Question-and-Answer Session
Operator
Thank you, sir. Operator instructions. Your first question comes from Ms. Anna Kupriyanova, please state your company name followed by your question.
Q - Anna Kupriyanova, Renaissance Capital
Thank you, my name is Anna Kupriyanova, I’m calling from Renaissance Capital. I have two questions, if I may. The first one is related to your guidance on EBITDA margins. You’ve mentioned in your press release expectations for EBITDA margins of about $0.55 going forward. Could you please explain how do you plan to eliminate the problems associated with bad debt and equipment subsidies which became as we understood the main reason for low EBITDA margins in this quarter. Could you please also comment, if the bad debts and equipment subsidies are associated with the Russian or Ukrainian businesses? The second question is related to your non-operating expenses, which as we understood affected your net income. Could you please provide us a breakdown for these items? That’s all. Thank you.
A - Andrei Terebenin
Can you please repeat for us the second question?
Q - Anna Kupriyanova, Renaissance Capital
My second question was related to your non-operating expenses which affected your net income, as we understood. Is there some other income or other expenses before the price, before taxes?
A - Vsevolod Rozanov
OK, this is Vsevolod. Thank you, Anna, for your questions. Speaking about OIBDA margin target of 50%, as I said, we launched an opex optimization program which we believe will be? Which has actually started to be implemented this quarter. We believe that the first results will be brought in the second half of the year. We expect to optimize certain business processes and there are also certain budget optimization initiatives and purchasing optimization initiatives which can basically be split roughly in equal parts, like one third for budget initiatives, one third for purchasing and one third for business process efficiency improvement. We expect that implementations of this initiative will lead us OIBDA margin of 50% plus for the whole year 2006.
Q - Anna Kupriyanova, Renaissance Capital
OK, Vsevolod, what about your bad debt and equipment subsidies plan?
A - Vsevolod Rozanov
Speaking about bad debt, the amount of bad debt was $60 million. This is the one-time situation in Q2, or in Q1 2005. We conducted an investigation of the situation and there was certain initiatives undertaken by the management, i.e. a USO agreement with the viewing provider, the new business processes between the IT and the finance functions which will allow us to highlight this problem as it can appear in the future. But we actually do not expect any repetition of such a problem in this year. The second item was the?
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