Good morning, and, welcome to Telenor and the presentation of the results for the fourth quarter of 2011. My name is, Scott Engebretsen, and I have the pleasure of guiding you through the presentation this morning. We hope that everybody has the material, that you have the material that we've made available. That would be our press release, the quarterly report, and a copy of the presentation, which will be used here any minute. You can watch this presentation live or in recording on either the internet or on a mobile phone, and you may also, during this transmission, send in your written questions, via the internet. You will find alternatives on these options as well as the material I just mentioned on our website, Telenor.com.
We will have a Q&A session directly after the presentation here, and we will then start with the audience present and then continue with the ones participating on the phone. As we will try to end this session before 10:15, that will be 10:15, we kindly ask you to limit your questions to one per person. If necessary, a follow-up question in the Q&A session. After the Q&A session here, we will have the opportunity to give individual interviews with key personnel, and but I also stress that these interviews will be rather short today. To present the figures, we have our CEO, Jon Fredrik Baksaas, and our CFO, Richard Olav Aa, and first, I'll leave the floor to Mr. Baksaas.
Yeah, thank you, Scott, and welcome to this day for where we are going to present the figures for 2011. Naturally, though, a lot of this presentation will concentrate on the last week's events in coming out of India. And, I guess that's sort of the main topic. But nonetheless, we have a pretty good set of figures from the full operation of both fourth quarter and the full year 2011. So, you have to bear with us to get through those before we address also many of those questions that you will be concerned about relating India in particular. The growth factor of the Telenor Group continued in fourth quarter.
And I have to say that, all in all, when you're looking at a quarterly growth this quarter of 6.7%, an organic revenue growth figure, this is equal to the year as such. So we both have 6.7% in fourth quarter and in the year as such. And this tallies well with what we achieved the year before, because in 2010, we had a slightly lower annual growth figure on top line of Telenor. So the growth dimension that started to show in 2010 has continued into 2011. With this top-line growth element, we have also achieved to grow the cash flow margin somewhat. On an annual basis, this has grown to 19.4%, which is up from 18.6% the year before.
If you add this all together and take a look at the quality of the balance sheet, the board yesterday made the decision to go to the general assembly with a proposal for this for the dividends for the 2011 to be paid in 2012, of 5 NOK per share. The number one growth driver in this quarter is again Asia. Asia, the four established operations in Bangladesh, Thailand, Malaysia, and Pakistan relates for as much as 10%, 10.8% organic growth in fourth quarter alone, which is slightly below annual average of 12.6%. If we include Uninor in that figure, the factors grow to 17.2, and on annual basis, 19.2.
So as you can see, the general optimism on the economies in Asia has continued and has given us strong growth momentum for the full year. We have now reached 140 million subscribers, all in all, for all consolidated operations. We then move on to the Nordic market. The picture is a bit varied. We have continued to invest both in networks and on marketing activities. We are seeing a significant transition from voice and SMS services to data services, and we've taken the bite on that one, and we are moving towards a different pricing structure, including bundles to a much higher extent in our pricing philosophy. And I will come back to this.
I'm happy to note that what we achieved in fourth quarter, when we see a customer growth of 51,000 in Norway, this stands up on what we had to register in the first quarter of 2011, where we saw a decline in the customer base. So we feel that we have got good momentum back into the game with these new price bundles. But there is a price tag attached to this, and I will also come back to that. There is still a solid demand for smartphones in the Nordic countries. And this smartphone generation which now accounts for roughly 50% of all handsets in the network in Norway and Sweden in particular, whereas it is somewhat lower in Denmark. This creates a new network complexity.
These machines, these handsets, they put other and new strains on the system, and the so-called signaling volumes in that this generation of handsets are creating, really needs to be taken serious. That's the learning curve through the year, and as you obviously know, I'm referring to what happened back in June, and what we learned afterwards on that score. Revenue-wise, Sweden is the country in Scandinavia that really beefs up the figures with 19% growth in the quarter alone. However, we should add that two-thirds of this growth relate to handset sales. But still one-third of that growth is coming from services over the handset as we know them, by bundles or connectivity priced services.
So there is an underlying growth in the Swedish market, as we probably also can see from others that have reported just recently. Having said that about Sweden, it's more or less the opposite in Denmark, where competition is high, and we also of course suffer because of the fact that Onfone is no longer with us in this fourth quarter. So there is a minus on our top line coming from that element. When you then go to Norway, where we see a strong campaign for taking the price bundles into the direction that I described, we do have a lower EBITDA factor in the Nordics than we should appreciate it.
But on the other hand, we are building the future, and we're building a market position based upon a new pricing philosophy, which I will give you some indication on in this panel. The revised pricing structures come as a necessity, really. Consumers will be more and more dedicated on data usage. And what we have done here is to establish and roll out a price structure, which should have the aim of bringing customers higher up in the usage staircase, if you like. And we have introduced bundles that basically should be able to attract different usage patterns among customers.
And what we have been trying to achieve here is to get a good value proposition into the high and top-end users, as well as bringing new curiosity from the other side of the user segments. We're trying to build a platform here where we also can utilize the future service layer, different service qualities and capacity, volumes into the future, which we strongly believe will be among those criteria that all and many operators will lean to in the years to come. We've now achieved as much as 40%, roughly, of our postpaid customer base to become active data users. This percentage is significantly up from previous quarters.
