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Mobile TeleSystems PJSCÂ (MBT)
Q4Â 2019 Earnings Call
Mar 12, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Dear ladies and gentlemen, welcome to the conference call of Mobile TeleSystems. At our customers' request, this conference will be recorded. As a reminder, all participants will be in a listen-only mode and after the presentation there will be an opportunity to ask questions. [Operator Instructions]
May I now hand you over to Polina Ugryumova, Director of Investor Relations, who will lead you through this conference. Please go ahead.
Polina Ugryumova -- Director, Investor Relations
Welcome everybody to today's event to discuss MTS fourth quarter and full year 2019 financial and operating results.
As usual, I must remind everyone that except for historical information, any comments made during this call may constitute forward-looking statements. Important factors could cause the actual results to differ materially from those contained in our projections or forward-looking statements. This, in turn, implies certain risks and more thorough discussion of which are available in our Annual Report or 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. You can find copies of the presentations and materials used in reference in this conference call on our Investor Relations website.
Finally, I also wanted to highlight that following the sale of our operations in Ukraine in December, we have retrospectively restated all eight quarters in 2019 and 2018 in our summary of financials. The impact from our activities in Ukraine has now been reclassified under discontinued operations in our Group profit and loss statement.
Now back to our results. Today's presenters are Alexey Kornya, President and CEO; Slava Nikolaev, First Vice President for Customer Experience and Marketing; Inessa Galaktionova, our First Vice President for Telecommunications; and Andrey Kamensky, Vice President for Finance.
Now, I will hand over to Alexey to kick us off.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Welcome everyone and thank you for joining us. Before we begin, I wanted to say just a few words on the recent developments. As you know there has been some significant socioeconomic news over the past several days. Naturally, this has led to market uncertainty. While the situation continues to evolve, we remain focused on what we can control and confident in our business looking ahead.
On macroeconomic side, our prudent financial approach largely protects us from currency volatility. We have limited forex exposure in terms of debt and we also actively use derivative instruments to minimize risk related to forex volatility.
On the current [Indecipherable] situation, we are monitoring the global developments and taking appropriate steps to protect our employees. We believe our sector is resilient, and even more importantly, has a much needed role to play in helping travelers, businesses and families keep in touch remotely.
Now, turning to today's agenda, I will begin with our performance in 2019 and some of the strategic highlights for the year. Slava will then take you through our recent ecosystem news and Inessa will give you telecom business update. Finally, Andrey will go over financials before I wrap up with outlook for 2020.
As you may recall in third quarter, we upgraded where we wanted to be at the end of the year and we largely hit all those targets, bearing in mind that the guidance we gave included the now deconsolidated operations in Ukraine. Extrapolating for the full-year impact from Ukraine, we estimate Group revenue in 2019 would have grown more than 7% versus 2018. On a similar basis growth in Group adjusted OIBDA would have fallen within the middle of our guidance range of 4% to 5% based on our projections.
For the year capex came in at RUB91.5 billion. This was principally in target as we continued to heavily invest in network development. All together in 2019, we added nearly 23,000 base stations in Russia. Finally we also followed through our commitment to reduce our retail footprint by at least 200 stores in the second half 2020.
Turning to our 2019 financials, as Polina mentioned we have retrospectively deconsolidated Ukraine. This aimed at providing a more transparent view on the performance of our continuing operations. On a like-for-like basis, revenue in fourth quarter was up more than 4% year-over-year to reach RUB127.1 billion, driven by core mobile connectivity and MTS Bank. Overall, we successfully carried out momentum forward and delivered a solid close to 2019.
For the year annual Group revenue was up 5.5% year-over-year to RUB476 billion and we saw year-over-year growth in mobile revenue in all four quarters as well as a strong top line contribution from MTS Bank. This illustrates how we are successfully maintaining a solid core business while also moving beyond connectivity.
In fourth quarter Group adjusted OIBDA was roughly flat year-over-year with a few one-off negative impacts that Andrey will talk about in more detail. For the year we saw solid adjusted OIBDA growth of 2.8% year-over-year to RUB210.3 billion. Despite facing regulatory headwinds, the primary driver was core connectivity with an additional contribution from MTS Bank.
Finally we made multiple big strategic moves in 2019. Geographically we derisked our international exposure and sharpened our focus on our core market. Organizationally we revamped our structure around four business verticals supported by horizontal enabling functions. Strategically we laid out a vision to build a digital ecosystem on top of our strong telecom foundation.
