Mobile TeleSystems PJSC (MBT) 2019 Q1 法說會逐字稿

Ladies and gentlemen, welcome to Mobile TeleSystems First Quarter 2019 Financial Operating Results Announcement Conference Call. I now hand over to your host, Polina Ugryumova, IR Director. Madam, please go ahead.

Welcome, everybody, to today's event to discuss MTS First Quarter 2019 Financial and Operational Results. As usual, I must remind everyone that except for historical information, any comments made during this call may constitute forward-looking statements. Important factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements. These in turn imply certain risks, a more thorough discussion of which are available in our annual report and Form 20-F or the materials we have distributed today. MTS disavows any obligation to update any previously made forward-looking statements spoken on this conference call or make any adjustments to previously made statements to reflect changes in risks. Copies of the presentations and materials used and referenced in this conference call are available on our company website.

Now I have the pleasure of presenting MTS President and Chief Executive Officer, Mr. Alexey Kornya.

Ladies and gentlemen, thank you for joining us. With me today are Slava Nikolaev, Vice President of Marketing; Inessa Galaktionova, Vice President of Sales and Customer Service; Andrey Kamensky, Vice President of Finance, Investments and M&A; and Kirill Dmitriev, Vice President for Digital Solutions for Home. As usual, I will begin with the group highlights. I also want to give you a short update on our digital transformation. Slava, Inessa and Andrey will then walk you through our business performance. And finally, I will wrap up before we take questions.

I'm happy to tell you that we are off to a strong start in 2019, delivering another set of solid results in first quarter. In Russia, we continued to see rational market landscape, growing data consumption as well as positive but somewhat moderating dynamics in retail sales. Year-over-year group revenue increased 9.4% to RUB 118 billion. This was primarily driven by our Russian operations despite some regulatory and tax headwinds. We also saw exceptional growth in Ukraine. Of course, we continue to observe major top line impact from the consolidation of MTS Bank in third quarter last year. Excluding the impact of the bank, group revenue increased by a solid 4.8% in the first quarter on a like-for-like basis. Group OIBDA came in at RUB 55.3 billion for the quarter, up 6.0% from the previous year. Excluding the impact of MTS Bank, OIBDA grew 5.7% on a comparable basis.

Now let me give you a few brief highlights on the progress we are making on our ongoing transformation. We continue to move forward on developing new business direction and building out an integrated digital ecosystem. In fintech, we're capturing incremental revenue by cross-selling financial products and services across our subscriber base. In first quarter, the loan portfolio of MTS Bank grew nearly 30% year-over-year while maintaining a solid overall level of credit risk. In entertainment, we launched the new streaming platform in March, and we continued to enhance the user experience with attractive commercial offers. In cloud-based services, over 600 clients are already being served by the CloudMTS platform. And we have strengthened our position in the significant market -- as a significant market player via the acquisitions of Avantage and IT-Grad. In big data, we are building a world-class in-house data science team to realize powerful benefits from analytics. For example, we're enhancing the productivity of our retail workforce by carefully examining foot traffic dynamics. In banking, big data is enabling us to better understand the (inaudible) created profiles to develop personalized offers. And we have launched our own targeted marketing service for SME called MTS Marketolog.

In total, around 20% of group revenue is already today being generated by products and services that go beyond traditional connectivity. And on average, these segments are seeing double-digit growth. While we are still in the relatively early stage of our transformation, we are beginning to see real and substantial results.

Now I will turn it over to Slava, who will go into greater detail on our country markets.

Thank you, Alexey. In Q1, we saw strong top line performance in Russia despite the negative impact from the cancellation of internal roaming and a 2% VAT increase. Revenue in Q1 grew 7.9% year-over-year to RUB 109.1 billion driven by mobile services, handset sales and the consolidation of MTS Bank. In services, we continue to see a stable benign market environment. In certain regions, some players are making limited aggressive pricing moves at a tactical level, but we regard this as a normal course of business and an indicator of healthy competitive dynamics. Overall, the rational conditions established over the past couple of years continue. Moreover, we see emerging opportunities to increase ARPU as well as indicators that the industry as a whole is ready for price adjustments.