As you can see to the right side of this panel, the blue part of that column really shows what kind of development we're seeing on the customer base being linked to these new price bundles. There is a negative impact on this to our financial figures in fourth quarter, in particular, where roughly three percentage points of the EBITDA factor being reduced comes from this campaign alone. This campaign was then closed towards the end of the year, and we have to follow the competitive situation into the Norwegian marketplace going on from here. I'll be brief on Central Europe this time. Basically, two dimensions to pay attention to. Serbia continuing its positive development from previous quarters.
ARPU is up, driven by the increased usage and higher subscription fees. So it's more or less the same pictures as before. Whereas in Hungary, again, a little bit of the opposite side of the opposite picture. The economy is still struggling. And there is a lot of macro activities from the government in that respect. And I'm sure you're aware of many of these elements that one have to struggle with in the Hungarian economy for the time being. What's good here, though, is that Telenor Hungary has managed to build its customer base slightly, and there is a positive ARPU element for the first time in many quarters.
So let's hope that, our colleagues in Telenor Hungary really has got something, new that can point to, a bit of a different message being given into the future here. But remember, the economic growth factors for both countries are very low. On Serbia, it's positive, anticipated 1%-1.5% economic growth next year, whereas Hungary is probably still on the minus side, between 0.5% and 1% negative GDP growth. Then, Asia. Asia is basically where the optimism is on many fronts for the time being. Asia is the driver of the global economies, and we see continued organic growth in all markets.
The growth factor in fourth quarter is not as strong as it has been in a couple of the other quarters, but we also have to note that we are comparing steadily towards sort of higher performing figures four quarters back. 11% organic growth year-on-year in established operations, and 17, as I said, with Uninor included, these are strong figures. And it's driven by customer uptake and high usage and various parameters of changes into also data the data phase of the mobile communication history, in particular in Malaysia, but we also see these trends being picked up rapidly in Thailand. In Thailand, data has really been the key driver after we launched the data offering on 3G.
However, we have to register that, the revenue share principle with CAT, then was changed to 5% upwards, which was anticipated from first of September. So that specific factor hits, of course, the margin in dtac by minus 4.5 percentage points this quarter. But we will continue to drive the 3G service offering in Thailand, and we're looking forward to the 2.1 gigahertz auction that is expected last year. If you remember, that one was the one that collapsed, more than 1 year ago. DiGi, moving forward steadily as before, and here, the data generation basically pours into both us and the two competitors, and DiGi performs well in that respect.
Grameenphone, another strong quarter, healthy revenue growth and margin growth, I should say. And of course, in this country, we are expecting a final decision on the 2G license renewal process. As you may remember and recall, we have paid what's needed. However, there are disputes on how to practice the pricing back on the licenses that was given out in 2008. So there is an idea of bringing also the market adjustment factor into that part of the frequency spectrum with a retroactive consequence. And of course, we're disputing that. Pakistan, a couple of words on Pakistan. Pakistan has a phenomenal underlying growth factor, and it's in a way, a pity that the news flow from the country is dominated by more challenging factors.
Once again, we have to see that it was a criminal attack, shooting in a franchise, some few days ago, and as much as three people was shot dead in a Telenor franchise. And of course, these are news that we really are disturbed about, and we are trying to increase security as much as we can, and we cooperate with authorities on that aspect. This happens in the Karachi region, and when speaking to the authorities on this, this part of the economy in in Pakistan really disturbs everyone. From an operating perspective, Telenor Pakistan moves forward, and once again, it's a very strong growth factor coupled with margin expansion.
So here, the underlying development of the economy is moving in the right direction, and hopefully, also, there will be a security situation that will move positively in 2012. Looking forward and reflecting upon Asia's position in the global economy, this is where the optimism continues. Many factors are feeding into this, of course, both on the positive side and on the negative side. And we have to watch out for energy prices, potential consequences into food prices, and inflation in general. And these are the parameters that normally impact our operations the most. We solidly believe, though, that the Indian, the Asian economies will basically be the driver of the global economy also for 2012. I think that is a pretty strong conclusion.
If there are conclusions from Davos, that's at least one of them. Then for the top topic that I really mentioned when we started. 14 days ago, when we knew little about what might come out of Supreme Court, we would have shown this panel with pride. There is a phenomenal operating performance in Uninor in fourth quarter, and as you can see, we are taking both revenues, and we are reducing the EBITDA loss significantly. I have, though, to say that there is a one-timer in, on the EBITDA side of roughly NOK 50 million, which has to do with reconciliation of fuel and energy prices in the operation.
But still, the operation, as it moves forward with a low-cost focus, with a competitive mindset at street level, being best on basic services, really has given us, figures, facts and figures to talk about when it comes to, fourth quarter. Then it is, of course, an extreme unfortunate fact that the Supreme Court of India came out with their ruling, only some few days ago. I have to add that if we take the market share of Uninor in, the geography that we have launched, we have now a market share, in that, geography of 5.5%. So, and this is according to the TRAI, statistics.
