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Edited Transcript of TELEC.PR earnings conference call or presentation 2-Aug-19 9:00am GMT

Half Year 2019 O2 Czech Republic as Earnings Call

Prague 4 Aug 22, 2019 (Thomson StreetEvents) -- Edited Transcript of O2 Czech Republic as earnings conference call or presentation Friday, August 2, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jakub Hampl

O2 Czech Republic a.s. - Head of IR

* Jindrich Fremuth

O2 Czech Republic a.s. - Chairman of the Board of Directors & CEO

* Tomáš Kouril

O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division

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Conference Call Participants

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* Martin Cakl

Patria Finance a.s., Research Division - Analyst

* Miroslav Frayer

Komercni Banka AS, Research Division - Equity Analyst

* Petr Bartek

Erste Group Bank AG, Research Division - Head of Equity Research of Czech Republic

* Piotr Raciborski

Wood & Company Financial Services, a.s., Research Division - Equity Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, welcome to O2 Czech Republic Financial Results for the First Half 2019 Conference Call. I will now hand you over to Jakub Hampl, Head of Investor Relations. Sir, please go ahead.

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Jakub Hampl, O2 Czech Republic a.s. - Head of IR [2]

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Thank you, Giselle. Good afternoon, ladies and gentlemen. On behalf of O2 Czech Republic, I would like to kindly welcome you to our today's conference call where we are going to discuss our financial and operational results for the first half of 2019. As in the past, the presentation is already available for download at our IR web page.

First of all, I'm pleased to introduce the speakers, who will be like in previous calls, Jindrich Fremuth, CEO and Chairman of the Board; and Tomáš Kouril, CFO and the Vice Chairman of the Board. Both gentlemen will give you the presentation, and then we'll be ready for your questions.

And now I would like to hand over to Jindrich to start with the presentation.

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Jindrich Fremuth, O2 Czech Republic a.s. - Chairman of the Board of Directors & CEO [3]

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So hello, ladies and gentlemen. Good morning. Welcome to the call. As usually, I'm going to take you briefly through some business highlights and events from the second quarter of 2019 again for both Czech and Slovak operations.

So if you can follow me to the Slide 5 on the provided deck that is available for download on our web pages, I'm going to talk about our broadband -- fixed broadband business. As you may know for a long time, fixed segment has been a challenge for us because the traditional services such as fixed voice and some product in corporate and government segments where we have been traditionally dominant were under a long-time market pressure. These were pulling the overall performance of fixed products down, and new products and initiatives had to compensate for this decline.

Now this is where our long-term focus was. We worked with all the levers of the marketing mix. We introduced some very innovative products such as O2 Smart Box and Smart Home, some security solutions. We started develop -- deployment of new WTTx network technology to be able to deliver connectivity to new locations and to more customers. And we have been also working on xDSL speed upgrades all around the country.

Now all these efforts seem to be showing results. Our broadband customer base started to rise again in third quarter of 2018. And as of June this year, we managed to grow year-on-year by 20,000 customers in fixed broadband connectivity which represents 3% increase off the base. Along with that, our fixed broadband revenues have also changed in the trend and are now slightly -- in a slightly positive growth figures going somewhere from minus 5%, 4% year-on-year to basically a positive 0% or 1% in the last quarter. So I think this is too early to judge really whether this effect is sustainable, but we believe we are on the right track fixing the fixed business, so to speak, as well.

If you follow me to the Slide #6. In respect of the O2 TV trading performance, again, we are reporting a very solid performance in acquisition of new customers also in Q2 where we added 20,000 subscribers. That represents 2.6x higher year-on-year growth in net adds. And O2 TV stand-alone service subscriptions grew by over 90,000 over the last year, that means by more than 30%, to 381,000 connections.

What we see is an improved adoption of our multiscreen offering as well. There we actually see 45% year-on-year growth as customers are becoming more educated and enjoy our content on multiple devices which are, of course, the set-top box itself but the website and applications on different devices. We're also seeing very good response to sport-only packages that we introduced. And all these resulted in over 900,000 users in total which is 39% growth year-on-year.