Altogether, we feel quite comfortable in the current market environment, which provides a firm foundation for further development. Going forward, we expect Mobile revenue growth to accelerate as we get into the second half of the year, provided there are no new regulatory pressures. In the midterm, we expect stable low single-digit services growth to continue.

In fixed line, we had a slight 0.1 uptick in revenue year-over-year against the backdrop of continued long-term weakness in the fixed telephony segments. At the same time, we saw an increased adoption of broadband and pay-TV services. By the end of Q1, we successfully grew our share in the consumer market in Moscow to 39% in broadband and 43.6% in pay-TV. The number of households using GPON services grew to almost 9 million -- to almost 2 million. Revenue from our e-ticketing and cybersports segments increased 32.1% year-over-year, and our integration business saw a top line growth of 65.4%.

In Ukraine, we saw double-digit revenue growth of 19% year-over-year on the back of rapidly rising data consumption. OIBDA, likewise, was up an impressive 19.2%. We continue to roll our 4G networks as well as fine-tune our 3G footprint. Going forward, we expect the current double-digit growth to normalize in the low teens given the stable competitive environment and rising data consumption.

In Armenia, we saw declining revenue and OIBDA. This reflects a tough competitive environment as well as the recent cuts to mobile termination fees.

And in Belarus, which is not consolidated, we enjoyed solid double-digit growth in revenue and OIBDA.

Now I will turn the call over to Inessa, who will walk us through our retail business.

Thank you, Slava. We continued to see a number of positive trends, including a sustainable slowdown in gross adds and declining churn rates across the industry. In first quarter, total handsets and accessories grew 12.9% year-over-year driven by the continued strong demand for smartphones with retail smartphones sales up 26%. This was partially offset by sluggish sales of accessories and declining sales of pushbutton phones.

According to our research, MTS outcrossed the overall Russian handset market, which we estimate as having grown 11% in first quarter year-over-year. Upgrade incentives were a key driver. In particular, our cash-back program remains highly popular with customers.

We observed several notable trends in the handsets market in first quarter. Sales of mid- and high-end smartphones remained strong with the market growing, both in terms of units sold as well as the average price, which we estimate to have reached RUB 16,000. We also saw growing demand for low-end smartphones priced under RUB 10,000 as users switch from future phones.

Going forward, we expect the Russian handset market to materially slow down throughout the remainder of 2019. This is driven by 2 factors: the higher base effect from exceptional growth we saw last year and affordable dynamics in consumer purchasing power. Last year, our revenue from sales of phones and accessories grew 29% year-over-year on the background of 20%-plus overall market growth. This year, we expect the market to decelerate to single digits with MTS roughly in line with the overall trend.

Our monobrand storefront have proven to be a highly effective platform for customer touch point. I'm happy to note that in April, our retail network won the top price for Best Practice in Employee Engagement at the prestigious Customer Experience Awards. This year was also recognized with high marks for customer experience, which is also reflected in our transactional Net Promoter Score of 63% in retail.

In first quarter, the number of MTS store remained sustainably flat. In the current environment, we feel comfortable of the results obtained in the average of 5,500 or 6,000 outlets. In the medium term, we may move closer to the lower end of that guidance.

As before, we continue to see long-term potential that the market would move towards optimization. However, at the present time, we have yet to see any big swings in that direction. We'll continue to monitor the situation closely, and we'll adjust our retail strategy as needed in line with market trends.

In addition, we observed sustainable positive dynamics in our online sales channels. In first quarter, revenue from online sales rose to 13.7% year-over-year to RUB 1.5 billion.

Finally, we continue to actively develop our appropriate app, My MTS, enhancing the user experience with new features. This year, we have already launched personalized offers, chat-based support and integration with Samsung Pay and Google Pay. By the end of first quarter, we had over 15 million active users of My MTS app, around 40% year-over-year.

Now I will turn over to Andrey to discuss our business performance financial. Thank you.