If we concentrate on the Telenor way of counting, we have now reached 28.3 million customers, which is up 4.1 in Q4. As you also have seen just recently, despite the fact that it came out from the Supreme Court, we are adding customers at high rate still, with in parallel seeing competitors being very aggressive on seeing Uninor going down on the radar screen. It was highly unexpected that the Supreme Court came to its conclusion the way it did, that all licenses awarded at a specific date in 2008, not reflecting to licenses that were issued in the years before, based on the same principles, that all these licenses, 122 by number, 22 of Uninor, were canceled.
And we will, of course, do everything that we can to protect what has been done and what is under development. And we will also investigate what kind of court initiatives we can take on this. At the same time, we have to evaluate all options when we are thinking of what's the future in India. And we have to build up our viewpoints and get them presented to the decision-makers that now is going to formulate how these frequencies are going to find its way back into the marketplace. Priorities then for 2012. The growth dimension in Asia, we need to nurture this one from all our operations, and we will go for both maintaining and building market share in the local marketplaces.
To capture this growth and also to nurture it, is in the genes of the Telenor companies, and we will continue this. The penetration will grow still, and user intensity will grow, and there will be associated services that will come on top of this. In particular, financial services, which already constitute a part of the average revenue per user in Pakistan, we see as a prominent, promising additional type of service that the telecom operators are very well fit to deliver. We also need to execute on operational excellence. We have a bit of too high cost structures towards the end of 2008, 2011, primarily, though, related to market activities, but that doesn't...
We, we must not fall in the trap of not focusing on the cost structures in general. So we will continue that push and, and, target what we said in 2013 on that, on that part. The data growth will continue, no doubt about that, and the, the relationship in the ecosystems with the OTT players and the operation, the OS systems on the smartphones, will become very vital elements on how this ecosystem will move forward. And if you couple it with the, with regulation, there are many parameters that plays into this. We also need to secure and utilize the new modernized network. We have a phenomenal new modern network generation deployed now completely in Norway.
We need to tune it a bit more and to raise the quality level, but the position is there to handle the growing data traffic that we know will come. There are a lot of opportunities in this industry. There are lots of challenges also. We have taken some bets to make partnerships with OTT players, most notably the agreement that we launched before Christmas with Google, and there might be others to come in 2012 as well. So, the transition to data is coming, the transition to services will also be in there in the future.
Then I leave the floor to Richard, who will take us through the details on the financial side, and then we're ready for Q&A afterwards. Thank you.
Thank you, Fredrik. I'll just start with the comparing our results with our guiding. I'm proud to say that 2012, the underlying performance was strong, and we delivered in line with our outlook. On the chart here, you see both India and for the group, and Uninor, as Fredrik said, actually came in better than the outlook. The EBITDA loss was NOK 3.4 billion, while we had guided negative NOK 3.5 billion-NOK 4 billion. So just to reiterate what Fredrik said about the performance. The group itself, we came in precisely on the revenue growth, and we've been running at this rate now for the last six quarters. EBITDA margin 31% due to high market activities, especially in Norway, in the fourth quarter, and CapEx to sales right in the outlook.
Let's turn directly to Norway. And explain you the effects of the campaign. As you see on the left here, you have the ARPU development, on the right you have the EBITDA development. The message on the ARPU is that we have a stable ARPU development on the mobile from fourth quarter 2010 to fourth quarter 2011. If you adjust for the termination rates, that's a drop of 11 NOK per sub, and the Q4 campaign, where there were two months free subscription to signing up for the new data plans. The rest of the effects are more or less netting each other, and the underlying ARPU is stable.
And that's why we also can say that we expect a margin recovery in Norway, from Q1, Q2, this year, as the effects of the campaign will fade out, during the first quarter. When we look at the EBITDA impact from the campaign, we see that this translate into NOK 90 million of reduced EBITDA, actually reduced revenue that transfers directly into the EBITDA. Then sales and marketing expenses in Norway was NOK 240 million higher last quarter in 2011, compared to the year before. Not all of that is related to the campaign, because sales and marketing was quite low in Q4 2010. But if you assume around NOK 150 million plus, I think you are on a fair fair assumption.
So we can say that the campaign roughly has an extra EBITDA effect of NOK 250 million. And then other is basically continued decline on the fixed side and some one-off related to the cable prices, which was decided by the Kabeltvistnemnda. Important note here also on the cost side, you see on the fixed, we have not this quarter been able to compensate the reduction in revenue in fixed with cost reduction. So cost reductions and delivering on our OpEx to sales targets in Norway is of crucial importance in 2012. Then on the growth side, the 7% growth, I'll not spend a long time of reconciling that, but just showing the slide there that the Asian units contributes approximately NOK 1.5 billion of revenue growth before currency adjustments.
But then the weak. Not the weak Asian currencies, I should rather say the strong Norwegian kroner, drags that down by approximately NOK 580 million. So that reduces the organic growth from 6.7% to a reported growth of 2.3%. The effects in Norway, I've already covered. The effects in Sweden is, like Fredrik said, two-thirds is related to the change in the way we sell handsets in Sweden, which gives a revenue boost, but there is also strong underlying growth in traffic. I think I leave the rest for the comparison to the Q&A or directly to the IR. On the EBITDA, we see that we have EBITDA this quarter of NOK 7.4 billion approximately, which is up some NOK 250 million compared to one year earlier.
