Earnings Call: Q1 2018

Apr 13, 2018

Good afternoon, everyone. Welcome to today's conference call. And gentlemen, please begin the call. And I'll be standing by for the question and answer session. Thank you. Hi, everyone. Good afternoon. Welcome to Digi.com Q1 2018 earnings call. Thank you for taking the afternoon with us. With me, Idrees Nakul, our CFO and Denis will join me during the call And then we will walk through key highlights frequently. We will then walk through operational and our performance review with a quick 2018 outlook And let me open the floor for Q and A. Mr. Longestat, once again welcome and I would like to report for 2018 Q1 on prepaid mobile Internet revenues, we saw this quarter taking us to 17 point percent year on year growth. Postpaid revenue continues a strong performance with 13.7 year on year growth. That's leading us to the 0.7 year on year total share repurchase. I have been translated 22,000,000 year on year gross profit improvement, a reduction of OpEx, Which is approximately minus 0.8% year on year, including EBITDA growth Year on year at 4.2%. And on the non financial, touching on subscribers, We surpassed subscriber growth on 4 gs subscribers taking into 6,600,000 with adding 405,000 subscribers. My DG continues its performance mainly of outstanding transactions, taking to about 9,200,000. And on spectrum, the reissuance of 2,100 megahertz spectrum Just taking you to the next part of the presentation highlights, just very quickly On 4 gs plus network, we've been able to hit 57% in population coverage for LTE Advanced And on 4 g LTE, we have covered now 88% of population. This has enabled us to do 2 things. 1, to get An average user monthly data usage up to 7.2 gig per user and it's also about The data traffic supported on 4 gs LTE and LTE Advanced. A number of the trends on how people use it It's also shared this time around with all of you, mainly around streaming still takes a bit out of the time. And again just on the spectrum portfolio, we have a portfolio that is shown here enabling us both the investments that we put into the CapEx of the network And the customer efficient delivery that you see, the 2nd portfolio has been very helpful in terms of delivering the 6th grade growth for us. On 700 megahertz, it's not mentioned here, but it's in process at Just on the quarter, a little bit on the quarter, on monetization of the plant growth. I touched a little bit, but let me just recap. We have 6,600,000 4 gs subscribers, driving bigger Internet And monetization, active Internet users stand at 73% of 11,800,000 per barrel base. The 9,200,000 upsell transaction sorry, 19,200,000 upsell transactions that took place on my DG that just shows us the highly engaged Users that we have and 2,500,000 active start might reduce this and this app continues to reach out More people giving them much more control on driving off by independent beta. Both these things give us then a 1.9% Q on Q In fact revenue growth and a 22.5% year on year growth in fact. And Akul, this is my opening issue that will be operational update. Thank you so much, Alvin. Good afternoon, ladies and gentlemen. The next few slides, I'm going to take you a bit deeper into our performance as well as the financial numbers also. Like Alban has mentioned, our focus this quarter, like the previous quarters has also been on how we grow our Internet revenues and our propositions have continued to be focused around driving equipment. As far as prepaid is concerned, in order to drive adoption of internet, we have introduced affordable, bite sized internet passes For the first time users in order to seek them into start using Internet. As far as more mature users are concerned, we are trying to drive Recurring behavior with the help of our big bonus offerings and also our super terror plan, which has a combination of data as well as voice. For Postpaid, we continue to drive record tracking of our existing base through plan upgrades, renewals via the Digi Postpaid family By leveraging on the thank you campaign that we launched in Q1. We're also trying to step up monetization from an existing base And for that we had launched a G Booster upgrade plan as part of our portfolio 41.2018. Move on to the next slide and I get a big deeper into the numbers here. Our service revenue as I mentioned, grew 0.7%. And this, I would like to say, is the first time since the Q3 of 2015 Is when we see a growth in our service revenue. This obviously is fueled by solid postpaid growth and stronger data monetization from prepaid. And as Albin mentioned, the digital revenue has grown 22.5 percent to RMB761 1,000,000. This also offsets The dilution effect from prepaid legacy services and the effects of MTR reduction that was effective 1st July 2018 onward. The ARPU has strengthened to RMB42 1,000,000 sorry, RMB42 on the back of increasing postpaid subscriber mix, Although marginally trimmed through 1Q was a seasonal decline. The next slide, if I get into the postpaid page a little bit more, we have continued the growth momentum on postpaid with the healthy net adds This quarter, which takes our subscriber base to 2,600,000 postpaid subscriber, up 17.5% year on year and 3.7% quarter on quarter. The postpaid revenue has also increased by 13.7% Year on year as well as 1.9% quarter on quarter and