VEON Ltd (VEON) 2011 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the VimpelCom Ltd third quarter 2011 analyst and investor conference call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time. (Operator's Instructions). As a reminder, today's conference call is being recorded.

I'd now like to turn the conference over to your host, Miss Alex Tramont of FTI Consulting. Please go ahead.

Thank you. Good morning and welcome to VimpelCom's conference call to discuss the company's third-quarter 2011 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 one, the expected profit growth in Russia; two, our expected future debt position dividends and capital expenditures; and three, the company's value agenda strategy.

Certain factors may cause actual results to differ materially from those contained in the forward-looking statements. Including the risks detailed in one, the company's press release announcing third-quarter 2011 financial and operating results and the related presentation; two, the company's annual report on form 20F for the year ended December 31, 2011; and three, other public filings made by the company with the SEC each of which are posted on the company's website at www.vimpelcom.com and on the SEC's website at www.sec.gov.

If you have not received a copy of the third-quarter 2011 financial and operating results press release, please contact investor relations at +31207977234 and it will be forwarded to you. In addition, the press release 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 Jo Lunder, Chief Executive Officer of VimpelCom. Please go ahead.

Thank you. Good afternoon, for those in Europe and good morning to our guests from the United States. Welcome to our third-quarter earnings release presentation. We are looking forward to discussing with you another solid quarterly performance across our business units. But first let me introduce the members of the team here, in Amsterdam, who are with us today.

We have Khaled Bichara, our President and Chief Operating Officer. Khaled will present the operational performance of the five business units. We have Henk van Dalen, our Chief Financial Officer, who will be covering the financials in detail. And finally, Gerbrand Nijman, our Head of Investor Relations.

Moving on to the quarter, we are satisfied with the solid performance we have achieved across our business units, where we have achieved double digit top line growth and we have surpassed the 200m subscriber mark in October. Our cash flow from operations of $1.9b remains strong, increasing by almost 70%. However, our net result declined, mainly due to non-cash items. Henk will explain this more in detail, later in the call.

In Italy, we continue to outperform the market. And we maintained profitable growth across our operations in all other emerging markets. In Russia, even though we achieved strong revenue and subscriber growth, this was offset by an increase in costs, leading to a decline in profitability. In line with our announced strategy, we will focus on cash flow growth in this market, by tackling the key issues through our operational excellence program we have implemented and by leveraging the synergies of the enlarged VimpelCom.

The integration process with Wind Telecom is ahead of schedule and we will complete it by year end. We have already secured synergies of $1.9b on a net present value basis out of the $2.5b committed on the time of the deal.

Looking ahead, we will maintain our focus on delivering on the value agenda, by driving sustainable profitable growth and improving our operational excellence and capital efficiency leading to increased cash flows.

At this point, I would like to shed some light on the progress we've made during the third quarter as well as bring you up to speed on major developments within the Group. First of all, I have by now met all key employees in the Group. I'm very pleased with the overall quality of our regional management. And I think increased empowerment to people will further unleash energy and motivations in the months and years to come.

In September, we introduced the key pillars of the value agenda; one profitable growth, two, operational excellence; and three, capital efficiency. These three pillars are being implemented across all our business units and tailored to their operating environment with a clear objective to grow free cash flows.

We have also made significant progress in a number of key areas. The company was awarded spectrum in the 800 megahertz sand the 2600 megahertz frequencies in Italy enabling deployment and launch of the next wave of 4G broadband services in the coming years. In addition to this, we have renewed our license in Bangladesh and we were recently granted a 3G license in Laos.

As part of the acquisition of Wind Telecom, VimpelCom entered into a value-sharing agreement with Weather Investments too, regarding Djezzy. The value-sharing agreement gave VimpelCom the option to exercise a value-sharing mechanism that would allocate the potential upside value and downside risk in various scenarios.

Having considered all of the facts and the circumstances, VimpelCom supervisory board has taken a business decision not to exercise and to let expire the value of the sharing mechanism and therefore, to retain both the potential downside risk and the upside value.

At Orascom Telecom, the company's demerger into two separate entitles is still ongoing and, in October, the EGM renewed its vote in favor of this demerger. Our integration process with Wind Telecom remains on track to be completed by year end. As our first phase initiatives, we have already secured synergies in the amount of $1.9b, again, on a net present value basis, out of at least $2.5b expected in total.

A few updates on management changes. I have asked Elena Shmatova to join the headquarter management team, so that she can apply her extensive knowledge and skills across the entire Group. Elena will continue to manage Russia until her replacement is appointed.

As we announced this morning, Khaled Bichara is leaving us at the end of the year and Jan Edvard Thygesen is joining as deputy CEO and Chief Operating Officer. Khaled has played an instrumental role in the merger and in integrating VimpelCom and Wind Telecom businesses and securing the targeted synergies within the enlarged business.

I use this opportunity to express our sincere gratitude to Khaled for his dedication and achievements within the Group. And we wish Khaled a continued journey of success in his future endeavors.

I'm also, of course, pleased to welcome Jan Edvard in his new position as deputy CEO and Chief Operating Officer. He knows VimpelCom well, having served as a member of VimpelCom's board. And he has broad, very senior operational excellence experience, in all aspects of the telecom industry. Jan Edvard will focus on operational excellence in delivering on our value agenda. I am very positive about the future and I believe that we have both the right strategy and the right management in place to take the business to the next level.

Now, let me turn to some of the highlights. Our performance and execution in the quarter gives us confidence in our Group, going forward. We achieved solid subscriber growth across all business units, surpassing the 200m mark for mobile in October and reaching 5m subscribers of fixed line.

We also achieved strong growth in fixed and mobile broadband in Russia, Italy and Ukraine. Revenue increased 10% year over year, driven by organic growth and favorable FX movements. These favorable currency movements also impacted our strong EBITDA performance, which improved 4% year over year. Organically, the EBITDA remains stable, compared to the same period of last year.

Our net income came in at $104m, clearly lower than the third quarter of 2010, on a pro forma basis and the main drivers of this were FX related items, with low cash impact for the Group. CapEx stood at $1.2b and this is in line with our plans and expectations. With that, I'll pass the floor now on to CFO, Henk van Dalen, who will discuss the Group financials performance a bit more in detail. Henk?

Thank you, Jo. As a reminder, we are presenting our results today on a pro forma basis unless otherwise noted. We believe pro forma financials provide a more meaningful comparison of financial performance for the quarter. Accordingly, the financial information presented here reflects what the company's operations would have looked like, had the company's transactions with Wind Telecom and Kyivstar occurred on January 1, 2010.

