Mobile TeleSystems Public Joint Stock Company
Q4 2020 Earnings Call Transcript

Published: 4 Mar 2021

[Polina Ugryumova:]

Welcome everybody to today’s event to discuss MTS Fourth Quarter and Full Year 2020 Financial and Operating Results. Before we start, I must remind you that except for historical information, any comments made during this call may constitute forward-looking statements. Important factors could cause our actual results to differ materially from those contained in our projections or forward-looking statements. This in turn implies certain risks and more thorough discussion of which are available in our Annual Report and Form 20-F or the materials we have distributed today.

[Alexey Kornya:]

Thank you, Polina, and welcome to everyone joining us. At a global level, 2020 was a year of unprecedented challenges. Before we begin, I’d like to thank the entire MTS team for their forth dedication and professionalism over the past year. Our sector continues to play a vital role in keeping our customers and communities engaged, informed and in touch. Against this backdrop, MTS performed admiringly in 2020. We proved the agility of our team, the reliability of our network and the rationale of our long-term growth strategy. Overall, I’m happy to report that MTS closed fourth quarter in a position of strength. We follow through our full year guidance target to our group revenue and adjusted OIBDA. Cash CapEx was also in line with guidance when including the effects from derivative instruments. Let me walk you through the headline results. For the year, group revenue was up 5.2% year-over-year to reach nearly RUB500 billion. Core telecom services were the key driver, but we saw an additional and substantial positive impact from new areas beyond connectivity. Overall, our three non-core verticals contributed nearly a third of group top line growth. For the quarter, revenue growth accelerated from third quarter to 7.4% year-over-year in part reflecting easier roaming comparables due to travel seasonality. Group adjusted OIBDA in 2020 increased 1.7% year-over-year to around RUB215 billion. Growth was driven by core telecom services as well as the positive impact in retail, which reflected both our long-term optimization measures as well as the temporary cost savings related to COVID-19. At the same time, adjusted OIBDA growth was constrained by multiple factors, primarily the decline of relatively high margin roaming revenue, as well as other one-offs and provisions at MTS and MTS Bank. For the quarter, group adjusted OIBDA grew 1.3% year-over-year to RUB52.5 billion.

[Slava Nikolaev:]

Thanks, Alexey, and good afternoon and good morning to everyone joining us. Mid global digital acceleration over the past year, we moved proactively to deepen customer engagement and drive penetration of new products and services, and we saw real results. Today more than 7 million customers are using two or more MTS services across telecom, FinTech and media. Our MTS Cashback loyalty program now has over 9 million registered users. By the end of the year, our customer care app, MyMTS, reached nearly 24 million monthly active users, a substantial fraction of our physical user base. This is an audience that has an established financial relationship with us and has already taken a proactive step to get closer to us. They’re a prime addressable market as we seek to increase our pool of multiproduct clients.

[Inessa Galaktionova:]

Thank you, Slava. As we’ve learned over the past year, connectivity is more essential than ever, and I’m happy to report, we demonstrated solid progress in 2020 across our core telecom business. In mobile connectivity, Russia mobile revenue service growth accelerated to 6.4% year-over-year in Q4, up from 3% in Q3 that’s reflected both steadily underlying dynamics as well as easy comps given 2019 roaming seasonality. In addition, we see promising indicators that are convergent and ecosystem offerings helping boost ARPU and reduce charm increasing overall customer lifetime video.

[Ilya Filatov:]