We have the NOK 500 million reduction in Norway that we have already explained. Then dtac, it's down NOK 178 million, but the underlying performance in dtac is actually NOK 80 million better than last year, because you have reduction in currency of NOK 80 million, and the revenue share is about NOK 170 million reduction on the EBITDA. And also remember, we had a network outage in dtac in December, so I would say that October and November were very strong months from dtac, and now it will be very interesting to see how we cope with dtac in the first quarter after the network outages and the flooding in Thailand. Hungary is basically related to that we booked the full telco tax in 2010, while this quarter, we only have a quarter effect.
Pakistan is probably the brightest spot in in a general strong report, in my opinion, but a fantastic underlying performance in Pakistan, an improvement of NOK 223 million on the EBITDA. Uninor, we have commented on earlier, an improvement of more than NOK 400 million. And other units, strong underlying performance in Malaysia and also Bangladesh, with more than NOK 200 million, but some of it is eaten up by currency. On the CapEx, we have a CapEx of about some slightly north of NOK 3.6 billion this quarter, down from same quarter in 2010. Despite that, we are in the midst of the network swaps in many of the Asian and and Central Eastern European countries.
You see the growth in the CapEx here, both on Hungary and DTAC, while Norway actually finalized its network swap in October 2011. So, there's a reduction there on the swap side going forward, but I'll come back to the CapEx a little bit on the outlook. I will also say that these swaps are in general very successful, but, as also Fredrik said, very demanding and challenging moving on over to a full IP network with all the signaling also coming in from the smartphones. So that is high on the attention. Then the cash flow, that's just the residual of the EBITDA and the CapEx, and we can see now that we are at a rolling cash flow of slightly more than NOK 19 billion.
That is, the cash flow is up approximately 11%, year-on-year. Asia is also the main driver of the cash flow. As now, the CapEx in traditionally high CapEx countries for Telenor, like Pakistan and Bangladesh, has come down significantly. Then, VimpelCom. I show here two slides on VimpelCom, both net income and dividends. As you see, the net income is reduced significantly in the third quarter in VimpelCom. These are mainly related to currency effects. VimpelCom has some $25 billion-plus in gross debt in various currencies, and as currencies move, you can have gains and losses on that debt, and that kicks in with some $300 million-plus in this quarter.
Underlying, I would say that the new operations that VimpelCom acquired from Wind they are contributing significantly to revenue and EBITDA, but they also carry a high debt burden with interest cost. So that, in a way, takes down the net income with approximately equal amounts. So we should expect, in my opinion, that net income adjusted for these one-offs effects on currency come back to the normal level you saw in Q3, Q4, 2010. VimpelCom also introduced at their investor day in November three overriding goals: profitable growth, operational excellence, and capital efficiency. Which we very much support, that these are good targets and good goals for VimpelCom. Also, that the dividend is keep coming from VimpelCom.
$0.45 per share came in in fourth quarter, 2011, which translate into $1.3 billion. And all in all, we received NOK 2.2 billion in 2011. And with the dividend policy of VimpelCom of, $0.80 per share as a minimum going forward the next three years, we should expect some growth also in 2012 on the dividend, of course, depending on the US dollar NOK exchange rate. Then, returning to, India. We made an write-down of, our Indian investment of NOK 4.1 billion, on Friday last week, related to the Supreme Court ruling.
We wrote off the licenses and goodwill on our balance sheet, and I think it's important to use some time on the numbers here, so the market fully understands these numbers. We have invested in equity NOK 8.9 billion. We have taken through the P&L accumulated losses of NOK 12.5 billion. That is the NOK 4.1 billion write-down and the NOK 8.4 billion losses that we have already taken through the P&L since we started late 2009, early 2010. That takes the equity on Telenor's books down to -NOK 3.6 billion.
On Uninor's books, the equity is even lower than this, as we had a higher value of some of the assets on our books than Uninor. So negative equity of NOK 3.6 billion, then on Telenor books, we also have guaranteed debt of NOK 8.1 billion to international banks. And we have a guarantee to the State Bank of India that is related to rollout obligations in India. As a part of the license, we have also committed to a certain rollout, and that has to be guaranteed versus Department of Telecom in India, and that has to be done by an Indian bank. That's State Bank of India, which is then guaranteed back-to-back to Telenor.
If we don't get any solution to the license problem in India, we certainly don't expect to be hold to that guarantee, as then there will be no license to have rollout commitments on. Our take on this is that the exposure to Telenor, as of now, is the equity injection of NOK 8.1-NOK 8.9 billion, and the guaranteed debt of NOK 8.1 billion, and we've taken away NOK 12.5 billion of that. The remaining exposure on our books now is approximately NOK 2.4 billion after tax, and that is basically related to the remaining portion of the guaranteed debt after tax. I'm sure there will be more questions on this to the IR as on the next following days.
Moving to the income statement for the fourth quarter, we passed revenues now of NOK 25 billion for the first time on comparable basis. The EBITDA of NOK 7.4 billion, we've already explained. Other items, continued workforce reductions in the Nordics and also some scrapping related to, for example, in Pakistan, an area where we cannot really go into due to various reasons in that region. So that's written off. EBITDA, then, slightly better than Q4 last year, and depreciation significantly lower as we're not depreciating so much on the network. The main part of the accelerated depreciations came in 2010.
