VEON Ltd (VEON) 2006 Q2 法說會逐字稿

Good day everyone and welcome to this conference call to discuss Vimpelcom’s second quarter 2006 earnings results. Today’s call is being recorded. At this time I’d like to turn the call over to Mr. Michael Polyviou of Financial Dynamics. Please go ahead sir.

Good morning and welcome to Vimpelcom’s conference call to discuss the Company’s second quarter 2006 financial and operating results.

Before getting started I would like to remind everyone that, except for historical information, statements made on this conference call may constitute forward-looking statements that involve certain risks and uncertainties. These statements relate, in part, to the Company’s strategy and development plans in Russia and the CIS, Russian market growth in a competitive environment, cash position goals and projections and the financial impact of CPP implementation.

Certain factors may cause actual results to differ materially from those contained in the forward-looking statements, including the risks detailed in the Company's press release announcing second quarter and six month 2006 financial and operating results, the Company’s earnings presentation entitled, Presentation of 2Q 2006 Financial and Operating Results, the Company’s Annual Report on Form 20-F for the year ended December 31, 2005 and other public filings made by the Company with the United States Securities and Exchange Commission, each of which are posted on the Company’s website at www.vimpelcom.com.

In addition, the Company’s second quarter and six month 2006 financial and operating results press release and Form 20-F are posted on the Securities and Exchange Commission’s website at www.sec.com. Vimpelcom disclaims any obligation to update developments of these risk factors or to announce publicly any revision to any of the forward-looking statements made on this conference call, or to make corrections to reflect future events or developments.

If you have not received a copy of the second quarter and six month 2006 financial and operating results press release, please contact Financial Dynamics at 212-850-5600 and it will be forwarded to you. In addition, the press release and the earnings presentation, each of which includes reconciliations of non-GAAP financial measures presented on this conference call, can each be downloaded from the Vimpelcom’s website.

At this time I would like to turn the call over to Alexander Izosimov, Chief Executive Officer of Vimpel Communications.

Thank you. Good morning everyone. Thank you for joining our conference call today. Let me introduce the team participating on this call. Here with me are Elena Shmatova, our Chief Financial Officer; Nikolai Pryanishnikov, our Executive Vice President who’s in charge of operations in the Russian regions; Kent McNeley our Chief Marketing Officer; and Valery Goldin, our Vice President of International Relations.

Today’s presentation will start with a general overview of our performance in the second quarter, followed by details on our balance sheet and cash flow positions. And after that we’ll discuss developments in each of our key markets.

Looking at the numbers I can only say that they are very good. Quarter two became another record quarter for revenue, OIBDA and OIBDA margin, and net income. Year-on-year, our quarterly revenue grew by almost 46% and, for the first time ever, it exceeded $1b. The top line growth was supported by strong OIBDA margin which is slightly above our guidance. Let me now ask Elena to report in detail on our consolidated balance sheet and cash flow positions.

Thank you, Alexander.

A few words about our consolidated balance sheet and cash flow. The trend and changes to our balance sheet are consistent with the past several quarters. Assets are growing, supported by our own operating cash flow and external financing. In line with our efforts to provide balanced and effective funding instruments, in May of this year we came to the market with a new bond offering. The total amount of the offer was 600m due 2016 with an interest rate of 8.25%.

As far as we know this was the first combined offer in the Russian market for the new cash and exchange of previously issued bonds. We have issued new notes for 232.7m in exchange for an equal principal amount of 10% bonds due 2009 and 367.3m in cash consideration. As a result, we have improved our debt amortization schedule, extending average maturity to more than five years and decreased average interest on our debt. Cash proceeds from this issue are dedicated to our acquisition plans.

Our operating performance, which we are discussing, naturally made our cash generation much stronger than we have seen before. Our consolidated cash flow for the last 12 months completely covered our last 12 month’s needs in capital investments than for property, equipment and licenses.

As we said we expect that our operations in Russia will be free cash flow positive this year. Potentially, on the Group level, we may be still slightly negative depending on our ability to accelerate [better] grow out in the CIS countries, where our operations are only in the initial stages.

Let me now turn the floor back to Alexander to discuss developments separately in our key markets.

Thanks, Elena. Let’s start with Russia, our largest and most developed market. Subscriber growth is still taking place, albeit at a much slower pace. Sim card penetration has reached 100%, putting Russia in the [camp of] saturated markets. However, if we discount the multiple and idle Sim cards, we believe the real subscriber penetration is closer to 70%. The untapped population and improving economic conditions suggest that subscriber growth is going to continue in Russia for a while. At the same time, the growth rate and the share of first time users will reduce sharply.

Consequently, incremental subscriber market share matters much less. What does matter is the quality of new subscribers and the way we develop our existing base. The ability to improve subscriber quality and stimulate growths in usage of voice and non-voice services is becoming a key competitive advantage. Success in this area translates into MOU and ARPU growth, gains in revenue market share, and increased profitability.

An encouraging development is that major operators seem to be deploying strategies aimed at protecting profitability and focusing less on expanded battles for marginal subscribers. If this is sustained, we should see good growth in the Russian market for a number of years. We believe we are well-equipped for this new [gain].

I will not repeat all the details but, briefly, it includes subscriber segmentation and targeted marketing, focus on subscriber loyalty and retention, market adaptation and promotion on value-added services, and finally conservative pricing policy. As one can see, this strategy works well and our growth during the second quarter of 2006 was very strong, with the quarter-on-quarter ARPU growth rate higher than at any time in the past.

For the first time ever our pool of the active subscriber base in the second quarter of 2006 was even higher than a year ago. It is no surprise that such ARPU dynamics translates into good year-on-year revenue growth in Russia approximately 40%. Although very strong, and above our [target] quarter, the OIBDA margin has slightly declined compared to the exceptionally high Q1 margin. The key reason were higher net dealer commissions due to smaller claw backs and higher spend on advertising due to normal seasonal increase, a response to competitive actions, and the necessary level of support for the launch of new ruble based tariffs.

In the second quarter we went through a long negotiation process with both mobile and fixed line operators and the regulator. This was triggered by the introduction of CPP in Russia from July 1. Our position has always been that interconnect charges between operators must be based on respective costs as it’s done in the other markets. Although this principle was not implemented in full, we believe we have made a step forward. The interconnect revenues and charges in Q2, however, kept pretty much the same structure as in Q1. The increase in the interconnect revenues was driven entirely by the growing traffic exchange.