Thank you, Inessa. 2020 was a challenging year for the banking industry. Overall, MTS Bank has increased 20.9% in 2020 to reach RUB217.1 billion. The overall loan portfolio X provisions grew 24.1% and the retail loan portfolio was up 29.7% year-over-year to RUB117.6 billion. On the back of loan growth, full-year net interest income increased 32.5% to RUB15.5 billion. Net fee and commission income reached RUB6.7 billion contributing 30% of operating income before provisioning. We’re making progress in developing stable condition based daily banking services. for the full year, fee and commission income accounted for just under half of overall retail operating income explanations. Among our many initiatives to develop our transactional retail business, I would like to highlight the upgrade of our smart banking app. We have added the feature. This allows users to integrate data from third-party bank accounts and in the near future, we’ll plan to add additional functionality for personalized offers, savings, goals and financial advice. Despite the negative input driven by significant provision in the middle of the year, MTS Bank delivered RUB1.4 billion in net profit for the full year. In Q4, cost of risk to the retail loan portfolio stood at 5.4%. The share of non-performing retail loans declined to 9.5% in Q4 versus 10.2% in Q3. Overall, the bank remains committed to a conservative approach to reserves with year-end NPL coverage standing at 128%. We remain at a comfortable level of capitalization. as of January 1, 2021, our M1.0 capital adequacy ratio stood at 13.1%, which reflects a healthy safety margin above minimum regulatory requirements of 10.5%. At the same time, the company is actively developing its FinTech vertical and the high rate of growth maintenance and additional capitalization. in the midterm, we do envision potential source of capital injections. We continue executing on our strategy with a focus on developing digital channels and maintaining a sober approach to risk management. We plan to expand our loan portfolio, grow the sale commission income and develop digital services within the MTS ecosystem to become closer to our customers. Now I will give the floor to Andrey for a finance update.

[Andrey Kamensky:]

Thank you, Ilya. Group cash CapEx for the year came in at RUB91.6 billion when adjusted for Forex related swap contracts. This was driven primarily by sustained network investment. In 2020, we added 14,500 LTE base stations in Russia with our 4G coverage reaching around 85% of the country’s population. Group free cash flow in 2020 amounted to RUB61.6 billion when excluding the impact from MTS Bank, as well as proceeds from the sale of NVision, MTS former Ukraine operations. The year-over-year dynamic in product reflect a high base from 2019 that included a contribution from our former Ukraine operations. In addition, free cash flow was impacted by higher CapEx, excluding Ukraine. At the same time, this was nearly – entirely offset by strong core Russian performance, reflecting the health of the underlying business as well as relatively low work tax payments and financing costs.

[Alexey Kornya:]

Thank you, Andrey. I’m encouraged by our 2020 results and the solid progress we achieved the growth, both core connectivity as well as new growth segments. Looking ahead, there remain a significant uncertainty in 2021 evolved with the timing and pace of roaming recovery as international travel resumes. At the same time, we have tail winds working in our favor. Such as low roaming base, head room for ARPU growth and sustained momentum in new segments. Taking all factors into account, we’re providing initial 2021 guidance of 4% or higher growth in both group revenue and adjusted OIBDA in 2021. This updated target is a reflection of our confidence we have that MTS will deliver in the year ahead. In addition, we expect cash CapEx to come in around RUB100 billion and RUB110 billion for the year. We recognize that this is material increase, which should reflect several factors, including Forex related, the competitive environment and our investment plans in new segments. We see 2021 in particular is a critical year for the execution of our growth strategy as we are prepared to make smart bets for the future. Turning to shareholder remuneration, for the year we came in slightly above our minimum dividend policy target, on top of which we paid out a special dividend and carried out a RUB15 billion buyback program. Although in 2020 MTS delivered a record high returns for shareholders. Looking ahead 2021 will be the last year of our current dividend policy. As you know, our policy is based around an absolute fair minimum payout. Well, this provides a predictable baseline. We appreciate that it can also limit market expectations on dividends upside on the back of strong operational performance. We understand the decision we will taken into consideration when formulating our new dividend policy that will take effect in 2021. Moreover, following our buybacks there are fewer MTS shares outstanding, which provides additional flexibility in increasing the payout of share. In this context, given our strong results, cash position in 2021 outlook, MTS management plans to recommend an increase in our per share regular dividend payout in 2021, above the level in 2020. Two years ago, we embarked on a journey to become more than a telecom. We are now well underway. We have mapped up out the road forward. We have put a strong team in place and we have gained momentum toward becoming Russia’s premier network-native with a system of digital products and services. So with that, let me hand it back to Polina for Q&A.

[Polina Ugryumova:]

Thank you, Alexey, and thank you to the rest of the speakers. As we take questions, please be aware that there may be a slight delay for translation. Operator, with that, let’s open the line for the questions.

