Good morning, everyone, and welcome to the presentation of Telenor's results for the fourth quarter of 2010. So you are present here at our headquarters this beautiful morning. Listening in on the phone or watching this via internet or on a mobile phone. My name is Scott Engebrigtsen, and I have the pleasure of guiding you through this morning's presentation. Before I'll do that, I would like to just briefly inform you about the emergency exits for the ones who are present here. In addition to the room, the door you entered into this morning, you will also find exits at the back of the room and at the bottom of the stairs on your right-hand side.
We hope that everyone has a copy of the material that we have made available for you this morning, that is our press release, the quarterly report, of course, and a copy of the presentation, which will be used here in ten minutes. As I indicated, you can watch this presentation live or in recording on either the internet or on a mobile phone, and you, the ones who are following this on the internet can also send in your written questions during this presentation. And you'll find information on these alternatives on our website, www.telenor.com.
As usual, we will have a Q&A session directly after the presentation, and we will start with the ones who is present here, and then continue with the ones participating on the phone before we open up for individual interviews at the end. And to present the figures today, we have our CEO, Jon Fredrik Baksaas, and our CFO, Richard Olav Aa . And I first give the floor to Mr. Baksaas.
Thank you, Scott, and good morning to you all. Fourth quarter 2010 concluded as a strong finish of a solid year. 8% organic growth, 8% organic growth in this quarter is actually the highest quarterly growth since Q4 2007, when it was 12%. For the year, we recorded 6% annual growth in 2010. This gives us a good momentum entering 2011. The main source of growth comes from Asia, in which we record 7.6 million new subscribers in this quarter. And this development leaves behind a solid improvement in the operating cash flow margin, which takes us to 19% for the year, including the early investments phase in India.
I'm also today happy to inform that the board will approach the Annual General Meeting with a suggested dividend of NOK 3.80 per share. This takes the dividends back to the normal practices, and coupled with the potential share buybacks, we are aiming to have a competitive shareholder remuneration also in 2011, balancing the growth profile of the Telenor group. In the Nordic operations, also in 2010, it was delivered a cash flow level of NOK 10 billion in operating cash flow. This is including the start of a substantial investment in network modernization . In the Nordic, as such, we have a cash flow operating margin of 23%. Mobile data continues to grow strongly, with particularly strong mobile growth in Sweden and Denmark this quarter.
In Norway, the growth in mobile data has been offset to a certain extent by the decline in voice revenues. During second half of 2010, we have seen increased competition in Norway and Denmark, putting pressure on revenues and market positions. Intensified competition in Norway has been fueled by the asymmetrical termination rates, as Norway is unique in Europe. This will probably last for another few quarters, but we don't believe it's sustainable long term. Competition intensified and will vary over time, as we've seen in previous phases. Our response to this is to preserve market positions through smart market approach and continued investments in customer experience, in good services and good network quality, combined with cost efficiency focuses on all work processes.
In Sweden, we have entered a network sharing model with Tele2, and we aim at that this cooperation will improve our cost position going forward. Moving then to Central and Eastern Europe, the picture is a bit more varied. In Serbia, we see a very visible rebound, where the top line is driven by both average revenue per user and subscriber growth. We are successfully migrating subscribers to incremental plans, and our operational excellence initiatives have taken off with them. It's also good to note that the special sales tax that was applicable for 2010 has been canceled to 2011. Hungary has a different picture. This is a tough market and but the underlying trend is fairly stable.
The reported margin this quarter is, of course, affected heavily by the Hungarian crisis tax effect that was introduced, so suddenly in, December last year. The full effect for 2010 has been taken in, Q4, alone. Excluding this tax, we are able to compensate the revenue development on the cost side. Also, in these two markets, we started network modernization programs, both in Hungary and Serbia, and these will go on into 2011. In the case of VimpelCom, unfortunately, the results, and market statistics have for some time indicated that VimpelCom in Russia, in particularly, has underperformed competitors, and has not been able to take its fair share of market growth. We consider it vital for VimpelCom to, improve the operational performance in this respect, in particularly in Russia.
VimpelCom management has to focus and to keep focusing on operational improvements in its core markets. When the potential acquisition of Wind Telecom was announced in August, the VimpelCom stock price suffered and has not recovered since. The Supervisory Board of VimpelCom approved the deal in December, with Telenor voting against. Telenor supports the growth profile of VimpelCom, also through M&As. However, Telenor still believes that this specific deal is no good for VimpelCom shareholders, and Telenor will vote against at the upcoming General Assembly . In parallel with this, Telenor has taken action to defend our shareholder rights in order not to be diluted in case the deal will be completed. We then take a look at Asia, which is the number one source of growth for our group.
Also, in this quarter, we have a double-digit revenue growth in the established Asian operations. In addition to this solid subscriber growth and strong margin, ending up with an operating cash flow of more than NOK 10 billion from our four established Asian operations in 2010. And this alone is an improvement of NOK 3 billion compared to 2009. We expect solid growth and strong margins to continue also into 2011. During second half of 2010, we've seen some increase in energy and food prices. However, we do not believe this to have material impact on our business so far. But of course, we will cautiously monitor this situation going forward. In India, we have continued the strong growth momentum since mid-2010.
The Uninor go-to-market model, including the distribution, is gradually improving, and Uninor is consistently taking a significant share of the subscriber growth in the Indian market. The multi-SIM behavior, though, is however expected to prevail, and means that Uninor has to position itself as a ultra-low-cost operator. The regulatory situation in India is still very unclear. More clarity is hoped for as soon as possible, and hopefully within this first half year. According to the license agreement, we are entitled to receive 6.2 megahertz spectrum without additional payments. We have it rolled out according to coverage obligations, and we have established Uninor as a significant challenger in the Indian market. Therefore, we expect Indian authorities to keep their part of the agreement when it comes to spectrum.