The full impact of CPP introduction and the new interconnect arrangements will become visible from the third quarter onwards. We can expect some negative pressure on the margins, but we believe we can -- have taken -- we have taken sufficient measures to protect our bottom line.

Our CapEx in Russia peaked in 2005 in absolute terms. But as a percentage of revenue, on a last 12 month basis, it was in decline already for some time and we see this trend continuing. On the same basis our OIBDA was approximately $530m higher than the capital investment in Russia, which gives us good comfort that we will fulfill our commitment to bring Russian operations to free cash flow positive position in 2006.

As we have mentioned before, the focus on the competitive dynamics in Russia is now less on the number of subscribers and more on revenue and profitability. While it is still tricky to build an accurate and timely comparison for the whole market, a comparison of the first quarter results for the three major operators may be of value. We are very happy about steady gains on the revenue market share and our ability to close the gap with MTS. The fact that, in quarter one, we became the number one operator in Russia in terms of OIBDA and OIBDA margin we view as a remarkable achievement as well.

The second jewel in our crown is Kazakhstan. The country is rapidly developing with one of the highest growth rates in the world. The market provides us with great growth opportunities and we’ll do our best to take advantage of the current situation when there is an effective duopoly in the market. Since September 2004, when we entered this market, we’ve gained 15 percentage points in market share, so that now the overall leadership position in the Kazakh market doesn’t look unattainable.

We also made substantial progress in reversing the declining trends in ARPU and MOU. In the second quarter of 2006, for active subscriber base, both parameters showed over 40% quarter-on-quarter growth. They also grew on a year-on-year basis. Naturally, these results were positively reflected in our financial performance in Kazakhstan. Year-on-year revenue growth exceeded 82% and OIBDA growth 100%. Net income growth of almost 360% was helped by about 8% appreciation of the local currency in the second quarter of 2006. OIBDA margin also improved to reach 42%, and we will continue to work on improving profitability further.

Our CapEx, as a percentage of revenue, is still high at the level of approximately 70%. However, this ratio should go down in the not too distant future as our network coverage and quality is rapidly improving. We see our Kazakhstan operations as an increasingly important part of our business and we believe we will be able to make more progress going forward.

In Ukraine we launched our Beeline brand in April and we consider this the start of our real business operations in this market. As a late entrant, we face the challenge of finding the right balance among the speed of growth, quality of our service and financial exposure. Hence, we fight the temptation of growing too fast, at the expense of the quality of our subscriber base. At this stage of market development our growth must be real with real, not fictitious, subscribers. To that end we have [scrubbed] our inherited subscriber base, we increased prices of our entry ticket and, unlike our competition, we did not give away free Sim cards.

In essence, our Ukrainian strategy is geographically focused. Initially, we intend to concentrate investments in the most promising regions to avoid spreading ourselves too thin. In selected regions we’ll fine tune our business model and only after that expand operations to the rest of the country.

This strategy involves three areas. First, network roll out in the targeted regions. Second, developing strong presence in the retail outlet, again, mainly focused within the selected regions. And finally, building our brand through national advertising campaigns.

Despite some delays in supply of equipment in the second quarter, we are happy with our start and hope we will be able to perform even better with improvements in the coverage and quality of our network.

Our operations in Uzbekistan and Tajikistan are in a preparatory phase, as we get ready for the launch of our Beeline brand later this month. The preparations include strengthening of our staff, network build out, establishing appropriate control procedures, and other actions which we usually refer to as the integration process. After the launch of the brand our operations in Uzbekistan and Tajikistan will focus on rapid profitable growth, where we see great potential as penetration level in these countries are still well below 10%.

So, concluding our presentation, I would like to say that we are proud of our achievements. Against many odds, our business is developing successfully and management is determined to continue to deliver good results for the Company and its shareholders. We believe we have the right strategy to realize great opportunities, to build our business both in Russia and the CIS. Thank you for your attention, and let me now open the floor for questions.

Thank you. [OPERATOR INSTRUCTIONS]. We’ll go first to Alex Kazbegi with Renaissance Capital.

Yes, good evening it’s Alex Kazbegi. Congratulations for the very good results. My questions are mostly on the cost side, if I can.

First of all if you look at your advertising, it’s -- in Russia especially, it went up to become like 5% of the revenues in the second quarter, which was actually higher than it was, for instance, a year ago when you had quite a heavy advertising on the re-branding.

So I was just wondering, because you gave the explanation recently that this is basically in response to the other operators, as well as the introduction of ruble tariffs. But this response to the other operators, does it mean that this is the beginning of a trend which we’re going to see, meaning that advertising is actually going to increase as a percentage of revenues?

Together with that also, your SG&A, which I would have expected to be declining as percentage of the revenues over the year, actually, went up from being 20.3% to 21.8%. So the loss of 1.5 percentage points on the margin there as well, also maybe you could discuss a bit the trend in that direction as well?

And moving to the Kazakhstan, again, as far as I understood also once the interconnect has been rectified with the [Kazakh] Telecom, the expectation was that your gross margin probably is going to increase and it actually did, but it went up to 69% from, I think, 67% in the second quarter 2005, so there doesn’t seem to be such a large increase there. Again, do we -- would you expect things to change there towards the better [size] on the gross margin?

And last one, if I may, again that’s all probably on the cost side, but I was just wondering on the CPP again, given that we are now two months probably into the territory after the CPP has been introduced. Maybe you can share with us some initial, at least, observations in terms of what is happening with the traffic from the fixed to the mobile networks and generally how do you view the development on your financials from the introduction of the CPP? Thank you very much.

Okay, I’ll start with the question about advertising and marketing. Our target this year is to be in the mid 5% range with our marketing spend. It’s a little higher than it was a year ago, from a percentage of revenue stand point but, as you’ll note, as we did last year we have a seasonal impact. Last year we had the introduction of re-branding, this year we had the launch of new ruble tariffs, which was a very important issue for the Company.

And with regards to your question about competition, I certainly don’t see this as something that would spark a competitive war. It was really more a response to a specific re-branding effort by MTS. So it was a combination of those three things which too us to the level but, again, it’s really at our target for spending.

Maybe I can just mention while I’m talking the CPP question that you asked? So far the traffic shifts from CPP have been quite modest - a percentage here and there from the various areas, so it really has not had a meaningful effect. But I would also say that I think it will be stabilizing over the next few months, because people are still getting their first bills from calling from fixed into mobile and so the impacts are still going to be stabilizing for some time.