Then the impairment of India of 4.1 coming into impairment, resulting in an EBIT loss of approximately NOK 1 billion in the quarter. VimpelCom, we have commented on, significantly lower contribution due to the one-time effects of currencies. Then in net financials, you see that that is increasing negatively. That's because of when we entered India, we hedged some of the investments of rupee. That was taken to equity as a part of the IFRS accounting. When we now wrote down the licenses and the goodwill, which this hedge was related to, the loss was already taken to equity, so it has no cash effect. That has to be recycled now through the P&L. That's about NOK 350 million. Taxes are on a normal level this quarter.
The underlying tax rate is in line with previous quarters, actually a little down from 2010. Yeah, I don't think I will spend much time on the full year income statement, as this is mainly a quarterly report. Then on the balance sheet side, our debt level is stable at NOK 18.2, down from NOK 18.6, and we still have net debt to EBITDA ratio of about 0.6. The big effects in this quarter is, of course, that we have the EBITDA coming in with NOK 7.1. We have significant income taxes this quarter, basically related to the Asian operations, which are now in solid tax position. CapEx paid, you see, is higher than CapEx booked.
That's also because we have prepaid 50% of the license in Bangladesh. That is a part of the CapEx there. We have the dividends from VIP that we went through earlier, NOK 1.3 billion. Additional share buybacks in the fourth quarter of NOK 1 billion. And then the revenue share in dtac is paid in the fourth quarter. It's accrued during the first three quarter, and it comes in now with -NOK 1.7 billion. So all these effects results in a net change of the debt of NOK 400 million, taking the net debt to NOK 18.2 billion. Then, on the dividend, the board yesterday decided to propose a dividend of NOK 5, a total payout of NOK 8 billion, which is all-time high for Telenor.
It's around 70% plus of the underlying earnings per share. We have a dividend policy of 50%-80%, and this is a little bit higher than 70%. It's a 32% increase compared to 2010. And this is to be approved by the shareholders on the general meeting, thirty-first of May. We can also see on the right chart that the combination of dividends and buyback for last year reached NOK 12.4 billion, which is the record high remuneration to Telenor shareholders. That was a 3% share buyback. That was done at approximately NOK 91 per share.
We're also aiming for buybacks in 2012, but that is something management would then have to propose to the board, and the board again have to propose to the shareholders. Then on the outlook, and I can openly admit that making an outlook for India is not so easy when the license is canceled. But we, but we have decided to make an outlook as a going concern, even though that is with great uncertainty of what will happen in India. And the figures you see here is that we are targeting an EBITDA loss of around NOK 2 billion and a CapEx of around NOK 1 billion. Total NOK 3 billion in further investments into India.
These numbers are well in line with the cash flow profile that we have to reach EBITDA breakeven within first half 2013, and within the NOK 155 billion peak funding target we have laid out. However, we now have to spend our time very well the next weeks and months to see how things can be resolved in India. So we have to take this outlook with a great caution. When it comes to the group, we are guiding revenue growth above 5%, and to help a little bit out on what effects if India, for some reason, could not continue, that constitutes about two percentage points of the growth expectations in 2012.
We're expecting the EBITDA margin to improve from 31% to the range 32%-33%. And CapEx to sales, we expect in the range 12%-13%. We have still a heavy network swap period ahead of us in 2012. Pakistan is coming in with a network swap, and we have several other operations that will finalize their swaps in 2012. In addition, we see that the fiber investments in Norway is increasing in 2012. Both fiber on backhaul from base stations, but also fiber to the home. In addition, we are also investing in better 3G coverage in Norway to cater for the big growth in the data demand, also in the rural districts.
So that's the outlook. And then before we open for Q&A, just the financial priorities as we see them for 2012. First, we have to find a good solution to India. And as Fredrik said, we are considering all options. And if we get into a situation where we have the possibility to get the license continuation, we will certainly be disciplined in what we can offer for such a license. Then we have the arbitration in VimpelCom that is going on, and we just have to wait and see what the arbitration panel finally rules, and then evaluate what kind of execution we can do from that.
Probably, most importantly, seeing from a CFO, but also our company perspective, is to continue the progress on operational excellence, in the wide context, everything from how we excel in our operation in the consumer fronts to how we manage our, our cost levels. We are now at 37% OpEx to sales. We are on the way to the target of reaching 35%, but, it is a challenge, and 2012 will be a very important year, to solidify that we can reach the 35%, percent in, in 2013. We will continue to maintain a solid balance sheet. We see the importance of that during, turbulent financial times as we, we are now.
But at the same time, we have a strong enough balance sheet so we can have a healthy and competitive shareholder remuneration. And finally, here, I think we can solidly say that we have the management capacity and the financial capacity to go after these financial priorities. But we'd also say, given the current uncertainties, both in India and also in VimpelCom, that major M&A activity is now currently not on the agenda. So by that, I open up for Q&A.
Thank you. And then we will invite Mr. Baksaas back on the podium, and we'll start with the audience present here. And please, please be so kind to wait for a microphone to be passed over to you, and state your name and company. And also, as I said in my introduction, please limit yourself to one question per person and eventually a follow-up question if that is needed. That is to allow questions from as many as possible within the given time. Okay. Any questions from the audience here present? Yes, we have Espen Torgersen.