I will conclude this presentation by taking a look on our priorities for 2011. In addition to work constructively towards VimpelCom Limited aiming at improving operating aspects and to secure positive valuation development of the stock price. We are having important operating aspects in the Telenor company group for 2011. The ongoing modernizations of the mobile networks will be at its peak this year. A successful turnout of this will be that the core will be at the core of our operations and ambitions for 2013. Both when it comes to operating margin of 35% and when it comes to CapEx to sales of around 10%. This, coupled with continuous improvements in all business processes, will take us there.
There are two significant drivers for growth in the coming year. Number one, Asian markets and economies will grow, and so will telecoms. We intend to compare, to compete for our fair share of this growth. Number two, mobile data will grow across the board. All markets are intensely focusing at bringing mobile data content to the market, and the market is very responsive. The Telenor Group and the units will be in a position to take its fair share of this growth by both contributing to growth as well as benefiting from it in the year to come. Now I leave the floor to Richard, who will take the financial aspects of the reporting package of 2010.
Thank you, Fredrik. I will start and end this presentation talking about the guidance. The start will be how we did compared to the guidance this year, and the end will be the guidance for 2011. Also, of course, then sum up the financials. Just check the boxes for this year. We did on five parameters: top line growth, EBITDA margin, CapEx to sales, and also EBITDA loss and CapEx to India. I think we're happy to say that we delivered on all five guidance parameters through a strong year and a strong fourth quarter. Going from the top, organic revenue growth ended at 4.7%, compared to a guidance around 5%. Remember, 2009 was zero growth, so it's a big improvement.
EBITDA margin ended at 30.8, compared to a guiding of 30%-31%. The underlying improvement in EBITDA margin, excluding India, is about one percentage point. Excluding India, we're at around 35% EBITDA margin. CapEx to sales, 12%, and that's also an achievement. We have started the network modernization in several of the markets this year, will continue at its peak in 2011, as Fredrik said, and we came in at the guiding, considerably down from 2009. On India, the EBITDA loss was slightly lower than expected. We expected about NOK 4.5 billion loss. We came in at NOK 4.2 billion due to lower costs, and this is not cost deferral, it's actual cost savings in there. CapEx came in at NOK 1.6 billion, which was in the low end of the range.
So again, strong finish, and just did on all the five guiding parameters. Then going more into the various aspects of the P&L and the balance sheet. Starting with the growth, 8% organic revenue growth in the quarter. The reported growth is more than 10%. That comes in particular from the strengthening of Thai baht and the Malaysian ringgit in the quarter. If we then break down the growth into the various regions, it's very easy to see that Asia, the fourth largest operation in Asia, is a big contributor to the growth, and in particular, Thailand and Malaysia, which has a very good macroeconomic climate these days. But you also see now that India is starting to contribute significantly to our growth, 1.7 percentage points in the fourth quarter.
The Nordics also should be mentioned, like Fredrik said, the mobile data growth is strong, and the mobile growth in the fourth quarter is close to 5%. That is in line with the first and the second quarter this last year. The third quarter was slightly lower, and we now see a pick up again, especially on the mobile data in the fourth quarter. Then on the EBITDA, we're reporting an EBITDA of close to NOK 7.2 billion in the fourth quarter. That is up from slightly more than NOK 6.9 billion in the fourth quarter, 2009. To the right, you can see how this is broken down. We see that India now we have a full operation in our circles in the fourth quarter of 2010.
While in 2009 fourth quarter, it was the launch phase, so we have a negative effect from that of close to NOK 350 million. Then in CEE, we have this special crisis tax in Hungary of close to NOK 300 million, which was for the full year, 2010, but hit with its full effect in the fourth quarter, as it was imposed in the fourth quarter. And that is a major part of the NOK 307 million on the, on the right side. This is then compensated by an improvement in the Nordics. Despite the price competition, we are able to improve our EBITDA in all the three Nordic operations in fourth quarter.
But the big effect is, of course, the Asian operations, and all the operations are doing well. But in particular, when it comes to the financial numbers, it's dtac and DiGi that is behind the major part of this. On the CapEx side, fourth quarter is a higher CapEx than the three previous quarters. We have 15% CapEx to sales, and the big driver behind it is that, you know, we have the network modernization really start to pick up. However, it's significantly lower than the fourth quarter last year, where we had about NOK 5.5 billion in CapEx. There are two very good explanations for the drop in the CapEx, and that is that we invested in a new satellite in broadcast fourth quarter last year.
That is equal to close to NOK 1 billion at right under broadcast. And we had a ramp up in India, where we spent a lot of CapEx before we launched. So that explains about NOK 850 million reduction in CapEx. But what is good is that we see, despite the strong growth in Asia, the Asian operations, excluding India, are able to reduce the CapEx. This is through good planning and also lower prices from the vendors. The Nordics, though, are increasing the CapEx in the fourth quarter, especially Norway had a high CapEx in the fourth quarter, which is tied back to the network modernization. So there we see a increased quarter-over-quarter on the CapEx side by NOK 400 million. Looking at the cash flow.
We ended the year excluding India, at the cash flow margin, close to 25%, which is good. We see now how is this broken down by region. The Nordic came out very close to NOK 10 billion. Eastern Europe, excluding VimpelCom, came at a 2.5, but there we have expense to NOK 300 million crisis tax in Hungary. Excluding that, we were almost at par with earlier , despite the difficult market situation in Hungary. When it comes to the Asian operations, we see the gray bars. Those are the four established operations. They now start to contribute significantly to the cash flow of Telenor, and have now passed the Nordic operations in cash flow contribution. Note that this is on a consolidated basis, so that we don't own all these operations 100%.