Okay, so let me take the question about general and admin expenses. So, if we look on the consolidated level, they are practically -- as a percentage to revenue, they are practically stable in the first and until second quarter, but slightly high as a year ago. So, mainly this increase also connected with the revenue growth such as the [universal service fund] and commission for cash collection and the rest of increase is connected with the capital investment increase and connected with this payment for frequencies, maintenance, licenses and so on. And, of course, some other expenses increased connected with the overall business expansion in CIS.

Right then, let me pick up the last question - Kazakhstan and gross margin. Indeed, the effect is modest so far but it’s important that we have a direct connection, so we eliminated probably about a quarter of the interconnect charges but they’re still remaining high. The charges there are actually in the ball park of $0.15 and we expect that they will go down over time. But also the effect will be equalized when we are growing and catching up on the subscriber base, but also the quality of the subscriber base. [K-cel] historically have been much stronger in the corporate segment than the [heavy] subscribers, therefore, it generates significantly more traffic than [Pet-tel] our operation and I guess with our advances we’ll see this traffic equalizing and, therefore, gross margin supposed to improve going [further].

We’ll go next to Vladimir Postolovsky.

Good evening, ladies and gentlemen. Once again, congratulations with fantastic results. I guess Alex mentioned the -- a sticky point but, on Kazakhstan, could you just maybe talk a little bit more about the competitive dynamics there. You did mention that you now envisage a possibility of becoming a market leader there, but the market share gains are, indeed, quite remarkable, so how do you achieve them? What’s going on with K-cel? If you could tell a bit more about that, that would be great.

And the second question I’m really sorry Mr. Izosimov to put you on the spot but, talking to investors, the key risk to Vimpelcom at this stage, in their minds at least, seems to be your potential departure, so if you could just update us on what you’re thinking is with regards to the shareholder conflicts and your position at the Company. Are you still considering leaving, or you -- could you give us more hope that you will definitely be staying. Thanks very much.

Anyway, that’s okay to put me on the spot, it comes with the job description, you know? But let me first take the Kazakhstan question.

Actually, the gain which was shown in market share this quarter could be a bit misleading because, what happened that we were getting information about the competition from their materials, right, from what they published. And they showed actually zero growth, actually, some with negative net increase. Our suspicion is that that’s a clean up on the [base] they’ve done and, therefore, this growth probably correctly would be attributed to the previous quarters as well, so it was more even than it looks on the chart.

In general what’s happening there, I think we created a better momentum because, finally, after a few hiccups here and there -- but we’ve launched our machine, which now runs very smoothly, building out network and we already have a better network than the competition and, therefore, our quality is getting better, so that’s one thing. We’re more active on the marketing side - very strong brand presence - and that delivers the results.

We harmonized and analyzed our situation in terms of competitive advantages and the tariffs and so on deeper, and we tweaked, if I can use this word, our tariffs in order to attract, for example, more -- and offer better conditions on net traffic and so on, so on, so on. So it was -- you cannot identify a silver bullet here. It’s more of a systematic work which has been put during last year and now it starts paying off.

I believe, therefore, that unless we’ll see significant changes the way K-cel does their business we will keep our momentum actually stronger than the competition. So we’re fairly optimistic in that sense. I also might speculate that it’s related to the management issues which are happening there, so it might be slowing them down.

As far as -- coming to your second question -- as far as I’m concerned, as I’ve said before, Vimpelcom is the best Company in Russian, right? And you -- without any doubt -- so it would be an honor for me to continue to lead this Company going forward but, as a CEO I can do my job effectively only if I have full support from the Board and the Board are also engaged into developing with the management a meaningful strategy going forward. So those two conditions I said would be determining whether I am ready to continue or not. But then again, this is subject to the Board actually supporting me, and this is unclear. So the decision should be made before October 1 and I think the Board will make it.

[OPERATOR INSTRUCTIONS]. And we will go next to Sergei Arsenyev with Goldman Sachs.

Yes, good evening. Can I follow up on the CPP question? You mentioned that there’s been no -- in the initial two months of the CPP introduction, there’s been no change in the traffic pattern. Should we then expect a negative impact on [OIBDA] from that, given that the interconnect rates, the termination rates have declined so significantly?

And just on Kazakhstan, to follow up on Kazakhstan as well, what was the exact timing of the direct interconnect agreement between the mobile operators in Kazakhstan?

And just maybe a slightly technical question on minorities, just why was the minority interest so high in the second quarter? It was nearly equal to the whole income from Kazakhstan in the second quarter, so what’s going on there?

Okay, on OIBDA effect on CPP. Actually we can say only about the first months because we haven’t analyzed all this yet and we don’t know exactly what’s happening there. But in July we didn’t see major changes so, overall, it would be fair to say that when CPP is introduced, we will see negative pressure on the margin but we hope it will be offset by the measures we took on the tariffs on the pricing, and on the introduction of conditional charges for the first minute, so we expect that margins wouldn’t suffer that much.

However, in general, if you take the overall analysis, we expect that the pressure could be anywhere between 2% and 4%, right, which we need to compensate finding elsewhere in our cost efficiencies when we take into account all of the CPP effects when they are implemented.

One has to mention that we still haven’t signed a lot of contracts with the fixed line operators because they’re still waiting for clarifications from the regulator. So this story is not over yet and we still have some level of ambiguity there. So that’s on CPP.

As far as Kazakhstan goes, that’s been introduced -- the direct interconnect has been introduced April 1. Elena you take [inaudible].

With minority, net income is the result which is after minority deduction, so net income of Kazakhstan before minority interest is approximately 21m, so that’s how it works.

We’ll go next to Rizwan Ali with Bear Stearns.

Okay, my first question is regarding receivables. Your receivables jumped up quite a bit in the second quarter compared to the first one and I was wondering what the reason may be?

And my second question was, in Ukraine you, obviously, had a very good performance in MOU’s and ARPU’s. Is there any one specific reason why we saw the kind of results we saw, or the improvement that we saw? Or was it just a general overall improvement in your operations?

Let me take first the Ukrainian results and then Elena will take the receivables.

I think that we’re simply playing the game more carefully than the competition. The difference -- fundamental difference between the Ukrainian and the Russian market is that you do need -- do not need registered subscribers on pre-paid. In Russia you have to show your passport, your ID and so on and in Ukraine you basically can sell Sim cards everywhere uncontrolled, so people give them. You buy two boxes of washing powder and you get a Sim card as a bonus.