Thank you, Inessa. For the first quarter, we reported group OIBDA of RUB 55.3 billion, growing 6% year-on-year. You can see the walk on the slide. We saw positive impact from core services growth in both Russia and Ukraine was -- which was partially offset by the consolidation of internal roaming in Russia. A significant portion of the positive OpEx impact in Russia was due to a one-off effect from a real estate transaction, which contributed around half of the nominal group OIBDA growth.

Group net profit came in at RUB 17.6 billion for the quarter, up 14.1% year-over-year. Net profit margin stood at 14.9%. Looking at the factor analysis, net earnings growth was driven by the increase in OIBDA as well as interest income. Meanwhile, we also saw higher financing costs owing to our increased gross debt position.

Turning to CapEx. We continued to invest in improving network quality. In the first 3 months of the year, CapEx totaled RUB 16.6 billion. Overall, the group had a CapEx to revenue ratio of 14.1% with a relatively higher spending in Ukraine given the ongoing 4G rollout. We continue to expect CapEx of up to RUB 90 billion in 2019 given seasonality and additional investments required to comply with new regulations.

Free cash flow for the quarter was negative RUB 31.4 billion driven by the SEC/DOJ payment. Excluding the payment, positive free cash flow would have totaled RUB 24.2 billion, up from RUB 13.9 billion in the year-ago quarter, which had compared to a more intense M&A activity.

We continue to make smart bets when we see the right opportunities. In first quarter, we announced the acquisition of the cloud assets of IT-Grad, one of Russia's largest IAS providers. This strategic deal strengthens our footprint in the cloud services space and positions us to capture future growth.

Turning to MTS Bank. We continued to see solid performance in the core banking business. In the first quarter, net interest income rose 18.7% year-over-year to RUB 2.5 billion. Total outstanding loans increased 39.9% -- 37.9% year-over-year to RUB 85.8 billion with cost of fees coming in just under 4%. Personal loan issuance was up 2.3 year-over-year, and credit card issuance was up 3.4x.

We are making good progress in realizing synergies, and we can see this reflected in the figures. As Alexey mentioned, we are leveraging big data analytics to gain better line of sight into our vast pool of subscribers and customers. That enables us to better understand the risk profiles and market personalized offers. As a result in 2018, we saw fourfold growth in cross selling of goods and services year-over-year. This is a great illustration of the benefits of blending a bank with telecoms, and we continue to see opportunities to drive additional synergies going forward.

In January, MTS issued RUB 10 billion in exchange-traded bonds. And the total debt increased by the end of the quarter to RUB 387.4 billion with a slight quarter-on-quarter increase in the weighted average interest rate to 8.1%. Our balance sheet remains strong with a net debt to last 12 months adjusted OIBDA ratio of 1.5, excluding the impact of new IFRS standards.

Finally, earlier this month, we completed the share buybacks that began last July. Over the past year, we repurchased 5.68% of our share capital through our wholly owned subsidiary, Bastion. In total, we spent RUB 29.8 billion under the program, split roughly equally between 2018 and 2019.

Now I will turn it back to Alexey for his closing remarks.

I'm very much encouraged by our strong operational performance in first quarter, even as we faced regulatory headwinds. Given these results, we feel comfortable raising our full year OIBDA guidance to largely flat year-over-year, up from our previous outlook of slightly negative. Compared to the first half of the year, we expect OIBDA growth will comparatively slow down in the second half due to the high base effect from second half 2018 as well as one-off effect in the first quarter this year. We reaffirm our revenue guidance of over 3% growth year-over-year, keeping in mind the exceptional surge in retail sales last year. Of course, uncertainties related to the competitive landscape, the regulatory environment and other factors could materially impact the group's performance.

As you know, we continue to return the majority of our free cash flows to shareholders as dividends. In first half -- in the first quarter, the Board approved a new policy increasing our annual dividend target over the next 3 years to at least RUB 28 per ordinary share or RUB 56 per ADR. We remain committed to generating significant long-term value for our global pool of investors, and we hope this step reaffirms how seriously we take that commitment.

To sum up, we have a clear vision and strategy. We are off to a strong start in 2019, and we are laser-focused on continuing to deliver going forward. Thank you, and we will now take your questions.