[Operator:]

Thank you. Ladies and gentlemen, we will now begin our question-and-answer session. And the first question we received is from Ivan Kim of Xtellus Capital. Your line is now open. Please go ahead.

[Ivan Kim:]

Good evening. Two questions from my side, please. First on CapEx, I was wondering the CapEx guidance is fairly wide. So what would prompt you to spend RUB110 billion, let’s say, over RUB100 billion? So what – you know there is a kind of higher spending where that will be driven by. And then also on longer term, is it safe to assume that the CapEx will be now above RUB100 billion mark for the next few years? That’s the first question. And then the second question on just the trends that you’re seeing in January-February on mobile service revenue growth. The exit growth was pretty good, strong, didn’t decelerate in the domestic business. So are seeing the same kind of 6% growth in January-February? Thank you.

[Alexey Kornya:]

Ivan, thank you for the question. CapEx range will be defined at a pace which will embark our digital investment projects, Forex dynamics, and that is basically where we see – whether there will be new initiatives, some investments, and new projects and ideas, which we’ll face in next year so that they will affect the overall CapEx, this year, actually. So three factors. And with the mobile services revenue, I’ll pass it over to Inessa.

[Inessa Galaktionova:]

Yes. So my answer will be pretty short. So we do expect the positive growth dynamics in Q1. This year, as you know, it will be some slight price increase, which was actually discussed with a regulator, yes. So we do expect the positive trend in Q1 in mobile revenue growth, but not on the level of Q4.

[Ivan Kim:]

Okay. Thank you for this. And Alexey, can I just follow up on the longer-term CapEx? So do you think the longer-term CapEx will stay above RUB100 billion now –?

[Alexey Kornya:]

Yes, yes. Not necessarily. I think it will depend on the number of factors, including the need for 5G investments and Forex dynamics.

[Ivan Kim:]

Okay. Thank you.

[Operator:]

The next question we received is from Vyacheslav Degtyarev of Goldman Sachs. Your line is open. Please go ahead.

[Vyacheslav Degtyarev:]

Yes. Thank you very much for the presentation. Couple of questions. Firstly, can you comment on the scope of the 5G CapEx investments in 2021 and also the use cases that you’re deploying that CapEx for? And also how was the economics there? Do you recover those investments in a short period of time? And my second one would be, if you can provide a few details on the benefits of the partnership with Yandex on the premium subscribers, and whether there are any early results there. Thank you

[Alexey Kornya:]

On the CapEx, there will be no material 5G CapEx in 2021. Since there still remains uncertainty over frequencies as well as the local equipment requirements for 5G network rollout, no material 5G CapEx in 2021. And for the second, I’m passing to Slava.

[Slava Nikolaev:]

It’s very simple. MTS customers of MTS Premium could get Yandex Plus at a cheaper price and could get also a month free of charge and it works vice versa too. So we are mutually expanding the number of customers who use services of two ecosystems at a discount. And we believe, of course, we are selecting the partners in this initiative and we think this is definitely for the benefit of MTS customers. Current results are – it’s too early to speak about current results. We see a good response to that when we were delivering the message to subscriber base, but it’s still at the very early stage on – of this curve that I think will show significant results. So it’s not going to be 1% or 2% of MTS Premium, it’s – but I expect it to be closer to from 10% to 20%.

[Vyacheslav Degtyarev:]

Thank you very much.

[Operator:]

The next question we received is from . Your line is now open. Please go ahead. Mr. Stander , your line is now open. Are you on mute maybe? So we go on to the next questionnaire. It’s Anna Kurbatova from Alfa Bank. Your line is now open. Please go ahead.

[Anna Kurbatova:]

Good evening. Thank you very much for taking my question. First question is also follow-up on the CapEx guidance. I wonder the amount within this guidance represents maybe rollover of projects which were not completed last year. And the second question, if you could give some update on your media article, so because you established the entity one year ago more or less, and it’s interesting in terms of the progress there, in terms of your plans for the in-house content development. And also if you could provide some update what’s going on with the MTS Arena. So when it will be – go operational. Thank you.