And we don’t play this game, partially by design, partially by the circumstances because we don’t have capacity. As soon as we launched the brand and we saw how fast people are taking it up and trying our network, we [found] unprepared for such a load and, therefore, we kind of scaled down a bit. Now we’re rapidly trying to improve both capacity on the [radial] part of the network, as well as the platforms and the billing. When it’s done then we can really see.

So it’s more of -- if you compare us, for example, with [inaudible], it’s more of the desire of us not to take idle Sim cards and bring people just for trial, so we’re really holding our prices for Sim cards reasonably high and that probably yields a better quality of subscriber base. As a result, better ARPU and better MOU’s in that sense.

Should we expect an increase in your CapEx in Ukraine going forward?

In terms of CapEx, as we promised, we need to indicate the CapEx as soon as we start reporting the country. And our CapEx budget for this year is 170m. And we’re still holding up to our general business case, which is targeting 10% market share of the market, and $300m revenue and it’s all supported by a $500m investment, so as a general framework and, therefore, $170m is a part of the $500m to be invested this year. We are slightly behind our plan in terms of implementing this year but we intend to catch up. So we’ll stay within that budget.

And talking about growth of accounts receivable, so mainly, of course, it’s connected with the overall business growth and accounts receivable which are growing from dealers and somewhat from customers. And from customers it’s connected with our promotions to which we have for post-paid tariff plans which we see it now as a very good time to promote such plans.

We’ll go next to Sean Gardner with Morgan Stanley.

Yes, thank you very much. Just in terms of the ARPU, and I know you don’t give quarterly guidance, but going into the third quarter there’s so many moving parts with CPP coming in as well as your fixing of the ruble exchange rate and charging for the first minute. Can you just help us understand how you see ARPU developing in the quarter, given the changes that are happening?

And then secondly, on the CapEx front, it may be a little early at this stage but have you started to think about much CapEx you might need to spend in 2007 for your businesses yet, since its September? Thanks.

So, on ARPU, I think we better stick to our rule here, there’s no guidance, particularly, when we have so many moving parts. In general we just repeat it, that our intention was all the adjustments we were making we were trying to neutralize the bottom line impact. And, therefore, we were less concerned about the true impact on the ARPU and we’re trying [all the major businesses] trying to separate actually the noise which is brought by interconnect and so watching it on that -- developing on that level. But I really would feel very uncomfortable giving you any guidance on ARPU for quarter three at the moment.

As far as CapEx is concerned, the story’s the same that yes, of course, we are thinking going forward but we do not disclose numbers until they are approved and discussed with the Board of Directors. In general I would think about it, that we need to bring our CapEx in the longer run, we still believe that we can achieve a level between 15% and 17% and, although some of the analysts challenge actually the feasibility of this, giving very low APPMs, but we’re still considering it as our working model. The question remains how fast are we going to rise to that mark. Well, it’s certainly not 2007 but whether it will be 2008 that remains to be seen. So, unfortunately that’s as far as I can go in giving you guidance on CapEx.

Maybe just [on the first one] your focus on neutralizing the bottom line impact, you spoke about a two to four percentage point impact on EBITDA potentially from the CPP. Do you feel that you’ve -- at the bottom line you’ve been able to neutralize it yet or are there a few more moves you have to make to get to a neutral state?

Again, when we’re talking about this we’re talking about a margin, right. It can be zero impact on bottom line because it’s a simple math. You increase by 100 the revenue and increase by 100 the cost your margin goes down as a result and in percentage terms, that’s what I was talking about. That we might get used to seeing lower margins although we still believe that with all the work we’re doing on capturing efficiency, we probably will feel comfortable saying that we’re between 45 and 50 in the upper part of that corridor. And no meaningful impact on the bottom line as a result of that.

We’ll go next is Olga Bystrova with Credit Suisse.

Good evening, Olga Bystrova from Credit Suisse, congratulations on good results. My question is, given the second quarter performance in margins and the ARPU’s, can you update us what you see for the full year on these two items?

And a sort of related question, in your final analysis that you committed to the market, what are the major risks to the revenue and costs that you see and how is it likely those risks to materialize in next one to two years?

And the second question is regarding the shareholder dispute, basically, can you update me on the latest that has been discussed between Telenor and Alpha, if at all, since you last communicated to the market.

Olga, I’m afraid I’m going to disappoint you again that we are not guiding and, therefore, [inaudible] but I want to say just in general if the sense the market in a way, the momentum, the feeling of the market is very positive and, therefore, I would repeat, I believe that Q1 –- ARPU of Q1 this year was the lowest point and we’ll see ARPU grow year-on-year going forward. I expected to happen actually in Q1 of next year. We see already on the active base ARPU is higher in Russia than it was a year ago, so it’s a very good indication, but I wouldn’t go further than that in saying what we think about the market.

In terms of risks, again, it’s very difficult. The risk set would probably be the same, right, if the companies currently seem to be happy taking more focus on revenue and profitability and, therefore, behave more rationally on pricing and that’s what creates a very strong momentum and a positive outlook for us on the market.

If anyone breaks the ranks and engages into, for whatever reason, price wars it could be very de-stabilizing. Clearly, the cost side becomes a bit more vulnerable with uncertainties and CPP introduction, general inflation, strengthening of the ruble and so on. So the cost side will require much more attention than we gave it in the past and we take it very seriously and there’s a lot of work, actually, being done inside the Company in that direction to keep costs under control. And that’s probably it, what comes to my mind, I’m looking across the table there, if anybody can chip in on the risk side, but those probably would be two which comes first to my mind.

As far as the shareholders’ conflict is concerned, there are no real news right. It’s been a holiday period so, it was a kind of a peace treaty, I guess, signed for the whole holiday period and nothing was happening there. And so I cannot give you much of an update on that one.

Okay, thank you very much.

We’ll go next to [Leyla Govey] with [Edgerton].

Hi, this is Leyla with Edgerton. Actually most of my questions have been answered but I just had two more. One is regarding the service costs line which was stable, as proportion of revenues, this quarter compared to last quarter, even though you have more interconnection costs I assume. So I’m just wondering what had exceeded your expectations or which costs have actually been coming down in order to leave the overall services costs flat because that seems quite impressive?

That was one question, and the second one, well, it was partially answered by it was actually just relating to Ukraine, Telenor etc. Does that mean that since you last had discussions there basically hasn’t been much contact, or any contact, since the last time we heard? Thanks.

