraine, yes, of course, it is substitution of fixed, but it's also mainly due to the fact that on-net traffic is very, very cheap in Ukraine, cheaper than in Russia, and therefore people are taking advantage of almost free calls on-net that they can get. In Russia, this is not the case, so it is to a very large extent a price-driven sort of development.

As far as future growth potential in Russia, we believe that as the macroeconomic situation stabilizes and people most importantly psychologically rebuild their confidence in the future, which with the oil price being where it is, can happen sooner rather than later, at least we hope, we believe we still have a potential of MOU going up in Russia.

Right, but at the same time, I suppose you are helping customers to talk for free with your expansion of partnership with Ocean now pretty much nationwide.

Pardon me?

Well, I'm saying that your partnership with Ocean into seven new cities in Russia, and these customers pretty much can talk for free between themselves. So, I suppose that's --

Yes -- but you should remember that the scope of this offer is very, very limited and we are on the controlling side as to what we do with the tariffication and the volume of sales of these tariffs. So, I mean this is -- at this point, this is completely immaterial to the overall financial indicators of MTS and if we see that this tariff is impacting us negatively, we'll just simply change the conditions on the tariff.

But presumably the tariff starts to make financial sense when it reaches certain scale. So, presumably you are interested in actually promoting it quite heavily at this stage, to gain critical scale so people start to make calls outside or start to receive calls, so you're making interconnect revenues.

Right now, our fund tariff makes a positive financial case already, and that's why we're continuing with it. We would not have been continuing with it if it didn't make financial sense, because it's not only on-net traffic, and maybe it has to do with the way phones are used in Russia, but we do make money on the interconnect, incoming calls on off-net, on Internet usage and so on and so forth.

And so right now, it's making financial sense and that's why we're proceeding with it. But we are monitoring not only this but also all of our main tariffs closely on a weekly basis and if we do see deterioration, we have all the mechanisms in place to quickly react and change whatever tariff settings we want to change.

Great. Okay, thank you very much.

You're welcome.

Thank you, and the next question comes from Malin Hedman from JPMorgan. Please go ahead with your question.

All of m questions have been answered. Thank you.

Thank you, madam. And the next question comes from Yavuz Uzay from Goldman Sachs. Please go ahead with your question.

Thank you very much. Thanks for the presentation. I have two questions. One of them is now you're paying this current dividend, which is around $1.25 billion out of '08 earnings, and then the potential Comstar acquisition, at least 51%. So, what kind of -- for the combined business, what kind of leverage target do you have in your mind in terms of net debt to EBITDA?

And for 2010 outlook, should we be looking at increased CapEx as a percent of revenue, especially if you're looking at accelerating growth of the broadband business under Comstar? And the second thing is, in the existing Russian mobile business, do you see any cost-saving opportunities that you can execute in 2009 and 2010? Thank you very much.

Thank you. On the leverage question, I can only say that we plan to stay well inside our covenants, our debt covenants that are given to us by our banks. And we have a cash flow calculation, including different scenarios, and I can tell you that we're comfortable with what we see. So, we're not planning to outstretch ourselves beyond reason.

In 2010, increased CapEx revenue, it is too early to talk about this, because that will be defined by the end of 2009, depending on how we see traffic behave, what's happening with the economy. We are currently making some investments in 3G in the cities and areas where we believe we can get a very quick payoff and where we believe it is very important for our brand. And maintaining or increasing this investment will largely depend on the demand and obviously payable demand on the development of people's incomes.

So at this point, it's too early to take about it, as well as potential Comstar broadband investments. Really, it depends on what kind of transaction we are looking at and therefore what kind of synergies and what kind of trends. So, presumably, we'll be making some investments, but I can't say whether it's going to be more or less in terms of CapEx to sales than it is today.

And what else? That's it, right?

The cost savings.

Yes, the cost savings. The cost savings, yes, we have an ongoing cost program and Alexey has been talking about it. We have not finished doing this. So, we're doing this as we speak and it consists of many items, including overhead reduction through organizational restructuring and cutting administrative costs and renegotiating leases and so forth. It includes savings on the international inter city calls. It includes savings on data through replacing reef lines with the fiber lines that we have been putting in place. This is something that we have been investing in for a number of years.