Operationally we made progress on rightsizing our retail footprint to drive long-term value creation and financially we further optimized our debt portfolio and kept a laser focus on cash generation and shareholder returns. Overall, I'm encouraged by the pace and progress of our execution on the strategic initiatives and I'm confident these steps are positioning the Company for long-term success.
With that, I will hand it over to Slava for a marketing and ecosystem update.
Vyacheslav Nikolaev -- First Vice President for Customer Experience and Marketing
Thank you, Alexey. In the middle of last year, we took a bold step to begin refreshing our Company branding. We launched a cleaner, more contemporary visual and we took an extensible approach to better accommodate our expanding product lineup. We adopted an umbrella brand that easily adapts to a wide range of formats such as vertical content for smart devices. We began rolling out last year and we immediately saw good results in our advertising service. We've continued to make progress and I'm happy to report, we are also seeing positive dynamics in our overall brand health tracking.
At the beginning of this year, we saw a further increase of our NPS and according to our analysis, we have retained and even improved a solid lead among the big three operators in Russia. Looking ahead, our brand favorability is a critical enabler as we move into new product segments. We are very happy with the new style and we are confident we are headed in the right direction as we are seeing good reception in the market.
Recently, we took another ambitious step by setting up a new unit for our live content, MTS Entertainment. This will be distinct from MTS Media, which covers video and music. We have several entertainment projects in the works in partnership with even [Phonetic] agencies and performance. Later this year, we'll be launching our flagship branded facility in Moscow, MTS Live Arena. This will be one of the premier concert venues in Moscow.
We are also partnering with a couple of other sites in Russia. Strategically entertainment has a lot of synergies with our ticketing business too. And it helps us engage younger audiences and energize our brand perception. Content wise, I think I can safely say that we have a strong lineup in the pipeline. We are excited about these opportunities and we have high expectations and we are off to a strong start.
I also wanted to briefly go over the steps we're taking to revamp the way we approach product development. One of our competitive advantages is our capabilities in in-house app development, everything from the back-end to the front-end. We started down this path a few years ago and we've really delivered. Today we have dozens of polished [Phonetic] popular apps and in Q4, our anchor app MyMTS surpassed 20 million monthly active users. But we are not stopping there. At the organizational level, we are improving our approach to product development.
Historically, we've had multiple product teams working independently. However, this can sometimes pose challenges in terms of ensuring compatibility and consistent look and feel. To help address this, we have now rolled out a unified quality control system across the Company and on the back end we've -- we are combining our efforts to build out modular capabilities in areas like client ID, login, payment and others. These steps have multiple benefits. First they help ensure consistent and seamless user experience; second, they give us plug-and-play building blocks that can speed up product development; third, they give our partners a standardized technical interface; and fourth, they provide us with a deeper insight into subscriber economics long term. Ultimately that insight will allow us to take a personalized approach to marketing. So overall, we are enhancing the ways we engage with customers. We are expanding our channels for interaction, both on and offline and we are putting the customer at the center of everything we do to provide a more compelling and engaging experience.
Now, let me hand it over to Inessa for a telecommunications business update.
Inessa Galaktionova -- First Vice President for Telecommunications
Thank you. Slava. I will begin with overall Russia results, and then walk you through our performance in connectivity by segment. In Q4 Russia revenue was up 3.9% year-over-year to RUB126.2 billion, driven by MTS Bank and mobile services. Adjusted OIBDA increased 0.5% year-over-year to RUB53.3 billion supported by top line performance. For the year Russian revenue grew 5.5% to RUB472.6 billion and adjusted OIBDA was up 2.5% to RUB214.6 billion. Adjusted OIBDA margin in Russia stood at 45.4%.
Turning to connectivity. In Q4 mobile services revenue grew accelerated by 30 basis points versus Q3, up 3.3% year-over-year. This partly reflected ease in comps. In particular in Q4 the cancellation of the majority of on-net roaming in fall 2018 became fully priced into the base. Importantly, we also continued to see positively subscriber dynamics. We had 1.1 million total net adds in 2019 reaching 79.1 million subscribers at the end of the year. Furthermore we also continued to see promising trends in customer loyalty. In particular we had robust long-term retention dynamics for subscribers who remained with us for more than 12 months. This is a promising indicator as we work to cement our customer relationships.
Along those lines we continued to make strides in growing connectivity convergence. In 2019 we more than doubled the size of our convergent customer base, reaching 1.2 million convergence subscribers across mobile, fixed line and satellite, and we have ambitious plans to significantly increase penetration going forward.