the Internet revenue has also shown a good increase. The next one is talking about stronger data monetization On prepaid, however, let me start by saying that the prepaid revenue declined this quarter at 6.4% year on year And a 4.5% sequentially. However, the decline is lower than the 13.1% for the same quarter last year that we spoke. Again, this performance is aided by the strong Internet contribution that we've had despite in the legacy prepaid voice and messaging services and the Q1Q has been impacted by seasonal decline from shorter number of days. We've also seen a strong demand for prepaid Internet passes that led to a high Internet usage. And that's the reason why prepaid today is 44.1 percent sorry, Internet is today 44.1 percent of our prepaid revenue. If I Jump on to the cost and the next slide speaks about the efficient cost management that we've had. The cost of goods sold has marginally increased 0.8% year on year With increase in device cost from the bundled sales that we have done in this quarter and it is significantly Pushed on by the lower traffic cost from the MTR revisions as well as the reduced traffic volumes from the legacy services. The gross profit on a nominal basis has improved $22,000,000 this quarter, 1.8% higher year on year. And this is backed by higher Internet revenue contribution as we mentioned before and also a well managed cost of goods sold We continue to optimize our cost along with increase in the data traffic. As far as OpEx is concerned, it's improved 0.8%. And this is for the reason that we continue to drive OE initiatives To run our cost as efficiently as possible. The next slide, Speaking about EBITDA, the EBITDA has strengthened 4.2% year on year and a 1.4% quarter on quarter. This is also supported by resilient service revenue growth and also efficient cost management. However, the PBT and PAT has clipped 5.7% and 5.6% basis points year on year respectively, accounting for the higher depreciation from the progressive CapEx investments that have been made And also the amortization of spectrum assets that is coming in this year for the 9018 100 mega spectrum, which was now there Last year, the BAB margin stood healthy at 22% for this quarter. The next slide on operating cash flow. The operating cash flow has strengthened 8.9% year on year to DKK560 1,000,000, Which is at a 35% alongside stronger EBITDA and relatively lower CapEx investments in this year versus last year. After the accelerated network deployment in 2017, our CapEx for this quarter is at 181,000,000 Or 12.2 percent of the service revenue and we continue our deployment towards LTE 900 Megahertz site With LTE Advanced and LTE reaching 57% and 88% of the population coverage, respectively, We have approximately 8,200 kilometers of fiber network nationwide. It's also worth to mention that we We'll continue to tap into Telenor Group's synergies on sourcing as well as operating model shift as we try and use the efficient As we try and make efficient use of the available assets that we have to deliver competitive infrastructure and facilities in a sustainable way. Just to take a look at the balance sheet. I'd say the EPS has trimmed slightly to 0.0497 dollars As a flow through from the level of the PAT that we have this quarter, however, the EPS has also seen an uplift of 0.05¢ So 5¢, post the adoption of MFRS fifteen. And I will go through some of the nuances of adopting MFRS fifteen in a subsequent slide. The Board of Directors has also declared the 1st interim dividend of 0.049¢ per share equivalent to 3.81,000,000 to shareholders on 29 June 2018. The net debt to EBITDA ratio remained healthy at 0.8 times, About the conventional debt over the total assets, that's driven to 21%. It was a mention that the balance continue to demonstrate solid financial capability and flexibility to fund immediate as well as future investment and operational commitment. The next slide, just to show you the debt profile that we have. And as mentioned earlier, our conventional debt as a Percentage of total assets is a healthy 21%. And on this note, I would also like to let you know that we have filed our audited financial statements to Persa before 31st March, 2018. Now I'll spend a few minutes to Speak about the impact of MFRS fifteen. And as mentioned earlier, we will give you a pre and post Standard adoption to just make sure that the financial statements are comparable to you. So the numbers that you saw previously were before adopting this standard. This standard basically reallocates revenue between the different performance obligations that There are any contracts, which basically means that the amount allocated to the device revenue increases and the amount allocated to service revenue decreases. Further, along with this, the timing of recognition of the device revenue since it is upfront also means that There is a higher upfront recognition of revenue versus the pre MFR experience. There is also an impact on the contract cost, but I'll touch upon it one time through With the explaining the impact that we have on service revenue and the device revenue. Since this is adopted On a modified retrospective basis, we had to restate the balance on 1st January 2018. And as a result, we recorded a retrospective adjustment of RMB93 1,000,000 to contract assets with a credit or