But you also see when we come to the reconciliation of this, that also we start getting significant dividends from these operations. Then, including India, India now has a twelve-month rolling cash flow contribution of NOK 4.5 billion. Then trying to reconcile the development in our income statement from fourth quarter 2009 until fourth quarter 2010. We have already discussed the development in revenues. The more than 10% growth in reported revenues, 8% organic, and an additional effects on the currency. EBITDA improvement, reduction from India and the crisis tax, more than compensated by strong development in Nordics and Asia. On the other items, we have had, we have continued to reduce workforce in this quarter.
We have reduced quite significantly throughout 2010 close to 1,500 man-years. We also have a lost contract in broadcast that we have accrued for. But then we have some items on the balance sheet that have been disposed. Close to NOK 100 million loss on that that was too high value. That takes us down to the EBITDA line, where we see then a significant improvement of over close to NOK 400 million. Depreciation is increasing. I coming back to that on the full year effect, it's easier to comment on the full year effect on the depreciation. Then from associated company, we see the contribution now from VimpelCom, which is the main part of associated company, is about NOK 1.1 billion in the quarter.
We are reporting VimpelCom with one quarter lag, so this is the third quarter result from VimpelCom with some adjustments. That is a significant improvement from the fourth quarter 2009 figures. But the underlying numbers from VimpelCom are more or less the same. Fourth quarter 2009 was a special quarter to VimpelCom, with a lot of adjustments for currency improvement, and other one-offs. So that is not representative. Then financials, more or less the same, more or less the same. Then on the tax side, the fourth quarter taxes was more on the normal level in 2010.
While in 2009, we had a special effect that when we took Grameenphone to the public market, IPO the Grameenphone in Bangladesh, we got a tax reduction for the full year of 2009. And that was entirely booked in the fourth quarter. So fourth quarter 2009 was abnormally low. So the rest is more or less self-explanatory. Then, reconciling 2009 full year versus 2010 full year, we see the top line growth. We report an organic top line growth of close to 6%. It's slightly lower on reported figures, due to the general strengthening of the krona.
We saw the fourth quarter, the effect was positive, but we have had the first three quarters, the strengthening of the krona affecting the reported revenue lower than organic revenue. Then we see on the EBITDA, we have NOK 30.7 billion last year and NOK 39.2 billion this year. We have expensed about NOK 3.3 billion more in India in 2010 compared to 2009. This is compensated by approximately NOK 2 billion improvement from Grameenphone and DiGi, and we also have improvements in broadcast and Pakistan, but this is weakened by the purchase price in, in Hungary. So we're able to offset about NOK 3.3 billion of the Indian losses, which will be an improvement in, in all the operations.
Then on depreciation, first to comment that, the depreciations now are about NOK 1.6 billion higher than last year. That comes from 2 factors. It's a network modernization. We're swapping out the network pretty much entire Telenor Group, then we're accelerating the book value of the old equipment. That accounts for approximately additional NOK 1.2 billion depreciation in 2010. In addition, we have the CapEx we invested in India in 2009, which we started depreciate in 2010. That's an additional NOK 700 million. So that increased the depreciation to NOK 1.9 billion and then, of course, the turnover book value on the rest, that takes it down to reconcile statement. We have no impairments this quarter.
And then on the associated company, we see have improvement there, and, the main, reason behind that, we went through in the second quarter, that we have an accounting gain of about NOK 6.5 billion related to the Kyivstar VimpelCom transaction. The Kyivstar, shares were technically sold, to VimpelCom in the project, this spring. And, then the Kyivstar shares was written off close to market, market value, and that resulted in a gain of NOK 6.5 billion. You should also note that it's only three quarters contribution from VimpelCom in these numbers, as we're lagging, one quarter, in the reporting. That will be, corrected then from, 2011. It will be lagging, but then it will be four quarters included.
On the tax side, we see last year NOK 4.1 billion in taxes, this year, about NOK 5 billion. A big difference there is that we have a dispute with the tax authorities, of close to, around NOK 814 million related to how, a gain on, a total return swap we have in VimpelCom shares should be taxed. We, are of the strong opinion that this should be tax exempt, while the tax authorities are of another opinion. But for, accounting reasons, we have elected to approve. I think that, the rest of it is more or less, self-explanatory, and, we end the year, at an EPS of about 8.9. But note that, there is a big effect from this accounting gain of, VimpelCom in that number.
Then on the debt side, development here, it's more interesting, I think, to see the development from the end of third quarter to the end of the year. We had NOK 19.8 billion in debt at the end of third quarter, and we come out of the year at NOK 19.3 billion. And reconciling this, we had an EBITDA of NOK 7 billion. Income taxes paid is NOK 1.5 billion, and that is the NOK 800 million we paid in taxes for the total return swap , and it's also now significant taxes in Malaysia and Thailand. On the CapEx side, it's NOK 3.4 billion. It's slightly less than what we have accrued this quarter.
The dividend paid to minorities, this is actually good news, because we're now starting to take out significant dividends from the four established Asia operation. Of course, with the exception of Pakistan. But now, both VimpelCom, Grameenphone and DiGi start to contribute significantly to the cash flow of Telenor. And this is then what is all that is paid out to minorities. We have received an interim dividend from VimpelCom of NOK 1.4 billion. We have repurchased own shares of about NOK 800 million. We have a share purchase program in 2010 of 3%. It is about 1.5% of that share repurchase program.