Turning to retail. After several years of rapid sales growth, we experienced flattish performance in 2019. The dynamics in Russia are largely in line with global trends. Market research indicates worldwide smartphone shipments declined in 2019 for the first time in more than a decade. For the year we saw sales of handset and accessories down 1.6% to RUB58.9 billion. At the same time we saw strong performance in online sales volume, which were up around 15% year-over-year in 2019 to RUB8 billion. Taken together, these signals reaffirm our strategic logic to rightsize our footprint for today's market.
As Alexey mentioned in the second half of 2019 we reduced our network by over 2,000 stores and we're continuing to take further steps this year. So far we're on track to reach our target up to 400 additional net closure by the end of 2020.
Having said that, on the competitive side, we're seeing some mixed signals. We're closely monitoring the evolving market situation and we will decide on further action in due course.
Looking ahead, our top priority will remain the primary channel for high quality face-to-face customer touch points. To that end last year we announced plans to revamp our retail network. This is aimed at providing a more convenient and more engaging shopping experience. We are now in execution on that plan.
In terms of attrition we are improving our IT and CRM systems. In terms of design, we're moving toward launching new store format. And in the terms of products, we are expanding our offering beyond connectivity. A good example is the financial services. Today over 1,000 of our stores are equipped with ATM or payment terminals from MTS Bank. And we have plans to significantly increase number this year. In addition, we have verified the identity of 4 million customers through our retail network. These users can apply online for an MTS Bank card product and if approved immediately begin making contactless purchases [Indecipherable] all without even stepping foot in a bank branch.
Overall we're making great progress in retail and we see that reflected in the figures. In 2019 we saw an overall strengthening of our CMBS [Phonetic] through the year, starting from around 60% in January to reach a very solid 65% by December.
Turning to B2B. This is already a significant segment for us with annual revenue of more than RUB65 billion across connectivity, integration cloud and other services. At the same time we're starting from a low base and we see significant room to grow up our market share. A good example is in B2G. Last year we won our first major B2G center to bring connectivity over 5,000 government facilities over three years. Project wise these enable us to expand our fixed line infrastructure and they demonstrate our commitment to help every Russian citizen benefit from the digital economy.
Finally, a few comments on our foreign markets. In Armenia we continue to face regulatory and competitive headwinds, while revenue for the full year was down 2.2%, OIBDA increased by 0.5% supported by double-digit growth in the fourth quarter. Belarus also continued to see solid performance with revenue and OIBDA up double digits for both the quarter and the full year.
With that, let me hand it to Andrey.
Andrey Kamensky -- Vice President for Finance
Thank you, Inessa. I will start with a few highlights from the bank, then I will turn back to Group results. 2019 was the first full year of consolidated operations for MTS Bank and our efforts are beginning to bear fruit. Since consolidation the bank has been a significant acceleration in growth, testament to the progress we are making on our fintech strategy. For the full year 2019, our loan portfolio expanded by 44%. That drove 21% growth in net interest income despite a declining interest rate environment. The bank also saw a solid net profit performance, reaching RUB1.3 billion for the year.
In line with our strategy, retail loans were our primary growth driver. In total for the year, MTS Bank issued more than RUB100 billion in retail loans with the overall retail portfolio increasing by 73%. Moreover, we made solid progress in expanding our customer base, which reached 2.1 million bank clients by the end of the year. In the long term, we continue to target 10 million financial service users, including bank clients. Our progress to-date gives us confidence in reaching the target.
Coming back to the Group, a few comments on adjusted OIBDA dynamics. In the fourth quarter adjusted OIBDA grew 1% year-over-year, which was somewhat slower compared to top line growth. This was largely due to year-end provisions related to MTS Bank as well as bad debt allowances recorded by us in the third quarter. In addition, there was a high base effect given very strong adjusted OIBDA performance in the year-ago quarter.
For the year, adjusted OIBDA was up 2.8% versus 2018. Group net profit reached RUB54.2 billion including discontinued operations in Ukraine. For the full year, net profit nominally increased eight times year-over-year, which largely reflects the provision in 2018 related to the SEC/DOJ investigation.
On a like-for-like basis, we saw a strong positive contribution to Group net profit from our continued robust core operating performance. At the same time, net profit was negatively impacted by two other factors. First was an increase in interest expenses. While some of this reflects the higher run rate in underlying financing costs, roughly half came from non-cash impacts related to IFRS 9 reporting requirements. Second, we also saw an impact from operations with the hedging instruments amid the strengthening of ruble environment in 2019.