an increase to the retained earnings. Less contract assets basically means that $93,000,000 of revenues should have been recorded higher For all open contracts that were existing as of 31st December, 2017, basically means that the device revenue should have been higher until this period. This contract asset will have a contract to the service revenue in the ongoing Once over the remaining unamortized contract period. Along with this impact, there is also an impact on the contract costs. And the standard basically says that the incremental cost incurred to obtain or to actually get a new customer Can now be amortized over the life of the customer, which basically means that the amount that we have already expensed off into the OpEx Until 31 December 2017 can be brought up on the balance sheet, which means a corresponding impact to the retained earnings of 75,000,000 These two adjustments coupled with the effect of deferred tax has had an incremental effect on the retained earnings of RMB 128 1,000,000 On 1st Jan, 2018. On an ongoing basis into the P and L, as I mentioned, the service revenue It's lower by RMB22 1,000,000 which is on account of 2 effects. One is all open contracts on 1st January will be reversed out The contract asset into the service revenue. And also the new contract that we incur or that we have sold in this quarter We'll also have a higher allocation on device revenue versus service revenue and hence the decline of $22,000,000 At the same time, the device revenue It's going to indicate a $58,000,000 increase versus the pre MFRS period and the net effect On the total revenue is a +36000000. The impact on OpEx is not significant Because the amount that you're incurring on acquiring a customer is quite close to similar to what we are incurring now, hence the catch up effect is not going to be On a net basis, the impact on EBITDA and profit before and after tax is $34,000,000 or a 1.1 percentage point improvement in our margin. This obviously goes down into our operating cash flow as well as an increase of 0.05 dollars into our EPS as well, which I mentioned to you a few minutes back. I think that's it from me. If I give to Alvin to about the guidance for 2018. Okay. Thanks, Nakun. Then just wrapping up here with the last For 2018 guidance, we remain and special focus in a couple of areas. 1, committed to continue to drive The revenues from core telco revenue streams and Solvayner's focus on performance, the cost agenda will remain as that gives us Sustainable and efficient cost structure is very forward. The focus areas will continue to be built on at the start of the year And also for 2017, it's a continuous focus on Sysina Postpaid and Enterprise revenue growth. Now on the patients' subscriber growth, it is driven mainly allowing to adoption and the advantage both to the patients and migrate. And For those who need to list monetize data and to grow in the revenue. When it comes to digitization of the call, We've seen a good progress in 2017, continue to see that in 2018, at least 1 and the ambition level there is The way we treat and manage our customers on the digital front and making digital customer experience a major differentiator for us. I am on mute of the streams are visual to see the progress and look for new opportunities in that space. With that, I would like to And our first question is come from Prem from Macquarie, Hong Kong. Prem, please go ahead. Hi, thank you for the opportunity. You. Two questions from me, pretty much around accounting. First of all, with the MSRS 15 accounting standard And that increase in the retained earnings, is there now going to be an increase in the cash tax Payments because you've now got this higher retained earnings coming through the balance sheet. So do you attract the cash tax on that one? And number 2 related to that is, does this increase in retained earnings then allow you to pay out more in the form of dividends going forward, essentially that $128,000,000 left. So that's one. And secondly, with regards to your depreciation and amortization, We're right in assuming that this quarter, not only did you have the remnants of the old 2,100 megahertz spectrum amortization Together with the new fee because that amortization number I suspect has jumped as well. If you could give us some color on What the breakdown between depreciation versus amortization was in that DNA that will be very helpful. Thank you for the question, Prem. I'll take the first one. This is Nakul. This is on the impact of MFRS 15 and the increase in regained earnings and the impact on tax payments. Our interpretation is that there is no change in tax profit. And only the change is on account of timing and And hence the current and deferred tax adjustment that we've had on the impact of the retained earnings here. This is something that we need to look and see How it is taken up by the tax authorities and we will probably see what needs to be done yet. But so far, Our assessment is the impact on EBITDA slows down to the profit before tax and the profit after tax as well. That's one. The one on higher retained earnings and probable dividend payout, which will be higher or not. This is something that again we have to assess As a going forward basis, so far we continue with the same basis that we have on paying which is based on