As reference the combination of OJSC VimpelCom and Kyivstar, which we shall put in the formation of VimpelCom Ltd, occurred on April 21, 2010. Then, on April 15, 2011, VimpelCom acquired 100% of Wind Telecom. And as a result of the Wind Telecom acquisition, the company owns, indirectly, 51.7% of Orascom Telecom and 100% of Wind Italy.

Pro forma financial information also assumes that all spin-offs that are part of the transaction considerations for Wind Telecom, would have happened on January 1, 2010. And the sale of Orascom Telecom Tunisia also happened on that date. All financing relating to the Wind Telecom transaction is assumed to have taken place as per the same date.

Additionally, Group financials are presented on a US GAAP basis. However, our Europe and North America business unit, as well as the Africa/Asia business unit, excluding our operations in South East Asia, are IFRS based. On a consolidated level, the required adjustments of IFRS to US GAAP have been performed on the business unit level and the Group level. The results for business unit presented later by Khaled are expressed in their local currencies, without such adjustments.

I'll take you through the third-quarter financial highlights. The actual results for the Group first. As you can see, revenues increased by 116% to $6.1b and EBITDA increased by 87% to $2.5b, as a result of the combination with Wind Telecom in April this year. Consequently, EBIT increased by 56% to over $1.2b.

The effective tax rate came in at 73% for the quarter. However, as explained before, from quarter to quarter this effective tax rate is heavily impacted by the lines other financial income and expense and FX in the profit before tax as well as by the dividend withholding tax provisions that, from time to time, are taken.

Correcting for these non-cash accounted movements, the earnings before tax is quite stable and the earnings before -- the effective tax rate is more in the high 20s or in the low 30s. Net income declined by 79%, mainly due to higher interest expenses resulting from higher gross debt, after the acquisition of Wind Telecom. I will explain more on net income in the next slide.

CapEx stood at $1.2b, with investments related to the further rollout of the mobile networks in Russia, Bangladesh, Pakistan and the CIS. While in Ukraine, it was mainly related to investment in fixed broadband. In Italy, we continued to invest in the rollout of HSDPA and in the back bone capacity supported graph and data.

Year to date CapEx was $2.9b, representing 17% of revenues. Net cash from our operating activities increased by almost 70% to $1.9b, increasing our net cash from operating activities per share, by almost 40%.

Now turning to the financial highlights on a pro forma basis. Revenues in the third quarter grew 10% to $6.1b, driven by 5% organic growth and favorable currency movements. Organic growth was driven by revenue growth across almost all of our business units. EBITDA increased by 4%, to $2.5b, supported by favorable currency movements as well. Excluding these ForEx effects, EBITDA declined slightly by 1%, compared to the same period last year.

On an organic basis, we saw EBITDA grow in emerging markets of the business units, Africa/Asia and CIS, up 13% and 23% respectively and flat organic EBITDA generated from the business units Europe, North America and Ukraine. This growth, overall, was offset by the year-on-year organic decline in Russia.

EBITDA margin for the Group stood at 41.6%, versus 44.1% recorded in the same period last year. This is due to a mix of higher margins in the business unit CIS and Africa/Asia and low margins in the other business units, mainly related to the expected development in the business unit Russia. Net income from continued operations was $91m coming from $463m pro forma last year.

Net income attributable to VimpelCom Ltd came in at $104m, being 77% lower than the third quarter 2010 on a pro forma basis. The main drivers of this decline were an unrealized ForEx loss of approximately $110m, attributable to the intercompany loan to Wind Mobile in Canada, which is denominated in Canadian dollars, due to negative movements in the exchange rate of the Egyptian pound towards the Canadian dollar.

The second point is approximately $180m due to movement in the euro, towards the US dollar rate opposite to positive movements in the third quarter 2010. And, in addition, there was a non-cash loss of around $110m related to value adjustment of embedded derivatives in Wind bonds, enabling them to be redeemed at a fixed price. Due to significant decline in the price of the bonds, the value of this call came down. Should the price of the bonds go up, the embedded derivative value will increase as well.

The combination of these downward factors was offset partially by positive movements, mainly in income tax and profits from discontinued operations.

Then, to the debt and the cash ratios and the ratio over debt, as you can see here, on this slide, our financial position remains quite strong. On a consolidated basis, the actual net cash from operating activities in the third quarter was $1.9b, which is, as I said 70% higher than the same period of last year. This more than funded our quarterly investments, which total $1.2b on a cash basis.

Gross debt decreased in the third quarter from $27.4b to $26b, mainly due to currency movements, of $1.2b and on balance a debt repayment of $0.2b. We finished the quarter with a balance of cash equivalent of $3.4b.

Net debt was $22.3b which led to a net debt to EBITDA ratio of 2.4 at the end of the quarter on a pro forma basis, an improvement over the previous quarter. Our last 12-month EBITDA to financial income and expense ratio remains at a comfortable 4.9% on a pro forma basis.

Then, to the debt composition and maturity profile, total gross debt, as said, stood at $26b, with an average weighted interest rate of 8.6%. There is a peak in 2017 caused by the Wind Italy debt, but we plan to refinance this before that date as said, before. However, this will not be completed before the end of 2013, although timing, of course, will depend on market circumstances.

In Italy, Wind made a first spectrum payment funded by $182m of cash and by a bridge loan of $500m. A bank guarantee has been provided for the remaining outstanding amount, which will be payable in five yearly installments.

Our balance of foreign exchange exposures in gross debt remains diversified across the ruble, US dollar and some other currencies compared to the mainly US dollar and Russian ruble-related basis at the end of the first quarter 2011.

With the capital markets being so volatile and complex as they are today, VimpelCom is also working on putting flexible financing sources in place in the form of a committed revolving credit facility. We are now finalizing discussions on our $500m facility, with 10 international banks at the level of VimpelCom Amsterdam. Typically, such revolving credit facilities are serving as a cushion for short-term temporary financing requirements but normally, are just an unused backstop facility for the financing structure of the Group.

I will now turn it over to Khaled, to provide an overview for the business unit performance.

Thank you, Henk. Let's go to performance of our five business units. Let me start with Russia. As you can see on the slide, our revenue in Russia increased 8% year over year and amounted to RUB69.6b. The impressive growth in fixed and mobile segment has boosted revenues and the consolidation of (inaudible) accounted for only 1% of this increase.

