[call of mobile]Mobile TeleSystems PJSC (MBT) Q1 2021 Earnings Call Transcript

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  Mobile TeleSystems PJSC? (NYSE:MBT)

  Q1 2021 Earnings Call

  May 18, 2021, 11:00 a.m. ET

  Prepared Remarks

  Questions and Answers

  Call Participants

  Operator

  Dear ladies and gentlemen, welcome to the Conference Call of Mobile TeleSystems. At our customers’ request, this conference will be recorded. [Operator Instructions]

  May I now hand you over to Polina Ugryumova, Director of Investor Relations, who will lead you to this conference. Please go ahead.

  Polina Ugryumova — Director, Investor Relations

  Welcome everybody to today’s event to discuss MTS’s first quarter 2021 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. These in turn imply certain risks, a more thorough discussion of which are available in our Annual Report and Form 20-F or the materials we have distributed today.

  MTS disavows any obligation to update any previously made forward-looking statements spoken on this conference call or make any adjustments to previously made statements to reflect changes in risks.

  I also wanted to mention that following the sale of NVision, we have folded the remaining portion of integration revenue into other services. For your convenience, we have retrospectively restated our profit and loss statement in our Summary Financials file, which is available on our IR website together with the press release and presentation for this call.

  Today’s presenters are: Slava Nikolaev, President and Chief Executive Officer; Inessa Galaktionova, First Vice President for Telecommunications; Andrey Kamensky, Vice President for Finance; and Ilya Filatov, Vice President for Financial Services and CEO of MTS Bank, who will speak in Russian and I will translate.

  So with that, let me turn it over to Slava to kick us off.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Thank you, Polina. And thanks to everyone joining the call today. This is my first call as CEO. I wanted to start with just a few words about where we are today and where we’re headed going forward. Overall, our strategy remains unchanged. We are continuing to execute on a two-pronged approach to build out an ecosystem of digital services, while maintaining mobile market leadership.

  Looking ahead, you can expect to see continuity as we move forward on that strategy. At the same time, we are going to put a sharper focus on concentrating our firepower to rapidly reach commercial scale along promising growth vectors. Context matters. In Russia, consumers prefer local content and corporates prefer domestic solutions. As a telco, this is frankly a unique opportunity and we are going to take full advantage of it.

  I am pleased to report we are off to an excellent start in 2021. Consolidated group revenue for the quarter was up 5.5% year-over-year to nearly RUB124 billion with solid contributions from all four of our verticals. Notably, areas beyond connectivity contributed more than one-third of the total upside, with Fintech leading the way, followed by Cloud and Digital Solutions as well as Media.

  Turning to the OIBDA waterfall. For the quarter, group adjusted OIBDA was up 6.7% year-over- year, supported by solid contributions from core services, which more than offset headwinds from the loss of high-margin roaming revenue as well as a material contribution from MTS Bank and other factors.

  A few words on digital news. First, I’d like to welcome Olga Ziborova as Vice President for Ecosystem Development and Marketing. Going forward, Olga will be leading our efforts to further refine our ecosystem products, services and bundles.

  Overall, we continue to see robust uptake and engagement across the ecosystem. Over the past three quarters, revenue from ecosystem clients has increased from around 19% to 23% of total B2C revenue. That’s compared to ecosystem client penetration of less than 16% of the subscriber base in Q1. So we still have a long runway for sustainable growth.

  Turning to products. Users of our ecosystem subscription MTS Premium are up around 50% over the past six months. Earlier, we had made this available for free to high-end subscribers that met a minimum spending threshold. In Q1, we shifted to a paid-only model for new adds, while also revamping the offer to a more generous benefit package that includes unlimited data and a higher-tier of video-on-demand content.

  Our loyalty program, MTS Cashback, continues to draw in new users, topping 11 million registered participants in Q1. On the app side, we’ve reached nearly 25 million active users of our self-care hub, MyMTS, more than half of all smartphone users in our network. This remains a critical gateway into our ecosystem, which is reflected in the ARPU of MyMTS users being more than 10% above average.

  We are also seeing good traction with NETARIF, our new one-stop-shop subscription that combines mobile connectivity and digital services. Based on our cohort tracking, we’re seeing higher CLV than our previous flagship tariff called Tarifishche and more than 30% above the B2C average, with the upside roughly evenly spread between ARPU and retention. We’re also seeing high engagement, with the majority of new adds to NETARIF actively customizing their plan instead of opting for the default configuration.

  In Fintech, we reached 2.6 million bank clients with open accounts, deposits and loans. Encouragingly, year-over-year growth in daily banking clients outpaced total clients, which is in line with our focus on increasing the frequency of customer interaction.