Now let me cover a couple of good details about our Slovak operations on the Slide 7. Again, I'm happy to say that also in the whole first half of 2019, we maintained the growth in all major customer as well as financial parameters. With the improved network quality and continuous shift from national roaming to our own 2G network, we continued our focus on up-selling customers to new data-rich tariffs. We also continued in expanding our services portfolio after launching fixed broadband and O2 TV services for homes and small businesses.

We recently introduced eKasa which is our complex solution for electronic recording of sales, and they're reporting to financial authority which is now required by the Slovak legislation, as you may know. eKasa was used in Slovakia not only as a cash register but also as a POS terminal and a printer. We use the same system in O2 CZ. already. So of course, we utilize the experience from Czech. For us, this is another step in expanding our product portfolio in Slovakia which had been traditionally a mobile player only. And we are actually making our product portfolio much more diverse going forward.

Regarding our core services, our mobile customer base in Slovakia grew by 5%. Proportion of the contract base improved by 3 percentage points. As a result, total blended ARPU went up by 4% in the first half of this year, and the total revenue in Slovakia grew 4% year-on-year in euros. More importantly, total EBITDA in Slovakia grew by close to 17% in euros. That was helped by national roaming cost savings and also application of the new IFRS 16 standard. So on the like-for-like basis, if we disregard IFRS 16 effects, EBITDA in Slovakia would grow by a very solid 8%.

And now please let me hand over to Tomáš Kouril who will take you through our financial results in more detail.

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [4]

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Thank you, Jindrich. Good morning, ladies and gentlemen. I will cover financial performance.

So let me highlight main messages on our financial performance on Page 9. Total group operating revenue reached CZK 19 billion, up by more than 2% year-on-year. And later on, I will comment in detail on our performance in the Czech Republic and in Slovakia. Our EBITDA -- our group EBITDA reached CZK 6.1 billion, representing nearly 13% year-on-year growth. So we have achieved 32% EBITDA margin. On underlying basis, so excluding application of IFRS 16, EBITDA would grow by nearly 6% year-on-year.

Net profit. Net profit reached CZK 2.6 billion, down by 6% if you compare on year-on-year basis. I would like you -- I would like to remind you that back in 2018, we invested heavily into different areas, IT transformation and exclusive sport content in the Czech Republic and improvement of our network in Slovakia. As a result, our recurring depreciation charge increased by close to 25% year-on-year.

Next comment is on free cash flow. In the first half, we generated CZK 2.8 billion of free cash flow so basically by 30% more compared to last year.

Last comment is on CapEx. As you can see, overall CapEx decreased by more than 22%, and this is driven mainly by CapEx decrease in the Czech Republic. And again, I will provide you more details on CapEx later on.

Moving to Page 10, Page 10 shows the year-over-year development of our mobile operating revenue. Here I would like to highlight that in Slovakia, we reported over 3% revenue growth. The growth on the back of investment into LTE network with a positive impact on data revenue, which went up 30% year-on-year and were the key growth driver there. In the Czech Republic, mobile revenue grew by more than 1 percentage point year-on-year. Close to 11% growth of data revenue and by 21% higher revenue from financial services were the key growth drivers which more than compensated 4% voice and 11% messaging revenue decline.

Moving to Page 11. You can see that in fixed revenue, we reported a 2.6% growth year-on-year for the first half of the year. This part of our business shows improving trend in time, and Jindrich already commented that our technology-agnostic broadband and also O2 TV are the key drivers here, the drivers behind the growth. On the other hand, we still see continuous fixed to mobile voice substitution in both segments, B2C and B2B, with a negative impact on our voice -- fixed voice revenue.

Broadband and pay-TV revenue grew over 6% year-on-year helped by strong performance of pay-TV revenue and overall flat broadband revenue year-on-year. In line with our broadband and pay-TV service revenue, there is also a relevant growth of 26% in fixed hardware revenue category.

And finally, ICT. ICT revenue grew by 11% year-on-year basis. It's also helped by one-off ICT project for the government in the second quarter. To help you with updating your models and also forecast going forward. This one-off effect might be estimated at roughly CZK 180 million level.