On the mobile side data revenue, a key growth driver in the segment continued to be robust, increasing 40% year over year, to RUB4.5b. You can expect a continued focus in this area. Fixed broadband revenue reached RUB2.2b, growing by 55% supported by a 46% growth in subscribers. Despite top-line growth, EBITDA was impacted by our marketing initiatives, both on prices and distribution channel, as well as by the accelerated build up of the network resulting in a margin of 40%.

The margin was also impacted by an increase in low-margin handset sales, write off in handset stock and ForEx, as the growing cost related to the calls in the CIS countries was (inaudible). Our operating expenses connected with the network rollout are also growing currently at a higher speed than revenues as we are building a platform for our future growth in 3G.

To recover ground on profitability, we aim to increase gross margins through rebalancing of our tariff plan in favor of more profitable products, while continuing our push to attract new subscribers. In the meantime, we have successfully stabilized our revenue market position. We aim to balance our costs with long-term revenue growth, targeting maximum efficiency to deliver solid cash flows. CapEx was at 20% of revenue, in line with our construction schedule throughout the year.

Now, on the operational highlights. We are pleased with the growth of subscribers in Russia. And we will continue to develop our network and marketing activities to further stimulate usage with a greater focus on enhancing contribution margin from the revenue mix from our sales channels.

In this quarter, we maintained our subscriber growth rate, reaching 56.8m subs, up 10% from last year, while mobile broadband subscribers increased by 59%. Our fixed line broadband business also continues to evolve, with a strong growth in subscribers of 46%. We have launched IPTV in two additional cities, bringing the total number of cities where this service is available to 34, out of the 94 cities where we provide SDTV.

The take-up of SDTV service increased during the quarter, from 15.9% to 16.6% and going forward, our target is to extract maximum value from our current coverage in existing cities, as well as adding new locations. Overall, we are pleased with operational development in Russia this quarter and we intend to maintain this momentum going forward supported by customer confidence. At the same time, we'll focus on driving sustainable profitable growth in this market.

To achieve this target, we have isolated a number of key issues we will focus on. This includes the decline of our average rate per minute as a result of a highly competitive market, an acceleration of maintenance costs and increasing costs of sales. We plan to counter the pricing issues by stimulating on-net traffic and other initiatives on the customer base, to improve the loyalty (inaudible).

We also kicked off our operational excellence program with aim of delivering significant cost savings in excess of RUB5b in 2012. This will entail a number of initiatives aimed at optimizing natural cost, sales mix, dealers commission structures and cash collection.

Moving to Italy, we continued to outperform the market. Wind total revenue grew by 2.5%, reaching EUR1.4b driven by 1% increase in service revenues and certain settlements with other operators [in the field].

Total revenues, excluding mobile incoming revenue, which were impacted by the mobile termination rate cuts, were up 5% year over year. During the quarter, EBITDA increased 1.4% over third quarter 2010, as a result of the top-line growth. Strong growth in fixed line EBITDA was partially offset by a decrease in mobile EBITDA. That said, margin remained a very solid 40.5%.

In Italy, our operating performance in Q3 remained strong, despite competitive pressure and unfavorable regulatory developments. Wind further strengthened its mobile market share and consolidated its position in the fixed line. Our mobile subscribers reached 20.8m subs, an increase of 6% over the previous period driven by solid trend in net additions. Of note, mobile broadband subscriber increased by 16% over the previous year.

ARPU in the quarter remained under pressure, declining over the previous year, mainly as a result of the cut of mobile termination rate and the increased proportion of data-only SIM cards which do not generate any voice revenue.

Our fixed line business continued to outperform strongly with voice subscriber growing 6% to 3.1m subscriber, the vast majority of which are higher value direct voice subscriber connected to our own network in unbundling areas. We also continued to deliver an exceptional performance in fixed broadband where we grew our subscriber by 15% while maintaining a growth in ARPU of 5%.

Turning now into our Africa and Asia business unit, we saw strong improvement in performance, driven primarily by increased usage of voice traffic and by focus on cost optimization. Net operating revenue increased by 5% driven by a 15% subscriber growth across our countries. EBITDA increased by 13% as a result of management's continuous focus of cost optimization leading to a strong EBITDA margin of 45.4%.

To elaborate more on our main countries' specific performance, our operation in Algeria continued to display (background noise). EBITDA increased almost 6% in local currency mostly due to a combination of revenue growth and the continued tight cost management initiatives [assumed.] As a result our EBITDA margin remained stable at 59.1%.

In Pakistan, Mobilink was able to expand its subscriber base through ongoing location-based and reactivation promotion. Furthermore, cost efficiency measures and higher revenue boosted the EBITDA margin to 41%. Our focus will remain on the youth segment through our dedicated product and offerings as well as promoting value-added services.

In Bangladesh, we surpassed 22m subscribers as a result of Banglalink's aggressive acquisition strategy following the SIM tax reduction in the country. Revenue growth together with the reduced SIM card costs had a positive effect on EBITDA which doubled in local currency year over year.

Moving to Ukraine business unit where we continued to deliver healthy top-line growth in the third quarter and maintained leading market position. This growth was largely due to our ongoing transition towards new bundled-tariff plans, stimulating an 8% increase in minutes of use. Mobile data revenue grew 27% driven by increased usage of data services and USB modem offers and within the new bundled-tariff plans. Fixed residential broadband continues to show strong growth as well with revenue increasing 94% year over year driven by a 117% increase of subscriber which reached 324,000 in this quarter. We continue to be the fastest-growing alternative broadband provider in the country and are driving towards becoming the number one alternative broadband operator in the Ukraine.

EBITDA declined marginally in Q3 as a result of a shift to off-net traffic and higher OpEx. EBITDA margin was at 53.7%. CapEx was at UAH644m, up 60% year over year due to the increased investments in fixed broadband as well as in mobile operations. We will continue to focus on actively managing our market position, sustaining operating margin and cash flow through synergy realization and cost control and aggressively building our fixed broadband business as the year progresses.

Now let's turn to CIS business unit, where product quality improvement, efficiencies and marketing efforts helped consolidated revenue reach $430m in Q3, a growth of 19% year over year. We remain focused on growing voice and data traffic which translated into an impressive revenue growth of 108% year over year in the data service. Despite intensified competition we are able to improve our market position in all key markets. Our sales and marketing efforts are paying off with our mobile and mobile broadband subscriber growing 27% and 579% respectively.

In Kazakhstan, our largest CIS market, we saw subscriber growth of 23% and solid revenue growth of 12% in the third quarter. EBITDA remained strong but declined slightly year over year due to the new regional offers and additional sales and marketing spending to retain our market position. However, quarter-on-quarter EBITDA improved by 11% driven by revenue growth.