In terms of service costs it was no serious change in the second quarter compared to the first quarter in interconnect charges. It was the same regime actually. The change will come in the third quarter when we will see all contracts, most of the contracts, signed with the fixed operators and we will have more costs and more revenue. So that will be pressure on the margin. But second quarter was the same in terms of regime, as compared to the first one, that’s why it was the same numbers.

Leyla, sorry, and what was your second question?

Hello, Leyla. Have we lost her? Hello.

Can you hear me now?

Yes.

The question was just if you have had any more chats with Telenor and Alpha since we last had an update. I guess, no, because you mentioned the holiday period.

No, I did have chats, so they’re back from the holiday periods and, yes, we did have. It’s a normal relationship actually between the Company and the shareholders in that sense and we are mainly, of course, communicating with the Board Members and giving the update on the numbers and what’s happening in the Company. So, that kind of a routine between the Company and the shareholders.

Okay. And sorry, just on the interconnect you guys mentioned that the costs were similar Q1 to Q2, but the revenues were about 40% higher, but still the costs were the same?

No, the costs were also higher, so that’s why the gross margin stayed the same, so absolutely the same percentage of gross margin, 82.1% in the second quarter and 82.1% in the first quarter.

Okay, but I’m talking about as a proportion of total revenues, and because total revenues were only up 20% sequentially, but interconnect revenues were up more than 40% sequentially, I would kind of follow the logic that the costs should also be up as a proportion of sales, so something else has fallen, do you see what I mean?

There are two factors here Leyla. One is that we, and I think Nikolai has mentioned, that we adjusted our agreements with MTS which is effectively the only agreement which was intact there, right, so we brought it down for the last months. Second, we’re gradually bringing in the transport network which we are building. It’s a significant investment of about 100m plus we’re putting in. And as soon as we bring a stretch in, it right away kicks in with some effect, so that was another factor which was in there. So I believe those two would be the true happening things, and –-

Okay, that makes sense. Thank you.

Alright.

We’ll go next to Alex Kuznezov with Bear Stearns.

Good evening, Alex Kuznezov from Bear Stearns. First of all let me congratulate you on strong operating results, it’s very impressive. I have two questions.

First on all, I would like to enquire about the reasons for such a dramatic improvement in Kazakhstan, according to the reported data, ARPU of active subscribers in the country, it was 43% over the quarter. And it’s my understanding that about 11% is explained by currency depreciation. There is also impact of positive seasonality. But still, could you elaborate on your marketing initiatives because it appears that you were able to increase minutes of use and ARPU quite significantly?

And second, it appears that depreciation expense went up from about 4.4% on average last year to about 4.9% in the first quarter and 5.1% in the second quarter. Could you explain the reason for this trend please? Is it probably explained by the change in the average asset life?

Let me take Kazakhstan first. So, if you take ARPU and MOU they were almost hand-in-hand in terms of growth. But if you subtract the currency effect you will see that, actually, MOU’s grew faster which means that the [price to] investments were made. In the previous earnings call I was saying that one shouldn’t be afraid of low ARPU in Kazakhstan because the nature of that low ARPU was low minutes and very high price. Our price was about $0.20 in the average price and, therefore, we started re-balancing those factors. And, of course, when you break certain thresholds the subscriber base becomes very responsive and that’s what we see essentially happening in Kazakhstan.

As for depreciation, I’m not quite sure that I understand correctly the numbers you are referring to. But if we look on depreciation as a percentage to revenue, yes, we have some increase in depreciation as a percentage to revenue if we compare this year and year 2005. So, average for year 2005 depreciation to revenue was 18.5%, first quarter this year it was 22.7% and second quarter this year it was 21.2%.

So, it was quite a big jump, I would say, in the first quarter due to the intensive capital investments which were made in the fourth quarter of year 2005. It was approximately 600m just in one quarter so, definitely, it was a big impact on the first quarter of next year. Now it’s coming back to, I would say, previous levels. And as for depreciation period, no, we haven’t changed anything recently.

Thank you very much. May I ask you two follow up questions please?

Go ahead.

First of all, does your competitor in Kazakhstan for your trend? Is K-cel also going to reduce tariffs following your marketing initiatives?

And second, regarding the question on depreciation, if you look at it as a percentage of fixed assets and it looks like the percent depreciation represented a higher percentage of assets in the first and second quarters this year. Do you think it might be related to the changes in asset mix?

We’re talk, Elena, you answer the first.

Yes, let me start with depreciation. [You know], actually calculating the depreciation as a percentage of fixed assets which you see in the balance sheet [it’s] not exactly a correct thing, because there already you see net value of fixed assets already with depreciation subtracted. So, it’s rather a tricky thing to look like this. That’s why we’re analyzing it as a percentage to revenue.

Okay, and on the competition, it’s very important to see that it’s not necessarily the price war we engage in, because it was such a [ease] balance there. So we’re making very, very delicate things on pricing and actually those moves are not necessarily seen as slashing prices on the comparable tariffs.

For example, attracting more traffic and attracting it through increasing the night traffic, which we’ve done successfully in Russia and we launched it in Ukraine. So in Kazakhstan it worked extremely well as well. So it becomes a very attractive feature and, effectively, you have more minutes but you don’t make price adjustment moves. And that -- I’m just trying to explain the principle how we do it. So, it’s not kind of your straightforward $0.10 offer, whatever $0.05 off, but creating more hidden, more subtle stimulus for the subscribers, that’s how you generate increasing revenues.

Thank you very much.

We’ll go next to Nadia Golubeva with Aton Capital.

Hello this is Nadia Golubeva from Aton. Congratulations on great results. First of all, could you please tell me what were the roaming revenues in the second quarter? And could you please compare them to the previous quarter as well as year-on-year?

Also I wanted to ask about CapEx. So, just to all, I didn’t find the CapEx figure for the second quarter separately, could you tell it please? And also talking about your CapEx plan going forward, can you estimate how much of expansion CapEx is still left or can we talk about it in terms of how much of your licensed population -- of your population of license under coverage is really covered by your networks? And, again, how much of expansion CapEx can we expect going forward or can we can say that, starting 2007, you are only talking about capacity CapEx?

And finally, on the cost side can you please tell us whether your wages are set in rubles or in dollars? So what I mean, are they pegged to dollars and if they’re still pegged in dollars, is there any plan to see [change the thing]?

I’ll take the last question which is the easiest one and then I think I’ll let Elena answer the rest.

