VEON Ltd (VEON) 2009 Q1 法說會逐字稿

Please stand by. Good day, everyone, and welcome to the VimpelCom Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Mr. [Tyrone Roth]. Please go ahead, sir.

Good morning, everyone, and welcome to VimpelCom's Conference Call to discuss the Company's first quarter 2009 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 management's expectations about macroeconomic trends and the Company's ability to generate cash, making its debt payments, and maintain its debt to target OIBDA ratio, the Company's development plans in Southeast Asia, the Company's capacity to accommodate demand and maintain the quality of its services, and projections relating to the Company's operating performance, including, with respect, to mobile usage levels, the B2B business, and the Company's competitive position in the broadband market.

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 the first quarter and three months 2009 financial and operating results, the Company's earnings presentation entitled 1Q '09 Financial and Operating Results, the Company's annual report on Form 20-F for the year ended December 31st, 2008, 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 first quarter and three months 2009 financial and operating results press release and Form 20-F are posted on the Securities and Exchange Commission's website at www.sec.gov. 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 first quarter 2009 financial and operating results, please contact FD at 212-850-5600, and it will be forwarded on 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 be downloaded from the VimpelCom website.

At this time, I would like to turn the call over to Mr. Boris Nemsic, Chief Executive Officer of VimpelCom Communications. Boris?

Thank you very much. Good morning, good afternoon, everyone. Thank you for joining our conference call today. Let me introduce the team participating in this call. Here with me are Alexander Torbakhov, General Director, Elena Shmatova, Chief Financial Officer, Kent McNeley, Chief Marketing Officer, Dmitry Pleskonos, Executive VP for the CIS countries, Andrey Patoka, Vice President, head of B2B Russia, and Alexey Subbotin, Director of International Investor Relations. On this call, we will discuss our operational and the financial results for the first quarter of 2009.

It was a challenging quarter, as the unfolding economic turmoil seriously affected economies of countries in which we operate. We observed diminishing consumer confidence, significant declines in industrial production, currency devaluations, and rising unemployment. Despite the negative environment, we managed to deliver a strong set of results, with revenue of RUB67 billion. We continue to add mobile subscribers and broadband customers.

The fixed-line corporate segment also demonstrated good performance. These results support our belief in the resilience of the telecom market during economic downturn. Our 3G rollout is on track, and last week, VimpelCom fulfilled the Phase 1 requirements of 3G licenses in 40 Russian regions.

I'm especially pleased with our ability to control costs and maintain margins as we achieved a 48% consolidated OIBDA margin, in line with our long term expectations. We improved efficiency in all major markets, continuing integration of fixed-line corporations, and focusing on cost control. Our financial position improved as we paid back debt as planned, and continue to accumulate cash.

Let me now pass the floor to Elena, who will present our first quarter financial results, and describe our financial position in greater detail.

Thank you, Boris. First of all, I would like to say that this quarter, for the first time, we are presenting our [results in] rubles, which is our functional currency in Russia, our main market. As announced in our fourth quarter 2008 press release, we commenced this change in reporting will simplify comparison and better reflect the underlying operational performance of our business. For convenience, we recalculate these results of previous periods in rubles, and now you can see trends in rubles. You can also see our key results in United States dollars in attachment E of our first quarter presentation.

Revenue in rubles dropped quietly compared to the previous quarter, but increased over 30% compared to the first quarter of 2008. The decline in revenue compared to the fourth quarter can be attributed to seasonality, which we normally see in our mobile business, further impacted by the volatile economic environment. The decline was partly mitigated by an increase in six segments revenue. The trends will be explained in more detail by Boris.

OIBDA continued to be quite strong, and we are happy to report a 48% consolidated OIBDA margin despite the inclusion of a full quarter's impact of the lower margin six plan business, and ongoing product expenses in the [STDD] business and in Cambodia.

Net income continued to suffer due to sharp ruble devaluation, approximately 16% comparing the March 31st exchange rate to the December 31st exchange rate. In the first quarter, due to a decrease of our total debt, and increase in treasury cash, our foreign currency loss was less than what we recognized in the fourth quarter. And with no more impairment charges, we see improvement in our net income, quarter on quarter, by almost [RUB13 billion].