Operator, we are now ready to take questions. Thank you.

(Operator Instructions) Our first question is from HSBC.

Yes. This is Herve Drouet from HSBC. A couple of questions on my side. Firstly, the real estate, I wanted just to check the amount of the one-off. Am I understanding well it seems originally as the 1.2 billion when you say how far the growth as a group OIBDA you are referring in absolute term or -- so I just wanted to check in terms of the size of the one-off in real estate. Second question is regarding Ukraine and 5G in Ukraine. I mean I don't know if you can give us an update. And finally as well with the ongoing current listing discussion that you have, just wanted to see as well if there is any update you can give us as well as in terms of timing.

Can we just specify the second question? It is about 5G and Ukraine or 5G in Ukraine?

Oh, in terms of the plan of 5G on availability of frequencies but also licensing. If -- it looks like there's been some ongoing discussions in term of a decree which has been signed, I believe, in Ukraine. So I just wanted to get your view on what is expectation for 5G in Ukraine in term of the delivery of licensing and in which frequencies and how available those frequency will be.

Okay. Let me take second and the third, and then Andrey will take the first one. As far as the 5G in Ukraine is concerned, there are no specific announcements were made by the regulator. So the plans are not fully communicated. We keep on the outlook and discussions, but there is no specific date set and no specific visibility at this point of time. As far as the capital strategy and leasing topic, we just confirm our commitment to return to the community by the end of summer with our strategy in this respect. So far, we continue our dialogues with shareholders.

With regard to your first question, we're not disclosing the exact amount. We are saying that the effect, the one-off effect of this real estate transaction is around half of the nominal group OIBDA growth. So that's the indication that we are giving. Thank you.

Our next question is from Dalibor Vavruska from Citi.

Can you hear me?

Yes. We can hear you, Dalibor.

I just wanted to ask about this 5G in Russia, if you can give us some updates, number one. The second question is around this case, Huawei now with the potential restrictions on the handsets and the equipment, I'm just wondering whether you envisage any impacts of that -- of the different scenarios that may play out and how you are planning for that.

Okay, Dalibor, thank you for your questions. By the way, no one is congratulating us with the good set of results. Wasn't that good enough? I'm just wondering.

As far as the 5G in Russia, we right now are in discussion with the regulator. I think the key challenge or the key topic is availability of spectrum in country because the main spectrum in 3.5 megahertz is occupied right now by other services and the need to be full-scale program on clearing up this spectrum. So if other spectrums available in C band, we are discussing right now is the approach. However, we agreed on some testing zones already where we can start testing 5G already this year, in particular in Moscow. However, as there is no final decision as to what would be the approach, how the regulator will approach the issue of lacking spectrum, nonavailability of spectrum and what would be the distribution policy, whether there will be consortium of all the players, which will invest in freeing up the spectrum, or there will be tenders or what is the approach, there is not yet final decision on the side of the regulator. So some uncertainty in this area remains in place.

On the other side that indicates that certain CapEx savings or we do not have any plans for CapEx in 5G in the coming -- in this year, and even I think there will be no major investments in the next year.

As far as Huawei's situation concerned, we don't take any specific actions or there is no impact in our operational activity from this executive order taken by U.S. authorities. Of course, we are closely monitoring situation. We are in discussion with Huawei with suppliers. However, we do not see any direct impact from that on us. And as far as handsets are concerned, we keep on supplying our network phone demand. We did not see any decrease in demand following this order in Huawei handsets, so it did not impact the demand in our sales.

Our next question is from Igor Goncharov from Gazprombank.

Yes. Let me congratulate you with the great set of results.

Thank you.

A couple of questions. One, in your press release, you mentioned that you have completed the next recurrent round of the buyback. And in this relation, so I have 2 questions. One is what is your view -- what are your plans with regards to the shares that you have accumulated on your balance? And if you plan to cancel them, what could be the time frame for the cancellation?

And number two is what is the view on the further rounds of the year-end buyback, if any? And the other question is on the real estate transaction. I understand you don't provide any additional quantitative details, but maybe you can qualitatively explain what is the nature of the transaction.