The rest, we will buy from the Norwegian government, and that will be set to second quarter 2011, with a similar amount as the more or less similar amount as we had in fourth quarter this year. Then the revenue share in Grameenphone is paid in the fourth quarter, significant amount, NOK 1.9 billion, and then current effect on working capital, about positive NOK 300 million, taking the debt to NOK 3.3 billion. Then dividend. Following up on Fredrik's earlier presentation on this. The board proposed a dividend of NOK 3.80 per share. Putting that a little bit into the context, it's the highest dividend ever for Telenor. And we're also going out from 2010 of the highest total shareholder remuneration ever.
A total shareholder remuneration in 2010 was close to NOK 9 billion, which dividend was slightly above NOK 4 billion, and share buybacks close to NOK 5 billion. The payout ratio is in the high end of the 40%-60% policy. The board has set a policy of 40%-60%, and yesterday they elected to set a dividend at the very high end of that range due to the strong performance. When it comes to the total remuneration in 2011, we have a clear intention to target our competitive remuneration also in 2011, as we did in 2010. So, for the next quarter, we will evaluate how we can top up the dividend with further share buybacks.
Turning on to Uninor, and the funding of the Uninor project. Let's start with operational side. We have communicated earlier that the key funding of the project should be no more than INR 155 billion . That is defined as operating losses, plus CapEx. When we look at where we are now at year-end 2010, we have on that definition funded about INR 79 billion. Regarding for 2011, it's a negative cash flow of INR 37-41 billion. Adding that on to the 2010 accumulator, we get to an accumulated operating and cash flow loss of INR 160-170 billion. That leaves an additional INR 35-40 billion before you are at full funding.
So that is what we then will have left for 2012, 2013, and 2014. That will be our guiding. And that, to achieve that, that will require exactly what Fredrik said earlier, that we really need to establish Uninor as a low cost operator. We have proven now that the acquisition machine is going, but we have to further improve the cost structure of Uninor. When it comes to how we finance an operation in India, we have invested a significant portion of our equity into Uninor. We had expected to take out some more of the financing with local project finance by Indian banks. That has proven to be rather difficult given the regulatory environment in India, both in the telecom sector and in the banking sector.
So for the time being, we are providing loans to Uninor, supported by Telenor. On the longer term basis, we see that project financing may come available again, but we also see that there will be a further mix of equity and various sources on debt to finance Uninor long term. Then moving on to the operational excellence, I will also keep Fredrik here, just saying that this now has a very strong focus in the group, and in 2010, we are on track delivering long-term ambitions. I think I would rather show this slide, and that if you go back and look at guiding on the CapEx, we are guiding long-term CapEx to sales of about 10%.
2010, we came out around 11, if excluding licenses and our investment in India. In 2012, we're guiding CapEx about 12%, including India, but we in India, so we're guiding maybe slightly higher in 2011 than in 2010. The reason for this is this picture, because we see a very good opportunity now, both that we have standardized a lot in our, the way we procure, network and hardware, to also standardize, the equipment in itself. And we also see a very good vendor market, currently with the introduction of Chinese vendors. So we're taking this opportunity of swapping out pretty much the 2G and 3G networks in all the Telenor, operations.
Montenegro has already finished its swap with very good results, and we're now in the midst of the swap in Scandinavia. Hungary and Serbia have started and will be pretty much finished through 2011, early 2012. We also now see that dtac and Grameenphone is starting to move, and we also expect True to start to move. So I would say 2011 would be a very busy year. If you've done this three, four years ago, before we had standardized, before we had professionalized the processes, and before the introduction of Chinese vendors, we would see a complete different CapEx to sales leverage . But I think it's important to note that we also do this to enable ourselves for a future with data growth and 4G and so on.
If you can justify these investments in its own on 2G and and 3G, the, the equipment prices are at this level. And that's why we also get this accelerated modernization of of the network, because we see that the new prices are at a complete different level than in the past. Ending this presentation, like I said, starting with the guiding, ending with the guiding. Let's start with India. We're guiding an EBITDA loss of around NOK 4 billion, that's more or less in line with the picture. But remember, we're investing significantly in the market, and in 2010, we did not have the last five circles in operations before in the second half. In 2011, we'll run full through in all 13 circles.
On the CapEx side, we're guiding a little bit down on the CapEx compared to this year, 1-1.5. That is largely capacity and infill CapEx in the various circles. And then at the end, for the total group, we also expect a strong 2011. We're guiding organic revenue growth above 4%.
... guiding EBITDA margin around 31%, and CapEx stays around 12%-13%. And remember, these figures, dividing here is in a year where we have the network swaps pretty much going out around in the entire group, enable us to an even, better position in, 2012. Thank you.
Thank you, Richard. We are now ready to take your questions. So, please, I invite Mr. [inaudible]. Please also, once here present, wait for a microphone to be passed on before you ask questions. Do we have any questions? We have a question there, please.
We have Security. Despite the reports of tightening and competitive pressure in the Norwegian market with several vendors offering not NOK 199 almost all inclusive packages. I think the results from Norway were quite decent in the quarter. So the question is, provided the market developments you see now, do you think we have seen the full effect in Q4 from the tightening market pressure? Or do you foresee further pressure on the margins and possibly on the RP levels going forward? That's part number one of the question. And part number two is, we're gradually moving towards a more symmetrical MTRs also in the Norwegian markets.
How significant do you see that being for Telenor's results in Norway going forward?
The price pressure and the sort of the dynamics in the market is going in sort of different phases. Now we have a more competitive phase driven by last year's asymmetrical setup. And there is no doubt that the asymmetrical termination regime basically favors the newcomers in this respect. We've seen this before when also our main competitor today, NetCom, had it some years ago. And we saw price competition, it's not the Minister of Transportation's intention on getting better coverage and extending network in the rural districts. Doesn't come with asymmetrical termination regime . You get price competition. And I think that's seen for the time being.