Our main changes in our balance sheet during the first quarter related to our debt position and certain improvements of cash flow (inaudible - technical difficulty) $530 million. So, our total debt outstanding, as of the end of March, it was approximately $7.7 billion, a decline of 9% compared to the year end. Our cash increased 22%, while the total amount of debt in rubles increased by 5% due to ruble devaluation.

As we promised, we reduced our CapEx in the first quarter in order to minimize cash exposure while we get a better understanding of the market development. If we see that there is no further deterioration in market conditions, we plan to increase our capital expenditures in line with our guidance. In the first quarter of 2009, our CapEx to revenue ratio was 6%, which brought the last twelve months CapEx to revenue ratio to 23%.

As long as the majority of our debt is in US dollars, we monitor our liquidity position in dollars. So, we can report that at the end of the third quarter, our debt OIBDA ratio, calculated in dollars, equaled to 1.6, which is an improvement compared to our year end ratio of 1.7. OIBDA in ruble terms increased in the first quarter of 2009 by approximately 18% compared to the first quarter a year ago. But in dollar terms, OIBDA declined by 16%.

Going forward, the last 12 months OIBDA will be influenced by exchange rate fluctuations, but we reiterate our intention to keep the debt OIBDA ratio in dollar terms to level 2. Our debt structures didn't change much compared to year end. As of today, we have repaid $693 million of total debt outstanding using our generated cash. (inaudible - technical difficulty) signed loan agreement with Fair Bank will be used for repayment of debt and other purposes.

Now, back to Boris.

Thank you, Elena. In Russia, our main market, we reported an increase in fixed line revenues, while our total revenues declined slightly quarter on quarter. Diverse revenue base contributed to the robustness of our business. Our focus on efficiency and synergies, from integration of business segments, helped to increase our consolidated OIBDA margin to 48.4%, which we consider to be a very good achievement.

At the same time, in line with our plans, we reduced capital expenditures, which in Russia amounted to RUB3.1 billion in the first quarter. On the back of the investments made in 2008, an integration of the networks of Golden Telecom and Corbina, we are confident that we have enough capacity to accommodate current demand, and maintain the high quality of our service.

In the mobile segment, we added 1.7 million new subscribers, significantly outperforming our main competitors. Our approach to distribution helped us to expand market share with our own sales channel playing an increasingly important role. Usage in Russia declined as compared with the previous quarter, although it was higher than usage in the first quarter of last year. We attribute a quarter-on-quarter decline to both seasonal factors and the impact of the volatile economic environment.

We have seen some recovery in usage in March and April, and hope this trend will continue through the summer, if the latest macroeconomic stabilization proves to be sustainable. We continue to employ a targeted pricing policy. In March, we adjusted some of our tariffs in line with our usual business practices. It resulted in stable APPM. Overall, in light of the current economic environment, we consider the results in Russia to be strong, and are especially pleased with our ability to improve the OIBDA margin to the 50% plus level.

In the fixed-line business, we achieved solid revenue growth in all segments, which is partly due to the fact that many of our contracts are denominated in hard currencies. We started active promotion of our bundled services, offering a discount if the customer takes up both our mobile and fixed-line services. We expect this to further strengthen our B2B business.

Significant increase in wholesale revenues is driven by growing traffic volumes, especially in the data segment. We continue to sell spare capacity of combined networks of the wholesale markets both in Russia and the CIS. We continue to solidify our position in the growing Russian broadband market. Our two pronged approach with FTCB and 3G technologies allows us to offer cost efficient broadband solutions to customer in the major Russian cities.

We continue to focus on sales within the existing networks, which by the end of the first quarter covered approximately 75.5 million households in Russia. Our focus on sales, and the new approach to distribution, helped us to significantly increase the number of active subscribers, both in fixed-line and mobile broadband, bringing the total number to 1.5 million. This broadband subscriber base generated almost RUB1.5 billion in revenues.

We maintain a targeted pricing policy, offering competitive rates for technologically superior product and faster speeds. In May 2009, we commercially launched IPTV service, offering more than 100 channels. IPTV will further enhance our competitive strength in the growing broadband market in Russia.