  Turning to Media. At the end of Q1, we approached nearly 3 million OTT users, nearly tripling from just a year ago. Historically, our OTT offering was a mobile-first app with smartphone users accounting for the vast majority of users. We’re now seeing robust diversification across platforms. For example, active smartTV users have increased more than 10 times since last summer and today make up a significant share of the total.

  In April, we reached a major media milestone with the launch of a radical redesign of our OTT platform, which has been rebranded as KION. This is a truly compelling and differentiated home entertainment experience. KION features hundreds of linear TV channels, thousands of licensed on-demand titles, and for the first time a select slate of exclusive content, which we’re calling KION Originals. To give a bit of color, these are not low-key web serials, but rich storytelling across drama and comedy series as well as documentaries and feature films.

  We’re also pioneering a new format which we call Kinostories that gives viewers flexibility in choosing between episodes or full-length viewing. As we execute on content, our top priority is managing our spend in a deliberate manner, keeping a laser focus on return-on-investment and business KPIs around engagement, retention and lifetime value.

  We’re being very active in showcasing and promoting the platform. We’ve launched nationwide advertising and we’re seeing good resonance with leading celebrities, media outlets and social media influencers. We estimate we reached tens of millions impressions in just the first few weeks. In terms of engagement, we’re already seeing higher app installs. That said, we’re still less than a month out since launch and we will hold off on sharing more details until we have a longer trend line.

  Looking ahead, KION will be a foundational component of our ecosystem. The media market is poised to be disrupted as the secular shift to OTT gains momentum. In the long-term, we think we can be a top-three player in Russia with a user base of 20 million viewers.

  On that positive note, let me hand it over to Inessa for a telecom and B2B update.

  Inessa Galaktionova — First Vice President for Telecommunications

  Thank you, Slava. In Q1, we continued to see robust dynamics in core communications. In mobile connectivity, service revenue in Russia was up 2.3% to RUB82 billion on the back of solid domestic demand growth. The deceleration from Q4 largely reflects a high base from relatively earlier tariff adjustments in 2020. There was also a negative impact on a comparable basis from the extra leap day last year. In addition, we continued to see significant year-over-year headwinds from the pandemic-related drop in international roaming revenue despite seasonality. Looking ahead, we expect roaming headwinds to ease or even reverse beginning in Q2 on lower comparables. Although even in our most optimistic scenarios, we expect full year roaming to remain well below pre-pandemic levels.

  Our three-month active subscriber base in Russia ticked slightly downward to 78.4 million. Strategically, our core focus remains subscriber quality. And in Q1, we saw healthy dynamics in our loyal customer base, those with us 12 months or longer, as well as our market share of data users. We expect to continue to differentiate away from connectivity as a stand-alone service, instead deepen engagement through complimentary services and bundle offers.

  In fixed-line, in Q1 we successfully sustained our momentum in broadband. B2C revenue was up 7.5% year-over-year when excluding telephony. Residential broadband net adds also continued at pace and edged toward 4 million. Fiber is a top priority and we continue to invest in our backhaul and FTTB network. Today, we offer gigabit broadband in more than 30 Russian cities. We also continued executing on our B2G project to build out connectivity to 5,000 socially important facilities such as schools and medical clinics. In March, we issued our first — very first social bond to help fund the project. Overall, we are on schedule to achieve the goals we set last year and we are now executing on the third and final phase. This is a further demonstration of our commitment to help build an inclusive digital future for all members of the society.

  In retail, we saw strong double-digit growth of 16.4% year-over-year in sales of handsets and accessories. This in part likely reflects a spike in demand due to the timing of device upgrade cycle. We also continue to execute on our channel diversification strategy with e-commerce sales doubling year-over-year. In Moscow, we have launched new showrooms in some of the city’s most highly trafficked shopping districts. These stores provide a richer shopping experience with dedicated zones for gaming, banking, wearable devices and smart home gadgets.

  On the product side, we recently launched new tariff plus device, bundles together with Samsung, which are aimed at boosting our subscriber conversion rate from device sales. And across our network, we’re making good progress on enhancing touchpoint quality with in-store transaction NPS topping 70.

  Finally, a brief update on B2B. As you know, last year was an unprecedented time for digital acceleration at a global level. This year, our customers are continuing to embrace digital transformation and MTS is a trusted partner in that process. We were proud to recently be recognized in the Customer Experience World Awards as providing the best B2B customer experience for telecom services in Russia.