Whether we are at the bottom of that curve, whether we will see that pressure continue, there is a different market dynamic beginning 2011 compared to beginning 2012. So sorry, 2010. And in that sense, the pressure is more on as we speak than one year ago. And we are used to having these kind of effects in the telecom market, and we need to adjust accordingly, both on balancing service quality, coverage and capacity in the network, up against the price level in the market in order to serve our main goal, mainly that to hold our market position in Norway in general. How long will the asymmetrical sort of advantage last? Well, there is a profile from that for that in the coming 2 years.
I think the profile is 11 and 12. Gradually this of that advantage will be reduced. But as we speak, it's a strong advantage, and I think the first final revision down really on this is June this year or July. I believe so.
Any follow-up or a new question? Okay, we have no question here. Yeah.
Hi, just supporting the just clarification regarding buyback. Is there any relevance in the present situation with injunction relative to how aggressive you will pursue your buyback for this coming year?
Yeah. I think the board yesterday decided on the dividend, as they normally do, based on the fourth quarter results. As we did last year, we'll consider buybacks over the next quarters. The clear intention to keep a competitive share returns .
Any further questions from anyone here? No, I can't see any hands. I have a question here.
You're talking a lot about mobile. But the future mobile is very much dependent on faster transport to the station, where they can get through radio. That means a lot of new connection with fibers. How are the strategies of Telenor with fiber?
...And then I have a second question: How is the satellite business playing into this, with handling transport of all kinds of data and telephony?
Yeah, the fiber question is in Norway a very central question, but we follow the build up of data volumes in the mobile networks. And here, 4G will play a vital role. LTE is still in the initial phases. And when equipment and the deployment of capacities are extending into the network, the fiber investment needs to go accordingly, and this will follow the market build up. And then of course, the usage pattern of the market at large, besides speed, on which the fiber deployment will extend to more base stations.
This is, in Norway, we have a good fiber status as it is to base stations today, but there's no doubt that this has to be extended to more base stations as we grow, LTE data volumes going forward. And of course, also the competitive situation will decide that key. In the sense of satellites, the satellite doesn't play any role in this on a domestic scale. Satellites do not play a role in data handling in domestic Norway, or domestically, nor domestically Denmark, for that matter.
Thank you. I think we'll then open up to the questions from those participating on the phone. So could we have the first question, please?
Hi, inaudible.
Hi, good morning. I've got three questions if that's okay. The first is in terms of food price inflation. Can you give me an idea of what assumptions you've got baked into your current guidance, in terms of inflation for 2011? And then on India, I was just wondering if your, if the other licenses that you've got that aren't currently up and running were to be canceled, could you give us some kind of indication of what peak losses would be? And does your current CapEx and CapEx guidance for India actually include rollout into some of those other eight circles from over the course of 2011?
Finally, I was just wondering, in Norway, do you think the, yeah, after the MTR cuts have happened, do you think there is potential for further consolidation in Norway, especially with some of your competitors being more pressured? Thank you.
On food prices, I think there we don't carry sort of a specific estimate on how this moves forward. But if you get shock curves, that's when sort of consumer demand changes. If you have a controlled development, you don't get the same type of change in consumer behavior. If there is any focus on any of the assumption here, it's more than we—it's more that we get a gradual development rather than certain shocks as we saw them in 2008, as a consequence, coming out of the energy crisis. Then we have not included in the estimate for India any license costs as such.
We are of the opinion that we have met our part of the agreement regarding the licenses according to the definition of the license back in 2008. There might be a question on the date of launch, as such. And the penalty discussion as to how and when these launches were made. But remember here also, that this is a topic for discussion, because some of the delays in the launch phase were created by Indian authorities themselves by introducing new mechanisms in order to approve deployment into the network. Then, what was your last question? Yeah, the consolidation in the Nordics.
Well, there are probably consolidation possibilities in Norway, as it is in the Nordics in general. In Norway, obviously, NetCom is not able to participate in that. But as others can find, from their perspective, efficient combinations, we don't... We, that may very well be said. And if it happens, it happens, and the window of that opportunity comes when it comes.
Can I just have a quick follow-up? On India, in terms of the peak losses and the losses that you're forecasting for the coming year, does that include rollout into the eight other circles that you're not currently present in?
Yeah. On the CapEx side, it's part of that CapEx that is also related to the circles we have not yet launched. A small part.
Okay.
Next question, please.
... Hey, Andrew Lee. Welcome back. So happy.
Good morning. I also have three questions, points for that. One on Russia, one on India, and then just a brief one on Denmark. On Russia, really a broader question on your. How do you think the new conflict compares to the level and type of conflict you had two years ago? So how can you reassure the market that this conflict won't be as bad as last time? On India, you mentioned in your answer to previous question and earlier in the presentation that the regulatory environment is very uncertain, potentially very different to that which you saw when you decided to come to capital.
Do you now see at least a potential scenario for regulation and competition, in which you no longer believe you compete with INR 155 billion rupee peak funding loss, or in which you no longer want to compete with capital to market at all? And then thirdly, just on Denmark, there's a very effective, at the moment in the mobile market. We know that they want to take up to move to aggression. Is that, is that, is that a business you'd be interested in taking on yourself? Thank you.
This conflict that you refers to regarding VimpelCom has a fundamentally different character from what was the case over the long-standing conflict we had in Russia previously. Remember also that that conflict was ongoing domestically in Russia. And had dimensions which were challenging to relate to. Whereas this one is based solidly on U.S. law under arbitration in London. And has more of a black and white type of outcome. Either you get support for your view, or either you don't get support for your view, the way it's now raised with the judge. So and there are two parallel activities going on.