On Page 12, I will comment on the development of group total operating expenses. As you can see, we are reporting 2% overall decline including IFRS 16 positive impact. We have commented on that recently and more comprehensively also during the last call.

In the Czech Republic, total cost declined by 1.6% year-on-year, and there are basically savings across all major categories except for personnel costs. Regarding personnel costs, while in supportive functions, personnel costs declined, the overall growth is driven mainly by increased capacity in customer-facing area. And as mentioned in the past, there is a clear payback for this, so this is a healthy, healthy trend.

In Slovakia, total OpEx was lower by 2 percentage point year-on-year driven by revenue and also business growth. In previous calls, I already commented on the positive impact of CapEx we spent on network coverage expansion which led to another savings in national roaming costs in Slovakia.

On the following page, Page #13, let me briefly comment on our CapEx in the first half of 2019. And again, there is still the same trend we have commented. So there is a difference in CapEx intensity between the Czech Republic and Slovakia. In the Czech Republic, CapEx declined by close to 40%, 4-0, and it was directed mainly into the upgrade and development of our IT systems and core network. And again, I would like to highlight also our investment into the redesign and reallocation of some of our retail stores. Overall, CapEx in the Czech Republic represented only 4 percentage point of revenue in the first half of the year.

Now CapEx in Slovakia. We continued with our investment mainly into further extension of our 2G network with the aim to reduce national roaming costs. And the other major areas in Slovakia are improvement of transmission and backbone networks, we do that to increase our transport capacity there and also fixed wireless network rollout. As a result, in the first half of the year, Slovak CapEx increased by 11% year-over-year, and CapEx-to-revenue ratio was at 13% level.

So all in all, total consolidated CapEx reached CZK 1.1 billion, down by nearly 23% year-on-year. And group CapEx-to-revenue ratio was as low as 5.5% at this stage. We commented during last call, even if we don't provide any guidance for the rest of the year, typically, first and second quarter are coming with some lower intensity, and there might be phasing for the second half of the year.

Now before we open the Q&A session, let me briefly comment also on major changes in our balance sheet. It's on Page 14. So first area is IFRS 16. So as a result of IFRS 16 standard adoption, total assets and liabilities were increased by about CZK 4.2 billion. We recognized the leases as noncurrent assets and corresponding noncurrent as well as current liabilities. You can see how it links on the page.

Second area, in April, we have successfully raised a new loan for a total of EUR 160 million which led to an increase of our gross debt by equivalent of CZK 4.1 billion to current level of CZK 11.8 billion. This means that based on our net financial debt as of end of June and EBITDA for last 12 months, our net debt to EBITDA remains still low and reached 0.5x multiple as of the end of first half of 2019.

Other relevant changes in our balance sheet between December 2018 and June 2019 relate to the approval of the 2018 shareholder remuneration. This item was actually approved by our shareholders at the Annual General Meeting in June. In total, at the beginning of July, so after the reported period, we distributed over CZK 6 billion to our shareholders. As you can see, our current assets grew by close to CZK 7 billion significantly driven by higher cash balance we later used for the payment of shareholder remuneration.

And equity. Equity has decreased by net CZK 3.8 billion in December, and this is a combination of a declared 2018 shareholder remuneration. So as a result, we reclassify it from equity to current liabilities and, b, the first half 2019 net profit.

So that's it from me. And now I hand back over to Jakub to open the Q&A session

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Jakub Hampl, O2 Czech Republic a.s. - Head of IR [5]

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Thank you, Tomáš. Thank you, Jindrich, both for your presentation. And now ladies and gentlemen, we are ready to open the Q&A session. Operator, we are ready to take the first question.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Martin Cakl from Patria Finance.

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Martin Cakl, Patria Finance a.s., Research Division - Analyst [2]

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Congratulations on a nice quarter. My question is regarding your last slide with net debt-to-EBITDA ratio after the dividend payment actually takes place assuming this will go up. So do you have any future guidance on what the net debt EBITDA level will look like? Because it's going to get close to that 1.1 multiple, and I'm assuming with the auctions coming on, the -- well, cash -- intensity will go up, so this might be hard to manage. So do you know where you want to be in terms of net debt to EBITDA going forward?