our net profits and our dividend policy of paying at least 80% of our net profits that we Yes, 3 quarters. This is something that we will monitor and update over the course of the next month. Sorry, could you just interject there? Does it's not whether you will or not, but does it allow does the Change in this MFRS 15 or the changes brought about by MFRS 15, therefore, allow you Legally to increase the payment of dividend because otherwise you are limited to 100% of current earnings. Now essentially you have an extra 128,000,000 Could be pumped up to shareholders if the Board approves? Yes, to answer your question, it is yes, And perhaps for the third question with regards to the From amortization, I think the question on the 2,100, that is only secured recently and the start date is 1st April onwards. So the total one time fee was RMB150 1,000,000 over 16 years. So 1 quarter is roughly around RMB2 1,000,000, but that Amortization has not been started yet, so it will be only in quarter 2. But if I may just add, the higher amortization in this quarter versus the same quarter last year because of 91800 Megahertz that was available for us on the 1st July 27. All right. Thank you. And our next question is coming from Feng Chan Cheng from CIMB Please go ahead. Hi, thanks for the call. Three questions from me. Firstly, the O and M cost was down a fair bit. What drove that and should we look at the Q1 O and M cost as the run rate going forward? Secondly, on the prepaid revenue trend that's still coming off, do you can you share what the Prepaid revenue would look like if we were to exclude out the effects of pre- to post date migration? And also when do you see data revenue growth offsetting declining legacy voice and SMS revenues? And then my third question regarding the EPN uplift post the MFRS, I just wanted to ask whether that's permanent or is that a Timing, is there a timing factor to that? Yes. Those are my 3 questions. Thank you. Phong, can you please repeat your third question please? Yes, the first question regarding the EPS uplift post the adoption of MFRS fifteen. I'm just wondering whether that is Permanent or is there a timing element to that meaning to say, it's because you can basically amortize Your device cost or your subsidies, so going does it mean that, yes, we see this uplift now, but then in the future quarters, When the subsidies then are charged out, then your EPS may be a bit lower than what it would have been under the pre MFRS Okay. Thank you for explaining your question again. I will take the first and the third and I'll request Alvin to step in for the Your first one is on the O and M cost being lower. I think as we mentioned in the past, It's because of the series of OE initiatives that we have been running over the past few months and quarters. Whether this is something as a trend that we expect in the quarter going forward, we do not guide on Specific items on cost on a quarter on quarter basis. And hence, it's difficult for me to say whether this is the trend going forward or not. However, as we mentioned, We're going to continue to work on the OE initiatives and also the structured way of how we have been delivering on the O and M cost the other elements of cost as well. The third question that you have on the EPS lift post MFRS fifteen, Actually, there's no straight answer to this one, but let me explain it a little bit. The impact of the standard It depends on what kind of contracts or what kind of bundled contracts are being sold in the respective quarter. While we have visibility on what happened in Q1, it's actually difficult to predict what's going to be in Q2, Q3 and going forward because we don't specifically return on our strategy on what On the existing contracts, since there is an upfront higher recognition of revenue And towards the end of the contract, obviously means the recognition of revenue goes down, which basically says that the overall cash that we receive in the transaction doesn't change. This impact will obviously be offset with the new contracts coming in. So as the tail end of the existing contracts come, The new contracts coming in and this will basically offset the 2. To the extent to which these 2 will be offset is dependent on how many bundle contracts are sold subsequent quarters, which is very difficult for us to predict and guide on right now. Hi, this is Alvin. Just on the second question on prepaid decline, just to be capitalized by Great question. On prepaid, as we talked about previously, prepaid decline is mainly coming from some of the core traditional voice services and IDB. And we had an intention that basically smoothly from non profitable So we were not surprised to see that. However, as Nakul pointed out, we see that the reduction year on year I think that basically was questioned by Then coming to your question, which is if you ask if you exclude the proposed, I won't ask, can you give me that So guidance now, I can tell you that I think we've told you before which is about 30% of the base is coming from pre disposed and that is a good Good run rate for us because that makes you actually look spend of the customer within the postpaid. When it comes to Mi, We already are seeing Mi and traditional voice almost at a close to 50%. And for me that is the reason why we continue Right. Mi usage