In Uzbekistan, revenue increased by 36% and EBITDA increased by 58% year over year, due to our continuous efforts of subscriber base growth, regional 3G rollout and data development. While economic conditions in Armenia are challenging, we are also satisfied with our EBITDA margin in Armenia which stabilized at 40% level. In the quarter we increased CapEx twofold as a result of acceleration of network rollout to support voice and data traffic growth. Overall, we are pleased with our CIS positioning and focused on continuing to grow our business in the CIS.

Now I would like to hand over back to Jo.

Thank you, Khaled. I think we're getting to the end of the presentation. So I'm not going to repeat too much of what's been said already.

But I think we're getting our hands around this large company now and when you look at the overall picture a very strong mobile subscriber growth. And the fact that we now have surpassed 200m mark in October, I think is a sign of quality. We have double-digit top-line growth. Even though part of that is FX, I still think we grow satisfactorily. We have organic growth in all our business units. We see data growth across all business units.

And I think also the integration of Wind Telecom, the fact that that is on track and finished by year end gives us confidence that we were able to integrate those two large companies with different cultures and create one group with a well-functioning headquarter closely cooperating with the business unit management in the different regions.

When we look at the EBITDA, of course it declined due to the performance in Russia. That's clear to everybody. I see that as an upside. Next step now is clearly to implement the plan that Khaled addressed during his presentation. We have a number of projects that we'll implement in Russia and hopefully we will now be able to convert the top-line growth that we're seeing into improved margins and improved EBITDA in 2012.

Maybe the most important point to me is the strong underlying cash flow we had in the third quarter of $1.9b and that benchmarks with a good margin to the $1.2b invested in the third quarter. So I think we have also strength and confidence that we can go on developing this Group in the years to come as well.

We have an Analyst and Investor Day tomorrow in Amsterdam. I hope you will be able to attend either in person or by the webcast. Of course we will provide more details on the strategy and on the value agenda tomorrow. But we are also of course now open to turn this call into the Q&A session and answer any questions you might have.

(Operator Instructions). Our first question comes from Cesar Tiron of Morgan Stanley. Please go ahead.

Yes, hi. On Russian margins, can you please say when the measures you have described will start to positively impact EBITDA and also explain in more detail what you're doing to curb churn please. Thank you.

For churn, clearly we see part of the churn is internal churn and it's something we're working on. So our -- some of our new offers are more favoring some of the new customers and that's something we're fixing. Also we're working on a mainly commission structure where it's more incentivized quality acquisition versus quantity of acquisitions. We've been very successful year to date where I think we've acquired 7m more customers than the competition. So we're moving now from a quantity game where we need to get the volume to sustain our position now into a quality game where we're focused more on quality.

We're also looking at the value of the commissions. So we're really looking at this market rationalizing and we'd -- in our view thinking that competition is doing it the same way. So I think there'll be more pressure on commission for distribution and also on the quality of the SIM cards they sell. That's on the commercial side.

Clearly on the network side, there is the synergies of the better price of equipment. We're also giving a lot of support on how we run and optimize the network from other areas in the Group trying to reduce the network cost.

Thank you. Can I ask another very quick question, just on the risk-sharing agreement? Can you please confirm if the decision not to renew it was the sole Board's decision rather than the other party refusal to renew it? Thank you.

This was a unanimous decision by the Supervisory Board of VimpelCom including independent directors, Alfa directors and the Telenor directors. And this was an option we had that we wanted to [activate] unanimously.

Our next question comes from Max Loginov of Goldman Sachs. Please go ahead.

Good afternoon. That's actually Sasha Balakhnin from Goldman Sachs. I have two questions if I may. One is again on this value-sharing agreement related to Algeria. You refer to a number of factors which the Board members considered. Could you probably say the factors, probably including the potential price VimpelCom would pay for a renewal and also what others factors were on the table so you decided that you're happy with the risk/reward balance related to Algeria?

And my second question would be on your margin dynamic --

Hello?

Our next question comes from Alex Kazbegi of Renaissance Capital. Please go ahead.

Yes, I will ask my question but I think the previous question got --

Yes. Alex, it's Jo. I think let's -- I think Goldman Sachs was cut off there. But it was a question on the value share. Let's take that first and then you'll -- you can jump in after that. The last part, the second question I didn't hear. It was about margin, but he was cut off.

So on the value share agreement, I understand the interest. Of course I understand the interest of giving more details on what kind of elements we rated and how we rated them and what kind of values we looked at, etc. etc. Unfortunately, all I can say about that is that we have agreed with the Algerian government that we will not disclose any details of the conversations we're having or any details about the nature of the conversations.

So I just have to ask you to judge and to view the judgment of the Supervisory Board sufficient to making a decision like this. And I think the fact that it was unanimous tells us that this is in the best interest of all shareholders and not a single group of shareholders. I can basically confirm that that we applied a very strong judgment I think in whether to activate or not and as said, details we will not provide.

Over to you, Alex.

Okay. Well, I'll just ask maybe a simple question in the sense that it's actually relevant to both markets, I guess Italy and Russia. But just looking at the mobile data, I was wondering again, your increases in the mobile broadband subscribers have been actually very modest. In Russia they were pretty much flat. In Italy they also grew but very little. So I was wondering again what is the dynamics there. Why do you think this is happening?

You also mentioned of course in your press release that you would activate your promotions in a small screen -- for the small screen devices. So clearly if you look just at the Russia, it's 1.5m new subscribers in the quarter and pretty flat on the mobile broadband subscribers. So there's hardly any -- well, I guess there is a rounding error there, but it seems to be a very small number of new Internet subscribers. So if you could give us maybe a bit of color on something which we all, I guess, think is a key for the telecom companies to see the turnaround in the revenues. So what's going on, on that front, both in Russia and Italy?

So I think as part of what Jo is discussing on tomorrow on the Investor Day, we're really discussing our strategy on profitable growth. So we're looking at growing data profitably which I'm sure is one of the biggest questions in the industry in general.

And one of the strategies we're looking at is now looking at three type of screen type of approach, small screen, medium screen and large screen. Each has different pricing for us now and different profitability margins. In a nutshell, one of the reasons of the lower growth is we stopped some of the promotions of giving away the modems because as discussed in the previous question between commission, churn and free modems, these customers were not making us any money. So we've decided consciously to walk away from revenue that is negative in terms of margin and creates no value for our shareholders, knowing that it might have short term effect on our market share, but that's not something we look at. We look always at something that we can build on for the longer term.