In addition, we recorded non-cash fixed losses from depreciation of the ruble. For example, the cash received in US dollar from the sale of Ukraine declined in ruble terms toward the end of the year. We regularly carry out derivative transactions with the aim to manage our financial position and we believe recent external developments confirm the logic of our approach. Overall, we are confident that our underlying profitability remains strong reaffirming the health of our core business.
Turning to capex, total spending for the year amounted to RUB91.5 billion, marginally above our guidance of RUB90 billion. In 2019 we continued to actively invest in developing our network, which is the strategic foundation of our brand favorability, customer satisfaction and long-term business success. Excluding the SEC/DOJ payment and cash received from the sale of the Ukraine operations, underlying free cash flow in 2019 increased by 34% to RUB73.6 billion versus the prior year. This was supported by strong cash generation in our core business. In addition, there was a lower base effect due to relatively higher acquisition activity in 2018. 2019, the total impact of MTS Bank on Group free cash flow was largely neutral. Overall, our free cash flow performance confirms our continued ability to generate cash and return it to investors.
At the end of the year, net debt to last 12 months adjusted OIBDA stood at 1.5, excluding the effects of IFRS 15 and 16. In 2019 we also actively moved forward on optimizing our debt portfolio. Russia has a very active local bond market providing a powerful lever in refinancing. In the previous year we issued seven series of local bonds on MOEX totaling more than RUB70 billion. These were long term issuances of up seven years increasing the tenure of our overall portfolio. And over the course of the year coupons for new issuances declined by more than 200 basis points, lowering our cost of financing. Overall, we have solidified our position and have already today nearly covered our entire funding needs to refinance debt maturing in 2020.
Now I will hand back to Alexey for his closing remarks.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Thank you, Andrey. As I said earlier, I am encouraged by the pace of our execution and performance in 2019. We entered 2020 from a position of strength and we feel there is a stable growth potential going forward. Looking ahead we are already seeing positive pricing dynamics and additional room for retail optimization. Given this context, we are forecasting Group revenue to grow around 3% in 2020. At this stage, we expect OIBDA to remain roughly flat, although we are aiming for some upside.
For the year, we expect capex to come at around RUB90 billion including data storage investments with the reduction of spending from Ukraine offset by an expected revamp in new growth areas. This guidance is based on our best view of the world today. We see a number of positive trends such as growing data consumption in a rational competitive environment at the same time we may be impacted by macroeconomic forces and other factors outside of our control. That said, we believe we are in a secured position and I am confident in our ability to adjust and adapt as necessary.
Last but certainly not least, we remain focused on generating attractive returns for our investors. In particular, I am pleased to note that in 2019 we slightly exceeded our first-year commitment under our new dividend policy. In total, we returned around RUB67 billion to shareholders last year while including buybacks on top of our regular dividend payments. And in first quarter this year, we paid a special dividend that was roughly equal to half of the proceeds from the sale of our Ukraine operations. Following the Ukraine divestment, core free cash flows are likely to be somewhat lower in the near term. At the same time, our solid track record and outlook in Russia give us full confidence in our ability to fulfill our dividend policy going forward. Moreover, we believe our steady performance stands in contrast to recent dynamics in our share price, which now looks undervalued. As a result, given our strong cash generation, we are considering launching an additional RUB15 billion buyback program. We plan to ask the Board to consider this matter in the near future.
Last year, we laid out our new vision and strategy for the Company. It has two pillars; world class connectivity and digital upside. We have all the ingredients for success, the right resources, the right partnerships and the right people. This is a multi-year journey; we are still at the starting line but I am excited and confident about our future.
Thank you. And let's open up lines for questions.
Polina Ugryumova -- Director, Investor Relations
Operator, we're now ready to take questions.
Questions and Answers:
Operator
All right. Thank you. [Operator Instructions] And the first question we received is from Mr. Tiron of Bank of America Securities. Your line is now open. Please go ahead.