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [3]

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Okay. Thank you, Martin, for the question. Basically, we don't have any specific target. What we have is full confidence that there is space to manage this specific area. I would say our current leverage is significantly below what I would call standard for telco industries, so we don't have any specific worries for this specific area. You are completely right that something is on the radar screen, and the auction is not only for the Czech Republic but also for Slovakia. So definitely, it's something we will manage, and there isn't, as I said, any specific concern for us. And we are ready to handle this particular item in our balance sheet. So no specific target and no worries. Our current leverage level is very low.

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Martin Cakl, Patria Finance a.s., Research Division - Analyst [4]

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Right. Okay. And may I just add to that? So going forward, you're expecting -- I mean the net debt leverage will go up, and do you want to manage it to grow gradually down again? Or are you comfortable with being in the higher levels? As you said, like it's way below the telco standards also.

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [5]

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Actually, we don't have any specific plan for -- or the ratio is not anything we have in mind. If we are basically considering our plans, we are to plan the, I would say, business as such. Then as you have mentioned and I confirm, the auction is something which will definitely change the ratio going forward. That's also one of the reasons because there is more factors to consider why we bear for the new funding. So we feel comfortable with all the capacity. Also revolver facility, we commented in the past, is still available to us, so I would say from practical terms, we are ready to handle all things which are on the radar screen. And we will see how it goes. We don't have, as I said, any specific plan to either increase or decrease the ratio. We will manage the business and go for the opportunity. So it's again not anything which should worry us at this stage.

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Operator [6]

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Our next question comes from Miroslav Frayer from Komercni Banka.

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Miroslav Frayer, Komercni Banka AS, Research Division - Equity Analyst [7]

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I have 2 questions, please.

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Jakub Hampl, O2 Czech Republic a.s. - Head of IR [8]

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Hello, Mirek, are you on the line?

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Miroslav Frayer, Komercni Banka AS, Research Division - Equity Analyst [9]

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Can you hear me now?

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Operator [10]

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(Operator Instructions)

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Jakub Hampl, O2 Czech Republic a.s. - Head of IR [11]

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Yes, yes, yes.

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Miroslav Frayer, Komercni Banka AS, Research Division - Equity Analyst [12]

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Can you hear me? Yes? Yes, okay. I'm sorry. Okay. So I have 2 questions, and the first question is about fixed segment. Is the trend reversal is -- or do you think is it sustainable? And can we expect another improvement in the following quarters? And the second question is about potential acquisition because in the market, there are rumors about some divestments by media company CME. It's hard to say if the company will be sold as a whole or it will be separated to several parts. So are these assets or some of these assets interesting for your potential acquisition in the future?

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [13]

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Okay. So thank you, Mirek. I will start with the first question which was sustainability and healthy trend we see for our fixed business. So first of all, what is sustainable and what we see as the healthy trend is definitely what is happening with our O2 TV business. You have heard about that from us already a couple of times now. But now you can see that our strategy works and our investment in exclusive sport content, which makes our offering unique and, I would say, the best in the Czech market, really works also in financial terms. So if you look at the category, broadband and pay-TV, I said that it -- this category, it's on Page 11, grew over 6% year-over-year. And I would say pay-TV is definitely the main contributor to the growth, and this is part of our strategy. So is it sustainable, this part, definitely yes.

My second comment on the slide was basically on ICT, where you can see also very high dynamics year-over-year for this category. And as I said, to help you with updating your models and forecasts for the rest of the year and overall going forward, this one-off effect which is part of this ICT revenue category might be estimated roughly at CZK 180 million level. So if I call it one-off, it's not basically something we will repeat in the next quarters. But there might be more projects. And you know how ICT works. This is rather opportunity-driven business, so depending also what Czech government and B2B customers will ask the market and how successful they are, so that's something I would be really careful about in terms of basically projecting going forward. But the trend is clear. Pay-TV is growing. Fixed-to-mobile substitution is still there. If you look at the Page 11, you see also very healthy trend for hardware which is growing by more than 26% also coming with nice margins, so I'm quite positive on this.