and also things like MiDG is reaching out to the customer service to be able to further push Yes, okay. Just a follow-up question. On the O and M cost for Panacol, were there any one off in the quarter that lowered the O and M cost? That's my question. And also we have a post MFRS guidance for FY 2018? Yes. I think there is a one off, Which is a catch up on the OE initiative that you've taken that has an impact on the current quarter cost. But also I would like to say These are structural cost savings that we're going to see in the subsequent quarters as well. However, the impact that we had in this quarter is slightly higher than current quarter impact itself. Okay. And Post MSRS, the guidance for FY 'eighteen, do you have that? We don't guide Post M and CAR S fifteen because we want to make it very comparable to what we have in 2017. So as we had given in the last Before call, we will guide it only based on the pre MFRS scenario. Okay. And in subsequent quarters, you will continue to provide the pre MFRS financial numbers? Yes, that's right. We will transparently give a comparison between 3 and 4 MFRS on all quarters when it's going to have an impact for Okay, got it. Okay, thank you so much guys. Thanks, Paul. Thank you. And our next question is come from Wu Wei Qing from BNP Singapore. Please go ahead. Thank you. Some of my questions have already been asked, but I would like to dig a little bit deeper into the operations and maintenance Question post earlier. Specifically, can you talk in more detail around the initiatives Around operations and maintenance as resulting in the cost savings. And related to this, Could you give us an indication of what the operations and maintenance costs in Q1 2018 would have been without the What you mentioned what Naku mentioned, the one off saving in the first quarter? Thank you for your question and your interest in getting a bit deeper into the O and M cost. This basically, I mean, if I have to explain what kind of thing that has been done on O and M, It's basically on optimization of the site rentals because that is one of those most significant items into our O and M bus. And hence, I say that it has some amount of catch Adjustment and also the subsequent benefit that we get from negotiating the good site rentals as well. What this amount would have been had it not been for this adjustment is something that we do not specifically guide on and we do not Okay, got you. And if I can squeeze in a second one, would you care to share some of your Strategy around the Enterprise segment and any specific initiatives there, please? I think on Enterprise segment, as I mentioned earlier as well, this is one area that we have not been very, very active And we certainly see that this is one of the important areas if you were to focus and we see growth in the subsequent quarters. Right from making sure that we have the right product and proposition in place, for example, with the fact that we have 900 megahertz of spectrum already available with us, We definitely have a good quality network that we can shout out. Along with this network, what we also have is a host of other capabilities Besides only offering standard connectivity to the customers. And here with the digital services that we have in place, For example, the high fleet solutions or the payment wallet of vcash and also some of the state of the art You think HR services that we've already launched, this actually gives us one important lever with which We can go out to all of these all the SMEs and approach that DG means business now. And that's why along with connectivity, you should give us other services as well. Our investments into the CapEx over the last Few months quarters are definitely being dividend with a better quality network and more seriousness from the SMEs to Actually, take interest in us and hopefully in the months to come have an update on our end. Thank you very much. Thank you. And our next question is come from Arthur from Singapore and Alpha. Please go ahead. Hi, thanks for the opportunity. Just one question for me please. If you can get some color with regard to the shift back to revenue growth, We're actually seeing more stable momentum across the industry with easing competition driving this? Or do you think you're actually gaining share, Especially on the postpaid side, it is helping drive growth. Thank you. Thank you for the question, Arthur. We definitely see a good momentum as far as our performance is concerned. However, we still believe that the market situation is as per it was in the previous quarter, which is that it remains challenging. What we can say is that we will continue to shift on what we sorry, we will continue to deliver on what we have done in the past. And as the customer behavior shifts from legacy services into more of prepaid, we will make sure that we are equipped well enough to offer good quality So the customer and grow the Internet revenue, sorry, not the prepaid, but grow the Internet revenues. And that's something we will continue to focus on. It's very difficult to say whether this growth is at the expense of somebody else in the market. But what I can definitely guide on is that we are in a good momentum as far as delivering on our strategy as well as on what we have set out Sometime in the beginning of 2017 to