Firstly, it is the business case as such, by combining Wind and VimpelCom, which we have concluded. The way we have explained this, that it does not benefit the existing shareholder sufficiently. And I think the market is well aware on our viewpoint on that. And then there is the injunction that we filed yesterday, after having had a dialogue with the VimpelCom management, in such a way that we saw ourselves forced to also use the injunction mechanism, in order to protect the pre-emption rights that we have under the agreement. And as you know, we challenge the fact that this is a related party transaction, the way it was treated. So these are two sort of separate tracks, separate areas of concern.
Then in India, will there be an extra bill on frequencies to such an extent that it fundamentally kills our business positions in India? Yes, there might be such an event in India coming out of this crisis. But on the other side, we will claim that we have met with the obligations under the license plans issued in 2008. And we will claim that we have met these obligations by investing into the marketplace, the way we've done, and that we have created competition in the Indian marketplace, the way Indian authorities wanted it, these licenses to do. And we've done that remarkably well on the customer side.
We have to face the fact that the competitive situation gives us a challenge on the revenue build up, but we're working on that. We have a good network, where we have coverage, and we have got good traction with the market, the way we go to market in trade and distribution. Will there be a bill? Well, we will have to see whether there is coming incoming extra bill from regulations, and judge it from there. Aggressive M&A and M&A in Denmark, well, have we seen that before? Well, Denmark has been full on this all of through so many years already. So that this model seems to be well known in Denmark by someone.
Surprisingly enough, there are some of the bigger players that keep them off one by one at the later stage. So I guess this is another try to get to the same goal. That's how regulation plays and how market plays, and that is the case in Denmark. Will it be picked up at a later stage? Probably, yes. By who? Well, that's an open question.
Thank you. Can I just follow up a question on, on India? You mentioned there seemed to be a scenario where your INR 155 billion rupee peak funding is pressured, at least. In that instance, would you just have to seek out a solution, essentially today, guaranteeing that you will not go above that peak funding loss, no matter what the regulatory outcome?
That's a difficult question, to the extent that we don't know the regulatory outcome. I think we have to sort of carefully analyze the regulatory outcome when that regulatory outcome is available.
... Next, go ahead, please.
Yeah, hi there. I've got two questions. So the first one was, Norwegian Mobile EBITDA was obviously quite strong in Q4. I just wonder, how sustainable is it to continue holding back on marketing costs in Norway, in order to protect EBITDA, whilst also maintaining market share and keeping revenue fairly flat? And the second one was on Eastern Europe. It's obviously shown signs of recovery, in Serbia and most of Europe. But how much do you say this is the economic recovery, how much of it is winning market share of some of the competitors which are talking more about stabilization still in the region rather than recovery?
Well, let me comment on Central and Eastern Europe, and we can follow up on Norway afterwards. There is a rebound in Serbia as we see it right now. And Telenor Serbia is both building success in terms of market share, as well as building revenues per user. So it's a... And this is done through a systematic approach from the management of Telenor Serbia into the marketplace. Understanding the dynamics and taking advantage of positioning Telenor Serbia favorably. So I think there is good work being done by the Telenor Serbia management for the time being. And that touching momentum is such is very important for a management that feels and have the confidence on moving along.
And if you go to Hungary, the economic development in Hungary is quite different from what it is in Serbia right now. Because the best one can say about the Hungarian economy for the time being is that it's, it's very sluggish. If you can accept that word, that word. Yes?
Yes, on the mobile EBITDA in Norway, where we'll not dive specifically on that, but there is some important facts to note, is that we're seeing now also in the fourth quarter, that the revenues from the data side increased by 41%. Which is a pretty good underlying growth driver. On the other hand, we have the price competition as we have discussed earlier today, which makes it necessary to further implement the cost measure and become more effective. Even though we think it's of a temporary nature, due to the termination regime, we have adapt to the market and adjust our costs in Norway.
Okay, thanks.
Before we go further, I'd like to ask the ones who are not to please limit the number of your questions to one or maximum one follow-up question. Thank you. Next question.
Richard, go ahead.
Okay, thanks, thanks very much. I probably have to wrap to cover the issues into one question. I guess, actually, I mean, if I can just quickly ask a follow-up on Uninor. What's the degree of confidence have you got that your injunction will be favorably, and that you will have preemptive rights to sort? What sort of degree of professional backup have you been able to secure? And then perhaps the operational question. You mentioned that India will have to move to a sort of low cost operator model. Is that really internal looking? Is that just looking at your own cost structures, or is this in front of the customer as well?
Do you need to reposition yourself as the lowest price offered to the Indian consumer?
Yeah. Degree of confidence, to the extent that we have taken this step, I think we should add that we believe we have the confidence that the case will be heard favorably. If we had had the opposite view, I don't think that step would have been necessary to take. And have we clarified that with lawyers? You bet we have. But to the extent lawyers express themselves, they don't give you guarantees. But on the other hand, we haven't done this if we believe that we would be rejected. And then in India, low cost, ultra low cost. Well, India, or entry to India, has taught us a lot already, really.
The network sharing principles that the Indian market was known for, it has basically showed its way into other operations as well. Just recently, you might have seen that we adopted a bit of the same type of principle in an agreement with Axiata in Malaysia. And we've done the same in Bangladesh, and in other markets. So here, the level of cooperation utilizing the assets and the investment better in the industry is something that characterizes the industry for the time being. In addition to that, the Indian market is special. It is a very high intensity in the competition. We have already repositioned the Uninor brand.
We did that last summer, and we got new and significantly improved traction with our go-to-market model with Indian customers. So in that sense, we've done that adjustments already. Having seen that, we still need to address the sales and acquisition cost and look for deeper efficiencies going on from here. And this will be our focus, not only for the sales and distribution, but also to utilize the assets and the airtime available in the network even better. And there is always a possibility of executing better from where we are and from the consistent stage we have.