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Jindrich Fremuth, O2 Czech Republic a.s. - Chairman of the Board of Directors & CEO [14]

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Yes. So let me take the second question. I never want to say never, so -- but there's more just by design and definition, so I will basically not make an ultimate no on this. But you are referring to events like potential CME M&A activities and so on, I already said in the past that our objective has never been to become a content creator and content provider. We are rather content distributor and aggregator. And I don't think we have changed this conviction and strategy. So this remains to be the same. We are a telco operator, and I basically have nothing to say to this. You -- definitely those things are not our primary targets. We want to leave all opportunities on the table, but this is not something that we would be really trying to transform ourselves into. Also as I said in the past, we do have some of original or our own content, but this is rather exception from the rule which is related to sports content, and there are some very specific reasons why this is the case. So definitely, I would not go and generalize -- basically try to generalize this into other areas of content creation, which is not our center of competence and which is not definitely somewhere where we want to build our competence in a big way.

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Miroslav Frayer, Komercni Banka AS, Research Division - Equity Analyst [15]

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Okay. And maybe one follow-up question, if you are thinking about potential acquisition, I don't know if yes or not. But if yes, so in which area would be or in which region, if it's only close to the Czech Republic or maybe in, I don't know, South Europe, or what is your thinking about potential acquisition in general?

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Jindrich Fremuth, O2 Czech Republic a.s. - Chairman of the Board of Directors & CEO [16]

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So again, anything we are commenting on are regards only Czech and Slovak. So I think this is the first thing I should say. Second, and maybe I was not clear with my answer, but I didn't say that we are hunting and we are going towards acquisition. What I meant by being opportunistic is we are always open to discussion with anybody, but we tend to stay more to the core of our services rather than to go and explore a completely new and big areas, yes, for many different reasons. So if you look at our activities on the -- in the M&A and, let's say, start-up area, what you will see that we have invested in the past into a couple of rather small companies. But the investments were typically -- not always but typically was basically determined by a target having something to do with our core business, yes? So we can leverage our customer base, we can leverage our core capability. So this is basically a general rule that we have in our heads. Basically, if you invest into something new, how will you leverage it under existing assets and with the existing assets that we have, meaning a huge customer base and distribution network that we have. So this is, I think, the general answer I can give. But again, we stay open to all opportunities, but we are not specifically looking in the direction of media, if this was your question.

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Operator [17]

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Our next question comes from Piotr Raciborski from Wood & Company.

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Piotr Raciborski, Wood & Company Financial Services, a.s., Research Division - Equity Analyst [18]

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Congratulations on strong results. I have a couple of questions. So maybe starting with your KPIs, you've changed reporting of your Czech mobile business. You've shown the mobile -- machine-to-machine customers for second quarter 2019. Could you please provide with us some information how this segment's evolved. I would like just to see whether these end-to-end customers was the main driver of the growth in the segment. And also if you could say what is the ARPU on this part of the business because I've noticed that you stopped reporting the ARPU in Czech mobile business and listing the Excel file.

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [19]

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Okay. Thank you, Piotr. I will cover that area. So first of all, I will comment why we have decided not to provide information on ARPU anymore, and this is not that we would -- we want to make your lives more difficult. We understand it would be better for you if we continue with the practice, but there is pure business reasoning behind that. We are -- or we used to be the only operator in the Czech Republic providing this sensitive information because neither T-Mobile nor Vodafone basically are commenting on this particular financial parameter. And therefore, we would be basically not in, let's say, a favorable position if we do so. So that it was the reasoning behind that.

Now I will comment also on M2M. So first of all, why we have decided to create a new category. So what we can see is increasing demand from our customers, mainly B2B segment at this stage, for machine-to-machine services. And to be brief, this demand and growth of this demand will continue. So this is point number one. Customers, we are basically seeing as the most active are utilities, transport companies and smart cities projects. Second fact is that this M2M, same characteristic including ARPU or spend, if you wish, is different if you compare it to both prepaid and postpaid. That's why we have decided to disclose all machine-to-machine cards in separate reporting category. Regarding dynamics, we applied so-called prospective method, so the year-on-year comparison will be possible from second quarter 2020 on. And maybe last comment on this topic, we see that some other operators already applied this reporting approach as well, and the others are considering the same change. If we wouldn't do so and we would continue with traditional way of reporting, at the end of the day, it would be really misleading also for you. And it would be very difficult to continue with traditional way, P times Q, meaning combining spend or ARPU and combine it with -- or multiply it by number of customers. So machine to machine has significantly lower spend compared even to prepaid, as you know, so that's behind that.