Our salaries we moved into ruble base and, therefore, our salaries bill is now in rubles. And actually we’re doing it with few costs, migrating it into ruble base in order to avoid potential exposure on the currency. As we lock in the revenues in rubles, we prefer not to speculate that we will get currency advantage by staying with the cost base in dollars but gradually migrate it as well into rubles. And they’re not pegged, they’re real rubles.

Percentage of roaming revenues we had approximately 6% of our service revenues coming from roaming, equally split from the visitors and our customers going to other networks.

And in terms of –- another question was about coverage of the population. When we fulfill our roll out plan of this year, we will have approximately 85% of population in our [inaudible] area covered which is, on the other hand, very good because we’ll have merely a small amount needed for the expansion and all interesting territories will be covered. On the other hand, it will be still some opportunity and if in next year we will have, for example, some channels to the very rural areas and we will be able to use satellite connection efficiently because some of the territories of Russia is very inefficient to cover. But if we find these solutions of efficient coverage, it will be still some potential to take more subscribers and revenues.

Just one addition to that. Basically, I would think about it, we’re saying that our -– every year our incremental CapEx per incremental minute is going down and that reflecting that, with every year we invest less in coverage and more reflecting the CapEx. So that will be certainly be true how we budget CapEx for next year. Incremental minute will be cheaper in terms of CapEx.

And maybe one other addition, we are still not [having 5%] of the population of this far east territories in our license portfolio. We have been fighting for that and we do believe we will get there sooner or later. And even if we will come a bit later they’re still having the strong Beeline brand and our good business model. We will just get some portion of the market there anyway. That’s our potential [actually] for the next year to keep growing our revenue share even further.

Thank you very much. But could you please also give me the roaming [occurring] for the previous quarter and if possible year-on-year?

For the previous quarter it was slightly less than 6% of our total service revenues. Exact figures are the following, 65m for the Q2 and 69m for the Q1.

Okay, thank you very much.

We’ll go next to Elena [Basynova] with [MDM] Bank.

Good afternoon. I would like to ask you about your ARPU again. Could you give some ideas -- can you give to distinguish which part of these very strong [trawls] of ARPU in the second quarter was due to seasonal factors? And what part of it was not due to seasonal factors? And what is your incremental ARPU for the second quarter?

The third question, what are your high end users ARPU dynamic? And previously you provided us with Moscow numbers - that would be also helpful.

And last question, what is your share of the subscribers now using your ruble base and what is your timeframe to migrate in full for ruble tariffs? Thank you very much.

Let me start with the easier one, which is business markets ARPU’s. Our average ARPU of the business subscribers is three times higher than the average of the mass market which is approximately $20. To build on that, it’s still more potential for Vimpelcom to increase the share of the business subscribers because [there is] nowhere than second, third, fourth operator in all regions. And still usually the biggest part of the business market is in the hands of the first entrant. Right now, becoming there already a leader in most of the markets and the mass market we have more focus on the [actual] business subscribers. We have special dedicated focus on that. That’s our future potential.

Just to comment on the ruble tariffs. We now have close to 20% of our active base on ruble tariffs. It’s made up about half from new acquisitions and half from transfers from other plans. And frankly, we’re very pleased that, it’s ahead of our projections in terms of how fast we thought it would move. Our sales today are only about 10% of non-ruble tariffs that are left, and we should be done selling any non-ruble tariffs by the end of September. So from then on 100% of our base would be there. Because of the conversion, the fixed conversion rate that was applied to our legacy tariffs, by the end of September everything that we have or, in fact, now, everything that we have is coming in in rubles.

And also I had a question regarding incremental ARPU and the share on the breakdown of ARPU [costs] if possible?

I think it’s very difficult to break the seasonality out because it’s –- the best I can suggest that you look at the increase in the volume of traffic last year and this year, but it’s such an intricate element that’s it’s very difficult to separate the growth of subscribers and ARPU’s over season. And already now, when we’re talking about actually very few new subscribers joining the network, relative to the base, therefore, talk about incremental ARPU is probably already less relevant and, therefore, we’re not trying to break it out. So we’re looking now at the overall performance of the active subscribers.

Just to add here, the quality of the existing subscribers and the new subscribers are very important for us. That’s why we’re right now not focused on bringing any subscribers and bringing spinners which are a lot of them in the market where we just focus on the quality sales and quality subscribers which increase our revenues.

Okay, thank you very much.

We’ll go next to Olga Bystrova with Credit Suisse.

Hi, I have a few follow up questions, more detailed ones. In general, with the increased usage do you see any risks for your CapEx estimates currently?

The second question is, on the general commissions, basically, the proportion of the revenues stayed relatively the same versus the first quarter. Is this something that you expect to continue going forward like at 4% or 4.5% or are there some one-offs and, therefore, we can expect some pressure on this cost item going forward?

And, I guess that’s it for now, thank you.

On -- I’ll let actually Elena -- in risks on CapEx we can say that we’re trailing pretty close on usage to our plans and, therefore, nothing indicates that we need to increase guidance on our CapEx. And you know that always it’s a trade-off between the quality and the volume which we pull through the network. And we believe that now we have reasonable comfort and that we can handle the increases if they come with what we’ve got. Therefore, no change in CapEx guidance as of yet.

The only one thing to add is that if you have increased use of usage of your existing base it is very good for the Company, it could be very efficiently handled because then you can only upgrade capacity, especially, we have all the upgraded core of the network and then you just increase transceivers on some base stations and that’s it, and you can take this whole traffic which is very, very efficient for the Company in terms of our ratios.

And in terms of dealer commissions, dealer commissions per se or per one gross addition was on the normal level. On the previous quarter it was actually low because of this claw back compared to the new year review [year] campaign. And moving forward, of course, it will depend on the volume of sales and the overall competitive pressure. But we see that this level we’ll try to keep trying to be as efficient as possible and try to ensure the quality of our gross additions.

Okay, great. And if you don’t mind, one last follow up. In terms of competitors, you mean competitors in the markets. Where do you see their main disadvantages versus yourself?

You’re asking us to speak for the disadvantages of competitors?

No, but I mean where do you see the weaknesses of the competitors currently?

If [they’re] not going to disclose you, they will [fix] them.

[Inaudible] management team.

I would say it is basically structural problems with MTS. At Megapoint we don’t see any particular weaknesses they’re just basically being a little behind in terms of scale, and they’re still rolling out networks. It’s a very, very strong Company and very, very respectable competitor.

MTS is the same. It’s a very good institution, very strong Company with very, very strong subscriber base, historically, which they inherited, or created sorry, inherited is the wrong word here. But probably they’re having difficulties more related to their structural set up and still presence of the lot of legacy of their previous acquisitions which they need to plough through and when they’re done that will be it.