Now, let's look to our CIS operations. In Kazakhstan, our largest market outside of Russia, the prolonged crisis was recently aggravated by sharp devaluation of the local currency. In spite of this, we continued to increase the active subscriber base and keep the revenue market share steadily improving. We increased almost 34% year-on-year the number of active subscribers, while our revenues were up 8% year-on-year in local currency terms, supported by stable pricing. Despite a challenging economic situation, our business in Kazakhstan demonstrates strong OIBDA margin of 51.2%.

Our operations in Ukraine, during the first quarter of the year, reflected the dynamics of the Ukrainian telecom market, and the worsening economic conditions in the country. Mobile operations showed 11% growth in currency year-on-year, and our subscriber base declined slightly. Usage decline was partly due to seasonality, and remains relatively high at 230 minutes. The fixed-line business in Ukraine continues to generate stable revenue flow. We observe the very promising development of residential broadband in Ukraine, where we almost doubled our number of IPTV subscribers compared to the previous quarter.

In Armenia, the recent macroeconomic factors like free floating of the local currency increased the level of uncertainty in regard to consumer behavior and further economic development. The subscriber base slightly decreased year-on-year, due to cancellation of multiple SIM cards used. The increase in usage reflect better quality of our active subscriber base.

Our fixed-line business continues to generate cash at a steady pace. We continue to deliver high consolidated OIBDA margins of almost 52%. To facilitate further development of our business in Armenia, a new experienced content manager was put in place in April 2009.

In Uzbekistan, we are facing a deteriorating macroeconomic environment and very aggressive competition. In response, we are taking action to secure active subscriber base and defend our revenue market share. We continue to add new subscribers, delivering mobile subscriber growth of 51% year-on-year.

Throughout the first quarter, we managed to keep stable pricing, coupled with targeted cost reduction efforts, which led to quarter-on-quarter OIBDA margin improvement of more than 5.2 percentage points, to almost 57%. Our operations in Tajikistan and Georgia remain on track to demonstrate a positive dynamics.

Now, a few words about our operation in Southeast Asia. I'm proud to announce that we launched commercial operations in Cambodia this month. The network was deployed on time and within budget. Presently, our service is available to approximately 37% of the Cambodian population, and we intend to increase it significantly by the year end.

Our distribution efforts in Cambodia already started to bear fruit, with our products available in approximately 1,000 retail outlets. The early results are encouraging. In Vietnam, the rollout of the network and sales channel is built up, are on schedule with commercial launch planned in mid summer.

To sum it up, despite the tough macroeconomic conditions, we managed to deliver good results. Our managerial efforts helped to significantly dampen the impact of the crisis, as we continued to build our subscriber market share and improve profitability. Our finances out in the first quarter reflect the intensity of the macroeconomic turmoil. However, stabilization of the Russian ruble, among other factors, give us grounds for cautious optimism.

Starting from April 2, Alexander Torbakhov joined the Company as General Director, and I became the Chief Executive Officer. We will continue to run the business, focusing operational excellence, cash generation, and debt repayment.

Now, let me open the floor for questions.

Thank you. The question-and-answer session will be conducted electronically. (Operator Instructions).

Our first question comes from Tibor Bokor from OTKRITIE.

Hi, it's Tibor Bokor from OTKRITIE here. I have a question regarding the pricing. I mean, we were expecting a little bit higher APPM on further tariff increase in February if I'm not mistaken. Can you comment on whether we will see more of this effect in the second quarter, or whether this is it basically and we should expect stable APPM in Russia?

Well, first of all, as we've said many times, our objective is to keep our APPM stable. We believe that the value of the minutes of use here in Russia is very good. And we believe we'll get the best business progress by focusing on that. But it is true that the price impacts went into effect on February 27th. So, the APPM actually was somewhat higher at the end of the quarter.

Can you comment a little bit comparison with your competitor, which -- I mean MTS, who traditionally has more corporate clients and they showed little bit better results in this respect. Is there anything that you would like to highlight that might be the reason?

I believe that MTS reported that their APPM dropped in the first quarter, which means we performed better.