  In Q1, our Cloud and Digital Solutions vertical saw rapid double-digit growth with revenue up nearly 30% year-over-year. We also continue to be a leader in the private LTE for enterprise clients, a promising indicator toward future 5G projects.

  With that, let me hand it to Ilya for a Fintech update.

  Ilya Filatov — Vice President for Financial Services

  [Foreign Speech] Thank you, Inessa. I’m happy to present our strong Q1 results for Fintech and MTS Bank. But first, I would like to note that based on full-year data, MTS Bank was recognized as the eighth-largest Russian bank by credit card portfolio and the number one bank in terms of point-of-sale loan growth.

  [Foreign Speech] In 2021, we continue steadily executing on our strategy with a focus on developing digital channels. In Q1, for the first time, we reached more than half of all loan product sales through digital channels. Just a year ago, this accounted for less than a quarter of all sales.

  [Foreign Speech] In the first quarter, we saw healthy dynamics in our retail loan portfolio, growing 35% year- over-year before provisions, which served as the key driver for our overall credit portfolio growth.

  [Foreign Speech] On the back of this loan growth and the lack of additional provisions as, for example, we saw during the pandemic last year, net interest income in the first three months of the year grew 14% year-over-year to RUB4 billion. Net fee and commission income increased 39% year-over- year reaching over RUB2 billion, contributing 35% of overall operating income before provisioning. Moreover, fee and commission income accounted for more than half of total retail operating income before provisions. Net income increased to nearly RUB1.5 billion and return on equity reached double digits, 16% versus 5% in the year-ago quarter.

  [Foreign Speech] Cost-of-risk for the retail loan portfolio declined to 5.2% from 5.4% a quarter ago. In the retail segment, cost-of-risk increased slightly to 8.3%, reflecting the active issuance of retail products and provisioning for the expanding loan portfolio. The share of non-performing retail loans declined to 8.8% in Q1 versus 9.5% in Q4. Overall, the bank remains committed to a conservative approach to reserves with year-end NPL coverage standing at 130%.

  [Foreign Speech] We remain at a comfortable level of capitalization. As of April 1, 2021, our N1.0 capital adequacy ratio stood at 13%, which reflects a healthy safety margin above minimum regulatory requirements of 10.5%.

  [Foreign Speech] Looking ahead, we see promising growth opportunities and we are continuing to expand our customer base and realize ecosystem synergies with MTS.

  Now, let me give the floor to Andrey.

  Andrey Kamensky — Vice President for Finance

  Thank you, Ilya. In the first quarter, group net profit decreased 8.8% year-over-year to RUB16.2 billion. Net profit was supported by higher income from business operations, including solid performance at MTS Bank as well as the positive impact from a decline in cost of debt on a year-over-year basis. In addition, growth was constrained by a high base effect in the year-ago quarter due to a significant non-cash impact from FX effects and operations with derivatives. Excluding this last factor, group net profit increased 19.5% year-over-year.

  Now a few words on capex. At our last call in March, we announced a higher capex plan for 2021. There are three major factors driving that increase: first, a FX drag in equipment procurement; the second, deliberate investments in new growth areas; and the third, short-term allocation for a major radio swap project in Moscow. In line with the outlook we gave you, capital expenditures in the first quarter amounted to RUB29.3 billion. We regard this higher capex intensity as a temporary ramp-up as we invest in our future, not a new run rate. In this context, group free cash flow, excluding MTS Bank and cash proceeds from the sale of Vodafone Ukraine, stood at RUB11.3 billion for the first three months of the year.

  Turning to the balance sheet. Our treasury team has made great progress in optimizing our debt portfolio amid the lower interest rate environment we have seen in the past few years. As Inessa mentioned, we recently issued the company’s debut social bonds, which are in line with the social bond principles of the International Capital Markets Association. We were happy to see very high engagement during the book building, including from smaller institutions and retail investors. In total, we had nearly 3,000 orders versus the few dozen or so large fixed income investors that we see in a typical issuance.

  At the end of first quarter, our gross weighted average interest rate stood at 6.3%. We believe we timed our refinancing actions well and we feel good about our debt position now that rates have begun to increase. Moreover, we continue to enjoy healthy tenor and our leverage remains at a very comfortable level of 1.5 times net debt to OIBDA ratio.

  Now, I will hand it back to Slava for his closing remarks.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Thank you, Andrey. I’m very encouraged by our performance and results. We delivered a strong start in Q1 and we are on track to deliver solid results for the full-year. At this time, we are reaffirming our existing full-year outlook that we gave you back in March of at least 4% growth in revenue and OIBDA and capex of RUB100 billion to RUB110 billion. That said, there could be some potential to revise that later in the year, in particular depending on how much travel and roaming resumes this summer.

