Okay, welcome back, and welcome to Telenor Group's Capital Markets Day. Again, my name is Marianne. I'm head of Investor Relations, and I will guide you through today's program. I hope you all now have the presentation material available. You can now see the agenda for the Capital Markets Day. The first part of the program will include presentations by the Group CEO and the Group CFO on the group's strategic direction towards 2020, and also financial priorities and ambitions. After a short break, we will then have presentations from some of our key business units from Norway, Thailand, and Bangladesh. They will give an update on their respective markets and also explain how the group's strategy is being implemented in their respective units.
After the presentations, as usual, when we have Capital Markets Days, there will be a more informal breakout session from approximately 3 P.M. to 5 P.M. These sessions will be informal Q&A sessions with management from Norway, Thailand, Bangladesh, and Sweden. So without much further ado, let's introduce our Group CEO, Sigve Brekke, for the presentation on the group's strategic direction.
Thank you. Thank you, Marianne, and good morning or good day to all of you. I have actually been looking forward to this day. As you know, the management, together with the board, we have now spent the last few months trying to figure out what is our 2020 strategy. In a very, very changing world, it's not that easy to find the direction and to point out where you want to go. But finally, we now have a strategic plan in place, and I'm eager then to present our story to you. But before I do that, let's see a little bit where Telenor is. In my view, Telenor has a very strong starting point. Throughout our 13 business units, we are number one or number two in all our markets, except India.
We have majority ownership and operational control in all our business units. Not that many of our competitors have the same ability to actually do what they want to do. We have a good balanced portfolio with a strong position in the advanced Nordics and with a, a position also in the growing Asia. Not least, we have scale. 210 million customers gives us scale when it comes to purchasing power when we are buying equipment, but also give us scale enough to actually get some attention when we talk to some of the big global digital players. We have delivered growth over the last few years. That has very much come from our strategy of going right into the mass market.
We have believed for many years now that everyone deserves to have a mobile phone, and we are now taking that also into internet. We have, in all our markets, a value for money position. We have built distribution as one of the core or the main competitive advantages, and because of this, in most of the markets, we have actually had growth above our peers. Maybe the best example of that is Digi Malaysia . When Telenor entered the Malaysian market, Digi had a market position or market share of 15%. Now we are closing off almost to 30%. That's showing how this attacker's mindset of always doing better than our competitors have formed our strategy in the past. And as I said, we have been growing.
If you go back, the last four or five years, you see that our revenues on average have been growing 7%. You see that our EBITDA has been growing almost 40% since 2012, and we have delivered on an increased dividend policy. Year by year, we have taken up the dividend payout. Let me also spend some minutes on to summarize the operation as we see it, as it stand now. 2016, we saw in the Scandinavian markets, we saw data demand to continue, and it continued to increase.
We took an early position in introducing, Roam Like Home in the EU areas, which, as you know, will come mandatory now from 2017, but we were early out, and we're almost now compensating for the, the shortfall of the roaming revenues with, upsell or packages, and Berit is going to talk more about that. We have increased our 4G rollout. Within this year, we will have 4G on all the 2G base stations in Norway. We have taken fiber step-ups, both in Norway and in Sweden, and I'm going to talk a little bit more about that as well. Altogether, now we have a high-speed broadband, around 1.1 million high-speed broadband customers in Norway and Sweden.
We have continued to focus on efficiency in the Danish market, while we are continuing also to look at more long-term opportunities there. In Central and Eastern Europe, we have built 4G quite aggressively in all our markets, and with that, we have taken a position for the valued or the high-end customers, and also had a continuous focus on cash flow. All our Central and Eastern European markets have a very healthy cash flow generation and contribution to the group. In what we call the emerging Asia, Thailand, Myanmar, Pakistan, Bangladesh, we have had a very solid revenue growth the last year. That is now coming on the back of aggressive investments into three or four new networks.
As Jørgen said, in the Q4 update, we have now almost covering the entire populations with data networks. We then see now that monetization is coming. Double-digit growth in both Q3 and Q4 in markets like Pakistan and Bangladesh. I also have to say a little bit about Myanmar. I just came back from Myanmar 2 days ago, and it's just a fantastic market. I was fortunate enough to be a part of applying for the license. 90 operators competed to get that license 2.5 years back, and we got it. To see now what we have been able to do, we broke even on the EBITDA in this market after 3 months, and we broke cash flow break even after 15 months.
This is what Telenor can do best, to put our best resources into play. Then the mature market, which is Thailand and Malaysia, intense competition during last year, and especially on the prepaid segment, and Jørgen also pointed to that in his presentation. We also see these markets now breaking out from the rest of Asia, with there being less prepaid focus, less price sensitive, and more into bundled data services on postpaid contract, as we see in Europe. And because of that, we have taken early steps, both in Malaysia and in Thailand, to prepare ourself for that. I'm then very happy to see now that the postpaid growth is coming.
We have double-digit postpaid growth in both these two markets, and we are now changing our operations to really take into account the digitalization that is happening in this market. It's amazing to see that in Thailand, the average usage for our customers is now up to five hours a day on a mobile phone, and most of that, of course, is coming from digital products and digital services. We are also in this market, and even though we have been losing revenue share in Thailand, we have improved our margins. In Malaysia, despite very, very tough competition, we have kept our margins, and we have actually taken market share. So again, 2016 was a solid year for us, and I think we are well prepared now for going into the digital future.
The world is changing. The world is becoming much more global due to the digitalization, and the world is also becoming much more driven by global digital products. And again, from Myanmar, 64% of our customers now are data users in Myanmar. So in less than two years after we launched operation, they have gone from nothing, not even basic connectivity, to advanced data users. That just shows the summary of this picture, actually, on how fast things are changing. For us, this leaves us with a lot of opportunities. It leaves us with opportunities where we actually can take global positions within digital product and services. We can build global platforms, and I'm coming back to that. It gives us opportunities within technology. Where technology is more and more software and cloud-based, we can use that to virtualize our networks.
We can use it to build standardized IT platforms across, and I'm coming back to that as well. And not least, we can take physical customer interaction into digital, digital ways of communicating, which is also enabling us to build an analytical platform. And not least, we can take some selective steps into new digital businesses, and I'm going to explain that more in detail. Telenor has 160 years history of change, and we will do it again, and that's embracing the digital opportunities. That's the fundament for our strategy going forward. We've summarized our strategy in this strategy wheel. Four main points. It's about being the favorite partner in our customer's digital life. It's about being the most efficient operators. It's about responsible business conduct, and it's about winning team and the way we want to work as an organization.
The overall objective with this strategy is to continue to capture growth opportunities and to focus more on cash flow generation and then cash flow growth. I think some of you are already saying that we are changing now the focus from top-line growth into cash flow growth, and yes, that's true. I will talk more about the need for us to both continue to grow, but also the need to work even more efficiently to reduce our cost base. I'm coming back to that. So what does this really means? To become the customer's favorite partner in their life, we need to have digital customer relationship and engagement. We need to have high-quality networks, be it mobile network, 4G networks, or also being fixed networks, as we do in the Nordics.
We need to deliver digital products and services on top of connectivity. What does it mean to be most efficient operator? It means a radical step up on efficiency, and we aim to be among the most efficient operators in where we operate. It means that we have to take the digital opportunities to digitalize our core business, and it means much more focus, prioritization, and simplification.... We are also present in very challenging markets, that being in the emerging part of Asia, mature part of Asia, or even in Central and Eastern Europe. That's why we have also chosen to put up being responsible business conduct as one of our strategic goals. Lastly, we need to continue to build a winning culture, the attacker's mindset culture, the ones that go after market share.