Our next question comes from William Kirby from Nevsky Capital.

Thank you. Yes, I have two questions, please. Firstly, the drop in advertising spend that we saw during Q1. Is that the sort of run rate we should expect for 2009, or now that the currency has stabilized, are you going to be cranking that back up again? And then, my second question is on the associate income. How much of the loss there was due to FX, and how much was due to the underlying business? And what should we be expecting for the rest of '09 and possibly after, too, please?

To begin with, on the advertising spending, we talked last time that when -- that last year, our targets were to be between 3% and 4% of the consolidated business revenues that we would spend in marketing. This year, as we entered the year -- as we were leaving the end of last year, we renegotiated a number of contracts, and were able to reduce our advertising spend. So, we expect this year that it will be more like 2% for the year, based on the current rates that we're seeing. And that is a little bit -- the first quarter was a little bit below that number. But I think 2% remains the likely target.

As for foreign exchange loss, you can see it in attachment B in our press release that foreign exchange loss for the first quarter was RUB23.6 billion.

Thank you. Sorry, my question was on foreign exchange losses at the associate level. How much of the associate loss we saw was due to the underlying business versus the FX exposure of [Everesa]?

You mean the loss of [URICIF]. It's also shown here that -- in net loss in associates. Actually, this time it was lower than in the fourth quarter.

And do you have any expectations for the rest of the year, or is that not something you're prepared to comment on?

No, we are not commenting.

Okay, thank you.

Our next question comes from Olga Bystrova from Credit Suisse.

Yes, good evening. Olga Bystrova from Credit Suisse. My first question also related to costs, but more on integration impact of Golden and VimpelCom, which finished last year. Can you say approximately how much of the margin gained could have been attributed to the integration impact, and whether it has been completed or we should expect more going forward?

And secondly, on the fixed-line business, corporate growth and wholesale segment growth was very strong in rubles. Can you speak a little bit what is going on in those businesses, or where corporate revenue growth has come from, and why wholesale business is continuing such strong growth rates? At volumes pricing, operators are going into your network, et cetera. Thank you very much.

Well, talking about integration impacts on the cost, of course it's pretty hard, really, to quantify what's the impact of the integration specifically, what's the impact of the others. The only thing which we can say about integration is that we are going absolutely in line with the initial plan to get synergies from the merger of the two operations. And that definitely has a positive impact on our OIBDA margins.

As far as wholesale business is concerned, well, in the results of the integration of the two businesses, Golden Telecom and VimpelCom, our network has gained capacity, and we have received additional capabilities of strengthening traffic from other raters, both within the country and abroad. And the international destinations, due to the change of the exchange rate, we've managed to gain additional income. On the other hand, are offered to the operators within the country gets more competitive as we develop our presence on all levels of telecommunications hierarchy in the Russian Federation.

For the business segment, we have managed to pretty much give the normative subscribers that we had both in the fixed and mobile segments. And in the fixed segment, given the stable volume sub traffic, we've gained additional segments due to reasons as part of our contracts with corporate subscribers are denominated in hard currencies.

Okay, great. And on the corporate segment of former Golden Telecom?

I'm talking about corporate segment of fixed. But the same trends are also true for the mobile part.

Our next question will come from Will Milner from Arete Research.

Thanks. A couple of questions. Firstly, has there been any improvement in the cost and the ease of which you're able to raise debt since the two Sberbank bank facilities you raised in March? And secondly, just coming back to what you just said on the fixed-line on the corporate business, did I understand that correctly that a lot of those contracts are priced in hard currency, so some of the fixed-line trends in Russia are currency boosted? Thanks.

Yes, part of the contracts that we have with our corporate customers on the fixed-line segment of our business are priced in hard currency. So, there are certain effects of that in our results.

Talking about the debt, we signed the debt agreement with their bank. We haven't yet drawn down. We have plans to start drawing it down just now. About other debt, yes, you know that we registered ruble bonds, but we haven't yet started placing it.

Talking about total cost of debt, now we can say that on one hand, yes, the new facility is there priced higher than what we saw before. But on average, we are more or less on the same level as we were before because LIBOR goes down, and we have quite a substantial portion of our debt with floating rates.