For Italy, I think we have been seeing a lot of growth. Probably we would have hoped to see better growth in Italy. There is no specific promotion that was stopped but we still believe that it will continue to grow in the few -- next few quarters. That belief is backed by our investment in the 4G spectrum.

So we really believe that our personalization strategy on these three different type of screens and new pricing it will take us time to enter the market but really looking at data as our next profitable line of business, not as simply something that increases revenue at the cost of the margin.

Our next question comes from Max Loginov of Goldman Sachs. Please go ahead.

Hi again. That's Sasha Balakhnin again here and my second question was on your Russian margin dynamics, related to the rollout of mono brand distribution network. Could you probably elaborate where are you with this project and what percent of margin dilution you experienced from that, from the rollout of the mono brand? And how far will you go with the rollout? How much would it cost you. So that would be really helpful. And the timeframe obviously. Thanks.

Clearly the Russian market in general is going towards more mono-brand and we're seeing that the mono-brand sales are of higher quality, higher ARPU and lower churn. So on the long term we see that as a good investment. We're unfortunately behind on our rollout on the mono-brand so it's not a significant reason for our change in margins. We believe our change in margin was due to the reasons we've mentioned before, some offers that were negative margin and some dealer malpractices, if I may.

We have an aggressive plan in the next two years to roll out our mono-brands. Having said that, we're still looking at an improvement in margins next year for the Russian business.

May I just clarify? So you expect that your profitability announcement steps will more than offset the potential costs coming from the rollout of the mono-brand distribution going forward?

Starting next year, yes.

Okay, thank you.

Our next question comes from Dalibor Vavruska of Citi. Please go ahead.

Hello, good afternoon. Two quick questions. I think we already touched on the mobile data story. I'm just wondering when you look at your major markets, can you tell us in broad terms what is the mobile revenue, the data revenue as a percentage of the total? And where do you see the highest growth opportunities in the mobile revenue in terms of percentage growth but also in terms of the impact on your top line?

And the second question I had on dividends. Obviously even considering the Italy ring-fence, the leverage of the Company is quite high. So I'm just wondering obviously you're paying relatively aggressive dividends and relatively early in the cycle in terms of the interim dividends. Can you just shed some light about this and how you're balancing the balance sheet risks and the dividend payments? Thank you.

I think Henk can start with the dividends and then Khaled is going to pick up on the question on the mobile data.

As you know on the dividends we have said that we aim to at least pay out $0.80 per share. The interim dividend that was announced a few months ago will now be paid in December. We do not yet know the exact date, but probably around the middle of December.

We feel that the dividend level that we have established fits also within the cash flow profile of the Group. If you take roughly $10b level, just rounded figures and you take about $3b to $3.5b in interest paid and taxes paid, then it shows that there is about $6.5b to $7b left which is then effectively for CapEx and for dividends and for certain other things we need to do. So we feel that is a healthy profile which will give us sufficient scope to maneuver in the context of the totality of the Group.

As for the data question, I think we are currently looking at our markets in two views. We have markets where we believe the mobile data complements the fixed line data like Russia, Italy, Ukraine, where we have both plays and where there will be enough [solid] values, maybe very high growth in terms of value or dollar terms.

When you look at markets like Pakistan, Bangladesh, Algeria where the fixed line infrastructure is very weak and 3G is not there yet and these will be as we always call them our growth engines where the percentage-wise the growth year over year would be huge in data, but in absolute terms maybe Pakistan and Bangladesh will be clearly less but then Algeria would probably be comparable to somewhere like Ukraine.

In Italy, for example today 23% of our mobile revenue is coming from data and services; that's including SMS. We believe with time, eventually the line will blur between voice and data and that's one thing we're working very diligently within the Group. That's why we did this classification with the different screens. We're looking at the fixed and mobile convergence not of launching [FT Unique] or something like that, but more of how can we provide converged services to these customers and leverage the same infrastructure to roll out faster and bigger data networks.

So for us we believe we're very uniquely positioned in markets that are more advanced like Italy and Russia and markets that are less fortunate. So we're leveraging really the experience within the same Group to be able to bet long term on this data story.

Thank you.

Our next question comes from Alex Wright of UBS. Please go ahead.

Thank you. I'd like to ask you a couple of questions about your voice pricing in Russia and Ukraine please. In Russia you're highlighting your plan to promote more on-net calls to drive the gross margin higher and certainly one of your competitors MCS has been talking about this for some time as well. So do you see -- do you expect the whole market to move more in that direction going forward?

And in Ukraine on the other hand, you're talking about OpEx increasing due to more off-net traffic and it seems as though you're expecting that to continue. So I wonder whether that's a deliberately different strategy that you're pursuing there and why you -- if so, why you're pursuing that different strategy especially given your high market share in the Ukrainian market.

For Russia, yes, you're right. I think it's two things. It's off-net but also a lot of international calls to CIS. So it affects the BU Russia alone but it's positive for VimpelCom as a whole.

Clearly as you mentioned some of the competitors are mentioning the same. We believe on-net increases customer loyalty because then you don't churn alone; you have your group there with you. It has an impact on the amount of minutes. And I think this is what Ukraine have done a couple of years ago where they increased a lot of sort of zero on-net type of offer. So then that's where Russia will want -- not go to zero clearly but to have more on-net.

If you look at Ukraine, because for the last couple of years, you've been on zero on-net you really have maximized this value proposition to the customers and you have to start giving something more which is currently the off-net. So that's simply different phases of the development of each market. You can't have the same strategy in all the markets.

Okay, thank you.

Our next question comes from [Dan Worth] of JP Morgan. Please go ahead.

Good morning. I have two questions please. The first one is there anything in the VimpelCom loan or bond documentation that stops VimpelCom guaranteeing Wind debt because obviously that would give Wind access to cheaper funding. That's the first question. And I will ask the second question, post the answer.

Well, there is a -- as far as I know, but I do not know all the details of the bond documentation. But as far as I know there is nothing in that bond documentation that would prevent us to do so.

And the second thing is obviously in its recent turmoil, some of the Wind debt has been trading at a significant discount. Given you've said already that you wish to retire some of the Wind debt in 2013, is it likely that you would actually come into the market prior to 2013 to take advantage of a discount and buy back some of the bonds, I think especially the Wind Picks are the ones that stand out obviously, because they have the coupon step up in 2013.

The only answer we can give, you could say on these very specifically highlighting questions is that we will always look at the totality of the capital markets and the opportunities that those capital markets provide us to also judge the potential for a possible early restructuring of the debt. So it is never something that is only focused on one area, but we also need to look at that in the total context of the Group.