Yes. I will take both questions. The first which relate to the buyback. Yes, we have finalized the program that was initiated last year in July. At the moment, there are no plans for new programs. But you know that recently, we have approved the new dividend policy, which sets the minimum level for our dividend payment. And actually, this is our -- this one more time confirm our commitment to the higher yield that we deliver to our shareholders.

In terms of the cancellation of the shares that we currently have on our balance sheet, there are no exact plans to do this. We are still in process of considering it.

Yes. And -- so that's related to the first question. With regard to the second, related to the real estate transaction that was disclosed in our -- in the first quarter. And actually, this is the transaction when we sold power of our real estate firm in the past and the positive effect that we also -- we have seen in the first quarter. So actually, there are no more details related to this transaction. Thank you.

Our next question is from Mr. Alexander from Renaissance Capital.

Yes. So 2 questions, please. So the first one is sort of a follow-up probably on the buyback, just from the different point of view. So looking at your, like, leverage, you're at around 1.5 net debt to EBITDA. Basically after the dividend payments, you will likely be like close to 1.8. So can you please provide any sort of updated view on how comfortable you are within this leverage and how far it might go? Like can you, over the short-term period, break this threshold, for example, to net debt to EBITDA or is completely unacceptable for you, let's put it this way. So that's the first question.

And second question is on MTS Retail. So I see that the number of the retail stores is pretty stable in this quarter. So there were some big expansion last quarter, and again it's stable now. You have, at the same time, really good results in development of My MTS user base. And obviously, the achievement is quite visible year-over-year. So when do you think you might consider again probably some optimization of the MTS Retail network? Because it looks like more and more servicing of the subscribers will be done for My MTS app. And the competitive situation of the market is also pretty stable, which probably doesn't require you to be fairly active at the retail front. So just, like, wanted to hear your thoughts on that.

This is Andrey. I will answer the first question. Just to confirm that our net-debt-to-OIBDA ratio now at the end of the first quarter stands at the level of 1.2. This is excluding the new IFRS standard. So this is on comparative basis, the same numbers that we were showing in 2018.

With regard to the -- whether we are comfortable -- on the comfortable level, this is just to reiterate what we were seeing before. That, in principle, the comfort level that we see is around 2. But even -- I'm still talking about the -- in old IFRS standards. But even if it's a bit above 2, this is not something that we see is a problem for us.

Does that answer your question?

Yes, sure.

Hold on a second then, the answer of the...

Okay. I will give some snapshot on the stores. As I mentioned, we are capitally investigating the situation of the market. On the current competition -- on the current market, we don't see right now any crucial needs to optimize the chain. We're pretty comfortable with the current level of our retail footprint. But in the midterm, as was mentioned during that year, we are investigating the opportunity maybe to optimize till the level of the minimum level like 500 -- 5,600, something like that. But again, it will depend on the competition environment. So far, we are pretty comfortable with the current footprint.

I would just a little bit elaborate on that, that generally, the trends which we are seeing in market are somewhat encouraging that we don't see intensification of competition in retail space. And in this sense, we see potential for market starting improving for all players in this market. So as more and more goals enter online, we see that the market might start optimizing already this year. And as Inessa mentioned, we vision that we might move towards the lower end of our target range in terms of number of stores, which is 5,600.

Yes. The reason I ask because, obviously, we all know that it's an easy way how you can positively impact your OIBDA levels. Obviously, that optimization in the market is stable, looks pretty reasonable to do that. And I think there's still some sort of a confusion in the market why despite the fact that nobody from the competitors is doing some -- any active movements in this -- in the area, everybody is too cautious regarding the future and not cutting the number of stores, just like a general comment.

As I said, the trends are encouraging. We are monitoring, yet too early to change anything in our strategy. But let's see, and we will keep on monitoring situation through the year.

(Operator Instructions) Our next question is from Anna Kazaryan from VTB Capital.