  Turning to shareholder returns. In March, the Board of Directors authorized a further RUB15 billion of stock buybacks this year and we’ve already spent more than RUB5 billion on the program. In addition, the Board has recommend a full year 2020 dividend of RUB26.51 per ordinary share to be approved by shareholders at the AGM in June. We continue to target a total regular dividend payout in 2021 above the RUB29.50 we paid in calendar year 2020.

  Finally, I’d also like to highlight that the Board recently set up a dedicated ESG Committee aimed at strengthening corporate governance, environmental initiatives and corporate social responsibility. We recognize ESG as an increasingly important factor for investors in their decision making process and we are committed to enhancing our transparency and disclosure around ESG.

  So with that, let me hand it back to Polina for the Q&A.

  Polina Ugryumova — Director, Investor Relations

  Thank you, Slava. And thank you to the rest of the speakers. As we take questions, please be aware there may be a slight delay for translation.

  Operator, with this, let’s open the line for questions.

  Operator

  Thank you. [Operator Instructions] And the first question we’ve received is from Ivan Kim. The line is now open. Please go ahead.

  Ivan Kim — Xtellus Capital — Analyst

  Hi. Yes, good afternoon. Three questions from, me if I may. Firstly, you raised prices at the end of February-March. And I know it fell to raised price in January too, did you see other operators adjust their prices higher as well from the start of the year? That’s the first question. The second question is on factors influencing EBITDA. So can you please comment on RUB1.5 billion of other qualitative factors influencing EBITDA year-on-year this quarter and whether we can expect anything similar in the remainder of the year? And just probably a technical question on your paid OTT subscribers. Thank you.

  Polina Ugryumova — Director, Investor Relations

  Ivan, can you please repeat the third question, which related to paid OTT subscribers?

  Ivan Kim — Xtellus Capital — Analyst

  Yeah. Just how many of those they have. Because you showed the total number of OTT subscribers. I was just wondering how many of those are — are they all paid or some of them are eligible for the services within their subscription? Thank you.

  Inessa Galaktionova — First Vice President for Telecommunications

  Okay. Ivan, I will take the first question. This is Inessa responsible for telecom. So, usually on the telecom market, there is a practice to make price indexation and review tariffs at the beginning of the year. Actually this is common factor for telecom operators to do that at the beginning of the year, so in the first quarter. We did it later this quarter. So, as you mentioned correctly, end of February beginning of March, so our colleagues on the market also reviewed prices in the first quarter.

  Andrey Kamensky — Vice President for Finance

  Yes. This is Andrey. The second question with regard to the factors on OIBDA. The positive impact on OIBDA from other factors primarily relates to the effect of one-off opex provision in Q1 2020 that resulted in a low base in the first quarter on a year-over-year basis. Overall, we expect the impact from this provision to be overall neutral in the first half of the year.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  And for the last question. I think, it’s the most difficult because it’s really difficult to define what is a paid OTT subscriber. I will explain why. Because if you look at the common market practice, you would, for example, see that there are users of Yandex.Plus that have access to Kinopoisk. The big question is whether those guys are paid users or not. They are paying. And we have the similar — very similar practice with the Premium service and other bundled services. So, in these terms, I can tell you that we are not looking for OTT users that will not bring any value to the company, including — by the way including the advertising revenues that could come.

  We don’t have this system now. But I think any online OTT user is looking into the system again. It’s becoming more popular because of the possibility to target this advertising, which makes it much more commercially viable. So, the number of OTT subscribers we report, they usually include subscribers that get revenue to the company through different channels, but they’re not free users generally. So maybe it’s a little long, but the question is not as easy as it looks.

  Ivan Kim — Xtellus Capital — Analyst

  Thank you very much for that. May I just follow-up on the provision that Andrey mentioned? So, did I understand correctly that you said that overall it’s going to be neutral for the first half. So there will be some — I’m not sure how to understand that. So, there will be some negative impact on the second quarter or…

  Andrey Kamensky — Vice President for Finance

  Hey. I mentioned that actually if we compare this year to the previous year that it would be neutral. Yes, the comparison, because it was the low base of 2020 when we made this provision. Therefore, you see now this positive impact. And if we compare the first half of the year of 2021 to 2020, it would be neutral. That’s what I mentioned.

  Ivan Kim — Xtellus Capital — Analyst

  Okay. Thank you.

  Operator

  Thank you. The next question is from Alexander Vengranovich of Renaissance Capital. Your line is now open. Please go ahead.