But I think secondly for the moment, we feel that let's say in this phase having the debt in Italy ring-fenced as it also showed with regard to the financing of the 4G license, also it has certain strength in the total profile of the Group.

Thank you very much.

Our next question comes from Nadezhda Golubeva of Unicredit. Please go ahead.

Good afternoon. I have two questions please. First of all, now you don't external finance, yes, but it might be the case that the 4G spectrum bandwidth in Russia in the beginning of 2012 and it might be the case that the cost for this spectrum is pretty substantial. So if you were to face the need to like either cut budget, yes, or -- so if your external funding capacity is limited let's say, under this assumption and if you need to fund this payment from your own funds, what would be the first to cut, the dividend or your CapEx plan. This is my first question please.

I think this is more a question of how we allocate the capital from Group level and the way we view different potentials we have in the market. We have enough capacity to develop all our businesses right now, including participate in a 4G tender process in Russia.

We believe in the data story. We believe right now telecoms is a little bit out of favor maybe for good reasons. But we also believe that it's possible to monetize data traffic going forward and for that reason to make sure that you have 4G spectrum in your core markets is important. And we will make sure that we allocate money and resources in such a way that we look after the best interests of shareholders. And I think 4G in Russia might be such an investment.

But of course it's always you need to compare it with other opportunities you have and look at in the end the return on capital. I think that's the best answer we can give you.

Okay, thank you. And the second question if I may could you give some timeline about the Euroset deal, so whether we can expect some decision in this regard.

Euroset we have an option to buy the rest of the shares in Euroset. And we are analyzing the different scenarios there now and our decision will be made no later than January I think.

Our next question comes from Sanford Lee of Canaccord Genuity. Please go ahead.

Hi, thanks for taking the question. My question relates to Wind Mobile Canada, although I realize it's a very small part of your operations at present. So in particular, the question is around the net additions. Wind Mobile Canada added 41,000 net adds and sort of down from 45,000 in the last quarter and 46,000 in the year-ago quarter. I'm just wondering why this is happening given on a quarter-on-quarter basis Q3 is usually seasonally strong, due to back to school. Your [pops] covered is growing, you mentioned over 12m pops now plus your points of distribution is also growing. And you're launching new plans in the quarter with Windtab Plus. Can you just give us some comments on why the net adds in the quarter were down quarter on quarter?

Sure. Clearly it's similar a bit to the Russian model where we're looking more now at quantity versus quality. And at the beginning it was all contract-less prepaid where we've seen a level of churn that we were not hoping for a market like Canada. So now in the new net adds there is much more postpaid, contract-based customers that we believe will have better churn. So we believe this is the right strategy to generate value and on the long term grow our base faster because when you have these customers more it's not a washing machine effect.

And maybe a quick follow up on that. You mentioned the focus is on the higher-quality subscribers, but then your ARPU for Q3 '11 was down 2.5% from Q2. Can you comment -- or are you satisfied with the performance of the ARPU?

Clearly you always want the ARPU to go higher. But clearly the ARPU in Q3 comes more from the additions coming in Q2 and early Q3. So the postpaid customers who are joining you now don't affect your customer base that much in the first quarter. So the view would be on the longer term that ARPU would go up and we would have a healthier mix, postpaid/prepaid. It's not that we're going to move fully to postpaid because clearly that's not our positioning.

(Multiple Speakers).

Our next question comes from Tatiana Boroditskaya of UBS. Please go ahead.

Good afternoon, gentlemen, Tatiana Boroditskaya of UBS. My first question is related to your strategy in relation to raising debt in capital markets towards the end of this year and next year and if you intend to do any buybacks?

Yes, [the servicing] operating debt, I think I mentioned it already basically in my presentation part, is that fundamental focus is on creating sufficient flexibility in the funding line. So we are now finalizing discussions on revolving credit facility at the level of VimpelCom Amsterdam, we are also looking at certain of those flexible instruments at a level of OJSC VimpelCom.

And we hope we are able to get those discussions to a final point in the next couple of weeks, because it's a good thing if these flexible sources of funding. Although they are effectively backstop and back-up, but if they are available in difficult markets it can also serve as a cushion for certain temporary needs.

For the rest, as you know, we are long-term financed, we execute financing for the next 10 to 12 years, relatively limited redemption over the years to come. If I am correct, for the year 2012 $1.2b or $1.3b in total, which is I think normally quite able to take that out of the market. So overall, I think, we are looking for flexible sources and, from time to time, we will go to the bond markets to replace certain packages for refinancing.

Thank you and my second question is related to Algeria situation. Do we know when we can expect any comments from your side, as you just said today you don't really want to comment in detail on the current situation?

I think for now we've said what we would like to say and I think also what is important to our shareholders and to the market. We have decided not to activate the risk-share agreement, which means that we have an upside but also, potentially a downside and, on the balance, we believe that was the right decision. On the timing going forward, it's very hard to predict and we're not in a position to comment on that, so we'll rather come back to you when we believe we have something more of substance to report.

Thank you very much.

Our next question comes from Harald Oyen of First Securities. Please go ahead.

Good afternoon, guys. Could I ask you just to elaborate on the $230m net other expenses in the P&L? Thanks.

Yes, I think I gave during the presentation already quite a detailed explanation on the movements in the net result. If I -- we see that at this moment then the net income attributable to VimpelCom Limited, as you saw, came in at $104m.

There is an element in the difference compared to last year, which relates to ForEx losses of almost $110m attributable to the intercompany loan to Wind Mobile in Canada, which is denominated in Canadian dollars, and that is due to negative movements in the exchange rate of the Egyptian pound towards the Canadian dollar.

There is $180m due to movements in the euro towards the dollar rate opposite the positive movements in the third quarter 2010, and in addition there was a non-cash loss of around $110m related to fair value adjustment of embedded derivatives in the Wind bonds, enabling them to be redeemed at a fixed price. That of course was the result of the significant decline on the prices of those bonds.

So that factually brings it together, there are a few smaller points with ineffective cash flow hedges, but they are not that important.

If I could just follow-up, and that includes -- all those items you mentioned included in the $230m other expenses?

Yes, a portion of that is in the ForEx loss and a portion of that is in the $230m.

So should we consider the $230m as non-recurring, or can you just elaborate on that?

Yes, absolutely, as non-recurring in this sense because it can change from quarter-to-quarter depending a little bit on the movements, that's why I gave this extended answer on the various movements in those elements.

Thank you so much.