[Alexey Kornya:]

Well, on CapEx guidance, historically, it is the high portion of rollover projects because this is infrastructure time-consuming investments. So it’s usually about 30% of our CapEx. So higher comes is a rollover. But of course, the decisions on 2021 CapEx are usually taking late 2020 early 2021. So you have a full capability to define the level of CapEx each year. And on media vertical update, first of all, we see apart from the figures that I told you earlier which are I think impressive by themselves. We can also say that we see a major improvement in the product itself. We have application that has much higher marks in all stores given by our customers, which is a great thing. Second, we have a better retention of customers because we have better libraries in the application. And most importantly I think is that later this year, or pretty soon, I’m not saying the date, very soon you’re going to see a major relaunch of MTS TV with original content and a lot of new features. So as I say, stay tuned, it’s going to be interesting and it’s going to be soon. On MTS Arena, we expect it to launch in the middle of this year. It will be technically ready before that, but the main point is an ability to create the proper lineup for offline concerts, which is not an easy task now because international travel is still restricted and there are still – and there are some concerns about how it’s going to match the flow of pandemic. So, it’s still unclear – the exact date is still unclear. It’s definitely this year. I would – my suggestions that it’s going to be slightly closer to autumn, but it still has to be determined.

[Anna Kurbatova:]

Thank you very much for that. Maybe, just a quick follow-up on CapEx. You – well, there are some operators were allowed to – let’s say to save something in terms of Yarovaya related project last year. So, the government allowed to respond some – or capacity expansion, yes, to later years, I mean, the COVID pandemic. So, could you bit update on what’s going on there? So, if you, let’s say, understand something last year on Yarovaya, does it mean that this year, you will need to invest for what was initially projected for the year 2021 and plus what was the underspent for last year, or it’s more be – will be some kind of softer trajectory? So, thank you.

[Alexey Kornya:]

Thank you. The limitations or ease are now Yarovaya spent does not relate to the first phase of Yarovaya infrastructure buildup. So effectively, we’ll have to build what was initially planned. So there – the easiness of future graphics after the initial infrastructure was provided by those adjustments, you just mentioned. However, the initial infrastructures need to be built at the initial kind of initial design and initial capacity. That’s the commitment, which we identified of 50 billion over the five year period is still intact.

[Anna Kurbatova:]

Thank you very much.

[Operator:]

And the next question is from Maria Sukhanova from BCS. Your line is now open. Please go ahead.

[Maria Sukhanova:]

Yes, yes. Good afternoon. I have three questions. So first one, you’ve mentioned price increase for your existing customers. Could you please specify what was the average percentage? Second, you also mentioned that you see which one on convergent offers, is there any number that you could share with us, or have a better understanding of how it works. And thirdly, the words, an article in a conversation saying that you have this experiment of free access to socially both sides and there was an inadequacy and that it might be expanded into video. Is this true? This kind of talks – discussions happening in the carriers and if they are how significant do you think this? That’s it.

[Inessa Galaktionova:]

Yes. First, I will answer the first question on the tariff adjustment; actually, it’s very limited once. So, we even don’t – it’s not even material in terms of the level of increase.

[Slava Nikolaev:]

On the second question, I can answer that, there are different conversions offers, and when we’re talking about mobile plus six, it is usually, the turn rate is less by 1.5 times, 1.7 times. So, it’s already significant, whenever we have more products in one conversion flow or for like new tariff, if the client gets three and more services, then it’s slower to up to three times.

[Alexey Kornya:]

And on the accessible internet project, the discussions right now in place. So, it is too early to say, what will be the final constellation of this initiative from the government.

[Maria Sukhanova:]

Thank you.

[Operator:]

And the next one is a follow-up of Ivan Kim . Your line is open.

[Ivan Kim:]

Yes. Hi, again. just two quick questions on buyback. So, do you foresee conduction buyback this year? And then secondly, on the MTS Bank capital injections that you mentioned before. So, what sort of a range shall we expect there about RUB5 billion or if you can give us any guidance on that. Thank you.