But to do that, we need to build new capabilities, and we also need to change the way we work, and I'm coming back to that as well. So now I'm going to go into three main areas, and you will see that when my colleagues here are also doing their presentations later, we'll be following the same concept. So, this will be the three main areas for us to be driving down the value creation towards 2020. It's about growth, it's about efficiency, and it's about prioritization. Let's start with the growth part. Telenor has historically been a growth company, and we have not given up on that ambition. We want to continue to be seen as a growth company, and I'm going to now go into what does that mean in practice.
I'm going to talk about growth in traditional mobile revenues. I'm going to talk about the growth we see in high-speed broadband or fixed revenues, and I'm also going to talk about the growth we see within some selective digital businesses. Let's start with the mobile revenue growth. Yes, we had a slowdown of the growth in 2016, 1%+, and this is mainly coming from challenges we have in two of our main markets, Norway, with the effect of including the free roaming, Thailand, with the increased competition and also Malaysia. We hope that these markets will also come back to a growth. But let's start with these graphs, which explains a little bit of where we have growth opportunities.
The first one on the left, it's markets where the real penetration is still low. And I'm taking Pakistan and Bangladesh as example here, but I could also add Myanmar. These are markets where people are so price sensitive that they will walk around with 7, 8 SIM cards in their pockets just to take advantage of the best offer. And if you adjust for these mobile SIM cards and see how many people do actually have a mobile phone, our estimate is that it's around 50%. So there's still a long way to go to connect people to basic services.
That's why it's important for us to continue to build distribution in these markets, continue to also be competitive on our basic mobile services, and to capture then the other 50%, which do not even have a mobile phone today. We also see that these markets have a very young population, and there are more and more kids coming in, into what I call it, mobile eligible age. So you can expect that Pakistan, Bangladesh, and Myanmar will continue also having a revenue growth just through the very basic connectivity offers that we have. The graph in the middle here is talking about the smartphone prices, and there is a very, very clear correlation between data usage and smartphone penetration.
And we typically see that when a customer goes from a feature phone into a smartphone, the ARPU will increase quite significantly just because the data consumptions increases. We see now that this is a graph from Bangladesh. The smartphone penetration is now 25%. The rest of the market have feature phones. And what we saw on the feature phones was we saw that when price levels came down some years ago to a $25 level, then we saw that suddenly the mass market could afford. And this is exactly what we are going to see on smartphones as well. And now we see it, when it's down to around $30, we see that the penetration starts picking up out in the mass market.
These prices are going to continue to fall, and that's why we are quite optimistic when it comes to then monetizing the data investments we have made in these markets going forward. It's just a matter of a year or two before you see that even these markets will be data users, as we see in the more advanced markets. The one to the right is explaining the data growth in Norway. As you can see here, the average data consumption per customer is going up. It's around 800 MB per customer per month now, but it's still very low. Our customers in Sweden are much higher, and if you take another market in the Nordics, Finland, for example, it's much higher than that as well.
We see that there is a continuous growth in data consumptions in Norway and Sweden. We also see the same in Thailand and Malaysia. As I said, more and more time is being used on the smartphone. In Thailand, for example, 50% of the revenues that dtac has now is coming from data. It used to be only in the tenth or close in the 20s, now it's 50%. We also see that almost 50% of the customers now are becoming postpaid customers, them asking for data bundles. These are markets which are skipping the fixed broadband period, and also skipping the laptop or the desktop connections to data. They go directly on mobile first.
This should be a possibility for us here to grow these markets with the right offers in the data to meet the data demand. The other one I want to talk about, we want to do more than being only a connectivity player and then leverage connectivity growth. We want to be present in also offering engaging digital product. That's important for us to add value to our core telecom offerings. But it's also very important for us to engage with the customer digitally, so that we get more customer insight. And using that to build analytical platform and be able to offer personalized services. So we are going to do this in two ways. One is on the left-hand side there.
There are some products we want to offer ourself, some digital products we offer ourself. This will be products which are close to our core. The reason why we want to do that is that we also want to have more and more information about our own customers. We also want to test and learn. For us to understand what's going on out in the digital, the big digital players, we need to understand more, we're testing it out ourself. We have chosen to focus on three areas: is connectivity, WowBox in Pakistan, and Bangladesh is one example on that. That's a content aggregator that we are offering to our customers, and it has had a phenomenal success so far.
It's within communication, appear.in, is a video service we have developed here at Telenor, and it's now going commercial. Storage services, My Contacts and Capture are also examples of products we are rolling out group-wide. Of course, the majority of the digital products we are going to offer our customers are going to be from partners or third parties. You see some of them on the right-hand side here. To do that, we are building a global backend platform. Because we want to be the preferred partner to work with from some of these digital players. What that global platform does is basically connecting all our business units together. They do that through having payment solutions.
They do that through having ID solutions, so you can log in as a Telenor customer, and they do that with open APIs. Such that if you want to work together with Telenor, you have one API plug-in into a global platform, and you can get access to 211 million customers. You don't have to do that BU by BU. As far as I know, there are few others, if any, of our competitors that actually are building such a global platform to prepare ourselves to take a position as being actually the preferred partner to work with with the third-party players. I'm going to shift a little bit to the fixed side. As I said, we are stepping up our fixed investments on fiber, both in Norway and Sweden.
The numbers you see here is the current market position we have on fiber. You see Norway around 20%, you see Sweden around 26%. And you see that we have quite ambitious targets here, in the years to come. We want to increase our presence, and we want to then take a part of the growth. We think this market will be over 3-4 years from now, because not only we are looking at this as a profitable market, so is our competitors. So that's why we already have increased our investments and focus on this. We see that the typical return on these investments is good, and that a payback will be around 5-6 years of fiber investments.
Two very different models in Norway and Sweden, and I think Berit is going to talk a little bit more about that, and Patrik will also be in the workshop later today to talk about that. So far, we have not done any fixed mobile conversion between mobile and fixed. But I think with the increased positions we now will have in both our two markets on fixed, we will also explore possibilities to with FMC. We will not do that to destroy value or discount our offerings, but we are going to look at it from a value-added perspective, and also from a customer convenience perspective. But again, Berit and Patrik are going to come more about this. Then, we have also now implementing with taking fixed positions in the emerging markets.
I'm talking then, Pakistan, Bangladesh, and, and the Myanmar. In this market, there are very limited fixed services available, and the penetration is extremely low. However, we see a growing middle class, so we see a demand coming from also the fixed services as we know them from, from Scandinavia. And we see opportunities to be early movers, into, taking some pockets in the cities, in the, in the big populated cities. We are running a pilot in Myanmar as we speak, and then pilot is basically leveraging on the fiber network we already have to buildings, to support then the rooftop base stations that we have. So when we already have that, that, building connection, it's relatively easy for us to just, wire that building and offer them fixed solutions.
So far, this seems to be working well. So far, we haven't spent a lot of money on it, but the plan is to scale it up and then do three major cities within this year, and then increase further in the years to come. This could be a way for us to secure a clear number one position in these markets. I will then move to the third growth area, which is adjacent digital areas. Some of these areas we do to support and grow our core business. Some of it will be standalone verticals that we see a growth in that vertical. Let's start from the left, financial services. We have actually been in this business for the last 10 years. It's now almost 10 years since we launched our services in Pakistan.
In Pakistan now, we are a clear number one player in the market. We have more than 20 million banking customers, active banking customers, in Pakistan alone. And we are now expanding from a kind of traditional services like bill payment, like transactional services, like, remittance, domestic and international, into a little bit more advanced products, and micro-financing, and also loan products. And we see now that, 12% of Telenor Pakistan's revenues is now coming from our financial services offerings, and that in money is around NOK 1 billion a year. We are now taking exactly the same concept into Myanmar. We launched, our financial services in Myanmar last year, and we now see that this start, being popular with, with the customers.