  Alexander Vengranovich — Renaissance Capital — Analyst

  Yes, thank you. Three questions from my side. So, the first one, on the assumptions you use for your roaming revenue forecast for this year, can you remind us what sort of outlook you have for roaming revenues by the quarters, if possible, in order to understand what sort of a potential upside we can have if travel restrictions are more or less lifted for the core geographies for travels of Russian tourists? That’s the first question.

  Second question is on your mobile retail network. I was a bit surprised to see the second quarter of growth of the number of the stores, which I think is a bit contradicting to what you’ve been saying before as basically the long-term target of mobile retail network optimization remains intact. So I’m just wondering what was driving that, whether it was sort of a timing effect of the opening of the new showrooms or do you feel that there might be some competitive situation which really prevents you to optimizing your network further?

  And the third question is again on KION. Can you please indicate the scale of the content investments related to KION this year maybe and until ’23, which you think is required to achieve your goals on the number of users and your top-three position on the market? And related to that, what do you think could be the key issues for KION to achieve these targets? Thank you.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Okay. I will take the first question on roaming revenue forecast. Of course, we never made any firm assumptions on that. We are generally assuming rather conservatively and that was reflected in my part of presentation, so nothing particular. It would be pure speculation to set a date when all the limitations will be lifted.

  Second question goes to Inessa.

  Inessa Galaktionova — First Vice President for Telecommunications

  Regarding the retail network. So actually, we, Alexander, appreciate that you are very careful with all the figures we provide for retail. And so, you are very carefully calculating. But I just want to address your attention that actually those small fluctuations, which is less than 2%, does not reflect any strategy behind that. This is actually a normal operational business, which sometimes require, make some shops to be close because we are searching for new good locations and in some regions it requires to lower, for example, less quality channels like local dealers and local distribution and invest more in our own retail chain, which has more quality. That’s why I ask you not just to pay such a huge attention to those small figures, because again we’ll repeat that right now we are very stable in terms of number of our stores. In the coming — I mean, in the current quarter or half a year, we don’t plan any big optimization, as it was announced one year ago. And we actually made that as we promised.

  In the coming months, we don’t expect any optimization. As soon as we have in our plan, the strategy, we’ll definitely share with you, because that will be something behind that, I mean, the strategy. Right now, this is just a small iteration of things which doesn’t reflect any kind of changes in the strategy.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  And then, the third question on the scale of content investment. We are not disclosing the particular — the exact figure. But I can tell you that it’s not groundbreaking. We are being very accurate with those investments. And at the same time, they are included in our overall capital spend. So it’s all in there and it doesn’t change much. So…

  Alexander Vengranovich — Renaissance Capital — Analyst

  Yeah. And regarding the issues or potential challenges, maybe you can provide some more details on that will be great.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Sure. I think, challenges for KION’s success could be only — well, if we go into SWOT analysis, I would say that given the start, the possibility that our own originals would be really bad is off the table now. It looks that it all goes very well. And of course, the competitive environment is there. We have a player that is able to spend a lot of money on that. We have another player, which is able to redirect a lot of search traffic into their platform. So, we are playing on this market with our own opportunities. And I believe currently the best team of making originals and at the same time, a very strong product team and you can see that in the product itself. So, I’m pretty confident that we are set for growth on this market.

  Alexander Vengranovich — Renaissance Capital — Analyst

  Thank you.

  Operator

  Thank you. Then we go to the next question. It is from Henrik Herbst of Morgan Stanley. Your line is open. Please go ahead.

  Henrik Herbst — Morgan Stanley — Analyst

  Yeah. Thanks very much. I had three questions actually. Firstly, I wanted to follow-up on the price increases beginning of the year. I mean, you’ve been doing price increases now, I guess, for a few years. Can you talk a little bit about what you’ve seen in terms of customer perception on price increases, any change in churn or anything different from last year?

  And then, I also wanted to follow-up on KION, I guess and your content investment. Firstly, when we think about the content investment, I realize you can’t give us any explicit numbers. But is 2021 sort of the beginning and the content investment is ramping up from here or are you sort of investing quite a lot now to get operations going? And from here, the content investment should be stable to sort of coming down a little bit, so more directionally, I guess, than perhaps explicit numbers.