Hi, it's Espen Torgersen, Carnegie. Do you have any idea when the regulator will disclose the conditions concerning a possible reallocation of licenses and spectrum? And I know it's a second question, but are you willing to recommunicate your financial targets in India, depending on the outcome of the license situation?
...Yeah, that was two if, two ifs. We hope, of course, that the government of India will be swift in their clarification of this. We have to recognize, though, that things takes time. But we have started a dialogue, and we will, of course, present our views on this, and as you can imagine, others will do that as well, and interests are differing from where you are in the marketplace. So we have to to sort of get ourselves through that period, and I cannot have a specific idea as to when they come forward with such a clarification. And to your second question, we have to take a look on that outcome, of course, before we address your second question. Any further questions from the audience?
Espen, if you could send the microphone up. You don't have it. Okay, sorry.
Hi, Arild Nysæther of Fondsfinans. I guess everything will depend on the terms of how the licenses will reenter the market, whether they will be confined to the existing operators or... But can you say from your point of view, where, how, what would you consider to be, say, a good set of terms from the Uninor perspective? What would you consider to be sort of a fair way to do it, as would sort of be beneficial to you, and what would be, say, the opposite, that would be terms that you would not like to see come out of this, possibly?
I think I can say the following. The licenses that were issued in 2008 were put to the market with the ambition of broadening the market activities in India. And four licenses were issued based on the same principles as other licenses had been issued in that decade. And Telenor, through its later entry to Uninor, we have responded to every corner, basically, and bits and pieces of that regulatory framework and put our operation into motion. And we have achieved a market presence to which I presented just now. So in the sense of what the government wanted to achieve with the licenses in 2008, we have delivered.
Telenor is the one of the four that got licenses at that point of time that has gone deepest into the response to that platform. Then comes the 3G licenses, which were issued at a different principle, because then the government say there is a market here for 3G, and spectrum comes... And I have to add, in the 2G license in 2008, only newcomers, as a consequence, were allowed to participate in the new licenses. Whereas on the 3G side, spectrum comes as additional spectrum on top of incumbents that are pushed for capacities in their network, and their willingness and ability to pay for 3G is, of course, very much different from a newcomer that comes in two years before.
So, it's the, it's two principles, basically, in these two processes that collide, because now the, Supreme Court says that the way things were distributed in 2008 were not optimal, seen from the, the interest of the state of India. And then it's a bit peculiar that they only look at the, licenses that were issued in 2008, and not licenses that were issued a couple of years before, because you could apply the same way of thinking there, of course. So what's the most likely outcome here? Does the outcome, if they still want to maintain a broader package of operators in India, then you need to allocate a bit of the spectrum to Greenfield players like Uninor.
If they offer it to the whole of the market, then you have another, probably, a willingness to pay and ability to pay, if you consider everything as additional spectrum to incumbents. So then I think I've indicated a little bit on what the preferred solution from our perspective should be. As sort of a type of best case, the licenses are returned, license fee are returned, and you pay back to get a new license on the future, so to speak. Then the sort of on the opposite side, on the opposite scale, you could say a maximized auction structure to incumbent players, and that will probably rule out greenfield players like ourselves. Any further questions here? Yes, please.
Hi, Donald Ian, Swedbank Securities. Just to clarify the negative cash flow effect by leaving India, are there any further obligations, or is the NOK 8.1 billion your best estimate of the negative cash flow effect?
Yes, as of today, that's what Telenor has guaranteed.
...There are no further obligations outside the Uninor.
I can add on this, that we have had a meeting with the regulator, and we've had a meeting with the ministers, as you probably noticed yesterday. And there is at least a timeline here that TRAI asks for input for this process that to which you asked within fifteenth of February.
Okay. I think we'll also include a question that we have received in writing from, it's on India, from Nikhil Pahwa in MediaNama. Asks: What kind of a base price for 2G spectrum in India would you be comfortable with? What price would be a deal breaker for you?
That's more or less the same question as I got, just recently, I think.
Yeah.
If we roll forward from where we are, it would be okay, and if it is an auction based upon the whole of the market, then newcomers will not have the ability to follow. That's my guess. But I think that's the best we can answer at this point.
Okay. Then we will turn to the call conference host to introduce the first question from the ones participating on the phone, I think.
Question from?
Andy Parnas, UBS.
Go ahead, please.
Yeah. Hi, guys. I've got one question, just a quick follow-up. Can I just clarify, what exactly do you have to submit, or does have to be submitted, or should we expect to hear by the fifteenth of February in India? And then the second question was actually on Norway. So sort of what have you seen in terms of promotional activity in Q1 in Norwegian Mobile? And what makes you so confident, I guess, that we're not gonna see sort of another period of intense price competition, I guess, like we saw at the start of 2011, or towards the end of 2011? Thank you.
What we have to submit, I don't think there is a have to, but we-- what we want to submit, is more to the question here. And, of course, we have never seen any ruling from any court which moves up against the principles upon which a government have distributed licenses. That we have never seen. And, throughout the investigations and due diligence and the process here, we have cooperated with Indian authorities on every examination on the license process, which happened before we came in, and we have qualified on every criteria that Indian authorities has put forward for foreign investors into telecom. And we've also got an FIPB approval to extend our ownership beyond 50% to the present 67%. So this is done on all proper... What's the word?