And we are going to concentrate on these two markets going forward to make sure that we are getting return on both the focus, and on our investments. The one in the middle is online classified. As you know, we are in a joint venture partnership with the Schibsted, with Naspers, and also with Singapore Press Holdings in Southeast Asia and in also in Latin America. We want to strengthen our position going forward in Southeast Asia, which is closer to where we have our, our mobile assets. And we see now that there are a lot of synergy potentials out of this investment. The investment in itself, on a standalone basis, have yielded quite, quite a positive result so far.
But the synergies is to use this as sales channels, and I'm coming back to that in a second, but also to get customer insight from the customers that are using these channels and, and, the insight we don't have from, from our mobile business. The last one to the right, Internet of Things. We are going to focus on that primarily in the, the Norway and Swedish market, and we're going to do it within the enterprise, segment. And Berit is going to talk more about that as well. And here we see a great opportunity within e-health. We see it within the smart cities, also meaning the governments. We see it also as a, as a platform to help smaller, companies to launch their digital services.
We just last week, I think, have launched a cooperation with Q-Free. It's a parking solution utilizing our narrowband network. We also have for several years now had the fleet management services we call it Connexion. It's generating around NOK 600 million with a healthy profit. Then I want to talk—That's some of the initiatives we have on revenues. Then I want to go into efficiency. And I just need some water. A clear message that you should take from this Capital Markets Day, and from me, and from Jørgen, is that we see a step change of our efficiency agenda. Not that we have been bad in the past, but we want to step this up.
And, the target we have is to then break this trend you see on the graph, a trend with an increased OpEx year by year, and we hope to then break that trend in 2017 and going forward. And Jørgen is going to talk a little bit more about that. And the way we're going to do that is through our digital transformation, and is to take advantage of the software-based and cloud-based solutions to build standardized platforms. It's to take advantage of the same, to big scale also, and going global and regional. And it is to take advantage of this in our digital customer journeys, and I'm coming back to that. And to do that, we are going to change our operating models to be more global.
So everything we do now, we have the slogan of global first, to see if we can globalize services across our markets. And it's going also to be driven by a clear agenda of simplification of both business models and product offerings. If we are able to do this, we will basically be able to operate much more efficiently than we have done, which also will have an effect on the number of employees we have in the company. Let me then go through a little bit more in practice, what does it mean? The first one, I talked about the opportunities of digitalizing customer journeys. That has two components, it's distribution and it's customer care. And this we do not only to reduce the costs, but we also do it from a convenience point of view, that this is something our customers want.
Today, there are around 300 million calls a year to our call centers across our 13 operations. That's quite costly to handle, because all those are handled by our staff. The aim here is to take a quite dramatic approach and to reduce that 300 million number with 80%, before 2020. And we then replace that, of course, with digital engagement. We will still need call centers, but the 20% of the 3 million calls will bring down our cost base quite significantly. Take one example: year-on-year in Norway, we, Berit and her team were able to reduce the number of calls to the Norwegian call center with 15%. And that's the reason why we took out around 150 employees last year as a consequence of that.
So there are tremendous cost opportunities here. We are then going to do the customer engagement through digitally, through our Telenor app. We have built an app on that. We have rolled it out in all our markets. In fact, we're starting in some of our markets, this app scores extremely high on in the App Store. We have around 1 million active app users in Norway now, and we have around 3 million active app users, also Telenor app users, in Grameenphone, to take another example. So this is something we see now the customers are picking up, and that they are using, and that is the tool we are going to reduce the call center cost significantly. And this is the app you are seeing on the left-hand side here.
The other example is sales and distribution costs, and that's what you see on the right-hand side. We have, as I said, had physical distribution as one of the main competitive advantages out in the mass markets and even in Norway. Today, we have around 1.5 million point of sales throughout the Telenor portfolio, and these are point of sales which our customers goes to on a very frequent basis. Most of those 1.5 million are third parties. We own only top shops. It's a small number of it, but we operate ourselves. But of course, when you have such a wide distribution reach, the commissions you are paying here is quite high. And the aim here now is then to reduce that sales and distribution costs with 25%, going forward into 2020.
The one you see on the right here is what we have done in Malaysia, in DiGi. We have introduced an app that the retailer can use rather than the physical and the manual process that they have today. Already now, 85% of all the retailers we have in Malaysia is using this app. And not only it's cost savings because we then can reduce the commissions, but it's also customer friendly, because using the app to deal with the customer transaction, it's done with a 20% reduced handling time. Then, this one I'm quite enthusiastic about, and I need to spend a little bit time on explaining it. Because this is about the analytical platform that we're trying to build. But let me start from the left.
From the left, you see the typical distribution store as we have today. And as I said now several times, both in advanced markets and in emerging markets, this is some core competencies that we have and also a core competitive advantage that we have. Of course, this is costly because it's all physical, and it's also have some limitations. If you then move to the middle here, that's explaining now all the digital products that there is. And the beauty of this is that we suddenly get access to an unlimited distribution. It's not limited to a physical store anymore; it's unlimited. And on top of that, we can also use that to know our customers much better.
We can know not only our own customers and what they do in the Telenor environment, but we can also know them from different interfaces that they have, and I will come back to that. On top of that, we can also start knowing our competitors' customers. That's the reason why we have some own services on top, to use them as getting more customer data from them. The digital verticals are the verticals that we are operating ourselves today, being value, which is the mobile financial services we have in Myanmar, or some of the online classified sites which you see the brand names on. Then moving one level down, it's the partnerships. And Pantip and Sanook, the ones to the left here, are partners we have in Thailand, e-commerce sites.
Facebook and YouTube is also willing to work with us and share data in the emerging markets. And it's back to what I said, that the advantage we have with scale. And then down here are the ones that also want to work with us and can provide us with customer insight. So if you then look at the wheel, it starts then from the top, where we can basically combine all customer insight data we have from all these different digital players. That's what we call the audience creation. So we do that now with our own services, our digital verticals, but also with some of the partners. And we also utilize the Tapad data that they have from working together with U.S. clients. So suddenly, we get access to a tremendous amount of data.
Then we go one step down, and we use this then for decisioning, decision modeling or advanced analytics. We are employing more and more now, people, in our company, which are experts on advanced analytics. And we work with use cases to figure out how are we going to use this data, in offerings. Then we take that down, to media execution or digital marketing. We are now building in-house experience of having our own trading desk. And again, we are using the expertise that Tapad has to help us then with how do we then take all the information into decision modeling and into media execution?...
And then we execute again back to, to this digital services that we have, such that we can then place very personal ads, both into our own services, but also in, in our, the, the partners that we have. In the midst of this, is the wheel is identity. To be able to do this, we need then someone that can help us to identify that this is the same person, if the information come from our own insight or if it comes from our own services, our digital verticals or some of our partners. And this is what the core competence of Tapad really is all about. So I will say that we have run a process now on our a pilot on this in Thailand, and our showcase going to talk more about it, and it's yielding some very, very interesting results.
If we can do this, then it means that we can keep the customer relationship, even though the SIM card may go away in the years to come. We cannot only keep it, we can develop it and personalize services and engage our customers in a very different way. We can use this analytical DND platform or data and distribution platform. We can use that to upsell, cross-sell, we can use it for personalized and contextual interaction with our customers, and we can use it also to access customers outside our own customer base, because we now get access to basically everyone that are digital engagers in the market where we operate. A bit on the network side. As I said, software and cloud-based solutions gives us new opportunities, and it gives us opportunities in cost saving.
Today, we spend around 20% of our revenues, 20% of our revenues on IT and network. That's both OpEx and CapEx combined. But on top of the cost savings here, we can use this to improve customer satisfaction with simplifying models, simplifying platforms, simplifying business models. So what are we going to do? We are going to use this opportunity to move from hardware to software through network virtualization. And to virtualize our networks, that will have significant both OpEx and CapEx savings. We are also going to launch regional and global IT operation models, and to do that, build on standardization and virtualization, and put it up in the cloud. And we are going to establish 80 gateways in all our BUs.