  And then, I guess, a bigger picture question on content investment. I think, if you look globally, most telcos that tried to invest in content have sort of changed their minds. I guess, the latest one is AT&T sort of now exited the Time Warner investment. Can you maybe talk a little bit about why — I guess what do you think you’re doing differently or what’s different with MTS and why we shouldn’t sort of be worried about the, I guess, lack of success from other telcos trying the same thing? Thanks very much.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Okay. First of all, thank you for interesting questions. The first question is easy to answer. I think we came — quite a few years ago, it came to a model which allows us to do those price increases in a very transparent way. And we see that our subscribers appreciate this way. They always have time and suggestions of how they can change tariff, if they wouldn’t want to stay on the tariffs that are being increased. And therefore, in the last two or three years, we don’t see any reflection on NPS after our price increases. So, we are confident that we’re doing that very accurately and we monitor all changes afterwards. So, I’m pretty confident we are OK here.

  On KION, content investment, I would say that in comparison with 2020 and 2021, the investment could go higher maybe by a notch but not much. And then, if we see this going well, it will pretty much continue on the same level because we have a model of how often how many originals we have to get on the market to keep the interest of new subscribers and the interest of existing subscribers and it seems working so far.

  And going into the last question on AT&T-Time Warner and this dilemma that everybody has, I would say that our situation is very different from the situation when a telco is purchasing an existing content provider because the idea behind content provider is to have the most — the widest distribution possible. So, limiting this distribution to one operator will really decrease its value. And this is the basic problem behind it.

  Our case is very different because we are not playing to conquer the world with that. We are making a very specific investment into enough local content to constantly increase number of subscribers on the platform. And then we are keeping them there both with the product excellency and existence of our libraries. And the libraries of course include libraries that we purchase from majors and libraries that are created with our own content. And I think that this difference is the most important and we see this model can really work out. So that’s pretty much it.

  Henrik Herbst — Morgan Stanley — Analyst

  Okay. Thanks very much. Can you also kind of perhaps follow up in terms of investment. Is there any significant sort of opex investment as well? Is your content strategy a drag on your OIBDA margin, so is it mainly on capex? Thank you.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  No, not really. It’s very, very moderate. The application is being done by our own teams. We have core of the platform from a big vendor, but then we — again, we create all the systems around it by ourselves. And there will be some opex, but only when the subscriber base will grow. So it’s all dynamic and only positive impact, I would say.

  Henrik Herbst — Morgan Stanley — Analyst

  Thank you very much.

  Operator

  Thank you. [Operator Instructions] We have received another question. It is from Ondrej Cabejsek of UBS. Your line is open. Please go ahead.

  Ondrej Cabejsek — UBS — Analyst

  Hi. And thank you for the presentation. I have a couple of questions, if I may. One is a follow-up on Ivan’s earlier question. So, maybe I completely misunderstand the answer, but when you kind of look at the similar annual numbers, if I look at the one-offs from last year, then in the second quarter of ’21, you had even more one-offs in the base and in 1Q ’21. So when you say flat impact year-over-year on a semiannual basis, does that indicate that we’re expecting some kind of negative one-offs in the second quarter of ’21 or is that understanding that’s not correct and maybe there’s something else. So, any clarification would be appreciated.

  Second question, if I may, on MTS Bank. So, very good numbers this quarter. Are you kind of confident that you can keep your return on equity at maybe double-digits this year before you get to your 20% target in 2023? And is that the target that you still think is achievable without any capital increase?

  And maybe finally, in terms of Net Promoter Score, you mentioned the progress on there, but one of your competitors on their Capital Markets Day recently was saying that their Net Promoter Score is going up, while the Net Promoter Score of the entire market — and that would mean you as well — is going down. So, can you clarify is that something that you are also seeing on the way that you perhaps measure Net Promoter Score differently or what the trajectory is currently for MTS? Thank you very much.

  Andrey Kamensky — Vice President for Finance

  Ondrej, thank you very much. Let me start with the first one. However, actually there’s not much I can add. I’ve already said that based on our assumption for the first half of the year, actually the effect of 2021 to 2020 would be neutral on this specific other item. So that’s actually it.

  Ilya Filatov — Vice President for Financial Services

  [Foreign Speech] Ondrej, thank you very much on your specific question on the bank. Yes, I’m really very happy to answer this. We do expect the return on equity for the bank will remain in the double-digit area by the end of this year, which could be taken as around like 12%.

  [Foreign Speech] As for the 2023 targets, we have recently reannounced them. So we remain on track.

  [Foreign Speech] As for the potential capital injections, so additional capital injections, a lot will really depend on the regulators’ initiatives as currently we see the regulators — some of the regulatory initiatives are made toward potentially cooling down of the retail market. So, for this year, we do not have any further specific plans to increase the bank’s capital. And for the next year, we still do not have enough clear certainty, enough clarity on what the regulator will do.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  I just wanted to add that that we really hope that the FinTech is going to grow and we see that it’s growing really fast. And if we see that this growth continues at a really healthy rate, we are ready to support it with some additional financing. Not again nothing that would really make a drastic change in our figures, but given that ROE is growing, I think there is a possibility. Go ahead.