Um-
Terms.
Terms and conditions that has been set forward by Indian authorities. Then, when we now come to this threshold, we will, of course, use that platform when we present what is to be presented within this timeline. And for Norway?
Well, for Norway, you can say that we have certainly stopped our campaigns by the end of last year. There will be some spillover effect into the first quarter as the packages we sold during the fourth quarter will have some financial effects. But the campaign in itself is stopped, and we see a more quiet competition picture. And we think that is needed in Norway now as the price level has come down significantly.
But you never know what competitors will do, and we still have an asymmetrical termination regime in Norway, which will last, though with a smaller effect, relatively, this year than previous years. But that asymmetrical system did spur a price competition last year, and we will have to see what kind of activity others will play in the put into the marketplace. But for the time being, it is stands as Richard is describing.
Okay, thank you.
Next?
Andrew Lee, Goldman Sachs.
Go ahead, please.
Good morning, everyone. A question on Norwegian Mobile as well from me. If we strip out the effect of the fourth quarter promotions, your underlying ARPU trends look to have improved. Are you starting to see a stemming of customer spin down into 2012? And secondly, what proportion of customers do you expect to be on the new price bundles by the end of 2012? Thank you.
Well, I can say that certainly, as you have said before, our longer term targets on the mobile side is, of course, to grow the ARPU as the services and packages we now offer to the consumers on the smartphones are comprehensive. However, it's been a challenging ride in 2011 to do that on the back end of mobile, of the asymmetrical termination rates. But if you had a more level playing field, I think the ARPU picture for the mobile would have looked very differently in the consumer. Having said that, in the corporate segment, it's a tough, tough competition. So we really have to watch out on the corporate segment in 2012.
...And when it comes to the price plan, I don't think we will sort of describe the percentage as such. But given the weight that we have put on these kind of new pricing philosophy or pricing structures, it's obvious that we want to grow that kind of percentages throughout the year. And we also see this as a pretty important retention activity in the marketplace.
Thank you very much. Next?
Dominik Klarmann, HSBC.
Go ahead, please.
Yeah, thank you. On your mobile pricing strategy, I can, well, pretty much understand your bundling strategy in Norway. But looking at your offerings in Denmark, I'm wondering why you're bundling so much data, even in your lowest tiers there. So, some color around what's driving your pricing strategy in the Nordic markets would be interesting. Is it mainly driven by market share targets, you know, offsetting the Onfone loss in Denmark, or what kind of signal do you think that your pricing is sending to your competitors?
Yes, I think the Nordic markets are quite different in nature. We have already commented on Sweden being the probably most healthy market the last quarters with a good underlying service revenue. The Danish market is hampered by fierce competition, and it did not really help that Onfone was acquired by TDC, which just then continues to encourage the growth of virtual network operators. When it comes to Denmark, there is a clearly overcapacity in the market, and that is driving prices down. For Telenor to just continue to sit and lose market share is not really an option. So I would say in Denmark, we're more a price follower.
Okay, thank you.
Next.
Barry Zeitoune, Berenberg.
Go ahead, please.
Hi, good morning. It's Barry Zeitoune from Berenberg. Just a couple of questions. Just a point of clarification, you said that it will be difficult to participate in the auction if it's open to all participants, not just newcomers. So as a newcomer, do you think it will be difficult for you to participate in the auction if it is open to everybody in the market? And if that is the case, do you feel that you have some sort of legal recourse within India to get some of the money back that you've invested there? And then the second question is also on India.
I'm just wondering, if you do invest in India, does that affect your thinking about whether you exercise your preemptive rights on VimpelCom, given that, you know, you could have one large cash cost? Would you be willing to swallow two large cash costs, if it comes to it? Thank you.
Well, on the auction side, the Supreme Court has ruled that the auction mechanism is going to be utilized on the revised distribution of the 2008 licenses. Whether this court ruling will result into investigations towards previous license processes in the same decade, that remains to be seen. But it is a bit odd that this specific ruling only targets the principles applied in 2008, which were equal to previous license processes. That's number one. Number two, if the auction principle is utilized to, and the whole package is addressed to the whole of the market, then incumbents will have a better position to grab additional spectrum than greenfields, and that will probably escalate spectrum prices too high for a newcomer.
Number three, legal action. We will have to see what kind of legal action that could be taken based upon international conventions and treaties after this, but that is too early to have a direct opinion on today. But we will be asking for a review by the Supreme Court of its own ruling, which there is an opening for in the system in India.
And then-
On your thinking in terms of exercising the preemptive rights in VimpelCom, I mean, if you are going to reinvest in India, will that impact your decision on what you do with VimpelCom?
No, like, like I said, towards the end of my presentation, is that, our balance sheet and financial, position has, more than enough strength both to give a healthy shareholder remuneration, also follow our rights in the VimpelCom, if we elect, to do that. And I would also say that we will be disciplined when it comes to India. As you all know, we have said repeatedly that our business case cannot tolerate huge, extra costs, in India. So, in, in the overall strength of the Telenor, balance sheet, I don't see, see that as a, as a real concern, that we have to do any trade-offs, there.