To do that, we see, as I said, both cost savings and we also see customer convenience. But the way we have to do it is then to change our operating model. So you will see that we historically have local, so every BUs have their own IT systems, and with that comes legacy. We're moving that to global and regional platforms. We are going to share services across, and we're going to do that with the new established units, which we call service and operation. And that service and operation units is then going to operate a lot of the IT infrastructure and also shared services on behalf of all the BUs, and through that, both get better service, the quality, but also cost savings. Then, last but not least, prioritization.
In order to create the value I'm talking about, and in order to also free up room for, for the coming growth, we need to prioritize, we need to simplify, and we need to optimize our portfolio. We also then need to align our governance and operating model accordingly. Let me talk a little bit about that. Going forward, you will see a Telenor that is moving towards a more simplified portfolio. You will see a Telenor which have a better prioritization of resources. You will see a Telenor, which hopefully is also trying to, even increase the return on our investments. You will see a Telenor with a simplified equity story. As you know, we have decided to exit VimpelCom. We did the first step on that last year, sold down in the market, plus an exchange with the bond.
So we moved from a 33% shareholding down to 23.7% or 24% shareholding. We are going to take the next steps to exit VimpelCom when we feel the time is right. In India, as I have communicated in several quarters now, the business current business we have is not sustainable. We are looking for long-term solutions. We haven't found it yet, but as soon as we have a solution, which we think is long-term, you will be the first one to know. In the meantime, as also Jørgen said, the business is cash flow neutral, so we are not allocating additional capital to India while we are waiting or while we are looking for that long-term solution.
We are also then now having a walk-through of all our assets in the portfolio, which we view as less strategic. I will not tell you exactly which assets I'm talking about, because we haven't started that work yet, but that will come. And lastly, the M&A strategy, we are not looking at any big acquisitions as we speak, and our strategy will be focused on strengthening our core position and our core capabilities. Our digital strategy, which I explained in this four-part view, everyone talks more or less about the same. But what it really comes down to is execution and focus. And what I'm trying to illustrate here with the bubbles, it's where I think that our focus in our execution is going to be. Our main focus and our main gains will come from digitalizing of the core.
I've already talked about what that means in terms of new technology, software, cloud-based technology. I've talked about it when it comes to what does it mean in digitalizing customer interactions. And I've also mentioned the simplification, simplification, and the possibility of digitalizing a lot of manual processes we have in the company today. On top of that, there is one bubble in the middle, and that is what I talked about when it comes to being more than a connectivity operator. We also want to take a position in digital products and services. That to support core business, but also to add value in standalone businesses. And we will do that, as I talked about, through own products, but mostly building a platform for third-party offerings.
In addition, we will select, that's the smallest bubble, opportunities in adjacent businesses. Again, as a standalone, as financial services, is, or to support our, our core business. Historically, Telenor has been a very, very decentralized company, and the reason for that is that every markets have been different. Every market competitions have been different. Customers have demanded different types of services. As I tried to explain on my, the world is changing, digitally slide, this is now being different. And we see now that both the markets and the customer demands across our portfolio is more similar than it's different. And that means that we also can take advantage of actually grouping business models and similar customer proposition into clusters. And that's what we are trying to do here.
So we see that our Nordic cluster, our CE cluster, our Mature Asia cluster, and our Emerging Asia cluster is more and more the same within the cluster. And the plan here is then to leverage this, to take out cross-country synergies and scale. And also then to look at not only the infrastructure part of that, but also the customer segments part of that. In Scandinavia, Sweden and Norway, we want to be a strong, fixed, and mobile player, which have a premium position in the market. In CE, we wanna be as mobile player, we are not planning for going to fixed, and we want to be a strong mobile player, continuing to focus on cash flow generation through building a quality data networks, mobile data networks.
In Mature Asia, Thailand, and Malaysia, we do not plan to go into the fixed and go to fixed. The reason for that is that we think these markets are going to be truly digital markets. We think that if we change our product offers to be more digital-centric, there is a room for us to play here, whereby in the emerging markets, Myanmar, Pakistan, and this, we want to proceed in the number one positions, with strong mobile networks and also then some selected fixed investments into the cities. So that's a more focused approach, and that's why I also have changed the organization. Because to deliver on this strategy, we need a different way of working. We need to leverage scale and standardization across Telenor.
And we need to also strengthen product development and customer digital engagement across the Telenor company. You will see Telenor moving towards a more integrated and a more global company than we have been in the past. And you will see that through those four clusters, which now have a cluster head, and you will see it through those four global functions: being product and customer interaction, building the competencies across all those two areas, building services and operation, as I explained, managing our shared services, our IT and network, being transformation, managing all the digital transformation process, and being the digital businesses, which are responsible, which is responsible then for taking the steps into selected digital areas. In addition to this, we are also going to continue our focus on performance management.
Traditionally, we have been good on this, but we think we can be even better, especially when we're taking out synergies across and fully leverage the digital opportunities. Before I end my session, I just want to recap on the main message before I leave the floor to Jørgen. We are looking at value creation in on our road towards 2020. We're going to continue to focus on revenue growth. We are going to see a step up on our cost efficiency, driven by digitalization of the core.
We are going to see that we are going to drive simplification and prioritization, both in the business models that we have, but also in our portfolio.... With this, I believe that we are building a solid platform for Telenor in the years to come, which can be used for continued value creation for our owners. Thank you, and Jørgen, I welcome you on the stage.
Thank you very much, Sigve. We are so efficient that we actually plan to share the glass of water, but I will actually skip that one and take the new one. Okay. So it's a great pleasure, again, to be here early in my tenure in Telenor. I will take you through a few financials, financial development performance lately. I will then talk a little bit about the key drivers for value creation, follow up a little bit from where Sigve left it, and then I will go through some financial priorities and ambitions towards 2020. I believe Telenor is a company that has stood out well compared to the sector when it comes to revenue growth.
We are still growing, and we believe we will continue to grow. We have, however, as Sigve talked about, seen a slowdown in the growth rate over the last few years, and organic growth rate, it was a 1.1%, slightly above 1% in 2016. This revenue growth has been driven primarily by mobile subscription and traffic revenue, which now accounts for 65% of our total revenues. These revenues come with a fairly high gross margin and have been the key driver for the growth in EBITDA delivered by Telenor in the recent years. Last year, EBITDA grew by 5%, significantly outgrowing the revenue growth number. In 2016, we ended the year with 35% EBITDA margin. This compares to 32% EBITDA margin in 2012, i.e., a three percentage points lift up.
The company has invested significantly over the last few years, both in order to maintain market positions and then also to capture the growth opportunities that has been there. Network investments has been the main part of CapEx, 80% plus, as a matter of fact, as the group has been through a hectic period of significant mobile network rollout, both for 3G and 4G, to cater not least for the massive data demand we have seen, in particular in Asia, where we also have added what Sigve talked about, a new operation, Telenor Myanmar. Another important CapEx driver has been securing the network leader position in Norway. Today, we feel the group is quite well positioned in network coverage in most markets.
Since 2012, we have gone from 85,000 net mobile network sites globally to more than we just crossed 120,000 sites at the end of 2016, which is in the order of 40% increase over a fairly limited number of years. During the last 5 years, 40% of our network CapEx has been focused, what we will say, maintaining our market and network positions. I.e., around 60% has been related to expanding our footprint, as well as cater, obviously, for new technology, new markets, new business areas, expanding networks, or new technologies. The share of maintenance CapEx has been higher in the Nordic and in Central Europe than in Asia, as these markets are more advanced in terms of technology deployment.