do. So we'll continue to do that even better going forward. Understood. Thank you very much. Thank you. And our next question is come from Alex Goh from Aon Bank Malaysia. Please go ahead. Thank you very much. I just want to follow-up on the question on MFRS 15. It's just I just want to understand The $34,000,000 increase in your net profit post MFRS fifteen, is this Something that is going to recur every the next three quarters or is it a one off, Assuming all things remain the same. Yes, that's my first question. And my second question, I understand on O and M side, there is and answer session. One off item, but what about the other items in terms of the traffic cost that has gone down about $30,000,000 in quarter on quarter as well as That has some impact as well. I noticed on your sales and marketing. How much of that reduction in cost is that Sustainable. Thank you, Alex, for your questions. I will take these both. I think for the sake of not repeating myself on MFRS fifteen, what we can offer is that in case any of you is interested in getting a bit deeper into how the standard is implemented and what is the impact on our financials, We will organize a session with all of you into our headquarters and we will invite you if you can please go ahead and Register your interest with Vinnie and we will walk you through the standard in detail. Because even I can understand it's not very easy to interpret Times the numbers over a phone call. So I mean, while it's taken us some time to make sure that we are on top of this, we'll be we also The fact that it is a lot of information to take in a half an hour, 45 minute phone call. So if you can register your interest with Vinnie, We'll be more happy more than happy to walk you through the impact of the standard and what it may entail for the future as well. What it also means that the standard does not change the cash in the transaction. So while it's an accounting adjustment, It doesn't give the higher cash from the customers to us. It's just a reallocation of revenues Between the devices and the service revenue and since the device revenue is recognized upfront, there is a higher recognition for all the new contracts versus what it was previously. On your next question, which is on the COGS, I think, I mean COGS has an impact on account two reasons for us. The first one is definitely because it's lower because of the MTR division that actually happened on January 1 this quarter. And also the fact that there is reduced traffic volumes The legacy services actually gone down. I mean, we all know for a fact that the ITT business, As also Alban mentioned, we didn't have the highest margin and we decided consciously Not to play the price game there. So any shift from the IDD business to the Internet business definitely has an uplift on our margin That's what you see as well. So these are the 2 impacts that are there on the box ending. Difficult To indicate what is the specific amount for each initiative. However, what I can say that The impact of the MTR reservation is not significant on our gross margin. Okay. Thank you so much. Thank you. And our next question is come from Ranjan Sharma from JPMorgan Singapore. Please go ahead. Hi, thank you and good afternoon. Couple of questions from my side. Firstly, on your Internet users, there was a slight decline quarter on quarter. If you can just explain that? Secondly, on have you seen any increase in competition for the customers which are moving from Prepaid services to postpaid services, I know there have been some is hybrid postpaid kind of plans been introduced in the market. So if there's any impact that you've seen from like March onwards? Yes, I think I can stop here. Thank you. Hi Rajan, thank you for the question. Just on the Internet user decline Q on Q, actually that's more Now coming from Q4 where we had a slightly larger base and activity and fastest, so that's quite normal and we've seen that On the second question, now that you see more pre proposed movement and whether you then see more Especially on the postpaid with the introduction of new different kinds of new offers in the market. I think that will always be there, Rajan. I think our approach to that is to make sure that we are finding the right customers on a pre disposed Basically, our customers are already happy to know what plans they are on the prepaid side and what would be the matching On the post, what we do see is positive that by the customer ends up basically moving into a higher plan Because of the high usage of the trends that are going on. And I think our competition and we will always find new office in market as we focused on to All right. Thank you. Thank you. And our next question is come from Gokul Kumar from Nomura Singapore. Please go ahead. Hi. Thanks for the opportunity. A few questions. Firstly, the O and M expenses, I'm not sure if you mentioned this, But do you expect the current lower cost run rate to continue going forward because of the savings that you've got? 2nd is when subscribers move from pre to post like you mentioned, what sort of ARPU upside are you seeing? Thirdly, on the guidance, we have gone back to the revenue growth in this quarter, But your guidance still remains the same, flat to slight decline. Why would that be the case? Thank you. Thank you for your