Okay, but if you were to raise new debt, would you still be looking at a coupon rate of 19% for ruble debt, and mid teens or low teens for dollar debt? Is that --?

No, actually now -- yes, the ruble debt is pretty expensive, and we are looking on the markets what we can get there. So, of course we will take the decision when we will get closer to some kind of consideration. Whether we take that expensive debt or not.

Our next question comes from Igor Semenov from Deutsche Bank.

Yes, hi. I just wanted to ask on the pricing, the discrepancy between your average price per minute and blended in Russia, and MTS has widened. So, it's now over 30%. Do you think it's sustainable going forward, given the factors you described yourself? Rising unemployment, flowing output and so on and so forth? Even if we have stabilization, do you think it's sustainable to have such a premium?

And the second question is you said the recent stabilization trend give you reasons to be cautiously optimistic. Could you quantify your optimism in terms of the revenue guidance? Perhaps -- and -- or OIBDA -- do you think your OIBDA margin is sustainable at this level, or is it going to improve or decline? Thank you.

I'll start with the pricing piece. The methodology that we use, and that MTS uses in reporting minutes of use is different. We use per second, and actually count each second of each call, and then aggregate that to calculate our MOU.

MTS uses a billing process that they take whatever portion of the call -- of the minute is completed, and they round it up to the full minute. And that inflates their MOU and deflates the APPM. This means that the real delta is somewhat less than what you're seeing. It's impossible to accurately know that. But from our estimates, we feel comfortable that we have a pricing that is sustainable.

And considering the OIBDA margin, we gave a long term guidance that we will be in the high 40s. And having the fact that we have the first year of full consolidation of fixed-line business, FTC business which is growing business, but of course on a lower margin, and the very sustainable mobile business, we think that we can keep this with -- of course, with all the seasonal fluctuations, which are normal.

You noticed also from our comments that we implemented cost control measures on time. So, we reacted on time, and we can react in both sides pretty fast. Meaning, being more aggressive in the market if necessary, or being I'd say more cautious if necessary.

Okay. And on the revenue side, can you tell us what sort of growth or stable or declining revenues you're looking at for this year, in rubles?

If somebody would know it, end of the year, he would be in another business probably. We saw that we had a decline in the mobile revenues in this first quarter. Part of this is seasonality, which is normal. But part of this is obviously also the economic downturn all around. So, good news in March in April, the minutes of use went positive, better than January and February. But to be honest, to predict this for the whole year long will be too ambitious.

Our next question comes from [Julia Mastefanova] from ING.

Yes, good afternoon. Thank you. Mine is a follow-up on the previous question. I'm just wondering if, given what you've already seen in March and April, and given already the past six months, do you already feel that you could be more flexible in terms of creating costs in CapEx in the following quarters? And what kind of margins will that fill dynamics do you expect going forward?

And the second question is on the wholesale operations. You've just mentioned that you have statistically more three years paring capacity. Is there any dependence between basically how many minutes of use your customers in the mobile spread and how much more capacity sales throughout your wholesale operations, for example, in the next quarter I know increases in mobile business and then you get lower sales probably in the wholesale? Thank you.

Allow me to start from your last question. There is no direct relation between the minutes of use of mobile to the wholesale business, because the traffic pattern of mobile can be more local and so on and so on. That's not the premium driver. What we wanted to say with our statement was that we made intelligent integration of these two core networks -- transport networks. And that we are now draining the advantage out of it. That's actually the sentence.

Coming to the CapEx issue, yes, in the second quarter already, and from CapEx point of view, second quarter is almost over, we released a little bit our CapEx spending in accordance with the network needs. The peak of the year of course in the minutes of use is going somewhere through August, a very intensive month, and of course again in December. So, we will be ready for this.

We gave the CapEx guidance from 12% to 15% of the CapEx to sales ratio and we keep it. We think this is a good value. Margin dynamics, I commented already. It's a seasonal part. Christmas is always in the same month. So, we think that all over the year, we will keep our long term guidance.

Okay. Thank you very much.