Securing access then to sufficient and relevant spectrum is also a critical part of all mobile operators' business. Telenor, no exception to that. As you know, we are in 13 markets globally, so there will always be an auction or a spectrum process to evaluate. The last five years, we have spent NOK 22-23 billion on spectrum, approximately 4% of the revenue in the same period. And then thirdly, in addition to this, we have made some few selected investments in businesses, or call it minor M&A activity. The most notable, I think, Sigve mentioned, it is the online classified initiative that we have taken, and that is well on the way. And then our investment in advanced analytics, which we have done in order to support growth and efficiency in our own core business.
Revenue growth and EBITDA uplift has given a solid cash flow from operating activities. This is the left side slide, part of it. However, the high investment level in the period, as I just talked about, has impacted, obviously, Telenor's free cash flow generation in recent year. In 2016, as I said this morning, free cash flow before dividends was NOK 10.3 billion, and we paid out a dividend last year of NOK 11.3 billion. Even if we have a solid balance sheet, it is our view, and I, and I hope you heard that, in Sigve's presentation. It is our view that securing a healthy cash flow generation is at the essence to support development of the company going forward. And cash flow generation and improvement will be a key priority for me as CFO of Telenor Group.
Our priorities on leverage and dividend policy has basically been the same since 2011, and we have remained, as a company, very committed to these policies. We have a solid financial position. We have a strong balance sheet. The net debt to EBITDA ratio is around 1.2, approximately the level it has been the last few years, and significantly below the ceiling that we have defined as 2.0. Telenor has also delivered consistently a year-over-year growth on dividend per share in line with the stated ambition. And today, we announced a dividend proposal of 7.8 NOK per share, an increase of 4% year-on-year, and giving a competitive yield, we believe, of around 6%.
So then let me just wrap up this introduction with a couple of soft reflections from my side. I believe I have come to a company, a solid company with a very strong operation. I'm very impressed when I'm out meeting the business unit and see the agility and the energy in the system in running their business, looking for new opportunity, chasing customers, and winning market share. There is clearly a strong performance-oriented culture in Telenor. This is what is behind the development over the last few years, exemplified lately now with the Myanmar what we regard as a success, but also, in general, solid market positions in most of our markets. Obviously, I believe that this performance culture will be an asset, a real asset for the company going forward.
However, then I believe that there is a potential to improve the cash flow of the company. A company that, for good reason, historically, has been mostly focused on top line growth. In the next few years, we believe that Telenor needs to be—we need to manage the interesting dilemma between growing through investments on one side and, at the same time, improving efficiency and reducing spend. It's obviously not easy. It will require, as Sigve said, strict prioritization from top management. It will also require simplification, both in the operation itself and in our portfolio. And we believe we can do this and have set out on that journey.
Then let me allude to the value creation potential, and as Sigve defined it, continued revenue growth, which he talked a lot about, so I will talk less about that. Improved efficiency and capital allocation. Also, the two latter important areas in order to ensure solid returns for the company. I think it's fair to say that Telenor has continuously worked on improving the efficiency of its operation. And this way, the company has been able to, to a large extent, control OpEx development. The OpEx has increased about 4% per year the last five years. This has predominantly come from network expansion, more sites, as I referred to earlier, and also new growth areas, including Myanmar.
However, we still believe there is a significant efficiency potential from addressing the cost base in an even more systematic way. In 2016, we spent around NOK 51 billion in OpEx, and for a simple guy from northern part of Norway, that's a sizable number. So when we look at the different categories here, we see that sales and marketing and personnel costs constitute almost half of the cost base. When we do benchmarking, we see that we are good, but we are not on the top. We are not. We are most often not on the top in cost benchmarking. This benchmark illustrates a gap of 10% or approximately NOK 5 billion to the top 2 or 3 players. This is a gap we aim at attacking in the years to come.
Our vision towards 2020 is to achieve a net OpEx reduction in the order of 1%-3% per year. In order to deliver on this agenda, we must radically step up the efficiency agenda. For 2017, it will be critical to break the trend of increasing OpEx year-on-year. We need to flatten it out or even get it to turn the other way around during this year. We have been, through the last few months, a systematic process in identifying initiatives necessary for reducing OpEx going forward. A fair part of this is already identified, and then the process will continue through 2017. Naturally enough, the largest sources of OpEx reduction are, of course, to be found within the largest functional areas: sales and marketing, and general administration, network, IT.
As you can see those issues coming from the middle part of the slide. In order to capture the efficiency potential, we will simplify and transform our operating model, as Sigve said. It is including digitizing customer care and sales. Also, to a much larger degree than today, leverage on clusters or global scale opportunities within product development, network IT, as we have talked about, strict prioritization, and that a very basic relentless day-to-day cost discipline will also be important going forward. Personnel cost is not covered as a separate cost item on this slide. However, as a result of the efficiency initiatives in all major functional area and all business units, workforce reduction is inevitable.
It's also clear that the four, five largest operations will have to deliver the majority of the savings. As we know, Telenor Norway has a long track record of cost cutting in the fixed legacy business, and they have also cost programs in place for the coming years, as Berit Svendsen will talk about a little bit later. In dtac, in Thailand, we expect to see lower regulatory cost, as we have talked about before here, as we approach the end of concession period. But also, dtac has clear ambitions on cost reductions in other areas, and Lars-Åke will address that. Going forward, OpEx development will be an important KPI internally, and we aim at getting back to you later this year, giving an update on the progress in this work.
Then, we need to continuously scrutinize investments to ensure efficient and right prioritization across network investments, spectrum spend, and investment in businesses. On the network side, we have been through, as we have said, some heavy years, or some years with heavy investments, I should say. It's natural to see CapEx coming down after such a period, we have been through. We believe CapEx peaked in 2015 and 2016. It was 18% of, CapEx of sales in 2015, it was 17% CapEx of sales in 2016, and that we will approach around 15% going forward, CapEx to sales in the midterm. And for those of you who were here this morning, you will know that I guided for between 15% and 16% CapEx to sales for 2017. Still, a significant CapEx program behind those numbers.
Our Asian operation have constituted substantial amount of these investments, approximately 60-65% of total CapEx. We now expect the CapEx to dip down a little bit, since we have come quite far in the network rollout in Myanmar, related to the establishment there, and the general 3G, 4G coverage that we have done in most other Asian operations. As we have said, we will also see a slight shift in our investment profile, moving some more investments from mobile to fixed broadband and fiber in particular. With this in mind, we expect CapEx to have peaked and to come down to around 15% in the medium term. Spectrum.
Spectrum, securing healthy spectrum, is a must. I'm learning every day in a company like Telenor, and we have some important spectrum processes ahead of us. There are both renewals and also new bands that are expected to be offered through auction programs or assignments, predominantly in Asia. The most important renewal process is the 1800 megahertz band in auction in Thailand in 2018. Lars-Åke will talk about that, and he will also discuss different spectrum scenario in his presentation. With potential, significant spectrum ahead of us, we will have to continue to take a prudent approach to spectrum investments, and we have to find a way to continue to balance the cost of spectrum against potentials and CapEx requirements. And I'm glad to see that we seem to have a very competent global team on spectrum.
I'm very impressed by the way they work and the way we are getting towards this issue, and there has been a certain degree of discipline, I believe, if you look at how we have handled both Thailand and India in spectrum situations over the last few years. Return on capital is an important matrix for a capital-intensive company. It is an important matrix for value creation, and it's a good indicator, a decent indicator, for a long-term development of Telenor. We have delivered a fair return on capital in the recent years, both on a reported basis and also when you look at our core operations. Even though it has come down somewhat in the last few years due to significant investments, in particular, including Myanmar. Our aim is obviously to increase return on capital.