I just would just add a little bit. Remind you our advantage and some disadvantage of competition is in our business model which was created for our operations which is one billing system, one pre-paid system which is working all over the Russia. Sets of services which would have the good product opportunity to development and roll out for the whole region.

Certain branches which we manage centrally but also give some flexibility to people who have a very good cooperation between branch management and good management of this management around –- across Russia. And this gives us, in my view, a very strong advantage. Competition has got disadvantages in different areas of the factors, that’s why we believe in the longer run we will keep growing the share of revenues and do strong results.

Okay, thank you very much indeed.

We’ll go next to Barry Schumaker with Alfa-Bank.

Good evening everybody this is Barry Schumaker from Alfa-Bank. I just had two follow up questions on topics we were taking about earlier.

The first is Ukraine, you were talking about the investment of, I think you said 500m in investment, and I was wondering do you have a target timeframe for break even point at the OBITDA level in Ukraine?

And my second question is, in Kazakhstan, you’re OBITDA margins are improving and looking very attractive, do you foresee this as a trend and do you have any expectation for the end of the year? Thanks.

In terms of Ukraine, 500m that’s overall investments which we targeted for the business case. And we expect to have it throughout the next two, three years. The bulk of the investment should happen this year and next year.

In terms of break even, we’re targeting quarter two next year to reach break even in the Ukraine.

In terms of margins in Kazakhstan, yes, we hope to improve a few percentage points EBITDA margin further.

Thank you.

We’ll go next to Anna Bossong with CAIB.

Yes, hello, good evening. I just wondered if you could help me first off all with the discussion about your interconnection. The regulators are talking about forcing you to have cost base interconnection and it sounded like, at the start of the call, you were saying that the interconnection rates are still below cost. So it will be interesting to hear what you consider to be cost.

And secondly, obviously, on the regulator still these investigations into the increase in [certain charges] and the interconnection rates going up. If you could say, perhaps, a few words about what you expect to come out of those things?

And lastly, I was just wondering if you could give an idea about special packages. In the first quarter you talked about traffic stimulation measures with free night minutes etc., and I think these must have been eased back in the second quarter. Should we expect these to resume in the third quarter, perhaps, or what’s your plan for us to forecast ARPU’s with? Thank you.

Okay, first of all in terms of the rates going forward from an interconnect standpoint, with the [MRKOV’s] the rates will be RUB0.95, that is regulated.

With the other operators we have reached agreements for tariffs of RUB1.1 and in all cases have [bred] different kinds of discounts that will lead to RUB0.95 for the balance of the year, and in some cases a little bit longer. And so for the rest of this year RUB0.95 should be the rate that we interchange with.

In terms of costs, we have presented that our costs are higher than that and using the way that the regulators have outlined, our costs would be somewhere in the $0.05 per minute range, that's for ourselves and for MPS as well. So that will just give you a benchmark.

And in terms of usage stimulation, we have not been using a broad scale free minutes campaign since early in the year, and we don't really have that in our plans for the balance of the year as well. One of the things that we did for usage stimulation was a promotion called you, "You Can't Escape From the Gift", which was directly targeted to billed usage and, in fact, did that very effectively. And so we will use more and more of those as we go through, in addition to launching more new and innovative products.

Thank you. And just on the investigations and things, do you have any thoughts -- is there a possibility of punitive damages or punitive [signs] or should it just be restoring the situation to the status quo, whatever the regulator thinks it should be.

First, with we believe that they are unfounded and so we believe that it will be dismissed. And second our understanding of the current structure and potential exposure here is immaterial. So most likely punitive damages are probably not what we are talking about here, so if for whatever reason, either publicity or just general feeling, because its people mainly not talking about the mobile industry as such but as construction business where there was allegations of price fixing, the gas, and then things like that.

It's on a general wave, we kind of caught that wind as well. And we believe that more likely it will be direct, if at all it happens, that would be regulation to neutralize the discounts and put everybody on the level playing field. I think that’s the key objective of current anti-monopoly investigation.

That's very good news. Can I just -- one last simple question. You're saying that you haven't signed fixed contracts yet with all the fixed line operators, so called CPP. I just wondered how significant is this in revenue terms? I assume you will have signed them all by the year end, but just trying to get a feel for what the damage of this could be in the third quarter versus, perhaps, the fourth quarter?

Well there's no damage because, right now, we're getting nothing in interconnect for their calls, or virtually nothing, a very low amount. But there is a benefit if we do conclude those agreements. And I believe in the third quarter, or early in the fourth, we should complete them. As we noted earlier, it really is several of the MRKOV fixed operators wanting to wait for some clarification from the regulators that frankly should have been done long before this, but it has just not been rapidly forthcoming.

I guess I'm trying to work out how many millions of dollars of lost revenue we're talking about here. Is it really significant or is it just a very small sum?

I think it's a very penetrating question. I'm not sure --

I'll leave it at that, thank you very much.

We'll go next to [Dalbor Varuka] with IFG.

Hello, good evening. I just had a follow up question on what was just discussed, on the CPP impact. In my understanding there is basically four impacts and one, as we discussed, the extra revenue that you get from the fixed operators. Secondly, the revenue lost from the incoming calls and then there are indirect impact related to traffic and the fourth is maybe not directly related to that, but it's the prices that you've increased to offset some of possible negative impact of the CPP.

I'm just trying to understand how this is going to play out in the third quarter and in the fourth quarter. I understand you couldn't tell us exactly how much fixed revenue you're loosing by not signing the contract but, perhaps, could you tell us how much revenue you lost as a result of not charging for the incoming calls?

And secondly, I think that MTS and LPU also give its guidance that you want to neutralize the impact on profitability -- on profits of all of this. Does this neutralization include the positive effects of the price increase or not?

Okay. We -- if you look at the last half of last year, the third and fourth quarter of '05, the revenue that we were getting as a percent of total voice revenue, not including roaming, was about 8%. And that number has been, frankly, has been coming down some even in the first and second quarters. So it may be somewhat minimized in the third and fourth, that has yet to see.

But when we were setting our targets we used that as a target and tried to, through our interconnect agreements, through modest adjustments to traffic which, in fact, has played out that way. And the premium that we charge on many of our tariff plans for the first minute or the first chargeable second, our objective was to make that a neutral impact from an EBITDA standpoint.

So that's what we have attempted to do in the work that we've done. We think that we're in a good position to achieve that and to protect our bottom line.