Cesar Tiron -- Bank of America Securities -- Analyst
Yes, hi. It's Cesar from Bank of America. Thanks for the call and the opportunity to ask questions. I have three, sorry about that. The first one is your flat OIBDA guide versus the 3% revenue growth. Can you please explain if you already assumed some retail optimization into the OIBDA guide? And how much you've assumed? The second one, I wanted to ask what FX have we used for your capex budget? And do you see any risk in spending more than RUB90 billion if the ruble depreciates to RUB92 a dollar, for example. Or would you in that case just reduce the amount of dollar capex you spend? And then the third question really is on your comments on the buyback. Can you please explain what drove the decision? What can be the size? And also, if you can link it to the shares that you have in treasury, are you not concerned that if you buy back more shares and don't cancel them, that would create some concerns in the market? Thank you so much.
Andrey Kamensky -- Vice President for Finance
This is Andrey, I will take the first two questions. The first question was about OIBDA guidance, I just want to confirm that this guidance included the retail optimization that Inessa talked about, that we had in mind. Your second question was about a fixed FX in capex budget. Currently, I just want to say that as I already mentioned, that we're quite actively using our hedging instruments to not to have FX exposure. We don't have a FX exposure in our debt and actually, I think the major part of our capex fixed is already hedged. And at the moment, it's pretty early to actually to speculate on what can happen depending on the fix, so we are pretty comfortable at the current situation that we will deliver, not only the amount of the capex but also the -- what exactly we want to build this year.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
And let me take the last one. On the buyback, we think that we have very strong financial position right now, we are delivering very good operational results. We are positively looking at 2020 in terms of our top line growth and potential OIBDA upside. Taking all those factors together, we feel possible to provide additional return to our investors, and with the macroeconomic volatility and the as the price of the stock is going down, we feel more efficient to do it in the form of buyback. So the buyback is a preferred option for us right now. As I said, the total amount we're considering is about RUB15 billion and, yeah -- and that is it.
Cesar Tiron -- Bank of America Securities -- Analyst
Thank you so much. And would that buyback be -- do you have a time frame for it? I mean, would it be realized in H1 or H2 this year?
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
We'll bring it to the Board -- the consideration to the Board in the near future, and then we'll act depending on the stock price performance. And to add to your question on treasuries, strategically as we many times mentioned, we are looking in cancellation. However, tactically we -- for the reasons of keeping a good retained earnings cushion, tactically we don't -- we don't want to do that. So, we'll look for opportunities. Our financial performance will give us such an opportunity.
Cesar Tiron -- Bank of America Securities -- Analyst
Thank you so much, Alexey. Thank you.
Operator
Next question is from Ms. Ederer Minova with the UK [Phonetic]. Your line is now open.
Ederer Minova -- UK -- Analyst
Hi, thanks very much for the opportunity. I had a couple of questions. First is a follow-up on Inessa's comment that what she was talking about the retail, that signals from the competitions are, the competition mix. If maybe you could elaborate a bit on what you imply by that, both from positive and negative sides? And the second question is on investments that are being done by competition. It seems like Pierce [Phonetic], for example, tier two has been -- had a big backended capex in Q4. Your [Indecipherable] has also enhanced plans for investments. What do you -- reflecting that on potential competitive intensity, what do you think? Do you think there is a risk of overcapacity looking at 2020-'21? Thank you.
Inessa Galaktionova -- First Vice President for Telecommunications
Okay, let me comment on retail optimization. Last year we mentioned that we see opportunity on the Russian market, opportunity to decrease the normal [Phonetic] for retail footprint. And last year we announced that we are prepared to reduce up to 600 shops, last year we did an exercise and we would closed 200 shops. And this year we are making the exercise to continue further closing the retail. Of course, we benchmark what our partners from the market are doing, yes, because being a leader on the market we're definitely also having very healthy situation on the sales. I don't want to ruin that situation, so before closing every Asia shop, we'll definitely monitor the situation and then make the decision. So, we confirm that we still have the plans for 400 shops. But as mentioned, we'll keep you informed every quarter on the status -- on the progress.
Ederer Minova -- UK -- Analyst
Thank you.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
And I'll elaborate on competitive market landscape. We feel that overall the competition is reasonable. In particular, we don't see a lot of competitive --
Operator
Ladies and gentlemen, due to a technical issue, we will have to pause this conference for a few moments. Please stay on the line. Thank you.
Ladies and gentlemen, thank you for your patience. The conference is now being resumed. I'll hand back to the speakers.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Yes. We stopped on discussing competitive environment. So as we said, and as I said, we see overall reasonable competitive environment and then, particular on the pricing field, we don't see -- the key players are falling in the pricing war, which is encouraging us and we think that the trend will continue. Also, we don't see any threat in terms of capex competitive investments because we are basing our capex program more on the customer needs and the capacity requirements rather than competitive institution.