To do this, we need that solid operation as the basis and strict capital allocation. I must also say that for us to be successful in our financial ambition, we believe and become a more cash flow-oriented company, close execution and follow-up of our business is needed. We are now adjusting our KPIs and our performance measures and how we do this according to more emphasis on cash flow generation. Obviously, continue to focus on profitable growth and margin development, efficiency, simplification, prioritization, and to keep high that net cash flow approach, the way we distribute capital and the way we run our business. We are running frequent performance reviews. We're having transparent monthly touchpoints between Group and business units and focusing then on very operational and financial KPIs.
Let me then talk a little bit about, to the end, financial priorities and ambitions for the coming years. I guess, the headline is quite clear. Telenor's financial priorities regarding leverage, as well as shareholder remuneration, remain firm. Firstly, we want to maintain a solid balance sheet also going forward with a targeted net debt to EBITDA ratio below 2.0. Again, it's a ceiling, and it's not a target. And as you know, we are currently at 1.2x EBITDA, and we have been around that level for the last few years. Secondly, we want to deliver a competitive shareholder remuneration. That is important for the board of directors and management of Telenor. And the cornerstone of our shareholder remuneration is the ordinary dividend.
Our aim is to continue to deliver year-on-year growth in ordinary dividend per share. You will then see that we have removed the reference to the 50%-80% payout of normalized net income from our policy. This simply reflect that a growing dividend has become the cornerstone, the more important part of our dividend policy in the recent years, and it's also consistent with our stronger cash flow focus in the coming years. As we announced earlier today, NOK 7.80, 4% increase from 15 if the general meeting approves it. And then in addition, we are saying that the buyback of own shares and special dividends will be evaluated on a case-by-case basis. But as I said, the year-on-year growth in ordinary dividend should still be considered as the main source of direct shareholder remuneration.
I have earlier mentioned that Telenor will become a more cash flow-oriented company going forward. Both the 2017 guidance and the 2020 ambition supports this direction. To recap what I said this morning, 1%-2% organic growth, an EBITDA margin of around 36%, marginal improvement from 2016, and a CapEx to sales ratio around 15%-16%, a reduction from 17% and a lower dollar amount year on year. That is our guiding for 2017. Towards 2020, we aim to continue to grow revenue, and we expect low single-digit organic growth per year. The key drivers for growth are expected to be the emerging market portfolio, the operations there, and continue to be the fiber step up in Norway and Sweden as well.
Further, as we have talked about earlier in the presentation, 18-20, we aim to reduce net OpEx with 1%-3% per year, and to see a CapEx to sale ratio of around 15%. 17 is the year we want to break the trend on OpEx and see the curve going the other way. As I said, the need for strict follow-up and prioritization is critical in order to make this happen. The improving operating trends should support our aim for a stronger cash flow generation, 1, and obviously, 2, to deliver a growing dividend in the years to come. Then, the summary: We see solid potential for improved cash flow generation, and this will be a focus for us going forward. In order to do this, make it happen, we are stepping up efficiency initiatives.
Capital allocation is key to value creation. For us, this also involves strict prioritization across all investment categories and potential for portfolio optimization. And then we are very committed as a company to competitive shareholder return, and remuneration, as witnessed by our dividend proposal of today. Thank you.
Thank you, Jørgen. We will now open up for questions from the audience, and I would like to join to ask Sigve to join for the Q&A. When asking questions, please limit yourself to one question and one follow-up. I believe one of the first hands in the air were on that side. Difficult to judge who's the first.
Good morning, it's Maurice from Barclays. So a more strategic question, Sigve, on your comments around the direction of the group towards a global platform, towards adjacent development markets, and the implications for investment there. So on the CapEx profile, he talks about perhaps taking mobile to fixed. I would thought the investment required into creating a global IT platform as defined, software-defined networks, these things, would involve significant investment. So the first question is: Is that a large investment you're making in that? Do you have the competencies in the group to deliver that for you? Does that imply you have to perhaps go out and find other third parties to help you create that or the implications of your costs? Thank you.
Yeah, that's a good question. Well, all the investments I'm going to talk about now is then included in the, in the CapEx guiding that Jørgen gave, of course. I think I used the term global/regional. In some of these areas, we will build global platforms. As an example, I mentioned the global back end, as in API, type of platform that enable us to connect all the views. That's something we have been doing the last few years. And most of the investments in that was already taken. The analytical platform I'm talking about, I will foresee a major investment. That's more to build capability and utilize the relationships we have with all these digital players. But in the IT domain, yes, there will be some investments. Some of this we have already done.
We have invested in a completely new software-based IT platform in Denmark. We call it together with a Chinese vendor. That is now live and it's proven to be much more customer friendly than the previous legacy that we had. Another example is what we do in the Nordics now with an IT shared services platform. So there will be investments into this and however, we see significant OpEx savings in the years to come. So the platforms that we have done and that we have on our drawing boards have very healthy returns, I will say. So to your second question, no, we don't have all the competencies in-house to do this. And this one is definitely something we need to work together with partners on.
However, we are upscaling now our in-house competencies, especially on analytics, and on the, on the software, technology. We are, as we speak, hires some people to help us with that. But that's going to be a journey, and I don't have the end answer on how it is going to look like in 2020. How much we will then do ourselves, and how much competencies have we developed ourselves to build this platform, and how much we will leverage, partners?
I believe the next one was Christer Roth from DNB, and after that, Dominik Klarmann from HSBC.
... Thank you. Just today, we've heard that Telenor is becoming a more cash flow-oriented company, but no more than last year. Sigve, you said that Telenor's mobile operations in Asia had to grow service revenues by 4%-6% to justify Telenor owning that. With respect to the mature Asian operations now growing, well, not growing at all, do you envision that Telenor should divest these assets? Are you still the right owner for them, et cetera, et cetera? So if you could touch upon that. And secondly, with respect to the headcount reductions and the net OpEx reduction you're seeing over the next few years, what kind of costs will be associated with that? Should we expect to see a NOK 5 billion one-off cost associated with the NOK 5 billion markdown in net OpEx going into 2020?
I can take both questions. The last part, we're only talking about any major restructuring programs here. I think the last five years, we have taken down around 200 employees in Norway every year for the last five years. And you will probably see more gradual approaches here as we advanced on our digital journeys. So I don't have any numbers there, and we haven't estimated any cost. This is going to become smoothed out in the years to come. On the first question, well, Asia is growing. We have double-digit growth in the three emerging market, sorry, Myanmar, Pakistan, and Grameenphone in Bangladesh. And we see that we will continue that growth profile in the years to come here.
At least as long as the smartphone penetration is still low and there is appetite for data. And we also see in the Thai market, there is actually good market growth of 3%-5%. It's just that that's fueled with a lot of handset subsidies and other costs. And we have, on purpose, we haven't been willing to actually do that. So I see that all the Asian markets should be able to come back to growth at a certain point in time. We are very satisfied with the position we have in Asia. We are happy with the emerging part of Asia, but we are also happy with the what I call the advanced part or the mature part of Asia.
We have no plans for any divestments or any change in our portfolio.
And as I said, I think it was Dominik Klarmann on this side of the audience. And let's, after that, turn to the other side of the audience.
Yeah, thank you. So on the midterm outlook, the missing piece is the gross margin expectations. So maybe you can talk us through the positive and negative drivers of that going forward. And then just on the asset portfolio strategy, I understand you don't want to be too specific about what assets are non-strategic, but just to clarify that Denmark remains non-strategic. Thank you.
Do you want to address the first one on the gross margin?
Well, yes, I can address it, but I will simply address it this way. We are guiding on the top line. We are assuming we are still in a small positive growth mode over the next few years. Then we have also focused our midterm discussion on OpEx, simply because that is a number we have a lot of influence around ourself. We don't see any gross margin significant change in our portfolio, but we are simply not guiding on that.