Can I just clarify, that includes the impact on the fixed line interconnect so that it's possible that the third quarter is going to be a little bit below or we might have a little bit negative impact because you hadn't signed all the contracts, and you said the traffic hasn't changed much.

I don't think that it's going to be far off the target that we've set.

[And we’ve just said that]. Right now [in essence] is still to sign them from the July 1. The only thing some of them are still waiting for some clarification from the Ministry in terms of the wording and definitions etc. But we have the contracts right now. We're trying to sign from the July 1. We're trying not to lose anything.

I understand, thank you very much.

We’ll go now to Jean-Charles Lemardeley from JP Morgan.

Yes, good afternoon. Just a couple of questions. Firstly, Could you remind us, the origin of your interconnections revenues, for example, how many from the mobile operators you have those interconnection agreements with and where do you see the rates and how that’s going to change with the second half?

And then just on [inaudible] what are the effects of [calling card paids] and some markets where it's been implemented in to allow people who are on low income that cannot really spend a lot of money on pre-paid charge, to basically get their usage subsidized entirely by incoming calls. For example, it's allowed the penetration to reach the lower income level. Do you think that can happen in Russia and are you going to change anything to your marketing to tap into that potential?

Let me take the first one -- the second one first. The -- some of the things that have been done in other countries to stimulate the very lowest income parts of the population, we are not anticipating in our plans as we go forward. We're really trying to focus on gaining quality customers and drive ARPU’s upward. And do that through a combination of usage stimulation on voice and more -- and superior [VET] services.

And the first question that you asked, can you repeat that one?

Yes, just your interconnection revenues and you used to have almost none, up until last year, and now it's roughly 6% of your service revenues in Russia. Is it -- do you have those interconnection agreements with all mobile operators?

We have interconnection agreements signed and in place with all of the [non-MRKOV] mobile operators now, yes.

Okay. And roughly what rates are you charging on --

As I mentioned earlier, we have been making our agreements for tariffs of RUB1.10 but, for the balance of this year, those agreements will be at RUB0.95.

Okay, so calling validation shouldn't result in much larger interconnect revenues and costs from mobile-to-mobile traffic?

On --

Relative to what’s in your [inaudible] this year?

In the third and fourth quarter it will increase because in the first half of the year it was smaller tariffs. That tariff which Kent mentioned, which is RUB0.95, $0.035 cents, will start from the -- would be in the second half. That’s why revenues not also costs will grow.

Can you repeat the -- I'm sorry, did I miss, I thought it was RUB1.1, you mentioned?

1.1 are the eventual tariffs that we will get to. The 95 are discounts or rebates that we are giving to aid an operational transition and those, the RUB0.95 will be in effect until the end of this calendar year.

And how much were you charging in the second quarter?

The only one we had was with MTS.

And what was the rate of MTS?

It was an adjusted rate, so it was two different rates during different times in the quarter.

Okay, so it was just with MTS so far?

We'll go next to Vladimir Postolovsky from UBS.

I guess the last answer kind of clarified one of my questions. But I was just wondering if you’re saying that your costs are significantly higher than the current rate of interconnect and, obviously, low interconnect is an indirect pressure on pricing, which you say is a major risk in the market, why do you accept the situation when the interconnect rates are low with all the operators. Why don't you make the rates the same for everyone, but increase them rather than lower them to RUB0.95?

And the couple of questions on -- accounting questions. You said the tax rate this quarter was very high, again, could you just explain why? And what is the reason behind the higher [works] on gain? And finally, on value added services, could you tell us what are the percentage of revenues overall in Russia and Kazakhstan, please? Thank you.

I'll take the first one. First it takes two to tango and so we need to sign the contracts on both sides. And, of course, those who see disadvantage because it's also subject to the balance of traffic, they're not openly agreeing to higher charges. That's one reason, but actually it’s not the key reason. The key reason is that when you have the regulated traffic interconnected at RUB0.95, if you go much higher on the direct interconnect with the mobile operators they have the alternative route. And, therefore, you become kind of exposed, that you are paying at a higher rate, but you receive the traffic at the lower rate.

And that arbitrage opportunity is also a very important factor which we are taking now our negotiations, into account.

Do you think this call for the fixed to mobile to go up next year?

Fixed to mobile, we believe that it would be appropriate to raise it to 110 and the regulator actually -- the [Miniteste Presse], the Ministry of Communications, supported us on that estimating our costs probably higher. But it was a decision of the Tariff Commission to keep it at RUB0.95. Therefore, we certainly will try to bring it again on the agenda and try to elevate it to 110.

And now, Elena takes the second question.

Yes, the effective tax rate. Yes, this time, this quarter it was connected with the ruble appreciation. And that's -- we recognized in our Russian books quite a substantial gain which is taxable and that's why the effective tax rate in Russia went up, I would say, to approximately 28%.

And then we have also more and more seen the effects of different income tax rates coming from the [CIS] countries. For example, in Kazakhstan the income tax rate is 30% and so as long as taxable income in Kazakhstan is growing, so the average percentage of all these calculations potentially will be more impacted by this high income tax rate. And in Ukraine the income tax rate is 35% and so that's the major impact.

And regarding your final question, VAS is -- last year was about 15, just over 15% of revenue. This year, year-to-date, we're a little ahead of that. And our objective is to grow VAS revenue faster than we grow voice. And so to do that we have a number of initiatives that we've implemented this year including what we call “GPRS For All”, making it basically a service that’s on full time for all consumers. Device management which makes it easier for us to change the settings on phones to allow consumers to take advantage of it.

Music, which is a very important part of our long term plan and we have an initiative -- several initiatives for the late third and fourth quarter, beginning with the kick off with our Madonna sponsorship. And finally, the efforts that we have in pushing messaging. So we feel like we're in good shape to continue to push VAS revenues faster than voice.

By any chance you don't have at hand the numbers for second quarter, the potential revenues for Russia and Ukraine?

I have one for Russia which is -- it was 14% which is typical that it is seasonally lower as roaming revenues and additional long distance revenues drive voice up faster and so the percentage is seasonally lower.

Thanks.

And at this time for any additional or closing remarks I would like to turn the call back over to management.

Well thank you all very much for your attention. If you would have more questions please do not hesitate to contact us and we would be happy to give you all necessary clarifications and explanations. And so now, I guess, it's appropriate to say have a nice weekend. So take care and good bye.

Once again, that does conclude today's call. We appreciate your participation. You may now disconnect.