Ederer Minova -- UK -- Analyst
That's very helpful. Thanks very much.
Operator
And the next question is from Slava Degtyarev, Goldman Sachs. Your line is now open. Please go ahead.
Slava Degtyarev -- Goldman Sachs -- Analyst
Yes, thanks for the call. First question, how do you see mobile service revenue progression in Russia in 2020? Do you think that the recent tariff increases will lead to acceleration of growth in 2020 compared to the levels we have seen in Q4? And secondly, how do you see developments around the affordable internet projects? Do you see any free data traffic level which is comfortable for you to provide to the customers? So, would you see any risks of additional costs on the back of that? Thank you.
Inessa Galaktionova -- First Vice President for Telecommunications
Okay, I will take the first question regarding the mobile revenue. So, we do forecast a very healthy growth in mobile service revenue due to several reasons. First of all, as Alexey mentioned, we have right now a healthy competition and there is no price wars on the market. Secondly, as I mentioned in my speech, we finished last year with good growth of sub-base. So we finished the year with a sub-base of 79.1 million subscribers which gives us [Indecipherable]. So, we see all the elements are in place to forecast a healthy revenue growth.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
And as for socially significant information, the resources -- it's a little bit premature given the indication or estimation of potential impact because there is no clarity on what will be included in such resources, what would be the treatment of such resources, and so on so forth. So I think right now we are in discussion with the regulator and with authorities on the project and we cannot give you much of visibility.
Slava Degtyarev -- Goldman Sachs -- Analyst
Okay. Thank you very much.
Operator
And the next question is from Ivan Kim, Xtellus Capital. Your line is now open. Please go ahead.
Ivan Kim -- Xtellus Capital -- Analyst
Yeah, good afternoon. Firstly, congratulations on a great execution throughout 2019. On the fourth quarter at '19 numbers, I would have expected the mobile service revenue growth to accelerate a little more since the internal roaming effect was completely phased out, and it was more or less at par with the third quarter growth, so any color on the factors there would be much appreciated. And secondly, going back to capex, so I understand about the hedging instruments, of course, but is there a ruble level where you think the capex will go up in the ruble terms? Thank you.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
I will take the first question. I can tell you that while you see that, really, there was slightly lower growth of mobile service revenues in Q4. There wasn't one single reason for that. There were a few, most of which were a one-off. I can give you an example. We've been moving a big tariff plan from a pure per month payment to per month and per day, which technically, in the month of change, would lead to decreasing revenues. But later on, in the coming months, it will increase revenues because people will be online more. So there were like -- when we've checked, there were seven or eight different reasons for that, most of which, again, were one-off. So, we expect this to getting better further.
Andrey Kamensky -- Vice President for Finance
Yes. With regard to the capex, just -- first, I want just to repeat that part of our FX exposure within the CapEx is the hedged. The rest amount is not that big. And in the current situation, I think, as I said, we're pretty comfortable with the levels that we mentioned. And I think it's pretty early at this stage to talk about what can -- when the amount can be higher. I think that we can accommodate and have some certain flexibility internally with our vendors. But still, I think, depending on the situation on the market, we will monitor this, and then we will provide more information later on. Thanks.
Ivan Kim -- Xtellus Capital -- Analyst
Thank you. Just a quick follow-up on the mobile service revenue growth. Slava, do have an estimate of what it would have been without those one offs? Thank you.
Vyacheslav Nikolaev -- First Vice President for Customer Experience and Marketing
Again, it's -- you understand that it wouldn't be a pure estimate. So, I see that it's going to be below, again, a seven or eight different reasons from RUB100 million to RUB200 million each. So, roughly below RUB1 billion, but something like that.
Ivan Kim -- Xtellus Capital -- Analyst
Okay, great. Thank you.
Operator
And the next question is from Ondrej Cabejsek of UBS. Your line is now open. Please go ahead.
Ondrej Cabejsek -- UBS -- Analyst
Hi, thank you. Two questions for me, please. On the new business capex, referring to your CMD slide, the 2020 total capex guidance, I believe implies that you will be at the very high end of what the new business capex should be as a percentage of total. Can I just understand whether that is a sort of initial rollout phase, that that should subside over time? Or whether we could expect, for example, in the next few years, over the entire median term guidance period, the new business capex to be up to 20% of total? That's the first question. Second question, if you could, maybe at this stage elaborate a bit more on why exactly the RUB60 billion in potential retained earnings after a potential treasury cancellation would be too low, whether that is simply due to some residual covenants, or whether that it's just cautiousness on your part? Any color would be helpful. Thank you.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Okay. I'll answer the questions. On the capex side, I think the estimate of 20% is a little bit puzzling. I don't know where it's coming from. As far as the overall capex in new areas is concerned, we see these are usually less capital-intensive areas. So, we do not expect the growth in those businesses moving forward will trigger significant capex requirements. However, of course, in order to support the growth, for example, in financial services or in other areas, will require certain capital investments.