[Alexey Kornya:]

Yes, Ivan. Thank you. I’ll take both questions. On the buyback program, actually, based on the very good results of 2020, I think that we are going to very soon announce another buyback program. It’s not defined yet. But most probably, it will come. In terms of MTS Bank capital injection; actually, it will depend on the dynamic of the bank. So far, we see that it’s growing quite rapidly based on the first month of this year. So of course, it will depend on that, but it would be – so far the estimation is a bit less than RUB5 billion.

[Ivan Kim:]

Great. Thank you very much, Alexey.

[Operator:]

The next question is from Henrik Herbst of Morgan Stanley. Your line is open. Please go ahead.

[Henrik Herbst:]

Yes. Thanks very much. A few questions please. I mean the first one, just if you can now, that’s a little bit for the cash flow expectations for 2021. I know you – can you help us with EBITDA and CapEx. So Slava, is there anything in particular we should be aware of maybe, you can help us at least with how we should think about working capital going into 2021? And then secondly, when you think about the investments in content, how do you think about that business? You start to think about it as a standalone business, with content investments and a TV business generating sort of standalone returns or is it part of the returns essentially coming from lower churn, et cetera, in the mobile business. So, how do you think about the investments in that business? Thanks very much.

[Slava Nikolaev:]

Henrik, thank you very much. In terms of the cash flows for 2021, I think you have all the components actually; we gave guidance on the EBITDA and on CapEx. in terms of the work working capital usually, the – it’s not the material on the cash flow, although we constantly working from one year to another to optimize it. So, I think it would be more or less comparable with this year.

[Alexey Kornya:]

As far as the content investments concerns, we are not looking at a certain particular content production, of course, we are following and doing all the analytics of what is activity on – with this specific content being our own production or partners or acquired and so on and so forth? However, of course, we are considering it in the more complex way. We’re achieving effectiveness. But as far as the return on investments, we are looking at this convergent offers, the bundling of this product into our packages and effectiveness of overall, our media business, which includes also satellite TV, IP TV, cable TV. So, it is not only online media platform, it’s all the complexity, where our content will be delivered. And we have a wide scale, which allows us to do those content investments. And right now, we’re having more than 5 million of customers in our media business. That includes all means of delivering content, which I just mentioned, mobile, OTT, satellite, IP TV, and cable.

[Henrik Herbst:]

All right. Thank you very much.

[Operator:]

And the next one is from Mike Stander again. Your line is now open. Please go ahead. So, Mr. Stander, we still cannot hear you. So, we’ll take the next one from Nicholas Chan of HSBC. Your line is now open. Please go ahead.

[Nicholas Chan:]

Hi, thank you for the presentation. Just one question, integration revenues were quite strong in Q4. Can you give a bit of color on what were the key drivers and also some outlook for 2021?

[Alexey Kornya:]

We apologize. Could you repeat the question? We didn’t get it fully.

[Nicholas Chan:]

Yes. so yeah, integration revenues were quite strong in Q4. So, can you give us a bit of color on what were the key drivers and also any outlook for 2021?

[Alexey Kornya:]

You mean that revenue – what were the drivers of revenue growth and what is the...

[Nicholas Chan:]

integration revenues?

[Alexey Kornya:]

Integration revenue, Okay.

[Nicholas Chan:]

Yes.

[Alexey Kornya:]

Honestly speaking, not fully getting which line you’re referring, because this year this quarter after a deconsolidation of NVision, we are showing the figures already without integration services revenue. So, to what you might refer is the cloud business, where we have some growth and positive strong dynamics. Also, we have quite good dynamics on sale of equipment? We’ll check, I suggest to take it offline, we will check what particular and you connect with our IR team to specify what exactly line of our email you refer, so that we can specify.

[Nicholas Chan:]

Sure, sure. Thank you.

[Alexey Kornya:]

Okay. I think we get this we have – in Czech Republic, the business the plant with some equipment production – and because of Forex dynamics in quite a good growth even in Czech koruna. We the positive – strong positive impact from this – from our Czech business, but it wasn’t that material.

[Nicholas Chan:]

All right, all right. Thank you.

[Operator:]

The next question is from Alexander Vengranovich . your line is now open. Please go ahead.