questions. I think I did mention Quite detailed about the O and M, but just to give you a brief, there are some savings that we have done because of OE initiatives that we have run over the past few quarters, which has definitely seen some traction in the O and M cost. We do not guide on Specific cost elements in the future. And hence, it's actually difficult for me to say Whether the cost is going to be entertainment as you see now. We will continue to build to deliver on the OE initiatives as well as Structural way in which we try and manage cost. And as mentioned earlier, the O and M reduction is coming on account of optimization of site rental expense. This is the bigger portion of our O and M cost. Your second question on pre to post, yes, there is definitely There are no upside on pre- to post migration. However, because of competitive reasons, we do not disclose the impact. But yes, I can confirm here that there is an incremental impact effect on our revenues well as on our ARPU when we move from 3 to 4. As far as our guidance is concerned, I think, I mean, you will appreciate that this has been a good quarter for us and we have kept it and we are quite happy with that as well. However, the market For us continues to remain challenging. There is a shift in customer behavior that we've seen in the past We will probably see the future as well as the legacy services will continue to decline and we will endeavor our level best to make sure that we offset It's with the growth in Internet as what we have seen in the past. I think it's quite difficult for us to give you Any judgment based on a change in our guidance looking at 1 quarter alone? So we will have a look at it in great detail We'll come back to you by the end of the second quarter, whether there is some adjustment that need to be made here or not. And I'm being absolutely honest with you, if Thank you. And our next question is come from Srinivas from Deutsche Thanks, Singapore. And please go ahead. Yes, hi. Srinivasan, if you can hear me. Mike, questions are 2 fold. 1 on the overall sector revenue, are you seeing any Hi, Jenny. Can you hear now? Is it better? Yes, better. Thank you. Okay. Yes, sorry. So I was saying first on the sector revenues, if you can throw some light as to if there is any relative improvement in the sector revenue Landscape, is there a bit more buoyancy are you seeing or that's not the case? My second question, I'll just go back the O and M, I want to, and Rahul did mention, one that there is a bit of some runoff left in terms of the Legacy contracts. So does that mean that after some time we will see the O and M number reset to Slightly more lower numbers than what we are seeing now? That's the first question. 2nd, when you say optimized site centers, do you mean basically you managed to kind of Lower site rentals negotiated, is that what we should kind of take it at? And I just want to check, you have bilateral, I mean, you had bilateral on a couple of sites. So is that still where the rentals are or something else? Do we have conflict? You have some feedback on that. Yes, Sreedhar, just on the first one very quickly before I go talk Just on the sector revenue, I won't be able to comment on relative general improvement in the landscape, but what I can comment is that at least we See that the customers are willing to move up when they see value and that can be seen on the pre to post migration and also on the pre It's right where we start to go back to our own base and start to look at outstanding cost selling. And that To your second question, Srini, on the O and M, I think what I will mention here is that this is something that we have always or we continue to do over the last quarters as well We know that one of the most significant portion of this is actually the site rentals, and that's something that we have always tried to negotiate to the best possible way. So I mean for us for me to comment whether this cost per site is going to increase or decrease is actually quite difficult because it is The effect of a lot of market factors, Derek. However, what I can say that what has been negotiated is going to remain with us for the time that the contract is And is it possible for you to repeat your third question please? Sorry, gentlemen. Is coming from Ping Yu from Deutsche Bank, Singapore. This is Shiny again. The line got disconnected. Sorry about that. Junit, this is Talis. How much did you hear and how much No, no, I got the full one. I got the whole don't worry, I got Okay. All right. It's all okay. My third question was on the sites which you had bilateral, where you have some bilateral agreements By that, it was sharing with other operators. So is that the fall in rentals linked to those or it is 3rd party towers which you have hired? Actually, no, Juni, it's not. But Sharing is, as you know, in a lot of markets and even BGN and others have done it, sharing is a way of better optimization. So that will always continue to be. Okay, fine. Understood. Thank you so much. Thank you. Okay, I think There's no more questions. With that, I would like to thank everyone for taking the time, for dialing in and also for the very good questions. Thank you very much And we'll talk to you soon. Thank you. And the conference call has been concluded. Thank you for your participation.