Thank you. Next,
We have to ask next.
Thank you very much. One question on India, please. In your shareholder agreement with Unitech, are there any provisions in there that would give you recourse in case you get an adverse regulatory decision based on what happened before you actually formed Uninor? Or is this the weight of such potential decisions really falling equally on Uninor, and so equally on Telenor and Unitech? Thank you.
I think we will not comment specifically on the text in the shareholder agreement with the Unitech, as that is bound by a confidentiality agreement. But what we can say is that we have done our due diligence in India before we went in, and acquired the shares in Uninor in a good faith, when it comes to what has happened in the past. And we have, of course, taken the kind of normal precautions in such an agreement.
Thank you.
Next, inaudible.
Yeah, thanks so much. Just on Thailand, I think you have some 850 megahertz , which you could potentially use for 3G. Could you let us know when you plan to do that? And secondly, on delaying the split from special general meeting, could you tell us how you plan to do that, or if you think you can do that? Thanks very much.
850 in Thailand is a possibility. A couple of years ago, when this sort of started to become a feature, and I think it was Telstra in Australia that really started to utilize 850, commercially at a high degree. True Move has been the front runner for this, through an extended, I'd say, testing period in Thailand, and has thereby shown that it has a good potential. Now, DTAC has also got an approval to extend the test period for it, and we will do so. I don't have the timeline for that, though. Then, to delay the general meeting in VimpelCom, I have no comments at this stage.
We really have done what we feel is necessary from our perspective. After having had a dialogue with the management of VimpelCom, on this issue, we felt ourselves in the position that we had to raise the injunction yesterday. And how this will play into the planned general meeting, we will have to, that remains to be seen.
So essentially, we have to wait for the result of the injunction before you have any idea whether the general meeting is going to be delayed?
I guess that might be how management of VimpelCom will be thinking at, let's say, April.
Okay. Thank you so much.
Thanks. Next.
Thank you. Good morning, everybody. I'd like to return to the Nordic businesses please. You can do a restructuring of, of the Danish and the Swedish business, I guess, the best for reaching out to you a lot more. But I'd like to ask, where are you sort of now, relative to where you want to be in those operations? So should we do 2010 as a restructuring year, and you're moving into a new phase now, or is this an ongoing process? Thank you.
I think you gave the answer yourself. It's an ongoing process. Really, I mean, telecoms is about change. It's about the change of technologies, of partnerships, relationships. It's about changes. It is driven both by regulatory instruments as well as the technology side of it, and not the least, the transition to data. It's a phenomenal change. In a way, the answer is, yes, it's a constant ongoing. It may be so that one structure fits one setting. A new structure might be needed to fix a new competitive setting, as we see evolve in the different in relation to the different services that we see comes up. Yes, this will be constant part of how we're looking.
... are you happy with the cost structures you have in those operations now?
No, we're quite okay where we are coming from through 2010. Every competitive move and every change on top of the competitive balance will have to be addressed once more. I remember back to more than 10 years ago, when we were discussing about the downward trend in fixed line revenues in Norway. We were asking ourselves, or you were asking us, "Will you be able to keep your margin as you execute these changes?" And yes, we did that. And we did it in a period of time. So, I think there is no new thing to the world. This world is for telecom operator is not linear.
We need to address any changes that are there, and utilize the new technologies when they come. In the way we're doing, when we're executing the next modernization program that we have in the three countries. In particular, entering now 2011.
Okay, thank you.
Next, Daniel Bluestone, Goldman Sachs. Go ahead, please.
Oh, hi there. I've, I've just got one question, just in terms of your revenue guidance. You're going from 8% organic revenue growth this quarter, to guidance of above 5% in 2011. It seems like you're sort of indicating that you expect some form of slowdown. Can maybe just talk through what are some of the drivers for slower revenue growth in 2011, and what you're currently experiencing as price inflation you mentioned earlier, or is it something else?
Yeah. A 5% growth factor compared to where... The first comment one to make is that, well, a 5% growth factor starting from something that was growing the year before is actually to start a growth from a higher level. So in a way, it doesn't signal that there is a downward trend, really. It's a trend that continues. And yes, we have not sort of planned in this for crisis of the kind we had in 2007 and 2008, after the energy crisis that led to the food crisis that again created the financial crisis a bit later.
These kind of crises are not sort, planned for, but we cannot disregard that they might appear once more, in some form and fashion. But as I said, everything is better as a gradual development than a short-term development. The drivers of growth, where do they come? Well, the combination for the Telenor Group, primarily, both by customers, the wider usage pattern, economies in strong growth. Again, we heard Indian officials in several settings and levels, pointing to the significant economic growth. Even pointing to the double digit type of growth level, going forward for a period of time. When you, when you're traveling in India, and see what's ongoing, it's quite obvious that the growth is enormous.
Rest assured, there is a lot to be done as well.
Thanks.
Next, Are Johansen . Go ahead, please.
Yes, thank you. I just had a question on your guidance for India. Where do you think revenue is going relative to where Opex is going to achieve at $4 billion in 2011? Thank you.
I think, we would refrain from not sort of breaking down or our guidance regarding just on the EBITDA loss.
Thank you.
Next, William Miller, Redburn Partners. Go ahead, please.
Thank you. I just wanna switch back to VimpelCom, if I can. Just a couple of questions. When do you expect, or what's your best estimate, that you might get an outcome to the arbitration action that you brought? Can you confirm what the cost of taking up the pre-emption rights will be if the injunction is agreed, and if the arbitration is successful, I guess, based on its current share price? And then just very quickly, do you have pre-emption rights over the preference shares that it issued to Wind as well? Thanks.