Our next question comes from Viktor Shvets from Nomura.

Yes, thanks very much. Could I ask you a question regarding [YVERSET]? I didn't have a chance to look at the first quarter results, but could you give us some kind of guidance of the revenue they've received, EBITDA, EBITDA margin, as well as the position of the debt facilities within YVERSET?

No, actually we are not consolidating YVERSET to our financials. And so, that --

Yes, I know that.

-- giving any guidance regarding their financial position.

Yes, yes, I know that you're not consolidating. But just some kind of an indication of the profitability of the business.

I think this is -- I understand your interest. But we are definitely not authorized to give any statement about this.

Our next question comes from [Bakashlab Shillin] from UBS.

Good afternoon, everyone. I generally get what market -- where you're talking about -- when you mentioned something about cancellation of multiple SIM card usage. Can you just clarify what did you mean about that by saying that? And also, what market you were relating to? And in relation to SIM -- multiple SIM issue, is what were the churn rates in the main markets of your operation in the first quarter? Thank you.

We don't know exactly what happens in the next quarter. But what we have seen then in some markets, because for different environment which we have, and price environments, we've seen that people start to less use double SIM card from one operator and another operator. And we've seen this in two markets. It's Ukraine and Armenia. It's the biggest part of that.

Thank you. And what were the churn rates in Russia, Ukraine, and your other markets of operation?

In Russia, our churn rate was just above 8%. And that's below the level of the fourth quarter, and it's also below the level of first quarter '08.

Our next question comes from Evgeny Golossnoy from Troika.

Yes, hi. Good evening, everybody. I've got a question on the profitability of your fixed-line business. Basically, what is -- well, apart from obvious things such as cost controls and things like that, what is the reason for a sharp increase in profitability of this business in the first quarter?

And then, would it be right to expect that going forward, if you increase sharply your investments or start investing again in the regional broadband, that this margin can go down again? And could you also clarify probably the second question a bit on the state of things with your broadband business, how it's going on? I mean, are you expanding the number of households passed, or what's the progress there?

The profitability of the fixed-line business partially was boosted by the fact that part of our contracts with the corporate customers in the fixed-line I expressed have currency partially by the low costs on traffic termination and expansion of the network. As far as the broadband business is concerned, our sales are falling in line with the expectations and plans. The task today is to increase penetration in the households as possible.

And going the --

Excuse me? Go ahead.

Yes, and what is the plan, essentially? What is the plan for 2009 in terms of reach in the regions?

You mean on --

Households plus.

Households plus --

Both on these regions --

You saw that we have actually excellent household base part which is 7.5 million, considered to be the third biggest network in the world, in my information. So, we focused much more in 2009 into the active sales in the household part, meaning that we want to build up the distribution network in these households - actually in the buildings part -- to get into the household. So, this is the premium goal for this year.

(Operator Instructions).

Our next question comes from Nadezhda Golubeva from UniCredit.

Good afternoon. Coming back to your broadband and fixed-line business, please remind me whether you are subsidizing current broadband and modems. And whether you dropped this into [fourdem] and how it goes. And also, could you please tell us about the sales of this broadband modems in this quarter, and so I assumed that there was a drop.

And was it just connected with the seasonality or did you just scale back on your investment into a fixed-line business and we should expect that we can see an increase of this sales and some subsidiary presumably going forward? And also if you could possibly specify how much of your business customers' revenues in this business is attached to the hard currency I'm seeing for the whole field. Thank you.

Commenting first on broadband, we maintain ownership of the modems. So, when we put them into households, we're putting in our equipment. And we believe that's an important piece in controlling the long term churn. As we presented in the presentation, we did increase the number of active subscribers in fiber to the building connections, and the total of number of households past. So, both of those are growing, and growing in line with expectations.

I'm saying -- but do you expense or capitalize modems?

Expense. We are selling them.

Thank you.

Our next question comes from [Daniel Dialogan] from Kit Investment Bank.

Hi, all. This is Daniel Dialogan from Kit Finance. My first question was related to a general dynamic. And please, could you explain what was the main drivers of sales and marketing expense decrease in first quarter on a quarterly basis? And my second question is related to debt. Is it possible, could you provide currency composition of debt payments for second quarter?