Okay, thank you.
... Peter Kurt Nielsen from Schroders. Thank you. Yeah, just a question, turning back to Norway. Fredrik, you made a number of comments about the new network, talking about strains on the network and need for fine-tuning and raising quality and signaling problems and extra CapEx on 3G buildup. Were these factors not sort of anticipated when the new network has been built? And are you not fully happy with the way it's turned out, the network swap in Norway has turned out? If I may just add a second question: When would you expect an announcement from the UK Arbitration Court on the VimpelCom case? Thank you.
I'm sorry. We will, we will only take one question now, please. So, please address the first one.
First, the new network in Norway, on the radio side, that was a fundamental success, both from the vendor side and as for the deployment into the geography. I think it's 10,600 base stations that has got new radio equipment. Then, bear in mind that we had spent probably 10-15 years tuning in the network to the quality level that it had when we started the swap, and this new radio equipment needs some tuning in the geography. So as a consequence, there are tuning work to be done and have been done through this autumn, and we're probably towards the end of that period. Then, the smartphone generation builds actually more signaling traffic in the network than anyone in the industry had anticipated.
And here also, the GSMA is working actively with the OS vendors, with them trying to optimize network resources utilization while in play. I mean, put it more simply, can we have smartphones that do not use network resources while we are all sitting still in this room? Or is it enough that they pull into the system when we, as customers, activate a service? And this is something that concerns the industry to a great extent, because normally, signaling capacity has been considered part of the mainframe sort of, and not being part of what you charge when you connect customers. So here, I think there is a bit of new work to be done, and I think this will be a topic also in Barcelona later this month.
There was a second question.
Yeah, on the VimpelCom arbitration. We are bound by the arbitration panel to disclose any details on when a ruling can be expected. So we can only reiterate what we have said before, that we hope that a ruling will be given within the first half this year.
Okay, thank you.
Next question, please.
Will Milner, Arete Research.
Go ahead, please.
Hello?
Will Milner, go ahead, please.
I think we lost that one. Can we have the next, please?
Next.
James Britton, Nomura.
Go ahead, please.
Thanks. I have a question on India. Are you ready to consider the business case for your Indian operations on a circle-by-circle basis, or are you committed to pursuing activities across the whole footprint if you can secure licenses at reasonable cost? Thanks.
I think we will have a priority on where we have been successful in the circles that we already are.
Okay, that's clear. Thank you.
Next.
Maurice Patrick, Barclays Capital.
Go ahead, please.
Oh, hi, guys. Yeah, Maurice here. On the signaling issue, presumably, I mean, I think AT&T was talking about this, I think, 18 months ago. Is it something that's accelerating in terms of the growth in signaling? And is it more a question of fine-tuning of networks rather than higher spend to solve it, as I always thought was the case? So a bit of commentary on that would be very helpful. Thank you.
It's actually an accelerating type of question. And it accelerates because of the sheer number of smartphones being out there. And in Scandinavia, that portion is probably the highest among any network population in any other countries. So I think we are getting a little bit of this challenge, the first as industry players. But bear in mind, this is not something that basically ruins the business model. So let's get it into proportions here. But on the other hand, it puts new efforts into how you allocate network resources. That's what's important.
Understood. Thank you.
Next.
Soomit Datta, New Street Research.
Go ahead, please.
Hi, yeah, Soomit Datta at New Street Research. Just, clarification on a prior question on Indian circles. Is there anything, to the best of your knowledge, which would prevent you bidding for spectrum on a circle-by-circle basis, or do you envisage having to bid on a nationwide basis? Thank you.
...There is, I have no sort of qualified opinion on that, on that question. I think this will be quite flexible, really. That has been the picture on what has been the case on previous auctions. Okay, I think we'll have time for one more, sorry, one more question, please. Last one.
Thanks. Ulrich Rathe, Jefferies.
Go ahead, please.
Yeah, thanks very much. On India, you're saying your guidance is sort of based on business as usual. Now, obviously, there's a lot of press, general press and general media on the license issue. So I was just wondering, how do you think about potentially the more serious customers, in particular, sort of the higher spending ones who really want the service and really want Uninor? How would they think about this? Have you baked that into your guidance in India? Because there's, of course, a risk that they look at this and figure, you know, if the company might not be there in four months' time, they might not want to sign up with them.
I don't know if I sort of have any sort of clear... I don't think I have a clear answer to that question, really. I think our concern now is to establish our viewpoint on how they can move forward with the regulatory mess in India, and to safeguard the investments that has been done. I think there is a lot of discussions on what kind of consequences will such a ruling have for investments in general and for indirect investment, in particular, in India. And if we'll take a look at international media, that kind of question is... And in Indian media, that kind of question is easily coming forward.
So we will concentrate on that phase, now in this very short term, and then we will concentrate on keeping the wheels and the machinery warm, as we have performed since the ruling came. And then we have to take a judgment call on the process when we will see it from the government, in this four-month period, hopefully.
But the question is very good. I mean, we have to have clarifications sooner than later. As Fredrik said, the machinery here is vulnerable if this clarification don't happen very quickly.
Okay. Okay, thank you. Any unanswered questions could be referred to our investor relations department, and I think that concludes the session here this morning, and I would like to thank you all for participating. Thank you.