So, based on that, we don't think that one should expect this share of capex in new areas grow. But I don't think also that we'll see significant reduction, and that is just the initial stage. Now, I think we'll pretty much keep the level of investments in order to support the growth. It's sufficient in order to support the growth, if I was clear in my answer. And on retained earnings, that's a very long-term based decision. What is the sufficient level of retained earnings in order to support a long-term dividend commitments and long-term vision or for the growth in return to our shareholders. So, there's no solid figure, or there is no strict limit. That's more kind of an estimate, soft estimate, where we feel confident in what we believe should be the right size of this cushion.
Ondrej Cabejsek -- UBS -- Analyst
Okay, thank you. Maybe just explaining on the capex, I am referring to your Capital Markets Day slide, where you're saying basically the estimate for 2019 of the new products and business is about RUB10 billion. And then you're saying that the total -- or that this new capex could be up to 15% -- or say up to 20% of the total and over 2020 through 2022, up from 13%. So, just backing out what that might be, it sounds like going into 2020 with your RUB90 billion total capex guidance, assuming a RUB10 billion flat number for year-over-year, roughly, it seems like you're ramping investments into those new businesses up quite significantly versus 2019. So, you're saying basically, that if you can confirm that the levels that we're going to see in 2020 should be assumed for the foreseeable future as well, in the coming --
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Okay, thank you. We got it. I think it was the upper end for this year, and that also is very much defined on how you split the capex between your infrastructure, where you are lacking. So, I think it's in upper end, and for this year, for 2020, I would say that we have a lower figure on capex into new areas.
Ondrej Cabejsek -- UBS -- Analyst
So, is the core driving the higher number then, just to confirm?
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Yes, yes, that's -- I didn't get it was a question. Yes. The core also is driving basically or contributing to the capex guidance, which we gave. Yeah.
Ondrej Cabejsek -- UBS -- Analyst
All right. That is clear. Thank you very much.
Operator
And the next question is from Igor Goncharov from Gazprombank]. Your line is now open. Please go ahead.
Igor Goncharov -- Gazprombank -- Analyst
Yes, thank you very much. My question basically was also related to capex and Vyacheslav actually answered it like a minute ago. But just to follow up briefly, if you say in the core capex is the driver of the capex hike -- capex increase, because clearly you are increasing capex in comparison to ex Ukraine level of last year. So, is the core is the driver of this, could you elaborate a bit? What drives the increase in the core capex? I understand that from your previous answers that FX is not the driver of that, but what is the driver of the capex increase, of the core capex increase next year, this year, 2020? Thank you.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Well, once again, the share of non-core capex or capex in other business lines is growing. It is not 20%. It's double that figure for this year, but it is clearly growing. And it's one of the key contributors to the overall growth of capex. Still, the core capex, overall capex, remains flat. And also, we include Yarovaya investment into this guidance which is in 2020 will be higher than in 2019. So, these are the key factors. So, growing non-core, growing Yarovaya and stable core business. But of course, core business is a significant part of our capex.
Igor Goncharov -- Gazprombank -- Analyst
Okay, that's very clear. Thank you very much.
Operator
And the next question is from Svetlana Sukhanova, Sberbank. Your line is now open. Please go ahead.
Svetlana Sukhanova -- Sberbank -- Analyst
Good afternoon. Might have two questions. My first question would be on capex again. I'm sorry, but under a bit different source. Can you remind us what share of your capex is fixed because you also have construction, you also have to pay constructors, you also have to buy some kind of metal, etc. etc. So, what kind of -- what percentage of your capex is a fixed? That would be my first question. And my second question would be on top line guidance. Inessa answering Slava's question, said that you do expect a healthy growth in mobile service revenues in 2020 and you have subscriber base growth. And you have repriced your tariff, my understanding, by around 4%. Why are you guiding top line to grow only 3%? In what kind of lines do you expect slowdown? Thank you very much.