Our next question comes from [Sergei Gunthrav] of Troika Dialog. Please go ahead.

Hi, on several occasions you were saying that the Company's pretty comfortable with ring-fenced structure for Wind debt. Does it mean that going forward you will continue to attract debt mostly at holding and Russian VimpelCom levels, as Wind is more leveraged currently, or will the situation change? So what do you say about that?

Well, of course, in the third quarter, you saw an example of also attracting some additional debt of the level of Wind Italy related to the 4G license. There was a bridge of EUR500m as well as a guarantee for phased payment over the next five years of that license. But indeed, you are correct in saying that the ring-fence is one block, the other block is the whole block of what you see VimpelCom, VimpelCom Limited and Orascom that is, you could say, connected to each other.

As I mentioned also in the presentation is that we are certainly looking in the next one, two years at opportunities to restructure the debt for the whole of the Group, if that leads to an advantage in the financing and Group structure. And that, of course, is then again dependent on market circumstances, capital market environment, etc, etc. So we are preparing that, you could say, very diligently but we'll only move when there is a good momentum.

I think it's fair to say, if I may, that the funding structure of the Group today I think is quite attractive and beneficial to shareholders and the fact that we have this ring-fence of the Italian asset, with everything that is ongoing in Europe right now. And if we then look at a leverage of the rest of VimpelCom, excluding Italy, I think you see a quite reasonable, even low level of gearing.

So that gives us flexibility, basically, to stick now through this turmoil in Europe and sit through the development the next 12 to 18 months and then we can make a sound decision whether we would like to unwind that ring-fence and list the debt to holding level and dramatically decrease funding costs, or whether we see it's beneficial for shareholders to keep the structure in place at that point in time.

So I think, actually, the funding structure we have in place that was executed on the timing of the deal, has substantial benefits right now, even though we pay, of course, more interest than we would have liked to do.

Okay, so just to make sure, am I right understanding that you always consider all the factors, but currently the situation is not likely to change in the short-term?

I think you only have to look out of the window and in the various newspapers and e-sites, etc., to see that the short-term is quite volatile on the capital markets. I think we need some rest to come back to those markets before there is a more optimum momentum. And in the meantime, as I mentioned in one of the previous questions, we are working on flexibility in our funding sources, which is, I think, the best we can do for the Company.

Our next questions comes from [Tala Boulos] of Deutsche Bank. Please go ahead.

Good afternoon gentlemen, I just have a couple of questions. The first one is that I see that you've managed to bring total debt down by over $1b and the presentation does give a few details, but I was hoping you could clarify that on exactly how it came down by that much.

On the second point, to do with the ring-fencing, I want to completely understand how effective the ring-fencing is. I understand that the debt has been separated and is ring-fenced, but it seems like the cash generation from the good assets is still coming through from Wind into VimpelCom. Thank you.

The total debt, indeed gross debt came down with about $1.4b. $1.2b of that is effectually the movement in the currency, mainly, the ultimal quarter decline in the value of the euro versus the dollar. So an appreciation you could say, in that sense, of the dollar compared to the euro, which of course brings then the euro debt, which is mainly in Italy, in dollar terms brings it down. There was $0.2b related, on balance, to a debt redemption that we also did, so that brought it back with $1.4b.

And the ring-fence is very effective, I would say, because there are a lot of debt instruments at the level of Wind Italy, but there is no recourse of those debt instruments to the Group level of VimpelCom Limited. So in itself it is an effective ring-fence.

Our next question comes from Marco Gironi of Credit Suisse. Please go ahead.

Yes, good afternoon, I've got a couple of questions about Italy. The first one is about the churn, which is in the Mobile a step up to 20%, I was wondering if you could comment on the factors driving that and whether that is just a seasonal or something to be broadly -- more broadly with the competitive elements in Italy?

The second question is just a point of clarification. Did I understand correctly what Henk said in the prepared remarks that with regards to the Wind Italy 2017 wall of maturities, they would be addressed before then but not before December 2013? And, if I heard that correctly, why exactly limit that option given that the debt becomes callable in July '13? Thanks.

Maybe I can take the last point first. Indeed I said that end of 2013 or mid of 2013, that indeed depends on, particularly, the cost that would otherwise be related to the big notes, which have quite a high core premium if you would like to do that earlier. On the other hand, I think I mentioned in that prepared notes also that we continued to monitor the capital markets, so there might be momentums for the Group that come earlier.

So we do not exclude anything, but under normal circumstances I think the best moment to maneuver probably is towards the second half of 2013, but there might of course be earlier moments, depending on what the markets bring us.

But your churn question on Italy, I think clearly Wind's churn came up but it's more or less in line with market, so you look at Vodafone's churn it's at 29%, today's churn is 31%, the only one that went down is TIM but it's coming after two years of very high churn so it's a cyclic move. Clearly that's not a very good sign for the world in general, where the churn is a bit higher than we would like it to be, because at points in time when it was in the mid-20s and we continue to have that as a target for the long-term.

Thank you.

Our next question comes from [Dennis Atgill] of Brevan Howard. Please go ahead.

Hi, I just had a question on Italy in general. Are you seeing any signs of a recession in Italy and its potential implications on Wind? We've seen in some geographies, such as Greece or Ireland, how the underlying recession has impacted the telecom operator quite drastically. And I was just wondering if you'd started to see any signs whatsoever of that taking place in Italy? That's my first question, thank you.

So far no. The reasons we've seen, if you look at our ARPUs in general, our broadband ARPU went up on Fixed Line, although the customer base went up, so on there we see good strong customer spending. On mobile the most reason why the ARPU is going down -- or two things that mobile termination rates which were cut in July, and the other one was that now more and more people are buying extra SIM cards what they put in their iPads or their PCs where they only use them for occasional use. These SIM cards have lower ARPU by design.

Got you, but as of November have you seen anything, over the last couple of weeks have you started to see anything? Because there are signs that Italy's going into a drastic recession as of now, so I was just wondering if you saw any signs over the last couple of weeks.

We are hoping you are wrong, so far we haven't seen something to write home about but we're hoping that is not --

Okay, so the next question is, and other people have asked variations of the same question so apologies if I'm repeating the question, but if the euro crisis was to continue to escalate, do you envisage VimpelCom taking advantage of this in the form of launching a buyback or Dutch auction for the outstanding Wind bonds that you could crystallize at discount?