I have question for relatively new services for you. Since some quarters have already passed since you acquired the assets in e-ticketing and eSport, can you give your view, updates on these services? For example, what contribution from these services you have seen to your core mobile operations? Did you have to change your approach, your view on these assets? For example, there were unused pieces that you decided to eliminate charges from customers for your e-ticketing services. Overall, how do you evaluate performance of these assets?

Okay. I'll take this question. It's Slava. Currently, I can say that the size of, especially the size of eSports, but also the size of e-ticketing is not so huge that it could really contribute into mobile operations. But the growth of both of these segments is very promising. So we believe that we will see this contribution in the future. And on the other hand, we see a contribution of our knowledge of the market into operations of both e-ticketing and eSports, which just shows that there are synergies in these businesses and our mobile business.

Our next question is from Mr. Alexander from Renaissance Capital.

Yes. It's Alexander Vengranovich again from RenCap. Just a follow-up question probably on the pay-TV services. So you mentioned in your presentation that, that goes quite well, so offsetting the decline in fixed telephony. So -- and like looking at the market trends, obviously a lot of OTT players are investing a lot in the content -- on content. And like recently like Yandex announced the intention to change the landscape, probably like invest more in their own production. I mean it looks like it's becoming more and more important for the consumer that you provide all contents on the platform. So the question is whether you're okay, first, with the technological part of MTS TV platform? And do you think it requires some, like, improvement, or you might consider even some M&A in this respect? And the second question is whether your -- you will consider, like, improving or increasing your investments maybe on the content side or partnering with the other content producers or like the other video streaming services to improve the quality of the service for the users, if that's clear.

I will also take this question. First of all, regarding the product and our satisfaction with quality, we are now currently -- as we speak, we are launching our new TV platform, which, in my view, is going to be one of the best on the market, and it will provide us with very good client experience and a lot of opportunities in both line air TVs and video-on-demand and also in partner services and in many, many other aspects. So in these terms, we are really optimistic. On the content side, of course, in order to grow the number of subscribers, one definitely has to go into planned coproduction. But we are not looking into huge investments in this area but would rather go -- rather conservatively and collaborating with different players of the market since we see this as the best combination with the state-of-the-art product that we're going to have in the nearest future.

Our next question is from Dalibor, Citi.

This is Dalibor again. So now I can congratulate you for the results. And I just have a quick follow-up, one more broader question. As you know in Europe, the telecom industry is experiencing a lot of pressure and low expectations. Your partner company, Vodafone, I think, is a typical example of this. I'm just wondering if you can name 1 or 2 differences in the environment that you are facing in Russia or your strategy relatively to what is happening in Europe that could make investors more confident in the investment case in MTS versus what we see in developed Europe.

Dalibor, thank you for the question. Look, I think if we take what are the challenges or what are the key challenges which we see, they are probably on the regulatory field. So we saw recently the fee increase, which affected our tariffs. We saw intra-country roaming elimination, Yarovaya, all this what we had is major headwinds in the past. So similar initiatives might come out, and we expect this is the key challenge, key risk area for us in terms for our predictability of our results and so on so forth.

Secondly, of course, a relatively lower disposable income is also limiting somewhat the growth potential for us. However, there are 2 very strong complements to our growth in basis for our strategy -- basis on which we base our strategy. Firstly, we have in Russia quite a closed digital ecosystem in terms of local players' formation. Like the biggest search engine in Russia is Yandex. The biggest social networks are VK and Odnoklassniki. The biggest online cinemas is not Netflix but ivi and so on and so forth, so the market -- in this sense, this is a uniqueness of the market. So we believe it gives us a unique opportunity to build solid digital products and win this market with those products.

And secondly, the pricing levels where we spend on our services, starting from satellite TV, which is right now less than -- average ARPU in satellite TV is less than RUB 200, which is like $2, $3, and -- or even less than sometimes. And we have one of the cheapest data globally. And in many other areas, we have very low pricing. So in this sense, that gives us a very good opportunity to grow further and to generate additional revenue based on where we stand right now. For example in Ukraine, we see that very large on that because of that low base effect, the market generates strong double-digit growth of 20%, 30%. So we are rather -- long term, we are rather optimistic because of the latter factors, which I mentioned, as to potential of our strategy in digital transformation in building up a good basis for our further growth.