We are pretty much looking at every budget item and we have a group of people in the financial block who are scrutinizing every expense and basically asking the question, why do we have to spend this money and what are the options? What happens if we don't spend it and so on and so forth. So, we're pretty tight on the costs and I think that the financial team is doing a good job. So, we expect to see more of this to come throughout this year, and definitely in 2010.

Well, if you're 100% successful with your cost-cutting plan by the end of 2010 versus 2008, for example, how much EBITDA margin do you think you can add to the core Russian mobile business, of course?

Yes, earlier we quoted the figure of around $200 million that we want to cut out of the cost this year. And I would probably stop at that. I wouldn't go much further in our guidance.

Thank you very much.

Thank you, sir. And the next question comes from Alexander Kazbegi from Renaissance Capital. Please go ahead with your question.

Yes, hi. First of all, could you maybe talk a little bit about the sort of other markets we haven't touched upon, the CIS markets and we've seen quite a dramatic reduction there, both in ARPU and the revenue side. So, I wonder if that's the matter of slow remittances, it's the matter of the economy is doing very poorly there and what do you expect most, probably over the course of the next quarters there, from what you know and what you see in those markets?

Secondly, again, I understand that the issue with the raising more debt, you sort of tried to answer it. I will not answer directly in the sense that -- what I am more after is that if you were to raise debt, you had obviously raised debt now twice over the course of the last several months, one domestically at about 17%, nearly, and the other one actually fairly successfully with the $630 million loan which was at LIBOR plus 6%.

So, my question is that if you had to raise more debt, does it mean now the international markets are open and you an raise it cheaply, or it will be actually domestic debt, which is more likely, and that means that it will come actually at a fairly high sort of interest rate. And together with that, maybe you can say also that you had 19% ruble-denominated debt at the end of Q1. Do you have any sort of target for the year end, where do you want to see roughly the split between the FOREX and between the domestic currency debt?

And last one, going back again -- sorry for this, but going back to the retail side. Could you just maybe just indicate what kind of -- because we have very, I guess -- very obscure ideas what kind of revenue these two acquisitions, plus your own strategy, can generate. Just a ballpark number. Let's say for the full year 2009, I'm looking for these two companies and talking about Telefon.Ru, Eldorado and your own generate, I don't know, $200 million revenues, $20 million revenues? What is the ballpark number which you can give us at least? Thank you.

All right, thank you very much. In terms of Uzbekistan and Armenia, in Uzbekistan, on top of seasonality, we had a bit of a pricing fight, not initiated by us but we had to respond, and in Q2 the situation is normalizing, so I think the market is going to sort of get a little bit back to where it was. But we did have this hiccup.

In Armenia, the situation overall for our place in the market as a business is pretty good. We maintain a very high market share and we're above our competition pretty much in all financing and operational indicators, but the market is suffering greatly from the economic crisis. As you know, a large part of Armenian budget or Armenian GDP, so to speak, is formed by people -- by Armenians actually living outside of Armenia and sort of sending money back. And that sort of flow has suffered, and also the international calls between Armenian diaspora also have decreased and that's sort of impacted the business negatively, and also devaluation of the dram.

And in Turkmenistan, it's seasonality, so basically things are quite normal there, and we don't expect any difficulties coming out of Turkmenistan. We just extended our license there, so the business is quite robust. We added customers and we have a quite positive outlook for this business.

And in Belarus?

Yes. In terms of retail, I will leave the debt questions --

Sorry, Mikhail, I also asked about Belarus, also had a quite a sharp reduction there.

Once again?

About Belarus, which also saw quite a sharp reduction?

Belarus, yes. If you allow me to get back to you separately. I don't think I can comment right now on Belarus too much. We will send you some information on this. I just don't have the numbers in front of me, because we typically don't comment on Belarus. We don't consolidate it.

Sure. Yes. No, no, you gave the ARPU numbers, so that's why the question.