Andrey Kamensky -- Vice President for Finance
Svetlana, thank you very much. This is Andrey answering your first question. Speaking about the capex, what we're saying is that there is no direct link. There's indirect link of our FX exposure within the capex, and it's up to 50% of our capex, less than 50%.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Well, given the current situation, about the second question, about top line guidance, frankly speaking, I don't see it as too conservative. I mean, if you would look at last year at the beginning of the year, we gave approximately the same level of guidance. And I think it's pretty accurate, given the data that we have now at hand.
Svetlana Sukhanova -- Sberbank -- Analyst
Very clear.
Operator
Thank you very much.There are currently no further questions. [Operator Instructions] And the next question is from Alexander Vengranovich of Renaissance Capital. Your line is now open. Please go ahead.
Alexander Vengranovich -- Renaissance Capital -- Analyst
Yes. Good evening. Just to follow up to the previous question on revenue guidance, so when we look at your forecast, can you please help us to kind of understand what sort of underlying growth you forecast for the new business segment or if you can provide more understanding on how you look at development of MTS Bank this year, which might be the largest bar of the additional revenue segments, adjustment revenue segments, which will be contributing to your revenue? And I think it will be the largest driver of that because, as far as I understand, we are more or less on the same page on the core business growth, and the biggest question will be how the other adjustment revenue streams will be growing, which will create more volatility on your top line. Thank you.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Thank you. We expect the other areas, non-telco to grow at a good pace. And we assume it's about double digit, and particularly in financial services might be not that high growth in media. But B2B digital and cloud services also is aggressive for growth estimates. However, we have also a flattish dynamics in our retail, which is about RUB80 billion, RUB90 billion of our overall RUB500 billion revenue. So, that's -- we forecast the taking out reduction in retail footprint and overall market macroeconomic situation, and so on and so forth we will be flat, and some other segments, non-core segments will potentially -- like roaming for example, will suffer probably from the current development, macroeconomic developments, and so on so forth. So, overall we are coming to the figure, which you see in our guidance, and we believe it's a solid estimate for 2020 taking our current situation.
Alexander Vengranovich -- Renaissance Capital -- Analyst
Thank you. Very clear.
Operator
And the next question is from Sergey Libin of Raiffeisen Bank. Your line is now open. Please go ahead.
Sergey Libin -- Raiffeisen Bank -- Analyst
Yeah, good evening. Thanks for taking the question. It is on the MTS Bank actually. With the expected fast growth, as you said, do you think that the bank would need the capital increase this year?
Andrey Kamensky -- Vice President for Finance
Sergey, thank you very much. This is Andrey. Speaking about MTS Bank, you're absolutely right that to support this level of growth we are ready to support the bank. And within this year, RUB4 billion would be provided into the capital of the bank. Sorry, RUB5 billion.
Sergey Libin -- Raiffeisen Bank -- Analyst
RUB5 billion. Okay, thank you very much. Very helpful.
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
And to add to this question, I would like just to stress the success of growth in our financial services. Our bank was within top five banks in Russia in growth of retail portfolio last year.
Sergey Libin -- Raiffeisen Bank -- Analyst
All right. Good to know. Thanks. Thanks for that.
Operator
There are currently no further questions.
Polina Ugryumova -- Director, Investor Relations
Okay, ladies and gentlemen, thank you very much for listening. If you have any further questions, we welcome you to contact MTS investor relations at any time. A webcast of this discussion will be available soon on our website, if you wish to replay the call. In the meantime, we appreciate your interest, and wish everybody a pleasant day.
Operator
[Operator Closing Remarks]
Duration: 50 minutes
Call participants:
Polina Ugryumova -- Director, Investor Relations
Alexey Kornya -- President and Chief Executive Officer, Chairman of the Management Board
Vyacheslav Nikolaev -- First Vice President for Customer Experience and Marketing
Inessa Galaktionova -- First Vice President for Telecommunications
Andrey Kamensky -- Vice President for Finance
Cesar Tiron -- Bank of America Securities -- Analyst
Ederer Minova -- UK -- Analyst
Slava Degtyarev -- Goldman Sachs -- Analyst
Ivan Kim -- Xtellus Capital -- Analyst
Ondrej Cabejsek -- UBS -- Analyst
Igor Goncharov -- Gazprombank -- Analyst
Svetlana Sukhanova -- Sberbank -- Analyst
Alexander Vengranovich -- Renaissance Capital -- Analyst
Sergey Libin -- Raiffeisen Bank -- Analyst