On the second question, I know, it's going to repeat what I have said before. We need to find a long-term solution for Denmark. It's a market where neither ourself and some of the other players are. This is not a sustainable type of a market. And our Nordic or Scandinavian strategy, I will say, is not dependent on Denmark. And so what we are doing in Norway and Sweden, and including the Scandinavian cluster we're building, those are the two main markets. Of course, if we are able to find a solution in Denmark, that will be an added to what we do to other markets. But and that's the reason I got looking for alternatives in Denmark, so I don't want to comment more than that on it.
Many hands in the air over there. I think Nick Lyall from Soc Gen was first, and after that, Håvard Nilsson from Carnegie.
Thanks, Marianne. Yeah, Nick Lyall from Soc Gen. Can I just ask around timing of savings? From what you've said, Jørgen, it sounds like timing could be, of savings, could be quite slow if you're just hoping to stop growth in OpEx in 2017.
Yes, uh-
Do you expect significant falls of within the 1%-3% range by 2018, or is it just over the period? And then secondly, on the scope of the assets, of the rethinking of assets and the overall program, is it still just VimpelCom, Denmark, and India? Is this going to stretch further to other assets, a little bit of an extension on what you've just said, Central Europe as well, maybe even Tunisia?
Well, I can take the last one while you are thinking about the first one. Well, when we're talking about the simplified portfolio, it's definitely India, and no more comments on that. We have to find a long-term solution in Denmark and with VimpelCom. I've added one more sentence, and I said that we're also going to do a review on what we see as non-strategic asset, outside what are the three examples that you mentioned. But exactly what that is, I won't go to comment on.
We believe we'll see the breaking point in 2017 and a speed between 1% and 3% from 2018.
Hi, this is Håvard from Carnegie. In terms of long-term capital allocation, could you give us an indication of what you're thinking around-
... sort of a long-term CapEx to sales and, of course, spectrum to sales going beyond 2022 anyway as well? And then the second question, I'm wondering what kind of position you see yourself having in online ads. Are you going to sell or manage your own inventory and sell Telenor ads, or are you going to take a more broad position and managing external ads as well?
Okay, so now it's my turn to say I can take number one, and you can think about number two.
Yeah.
And number one, I will refrain from going beyond 2020. You know, I think we are now giving a midterm guidance, which we haven't done every year. We are saying that the ambition is to get it both in absolute numbers and in percentage of revenue down, and still we are acknowledging that there is significant investments in there. But that is as far as I think we should go, standing today and looking towards 2020. Spectrum. We are not guiding on spectrum, for quite obvious reasons.
What I tried to allude to, and what we have tried to kind of give a flavor of in, in the discussions here today, is that we see the total CapEx area as key, and we'd like to embrace that in our discussions internally and with you around the dilemmas and opportunity on value creation and how we allocate capital. It's all in that basket. But obviously, the nature of spectrum is so different from others. I was alluding to the fact that we have these processes taking place the whole time. It's quite important for a telecom company. We are facing a very interesting and exciting and tough period going forward, with a lot of spectrum opportunities, in particular in our Asian portfolio. And then we will be as prudent as we can in a very competitive market.
We have seen prices increase. We have taken a step back in some situations, and then we have to participate where we need to participate and be a little bit firm in other areas. And then we are, in the meantime, developing our network to such a degree that we can be robust for various scenarios.
To your first question, yeah, that was the first question. As you know, Tapad is into the media or the ad industry, and we want them to continue to do that. So that's kind of a vertical where we expect Tapad to continue to do well in the U.S. market. But Telenor as such are not going into the ad industry. So what I was talking about is then utilizing that analytical platform, but also utilizing marketing to place our offerings, not the Telenor ads, but our offerings into the face of our customers in digital spaces. So for example, when a customer enters Facebook or another digital services, you get a personalized offers, because we know you so well in the back end.
We also want to do that with our competitors' customers, because now we also get access to those, those customers, and we use the identify, identifying tool that Tapad has to actually personalize offers. So it's in that space we're building an analytical platform.
I think the next one is Terence Yu from Morgan Stanley, and then Ulrich Rathe from Jefferies. I see we are running a little late, but there are so many hands in the air, so I think we have to continue for another 10 minutes or so.
Yep.
Okay, thank you. It's, it's Terence Yu from Morgan Stanley. I'll just stick with one question. So just on the efficiency agenda, you know, a lot of telcos have been talking about moving towards more digital channels and also targeting IT and network savings. So forgive me for my initial skepticism, but what's gonna be, like, the step change in behavior with the new organization at Telenor to actually achieve some of these net OpEx savings? Thank you.
Well, as I said, this is not about the strategies. It's going about execution. And I think we are well prepared now to execute on this. We have already done some of it on the IT side, and I mentioned some examples on one of the earlier questions. And we're also starting to gain some experience now on the customer engagement part. So, of course, we need to demonstrate that we're able to do what we say. But I think the focus on this, the platform we have on this, the organizational setup we have on this, gives us a good chance to succeed in this area.
This is then the main driver for what Jørgen is saying on breaking that OpEx trend, and trying to take down this going forward. We have some very aggressive targets here. I already said about 80% of the NOK 300 million costs should be gone by 2020. I said that 35% of the sales and marketing costs should be gone by 2020. We do some top-down targets here to drive this going forward.
Thanks. Ulrich Rathe from Jefferies. It's really a bit of a follow-up, really. I mean, a couple of years ago, I think I remember the then CTO was standing in this room, sort of was talking about CapEx to sales falling from now. And then you put out very aggressive OpEx pre-cash flow targets, which a couple of years later, then you abandoned, because you couldn't get the CapEx down. So the question really is, when you put out stuff like that, when the top line momentum starts to sort of go a bit slower, what is really the, what are really the drivers? Have you specified and given budgets all the way out to 2020, and agreed that with the business units? Do they actually know what's coming there?
What's the difference now versus the difference a couple of years back when you did the same? In this context, also, so second part of this question, I mean, on the one hand, you highlighted sort of the agility and energy among the employees. I mean, the flip side of that, I suppose, is when you talk about the OpEx cuts, you made it very clear that there were the FTE implications here, and that obviously tends to sort of affect morale when compared to the situation you now have, where there's sort of enthusiasm for future growth and more opportunity, and now sort of the operation is sort of being turned the other way.
How can you bridge that gap, sort of when it opens up, when the cost-cutting measures come through, when people get fired, and they might not sort of see this as a exciting growth opportunity, a place to work?
Yeah, on the first question, I think, going back, I think it's right to say that we underestimated probably the need for investment in 3G and 4G network in some of our markets. We did that in Thailand. I think we could even have invested more in fixed network in Norway, to take another example. And I think that the data explosion that we saw in some of our markets, we didn't see then. So we've been doing a little bit CapEx catch up since then. That defends, that defends a little bit the target that you referred to in the past. Going forward, yes, we have broken down the ambitions that Jørgen talked about with our business units all the way to 2020.
Of course, all the details are not in place yet, but this is an exercise we have been running with our CEOs in the business units and with their management teams. The second part, I don't think there is anyone in Telenor that thinks that the digital journey or and the transformation we now have will means that everything will be the same. The governance model will be changed to more globalized model, and the efficiency gains we get from digitalization will also have an effect on some of our employees. On top of that, we will also have to recruit new competence and also reskill significantly the competence that we have.
I think, again, we have spent the last year on getting our people on board on this journey. I hope that we will be able to actually execute on what you're saying here, without losing the energy and enthusiasm that we are well known in, for Telenor.
Okay. Then the next question goes to Georgios from Citi, and then to the gentleman on the row behind you guys, and after that, to Roman Arbuzov from UBS.