(Operator Instructions) We have a follow-up question from a caller from HSBC.

Yes. This is Herve Drouet again from HSBC. Just a follow-up question as well. Firstly on RussNet, just wanted to -- your confirmation that, on your side, there is no additional cost if some kits need to be installed and if it -- that is either subsidized or paid by government entities to do that. And second one is could you give us kind of an idea in term of within your network, how much of Huawei equipment there is, to give a sense on how much does it represent within your network in term of equipment versus other suppliers?

Thank you for the questions. As far as sovereign internet regulation concerned, it is being paid by the government. So we are more -- whatever the equipment to being sold, whatever the kind of investments to be made so far, how the law stipulates it right now, it is to be provided by the government or by the regulation, regulatory budgets, and we are just to install the appropriate equipment.

And speaking about Huawei, we have about 30%, even less than 30% of our network if we talk about radio. But one should understand, usually it is not on the radio, so it's very difficult to measure whether or how -- what is the share or what is the proportion of Huawei equipment on the network. But it's still -- we have probably the lowest level of Huawei equipment among all the players in our market. But still, it's quite a sizable piece of our infrastructure. And we think it's a reflection of global situation.

(Operator Instructions) We have question from Ms. Anna from Alfa-Bank.

As far as the positive one-off.

Sorry, Anna. Your voice is very low. Could you speak up, please?

Oh, I'm sorry. I'm sorry, very sorry. The question is regarding the real estate. As far as the positive impact one-off on the EBITDA came from the real estate transaction, could you please give us some update about the long-term MGTS real estate program? How much of -- how many square meters you still have that may be disposed in the coming years? And what are the -- your expectations in this regard?

Yes. We were pretty much done most of disposition of our MGTS real estate. So we still have hundreds of square -- hundreds of thousands of square meters in our ownership. But this is for our technical needs and for our own needs. As far as the program related to GPON and freeing up with real estate, it's pretty much been complete, and most of this has been disposed.

Okay. Does it mean that the transaction that you've made in the first quarter is pretty much one of the last ones that could affect your results, operational results in the next quarters or years?

Well, we do not have anything specific in our plans related to sale of real estate over the next 12 months.

Our next question is from [Jana] from [BCP Securities].

Congratulations on solid set of results. I have a question about IFRS 16. Net leverage presented from your viewpoint excludes all the leasing, which technically should be included under the IFRS 16. Going forward, are you planning to adjust that report or you'll continue to exclude the short-term and long-term lease obligations from net leverage calculation?

[Jana], thank you very much for your question. As you said, actually the number that we disclosed, 1.5, on our leverage, this is excluding new IFRS standards. And as I said, we deliberately give this number to be on a comparable basis versus the figures that we're providing for 2018. And going forward for this year, we plan actually to continue this indication. And at certain moment, of course, we will shift to the new IFRS standards. But for the time being, we would like to continue giving these figures on a comparable basis versus 2018. Thank you.

And just to clarify that on the OIBDA side, you also continue to -- because OIBDA would have been impacted positively if you include IFRS 16. So you continue to do both kind of like excluding that IFRS 16 for the moment?

No, no. OIBDA

No, no, no. On OIBDA, we were early adopters of new standards. So we switched to new standards yet last year. So...

No. On OIBDA side, you...

In many other areas, we are the first -- so here, we were the first start to adopt the new standards. And in this sense, we are already reporting in new standards from the last year.

Just to clarify. On OIBDA, you're already adopted. On net leverage, for now, you're still reporting under the old one. Is that correct?

[Jana], this is Polina from IR. So we already report only new absolute amounts of revenues on OIBDA. And the old standards refer only to the leverage ratio, which we're showing. And this is for the purpose to maintain the consistency and to show the continuing trends, okay, and to make the numbers comparable.

(Operator Instructions) We have no further questions. Dear, speakers, back to you for the conclusion.

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

This concludes today's conference call. Thank you all for your participation. You may now disconnect.