  Inessa Galaktionova — First Vice President for Telecommunications

  So I’ll take the question on NPS. So, actually we don’t comment on information that was mentioned by a competitor, especially then we don’t know which materials or reports it’s referring to. That’s why it’s difficult to comment. And overall, we see that NPS on the market is pretty modest, mostly due to pandemic mood, which has happened for the last year. But this is the only trend we see. So that’s why we don’t comment on the — comment upon our competitor.

  Ondrej Cabejsek — UBS — Analyst

  Thank you very much. Maybe if I may only follow-up because there were no other questions in the line. Can I just clarify? I believe there was a comment during the presentation about capex being temporarily higher. Is this the way to say that 2021 is a kind of one-off year or is this a multi-year thing you think? Any clarity would be appreciated.

  Andrey Kamensky — Vice President for Finance

  Yes, Ondrej, thank you very much. That actually was part of my speech. What I wanted to mention is that it’s not going to be a new run rate for the future. And yet we expect that for the next years, that might be lower. It’s too early actually to give any guidance or whatever, but that’s our understanding at the moment.

  Ondrej Cabejsek — UBS — Analyst

  So, the one-year spike would be your current working assumption?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  This is what Andrey said, I’m sorry.

  Andrey Kamensky — Vice President for Finance

  Yes.

  Ondrej Cabejsek — UBS — Analyst

  Thank you very much.

  Operator

  Thank you. We’ve received another question. It comes from Anna Kupriyanova of Gazprombank. Your line is now open. Please go ahead.

  Anna Kupriyanova — Gazprombank — Analyst

  Hey. Good afternoon. Thank you very much. I will have a couple of questions. Coming back to your OIBDA margin, if I correctly estimate that if we exclude the effect from provision last year, we get to the OIBDA margin for Russia to be flat roughly year-on-year, if I correctly understood your comments. And what could we expect in terms of year-on-year margin trend going into the next nine months of this year? This is my first question.

  And my second question will be regarding your music subscribers. I see that they’re slightly down. Just to understand how this direction develops and what do you expect in the future. Should we consider this as a promising part of your media division going forward? And my final question, I think, I missed the number of your multi-product users, if you could repeat that please?

  Andrey Kamensky — Vice President for Finance

  Yes, Anna, thank you very much. I’ll take the first question. In terms of OIBDA margin, actually we do not provide any guidance on the OIBDA margin. And frankly speaking, on our business we are not so much focused on the margin itself. We are more focused on the numbers. And therefore, actually you can refer to the guidance that we are giving for OIBDA plus 4% growth a year that we stick to. So that’s the answer to your first question.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Frankly speaking, as for music subscribers, really I didn’t see any major changes there. I can follow up on that later, but nother drastic change there. And this is not a core to MTS Media. MTS Media is currently focused on the online movie part. But on music subscribers, we have several directions working with music. One direction is partnership with Spotify [Indecipherable] and it’s probably not included in this number. We also have — we still have partnership with Apple Music and we have our own application which is also a partnership application. So, I will — again, I will check on that but nothing major on this business happened in the last year. We did not disclose a multiproduct user number this quarter. So it’s growing, but we didn’t have this exact number.

  Anna Kupriyanova — Gazprombank — Analyst

  Thank you very much. And may I please ask a bit more about your major revenues in terms of share of TV revenues and fixed-line revenues. I mean, which fixed-line revenue growth came from TV? How does it compare to the overall segment increase, not in terms of users but…?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  I understand the question, but we cannot answer it now. And going forward, it will be more and more difficult to diversify revenues coming from different business lines because everything is coming in bundles. And the way you attach revenue for this bundle to different businesses is very artificial. So it’s really impossible to say which part goes — comes from fixed line, which part comes from TV, sorry. But everybody would want that because to realize your cost efficiency but unfortunately it doesn’t work this way.

  Anna Kupriyanova — Gazprombank — Analyst

  And then, final question. When can we expect a new disclosure in terms of your results in new business segments?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Could you please specify what do you mean by results of the new business segment?

  Anna Kupriyanova — Gazprombank — Analyst

  The disclosure of your business segments in terms of results presentation by new direction as Media, FinTech, Digital?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  We are a little bit bundled here at this table, because we are giving the results of our business lines. So that’s why I asked you to specify the question.