[Alexander Vengranovich:]

Yes, good afternoon. Two questions from my side. So, first one on your mobile retails. So, we’ve seen that over fourth quarter, there was some slight increase in the number of the stores, which kind of contradicts the previous trends we’ve seen through the whole year. So, I’m just wondering how should you look about your store counts this year, whether you continue to plan the reduction of the number of the stores and how do you see your competitors reacting on that? is that a market trend, which continues this year? And second question is on your – probably M&A strategy maybe, B2B business. So recently, there was an article in the press that you might be looking at potentially, an acquisition of the MTT, which is focusing on different types of the B2B products in lots of new endeavor. So I’m just wondering whether these type of the services, is it a focus for you, for your B2B segment? Do you continue to plan to enrich your product offering for B2B clients and whether you have any aggressive plans maybe, for the development of your cloud business, because obviously, you are a number two player on the cloud market. You also have quite strong presence in terms of the data storage capacities. So, can you also please provide some more color on what are your plans with regards to the development of this business segment this year and going forward? Thank you.

[Inessa Galaktionova:]

Okay. I will take the first question regarding retail. So, first of all, we have the stable situation with a number of retail stores. So, we optimized in 2020 600s of stores. And in Q4, we’re not increased or decreased any stores. in 2020, actually, we are not already taken into our consideration any further retail optimization to bring the optimization, because we don’t see the novel thoughts already as – how to say a big factor for any distribution, say to any kind of a big influence for the self-distribution. Yes. So, in the current phase as well, we don’t see any competitive dynamics happening in the retail footprint optimization. So as well – we don’t plan to do any steps in that area.

[Alexey Kornya:]

And as far as our M&A strategy concern, yes, we do look at non-organic opportunities for expanding our business in our existing vertical, as well as beyond those verticals. And speaking about existing businesses, yes, where we see interesting technological opportunities, we are considering them, which they need to be complimentary. They need to be positive business case of internal development versus non-organic growth and also that we need to have positive perspectives for the market growth in particular segments. If we talk about B2B segment, which is slightly different topics, yes. We believe that we have a very good and strong potential in B2B segments, especially with the development of 5G era, which I think will be even more important, because it is internet of things. And those things will be very much delivered to customers and will be brought to the market through a corporate segment. So, B2B is becoming a more of our focus in importance. And in this context, we think of developing now B2B ecosystem. For that reason, we build a separate digital B2B in cloud vertical. And that helped us already, as you rightly mentioned, to become number two cloud, yes, a provider in Russia although a year, two, three years ago, we were not visible in this market and the cloud is one of the most promising segments including potentially H cloud, which we are in cloud businesses, we’ll be investing. And this is one of the most interesting areas of incorporate segments, which we see and we will make for investments.

[Alexander Vengranovich:]

Thank you.

[Operator:]

The next question is from Anna Kurbatova of Alfa Bank. Your line is now open. Please go ahead.

[Anna Kurbatova:]

Thank you very much for taking my follow-ups. basically, the first one is just clarification. You mentioned in the introductory speech that in the Q4 EBITDA was impacted by provisioning, so, if possible to share with us a rough estimate, a rough number for the amount of provisions. And the second question also to like double check the timeline with the new dividend policy. So, would it be correct to assume that the board of directors will make a decision maybe, in April? Yes – April, may and the new dividend policy will be applied from 2021. So, the interim dividends, which you normally announced in October, November already will be paid that amount in line with the new policy. Am I correct? This is the question. Thank you.

[Alexey Kornya:]

Yes, Anna. Thank you very much. I’ll take the first question. in terms of OIBDA dynamic in the fourth quarter, as we mentioned actually, besides all the positive factors that we saw in the fourth quarter, it was constrained by the number of factors, some provisions on the bank caused by the pandemic. and also, some provisions that we made and we booked that now judgments were prudent to make and the biggest parts of them are related to operational provision concerning specific business activities. So, there’s no something, specific index that’s a kind of a regular business – that a core of business that we’re actually making. And speaking about dividend policy, as I mentioned in my speech, we will not revise this year dividend policy. So the timing for new dividend policy will be the next year, spring next year. And we will take into consideration that the current dividend policy is limiting an understanding of upside or following the good and strong results which we are traditionally delivering. And taking this into consideration, this year we will recommend a higher then our fixed figure of dividend in our dividend policy. We will recommend to the board, the high figure. So demonstrating that the reason upside, if there are strong results and good guidance.