On the primary -- there are two primary factors in lower sales and marketing spending, and lower marketing spending specifically. The first one is the first quarter is always our lowest seasonal quarter. That's in line with our overall business. So, we keep spending down since revenue is lowest in this quarter typically. And the second thing is that we were able to renegotiate a number of our media contracts at the end of 2008. So as we entered 2009, we had lower rates on each of our key medias.

As for debt composition, if I understand correctly your question, the composition of specific repayment in the second quarter, right?

Yes, yes, absolutely right, yes.

Actually, I do not have it in the top of my head. We can send this information to you later.

Okay. Thank you very much. That's all. Thank you.

Our next question comes from Denise Molina from Royal Bank of Scotland.

Thanks so much. Just a quick follow-up question on broadband and on the fixed line. I'm just wondering -- I know you're not subsidizing but if you are offering other incentives to get the sales through on what you've already built out. And also, on the corporate contracts, do you foresee still being pressure to offer more services for the same pricing? Is there any pricing pressure there?

And then secondly, just wanted to ask, in terms of the adjustable market for the broadband business on residential, given that you did a write-down of Golden Telecom -- a partial one at the beginning of the year, I'm just wondering if the adjustable market for you has changed since the acquisition.

First of all, we run a variety of promotions on fiber-to-the-building business. An example of this is in the fourth quarter. We provided an incentive for someone that would recruit other people. And we gave three months of service for doing that. So, that kind of normal promotion activity helps us to build the business.

Okay.

Regarding the pressure of the crisis on the pricing in corporate segment, so it is there. Definitely we try to cope it with combined offers on the fixed and mobile solutions to our customers.

And on the adjustable market?

Yes, the adjustable market is actually the same. It depends always on the cities where we want to go with the broadband. We have 42 cities which we are -- which we reached with our broadband offer. And as I said, we are focusing to -- on the houses past to get into the households. This is the priority for this year.

Our next question comes -- is a follow-up question from Olga Bystrova from Credit Suisse.

Yes, hi. Sorry for the follow-up question. But I was wondering if you can talk a little bit about Kazakhstan, because usage dynamics was -- saw quite a significant decline quarter-on-quarter, and even year-on-year. And you had increasing pricing in the quarter. And it seems to me that the market is also struggling just to -- like all of the other CIS markets.

But I was wondering if you can tell us, is it -- is there an increasing competition, or relative to let's say Russia, Ukraine, is Kazakhstan -- is looking weaker, from your perspective, from the macroeconomic point of view, and impact of market on the mobile business? Thank you very much.

In Kazakhstan, of course, we have seen that the crisis is going. And Kazakhstan is second year in the crisis. The environment -- and you know in February, it was big price devaluation. But what we have seen is that in terms of number of subscriber, we continue to increase our active sales. And we increased exactly in the first quarter our active sales by 100,000.

Of course, usage in Kazakhstan, little bit decline in the third quarter for some reasons. Of course, it's seasonal. It's one thing. The second, what we have seen is that price devaluation exactly shows that results is not exactly how we want. Compared to previous year, I can explain then in previous year -- in the first quarter previous year, we did a lot of promotion in new year period. And this promotion connected with some minutes, which we brought free to our customers.

And in this case, the first quarter in 2008 and first quarter in 2009, it's not exactly the same comparison yet. In Ukraine -- in Ukraine, we've seen that markets -- and the usage has continued to be really high. The MIU in our clients is more than 200 minutes. And in March, we've seen some growth.

Our next question comes from [Nick Igenoff] from Prudential.

Yes, hello. I just have a clarification question. The two Sberbank loan facilities, what was the amount, and what was the maturity of that?

Two facilities, they were $250 million, and RUB8 billion, maturing in 2011 and 2012.

Thank you.

We have no further questions. At this time, I'd like to turn the conference back over to you, Mr. Boris Nemsic.

Boris Nemsic. Thank you very much. Thank you for taking part in our conference call today. If you have more questions, please contact our Investor Relations department. Good bye, and have a good day.

This does conclude today's conference. Thank you for your participation.