  Anna Kupriyanova — Gazprombank — Analyst

  What I mean, for example, your media revenues, your digital revenues, given it’s your major four new directions. I would be interested to understand when we can see the revenues by these directions. At this stage, you don’t disclose your media revenues. Sorry, if I missed something.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  We will process your request and come out with some solution. But I think that again, given that most of the services are given in bundles, this would also be pretty much artificial, but we will try to help you. So, we’ll consider it. Thank you.

  Polina Ugryumova — Director, Investor Relations

  This is Polina. As we have given this message for quite a long time to the market, the whole paradigm idea behind the ecosystem is that you’re building a specific ecosystem surrounding around specific — around each client, let’s say. And you are selling the services in the bundle. While some of the services can be absolutely profitable, other services, which do increase the life of our clients or increase the NPS which is associated with this client, can be OIBDA zero for example, OIBDA even negative.

  What is really very important for us is that that type of bundling provides the longer life of our clients. And in the end, results in the higher CLV, which is customer lifetime value. From that perspective, going forward in implementing our strategy, it would make less and less sense to give you a breakdown between the division, especially at the level of the profits, which are generated by this division. But anyway, as you may see, we keep increasing the transparency and the fulfillment of our disclosure to better understand you how our business evolves and to make you understanding of how the whole ecosystem paradigm develops here. It is more friendly and more transparent in terms of understanding.

  Anna Kupriyanova — Gazprombank — Analyst

  Thank you very much for your comments.

  Operator

  Thank you. The next question is from Slava Degtyarev of Goldman Sachs. Your line is open. Please go ahead.

  Slava Degtyarev — Goldman Sachs — Analyst

  Yes. Thank you very much for the call. One general question for me. There is quite a large spike in inflation across the globe and looks like Russia is not an exclusion here. Do you see any inflationary effect putting pressure on either capex or the opex side in the medium-term that we should be aware of, and which lines can be most effective? Thank you.

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Since you’re mentioning that this is a global effect, of course it has influence on every company and probably every person. But I would say that we don’t see anything specific in terms of capex and everything. We have long-term relationships with our vendors. And I don’t think that we have something specific to our company with this regard, no, just as everyone else.

  Slava Degtyarev — Goldman Sachs — Analyst

  Okay. Thank you very much.

  Operator

  Thank you. And the next question is from Ondrej Cabejsek of UBS. Please go ahead. The line is now open.

  Ondrej Cabejsek — UBS — Analyst

  Hi. Thanks. I have a follow-up. Thanks for your patience. Following your last quarter results, there were press reports that you may be putting up your towers into a separate company. And we have one of your competitors especially being very vocal about trying to do something especially in maybe the more remote regions of Russia and when it comes to network sharing, etc. Is this something that you’re ready to comment on? What potential paths would you be most interested in, when it comes to some infrastructure sharing or deals, etc.?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Yeah. We have a very, very easy answer. We are looking at all opportunities and we’re very closely seeing [Phonetic] what’s happening on the market. Nothing happened yet. We realize there are a lot of negotiations in this area. And of course, we are on top of it, but we’re not ready to disclose anything yet.

  Ondrej Cabejsek — UBS — Analyst

  But can you maybe say in the past MTS has been very much opposed to this? Is the situation a bit different now from your perspective, now maybe that the market is kind of on more level-playing field when it comes to coverage, network quality, etc, is it something you would consider at all today as compared to five years ago?

  Vyacheslav Nikolaev — President and Chief Executive Officer

  I can only repeat what I’ve already said. Of course, life is going on and we are going on. We are looking at opportunities. And whenever we are ready to disclose any news for you, we will do that, believe me.

  Ondrej Cabejsek — UBS — Analyst

  Thank you very much.

  Operator

  Thank you. As there are no further questions, I would like to hand back to you.

  Polina Ugryumova — Director, Investor Relations

  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.

  Operator

  [Operator Closing Remarks]

  Duration: 62 minutes

  Polina Ugryumova — Director, Investor Relations

  Vyacheslav Nikolaev — President and Chief Executive Officer

  Inessa Galaktionova — First Vice President for Telecommunications

  Ilya Filatov — Vice President for Financial Services

  Andrey Kamensky — Vice President for Finance

  Ivan Kim — Xtellus Capital — Analyst

  Alexander Vengranovich — Renaissance Capital — Analyst

  Henrik Herbst — Morgan Stanley — Analyst

  Ondrej Cabejsek — UBS — Analyst

  Anna Kupriyanova — Gazprombank — Analyst

  Slava Degtyarev — Goldman Sachs — Analyst

  More MBT analysis

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