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Piotr Raciborski, Wood & Company Financial Services, a.s., Research Division - Equity Analyst [20]

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Okay. And other question considered Vodafone. You've probably seen a spinning of their towers infrastructure. Do you see some risk stemming out from this fact? Do you think that the new mobile entrant in Czech Republic might -- I don't know, maybe somehow use this infrastructure? Or what do you think about that? And the thing that this might be like a broader trend that comes to separate their infrastructure -- their tower infrastructure from their business.

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Jindrich Fremuth, O2 Czech Republic a.s. - Chairman of the Board of Directors & CEO [21]

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Okay. I'll take this question. So yes, of course, we are aware of this, point one. Point two, you may know that we were the first ones who did this in this market a couple of years ago, and we are actually possibly the first or second market in the world where it happened, and we had our reasons. So yes, it might be a trend. It is nothing new to us, and you can actually see it elsewhere happening. So I would not be surprised if this turns into a more massive trend overall globally. Third point, no I do not see or associate this move of Vodafone to any risk for us. Frankly, I think from their side, but you need to ask them. Then this was driven by a kind of global situation of the overall business rather than a situation in particular country but on -- such as a smaller -- small market as Czech Rep. And therefore, we're not really considering this as to be a potential threat related to the changes on the market in the -- in terms of competitive structure or launch of a fourth operator, no, not necessarily. This is not something that concerns us.

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [22]

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In general, we are actually believers in separation. We understand that business model can create value. As Jindrich said, we created a lot of value by separating infrastructure into a newly created certainly in the Czech Republic. So it might be even, at the end of the day, good for the industry.

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Operator [23]

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(Operator Instructions) We have a question from Mr. Petr from Erste Group.

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Petr Bartek, Erste Group Bank AG, Research Division - Head of Equity Research of Czech Republic [24]

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It's Petr Bartek, Erste Group. One more question to your leverage. If I calculated correctly, the leverage including leases, which would be more in line with EBITDA reporting, is about 0.8x. And if I include the dividend payment, I get to slightly below 1.5x which, if I remember correctly, was still kind of unofficial target for you in terms of leverage. So if you feel any constraints out of that. And also if you can remind us of the loan covenants, how are they structured? What's the level?

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Tomáš Kouril, O2 Czech Republic a.s. - Vice-Chairman of the Board of Directors, CFO & Director of Finance Division [25]

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Okay. Thank you, Petr. I will answer that. So first of all, if we see any issue there, no, we don't, number one. Number two, in your question about the covenants, actually, we don't have any covenant which would consider also IFRS 16. So your calculation, I am not in the position to comment on that because we don't do that even internally. We don't consider IFRS 16 to be part of our leverage even technically you might be right. Some of the rating agencies have their own internal methodologies how to consider those areas, and they actually had it even before adoption of IFRS 16. So it will be an interesting discussion how it evolves. But to simplify for O2 not having anything in terms of funding going to rating or any facility and covenant related to IFRS 16 is not our worry at all. Basically, just to remind you, we have different facilities. Basically, these is the 2 facilities and funding through a crop funding, so relevant banks from -- who are all related banks in the Czech Republic provided us so-called crop funding. And there are again covenants never considered IFRS 16 in that time, so no, it's not our worry at this stage.

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Operator [26]

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(Operator Instructions) We have no more questions for the moment. Mr. Jakub Hampl, back to you for the conclusion.

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Jakub Hampl, O2 Czech Republic a.s. - Head of IR [27]

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Okay. Thank you very much, operator. So if we have -- if there are no follow-up questions, so I would like to thank you for -- to all of you for participation in today's call. And on behalf of the company, I would like to terminate the call. Thank you, and goodbye.

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Operator [28]

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Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.