So maybe I can start on the arbitration. The arbitration process itself probably have, roughly speaking, 18 months timeline. Whereas the injunction instrument obviously has a much shorter timeline, and should be available in good time before the estimated time for the general assembly. Richard?
Yeah. When it comes to the, the cost or the investment, rather to say, in, in new shares in VimpelCom, based on the current price level of the VIP share , that would create around $2.7 billion. So on, the question of, preference shares versus common shares, yes, we have potential... Oh, we have pre-emption rights on both preference shares and common shares.
... Okay, great. Thank you.
Next, Dominik Klarmann, HSBC. Go ahead, please.
Yeah, thank you. Just to follow up on, on Thailand, the 3G auction, is that still expected to be a late 2012 event or even later? Just an update there would be helpful. And then a general question on mobile data pricing. Looks like you are still selling all-you-can-eat data packages in Sweden. Now, in the past you said such services are unsustainable, but I guess this remains rather a short-term tactical decision or is there any change in your general thinking? Yeah, so let's leave it there.
Well, a date for 3G in Thailand would be appreciated. Unfortunately, the process that was ongoing, as it was, literally falling apart just this autumn. I think that was unfortunate for the telecom market in Thailand. I think Thailand is ready for 3G, in the same way as we've seen the response in Malaysia. But there isn't any new time for that 3G, despite the fact that the authorities are pointing to the new regulatory committee that they should work as expediently as they possibly can. And things have taken time under such descriptions before in Thailand. Hopefully they have a different attitude this time.
all-you-can-eat , I think, you have to add the fair usage policy attached to that. And, it's very clear that the all-you-can-eat principle, we are of the opinion that that will potentially create cost structures which will be very difficult to sort of cover into the future. So, the attachment of fair usage policy is very visible in all our subscriptions and for the time being.
Thank you. Next, Josephine de Chazal, Exane BNP Paribas. Go ahead, please.
Thank you very much. Good morning. I have two questions, please. More sort of clarity on some already asked matters. The first one is on VimpelCom. You think you're prepared to buy for $2.7 billion worth of VimpelCom shares? Help me understand that this is your statement, that there is no better investment for you to make at this exact moment than VimpelCom shares in the market. Does that specifically rule out any other M&A activity for the time the arbitration is ongoing, in case the injunction goes in your favor in the next 15 days? That would be the first question. The second question is related to India.
Could you clarify, please, when you said that you'd expect to receive 6.2 megahertz of spectrum in all circles without additional payments, whether you refer to the 22 circles or to the circles that you have already launched? And in the event where you do not receive spectrum for the circles not launched yet, does that mean you would consider buying spectrum in Delhi, for instance? Thank you.
Maybe I could start on India first, and then we want to VimpelCom afterwards. The extension of spectrum from 4.4 to 6.2 is based upon market position and customer growth. And that is also part of the UAS definition of the license. Obviously, our comment on expecting to receive 6.2 without extra cost has to do with the market position that Uninor has taken in the respective circles. In those circles that we haven't launched commercially, but only covered the minimum requirements according to the license, then as a consequence, we wouldn't be eligible for 6.2 as such. So those things are linked together in that fashion in India.
When it comes to VimpelCom, yes, $3.7 billion is a substantial amount, but, fortunately, Telenor is a financially very strong company. And, I think we have three, kind of, main overriding factors when it comes to the capital allocation. And that is preserved as strong balance sheet. It give a competitive shareholder remuneration and do selective M&A. Then when all this, opportunity or, situation in VimpelCom, comes about, we of course, have to, react on that to protect our position in VimpelCom.
Okay, we'll have time for two more questions now. So, next.
Next, in line. Go ahead, please.
Yes, hello. Coming back to Russia. Historically, you've had a control or exit strategy in all your holdings. Obviously, you do not have control in VimpelCom, as you do not consolidate that. But you had at least some form of control with your shareholder agreement. Now, this Wind deal is showing that you have limited control despite the shareholder agreement, and if the deal goes through, you will, and if you cannot stop this, then you would be diluted to 25%, and you could also risk being diluted out of the shareholder agreement. If this were to happen, would you then evaluate your position in VimpelCom and maybe see this more as a financial asset?
I think the answer is straightforwardly yes. But we don't believe that that outcome will be the case.
Okay. Thank you very clear.
Yes, thank you. Go ahead, please.
Yes, I'd like to know about the plans in India. Do you have any plans to launch your mobile data services?
Mobile data is also part of. Actually, it's a component of data for 3G. So, the EDGE protocol serves data to, in particular, phones very well indeed. And in many markets, we've used that technology for data access for customers for quite a long time before 3G has been made available. So, yes, there will be data offerings. There are data offerings as part of Uninor, and it will grow in importance, but we have no plans of sort of moving into 3G from where we are today.
All right, thanks.
Thank you. Before we end this session, I'd just like to have a few more questions from the participating via the internet, and that's from Nikhil Pahwa of MediaNama.com. The question is: What has been the impact of mobile number portability in India on Uninor? How is this likely to impact subscriber addition? I wasn't aware that you were asking questions as well. I'm not. I'm just. But okay, you're conveying a question. On the other hand, I think the answer is clear. Number portability is something that sort of has created the expectations when it has been launched in every market. But experience shows that number portability doesn't really create a momentous change in the competitive situation between the operators.
And Uninor being a sole prepaid activity in the Indian marketplace has seen only marginal positive effect from the introduction of number portability. And remember also that the Indian market is as yet not as focused as to the personal number as we are used to in Europe. So from that perspective, customers in India are used to operate with with more numbers to their multitasking solutions than to that specific number to one specific number as such. That may of course change because the number portability has been introduced. So the initial effects are for Uninor marginally positive. Thank you for that, and,