Yes, I don't think I can give a much different answer than the kind of answers I already have given, is that we monitor the terrible situation, we are working on what kind of structure we would like to have going forward, looking at of course what will bring the best for our shareholders, as Jo already mentioned earlier. So there is no particular other thing to say and, in the meantime, we are focusing at bringing, let's say, flexible instruments in place that can provide, from time to time, a cushion for temporary needs but normally are only there for back-up in the job of financing of the Group.

Our next question comes from [Behab Khalil] of Joy Fund. Please go ahead. Pardon me, your line is open, you may ask your question. Our next question comes from Mikhail Galkin of VTB Capital. Please go ahead.

Hi, I have a few questions, since I'm mostly focusing on debt side, questions on the cash flow. Is your CapEx going to -- for the Group overall going to stay at the 17% level and going forward is it going to be a bit higher or lower please?

I think we indicated earlier that we expected for the year to be around 20% and we still keep it at indication, because normally indeed the fourth quarter has slightly higher CapEx level than the earlier quarters.

Sure, thank you, and the working capital, you benefited from some cash being released from there in the third quarter. Is this more -- we should be treating it more like a one-off, right? In your case working capital wouldn't be a regular source of cash?

Well we are certainly working very hard on the situation that it will be a regular source of cash, in some of our business units that certainly has been the case, particularly in Italy I think over many, many years working capital has provided an additional source of cash. Year to date we are roughly -- and then you talk about total working capital, roughly $100m negative still. Third quarter had a positive effect but our clear aim and focus, also in the year 2012, is to make working capital a contribution to the cash.

Okay and the cash at Kyivstar, has this been up-streamed already or is that going to be something that is going to happen in the next couple of months?

No, we are in the middle of a process now of a dividend that is paid by Kyivstar to VimpelCom Limited so that goes, you would say, day-by-day, also depending on what the market can have in terms of converting the hryvnia to the dollar.

Our next question is a follow-up from Max Loginov of Goldman Sachs. Please go ahead.

Yes, good afternoon again, it's again Sasha Balakhnin from Goldman Sachs. I just wanted to ask you two questions, the first is on Jan Edvard joining VimpelCom. Should we read much into this in terms of the level of cooperation between VimpelCom and Telenor going forward, given Jan Edvard spent more than 40 years with Telenor?

And my second question was on the holding expenses or adjustments at EBITDA level. If you try to reconcile your business segments EBITDA you have something like $100m elimination on that level. What is the nature of this cost? This number was high last quarter but it was explained, I guess, by the accomplish of acquisition. What is the driver of that number this time? Thank you.

I can address the appointment of Jan Edvard Thygesen. First of all, I think we lose a big capacity in Khaled departing but that being said, first time I met Jan Edvard was 20 years ago when we were developing the Norwegian mobile market and I have followed his career ever since and he has an excellent track record in most mobile markets throughout the world and I think his profile fits very well to the strategy of VimpelCom going forward, focusing on operational excellence and the results. So I think he has a perfect fit for what we are trying to achieve over the next couple of years.

And I think also you can read into it, as your question actually was asked, I think you can read into it the willingness among our shareholders to make decisions that they believe are in the best interest of the Company from an operational point of view. And there was no resistance at all to such a move and everyone, all Board members and shareholders I've spoken to understand the logic behind this and I think this is at least a sign of being able to agree on a potential difficult item that turns out to be a good decision for the Company.

Yes, then on the two elements that you find on page three of the press release under other net operating revenues you find a minus $98m that is mainly intercompany on the revenue level. And on the other under the EBITDA it's minus $34m, that is partially, you could say about one-third, related to integration costs. So effectively all the work that is currently done to integrate the companies, to develop new processes, new structures, the work that has been done and is still going on, on the area of synergies that Khaled explained earlier.

So a range of those costs and the rest also has to do with the growing Headquarters, in particularly we are developing the technological procurement and commercial functions in the Headquarters and, of course, those bear some additional costs as well.

Our next question comes from Jonathan Moore of Blue Mountain. Please go ahead.

My question was answered, thank you very much.

Our last question comes from Alex Wright of UBS. Please go ahead.

Yes, thank you. I just wanted to follow-up on some of the synergies that you talked about and you mentioned that you secured $1.9b out of the $2.5b that you targeted. I'm just wondering if you can highlight to what extent we are seeing that in the numbers already and, if so, where and how much we're seeing in the OpEx and the CapEx at this point?

And then just secondly, the RUB5b of upside that you see in Russia, is that completely separate to the synergies that you've identified and, yes, again really when do you expect to start those kicking in, is it from the beginning of 2012? Thank you.

Okay, for the $1.9b it's mostly CapEx, it's mostly the NPV of the contacts with major vendors compared to our business plan, which compares to how the $2.5b was initially communicated and shared with the market. So last quarter we reached $1.6b, we've added $300m Q3, so clearly we started with the bigger contacts with major suppliers and we're going down the value chain. So these prices are mainly CapEx, so they will only show on, eventually, the depreciation of that CapEx in the long-term but also allowing us to buy more equipment for the same amount of money, with some of our markets we were a bit behind in the roll-out. In the future there are more OpEx synergies that we're working on. That's for the $1.9b.

As for the RUB5b on Russia, it's a whole new program, it's no intersection whatsoever with the $1.9b, it's a program with a lot of sub-programs, we do not want to bore you with all the details but I think we have 24 different areas where we're looking at. Again that's a program that's already started now, it will start generating from January 1 of next year OpEx savings to the normal trend if this product if this program would not have been launched.

Okay and the CapEx savings that you're securing, are we already seeing those in the CapEx numbers that you reported in Q3, for example?

Yes, some of them, yes.

I would now -- proceed please.

Sorry, what we've elected to do, at least for this year, is any savings we've made we will view as to catch up. So basically we bought more equipment for the same amount of money in some areas. So clearly, for example, in Russia where we are behind in 3G we're using that money to catch-up on 3G. (multiple speakers).

I would now like to turn the call over to management for any closing results.

Thank you. First of all, thank you very much everybody for your interest in the Company. I hope we were able to explain the (technical difficulty) of the business and the numbers and that we have also managed to point the direction going forward. We will provide some more details tomorrow for the ones that are available for the Investor Day and dig more into each business unit and also focus a bit more on the whole funding structure and the financial side of our business. So I hope that also can be a useful and fruitful day for all of you.

And then we have extensive travel, I think, and participation on Wednesday, Thursday and Friday, UBS conference Wednesday in London, we're in Barcelona on Thursday/Friday with Morgan Stanley, so I hope we will have one-on-ones with a number of you and also have the ability to keep explaining our thinking and our plans going forward. With that I suggest to close the call and again thank you everybody for following us. Thank you.

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.