[Anna Kurbatova:]

Thank you.

[Operator:]

And the next is the follow-up of Henrik Herbst . You line is now open. Please go ahead.

[Henrik Herbst:]

Yes. Thanks very much, I realize, it’s getting little bit late. Just a quick follow up. In the last call, you were expressing some concern around mobile competition. I guess, I just wanted to check whether anything changed. I mean, arguably your decision to raise pricing would suggest you’re not too concerned about competition, but I just wanted to double check. Thank you.

[Andrey Kamensky:]

You know we see that pricing environment in Russia is pretty healthy now. Yes. I agree we’ve seen some movements from different operators in the fourth quarter, but it seems that especially given that our new propositions are mostly convergent. They are – as I said, some of them are really couldn’t be compared to those of our competitors. We saw no real impact on our figures by those movements. And in the fourth – in the first quarter where we don’t see any continuation of that. So we strongly believe that pricing environment is going to be healthy in 2021.

[Henrik Herbst:]

Great, thank you very much.

[Operator:]

And the next question is a follow-up of Alexander Vengranovich . Your line is now open again, please go ahead.

[Alexander Vengranovich:]

Thank you for taking the follow-up. And just one question on the MTS Bank. So, if you look at the number of the customers during the COVID-19 obviously there was no big increase in that number. And we haven’t seen any visible impact on the improving number of the consistent customers on MTS Bank. So can you please share with us your plans or maybe whether these number of – kind of stable number of the customers is a concern for you and you want to accelerate customer acquisitions this year. So, you mentioned plans to launch and use intact products, and also provide an indication that the bank might require additional capitalization. So are these things connected between each other. So the main idea is actually to derive the number of the new customers of the bank. Thank you.

[Ilya Filatov:]

Thank you for your questions. Obviously the number of active clients at MTS Bank is one of the most critical methods for the bank development. Looking back on 2020 performance and on 2020 environment, we can confirm that the pace of the new sales growth was below what we expected in the beginning of last year. That’s why the current dynamics of the active customers has MTS Bank looks more or less before. When we addressed our achievement to 10 million Bank clients back in November, 2019, at our strategy day, we will reference into the overall number of clients which are Bank clients as well as FinTech clients. Looking at – well, our expectation by the end of 2021 is that we are targeting to achieve close to 10 million clients if accounting together of active MTS Bank clients as well as FinTech clients, which are non-bank clients, but still using financial services within the MTS Group. And when we talk about the potential capital injection in the MTS Bank, we first of all are thinking about this injection as a support to maintain MTS Bank growth above the market average growth, rather than thinking about in compliance with regulation. Regulation, which is not a problem. So the main goal for the capital injection is simply to maintain the bank growth rate above market average. As an example, last year the overall industry in the retail loan segment grew like 8% to 10% – 8% to 12% and this is significantly below, around 30%, which was performed by MTS Bank. I am sure we answered your question.

[Alexander Vengranovich:]

Yes, I think, yes. So yes, more or less. I am more or less, okay. I think the key issues that’s – it’s probably difficult to define this 10 million of clients. I mean, in terms of the usage of the services, obviously the client we have a bank account and the client which just use, whatever one minute transfer service during the month, obviously the value of this clients might be dramatically different to your overall ecosystem, right. And so this is just my concern on this. So I can’t add more to that. So we’ll be looking at your dynamics in that business segments. Thank you.

[Polina Ugryumova:]

Thank you, Sasha . We have taken your source, your concerns, we’ll definitely get back to you offline from IR side.

[Alexander Vengranovich:]

Thank you.

[Operator:]

As there’s no further questions, I’ll hand back to the speakers for closing remarks.

[Polina Ugryumova:]

Ladies and gentlemen, thank you very much for listening. As usual, we will make a replay of this call available on our IR web page in the near future. If you have any further questions please do not hesitate to reach out to MTS Investor Relations at any time. Our inboxes and phone lines are open. In the meantime we appreciate your interest in MTS and wish everyone a pleasant day. Thank you.