On the retail, what kind of revenues can we expect for 2009, I mean, this is sort of around $500 million number I'd say, $500 million plus in terms of sales of retail handsets.

Okay.

That's re rough estimate. Rough ones, so we don't know too much about this market yet.

Sure.

So, we'll come back to you with a formal report on retail sort of towards the end of Q3, I believe, where we can tell you the whole story. Right now we're just in the building process. And on debt, this is up to Alexey.

On debt mix question, what we see right now, that both international and local markets had some appetite to MTS in terms of providing that financing. However, the key question is the tenure of available debt and the pricing for the debt. So, our targeted mix depends on available liquidity for long-term money and the pricing for them. And our, of course, exposure towards FOREX risks, so our approach is like this.

Would you have any preference still for rubles or for the FOREX at the moment for instance, if you had to.

Well, it depends pretty much on a number of factors, as I said. Of course, if it's the same tenure of the loan period and the pricing is similar, then of course we're in favor of ruble financing, because it matches our revenue line. However, the key question, what liquidity is available in terms of long term. What markets, international, local, we feel are available for us towards some limits, of course.

Okay, thank you.

Thank you, sir. And the next question comes from Tom Furda from UralSib. Please go ahead with your question.

Yes, hello. I had a question regarding Comstar and regarding any possible acquisition, could you walk us through the shareholder approval process that you anticipate? And specifically, would it require a majority of disinterested shareholders to approve such an acquisition? Thanks.

All right. Right now, we are in the process that we set up with the independent directors and the special committee which we set with the Board. We are getting appropriate legal advice and bankers' advice on the process of the deal and once that process of the deal is finalized, we'll be able to answer these questions. At this point, I don't think I'm in a position to clearly outline the process to you. All I can say that it will be in line with best practices that exist in the United States and internationally.

Okay, thanks.

Thank you, sir. We have a follow-up question from Nadejda Golubeva from UniCredit. Please go ahead with your question.

Hi, excuse me, could you comment please on the -- on your balance sheet? I see a redeemable non-controlling interest of $100 million. This is instead of minority interest, which was like material less. What was the change in the accounting policy? Thanks.

I think that relates to our Armenian operation, where we have minority interest.

Sorry, but my question is you used to have -- at the end of fourth quarter, you had minority interest of $23 million, yes? Now, you have this one item of $100 million, so what happened and what changed here?

Well, we had a consolidation, a full consolidation of [Digestan] over the period of operations where we bought out the minority stake over the first quarter, so the amount decreased due to this reason. It --

No, no, it increased.

-- our Armenian operations.

Sorry, but the amount increased. It used to be $20 million, and it went up to $100. What happened?

If we talk redeemable non-controlling interests --

Yes, maybe it includes some other items, no?

No, no. Do I understand you correctly that the question relates to redeemable non-controlling interest, which was at the end of 2008 $140 million and as of the end of March $100 million?

Okay, maybe I had some sort of like different source, because I referred to the previous reporting from fourth quarter. Okay, I'll check with them. If I may, I'll come back to you this question, okay, if I still have it open. Okay, thank you.

That's fine, Nadejda. And the last question, please?

Thank you, sir. We have another follow-up question from Will Milner from Arete Research. Please go ahead with your question.

Thanks a lot. I'll be quick. I just want to confirm, relative tot the Comstar deal, am I right in thinking that right now under Russian corporate law, if you buy over 50% of the business, you have to make a full offer to the minorities? Thanks.

Unfortunately, I cannot comment on this one because this is due to our legal advisers to speak out on this and we don't have the advice fully prepared in a due form, so I can't really say anything about it.

Okay, thanks.

Okay, ladies and gentlemen. Thank you very much for your participation in today's talk. We welcome you at any time to contact our Investor Relations department for further questions. A webcast of the discussion will be available on our website if you wish to replay the call. In the meantime, we appreciate again your interest and wish you a very pleasant day. Goodbye.

Ladies and gentlemen, this concludes the Mobile TeleSystems First Quarter 2009 Financial and Operating Results Conference Call. Thank you for participating. You may now disconnect.