It's Georgios from Citi. I have two questions. The first one is a follow-up from a risk question. Three or four years ago, you presented your cluster strategy in Asia, and the implications potentially in Norwegian fixed. And it was based on the entrepreneurial spirit and decentralization of Telenor. I understand that customer needs are converging and the logic behind this, but are you worried about the change in culture and execution risk behind this? And specifically on points of sale, you will be partly cannibalizing some of the efforts of the people on the ground. So are you worried about the execution there? And then my second question is a bit to quantify the OpEx savings beyond 2017.
1%-3% over 3 years, obviously, there's a NOK 3 billion gap by 2020 between the low and the high end of the savings. I'm just trying to understand, is this gap because you are uncertain about, the savings and execution? Or have you left room to go back in certain markets, if needed, and actually be more aggressive in terms of investment to customers, and that's why the NOK 3 billion difference between the two numbers? Thanks.
Should I take the last one?
Yep.
So it's a mix, but it's more, it's giving us a little bit flexibility at this point in time, huh? Without ruining the direction and the effort and the mobilization of it. We are going from a company that has been in a continuous growth situation, high growth situation, and that has been the momentum, quite successful. And now we are going to succeed in tilting that around a little bit, maintain the growth that we see in niches, in important niches, combined with a much tighter drive on OpEx. So this is a first step, a first discussion with the market, and we are firming up the plans, as Sigve was saying.
We are going for that midpoint and higher in our horizon, but you know, there is a terrain, and we need to go that terrain step by step. And to your first question, no, I wouldn't use the word concerned or worried. But of course, we are talking about a major transformational journey. And that transformational journey is very much about what I already explained, with changing the operating model, changing the business model, changing the way we interact with customers, the way we are used to technology, changing competence and all that. And that's a major effort that we are looking into.
And only to cluster the business units as we have done now, and to see how can we take out synergies and scale across, of course, that does something with the organizational setup, which so far has been very decentralized. However, I think that we are well prepared to do that, and we have spent, I will say, most of last year to get our business units on board on this, and to try to prepare ourselves as much as possible for this really being a needed change. But it's not going to be easy. It, you know, it's a major process that we are up against. But I think we have good plans and a good momentum.
Yes. Yes, please.
Yeah, hi, it's Matthew Bloxham from JP Morgan. You described the leverage of 2x as a ceiling, not a target. Plus, you're a long way below that, so I just kinda think even 1.5x would give you quite a bit of buffer against that for, you know, unexpected eventualities. I'm just trying to think if there are specific things, either around M&A or extra shareholder distribution that, you know, you have in the back of your mind that might be absorbing some of that fairly substantial buffer.
I think we both have a lot of things in the back of our mind, and then it is to sort the sequence of it. I think simply, we have set that ceiling, and I stress that it wasn't a target. Then we have said that we are going to focus even more on cash flow going forward. Then we have said that we are going to, you know, further cost side, investment side, but we still have also said that we have significant spectrum processes going forward. And then we have said, regardless, I'm also saying regardless, but we are going to be very committed to our dividend policy. All in all, you know, that is what we want to communicate around this.
We have opened up for extraordinary measures, if that should be what the board wants, but that is up to the board on a case-by-case basis. That's it.
Then, Roman Arbuzov was the next from UBS, and after that, I think we have time for one last question, which goes to Peter Kurt Nielsen from ABG.
I think there's one before me? No.
I know there are many other last questions, but we have had a long session, and I think we really need a break now.
Okay, okay. Thank you. You talk about some fairly ambitious targets and ambitions for Norway and Sweden, fiber rollout, and also exploring FMC opportunities in an area where Telenor traditionally has had a fairly low profile. I guess we'll hear more about Norway later today, but as far as I know, there's no presentation on Sweden. Could you give us some key points on how you intend to reach these fairly ambitious growth ambitions in Sweden, and what has made you sort of change your view slightly on the convergence offerings? Thank you.
Just before you start answering, Sigve, we will have a breakout session with Telenor Sweden later today, and Patrik Hofbauer, the CEO of Telenor Sweden, is sitting here on the front row.
Yeah, so let me be very short. The fiber market in Sweden is a fantastic opportunity of the customer, basically pay for the installation himself. And we see now that we have got some very good experiences with the rollout, and we see that we are able then to monetize this quite quickly. And we also see that there is a room for us to be more aggressive in that for the time to come. So this is not a new ambition. I will say we are just scaling up a little bit what we have been doing the last couple of years. But you can get more details when you ask Patrik. He's sitting here.
Will it mainly be through own investments in fiber in Sweden, or?
It's going to be both.
Both.
Both own investment, and we're also going to leverage on the fiber that is already there.
Yeah, and then the last question on this session goes to Roman Arbuzov from UBS.
Thank you for taking the question. It relates to data analytics and the true value of data analytics. You've mentioned this is an area you're quite excited about. So thinking about it, is there a simple way that you can try and perhaps quantify it for us? Assuming you get everything right, and you know a lot more about your customers than you do today, if I take into account the cross-sell opportunities and the upselling opportunities of your core products. So if you do all those things, is there a way that you can tell us, for example, that today a customer pays you X in terms of ARPU, and then you can get 20% extra or, you know, some extra amount?
In terms of the data analytics, how much is it really worth? I mean, there is a lot of talk about it, but how much value do you think we can get on a longer term view?
Lars-Åke is going to explain a little bit more in detail the pilot we are doing, that we have done in, in, dtac, Thailand. But let me just very short answer to your question. Two examples. One is when a customer in Norway call the call center, and the call center agents have perfect information about this customer's behavior, that gives an excellent opportunity to sell or to upgrade that customers to a higher package. And that's exactly what we do in Norway now. And I think on average, that's around 20-25 NOK in an ARPU increase, just because we know have a lot of data, and the call center, and we empower the call center agents then to do the upsell. That's one example.
Another example is in Thailand, where today we are trying to migrate a prepaid customer into postpaid, or we are trying to take a customer from the competitors into our network through mobile affordability. That's a quite difficult process. We basically need to target all customers through traditional marketing or we run campaigns, and we do that through our own stores. With the analytic capability I talked about, now we know exactly what this customer, what type of customer it is. We know his data usage, we know which data product he's using, or she's using. We know what kind of handset that person have. We know if that person is just about to look for a new handset.
Then we combine all this information into one identity, and then we are sending a very, very personal direct marketing offer to that person to then put him or she into our network. There's a major savings of doing this, and we can do it also much more selectively, because we can target the high-end customers rather than just the mass market.
... Thank you, Jørgen and Sigve . There will now be a lunch break, and I'll ask you to try to be back here in 35 minutes, meaning at 1:20, since we are running a little late. And as promised, for the media present here today, there will now be a separate session where you can have a chance to ask questions to the Group CEO and Group CFO. Meera Bhatia from the group communications team will host that session. Thank you.
... Okay, I think we are ready to start, and welcome back. In the first session here today, Jørgen and Sigve took you through the group's strategic direction, the financial priorities, and ambitions. In the second part of the program here today, we will hear speakers from three of our largest business units talk about the development in their markets and how they are implementing this strategy. The first speaker in this session is Berit Svendsen, the CEO of Telenor Norway. Please, Berit.
Thank you, and good afternoon. It's a pleasure for me to be here with you today. I will talk about the priorities and focus we have in Telenor Norway and how we work to create value going forward. Let's start with the Norwegian market. The Norwegian market is a leading telecom market. Together with Sweden, it's one of the most advanced markets in the world. 70% of all the handsets amongst our customers are 4G handsets, and it's 50 years since we introduced the first mobile telephone in Norway. The Norwegians don't get enough of what we are providing, so it's a very good situation to be in. The total telecom market in Norway is around NOK 38 billion, and it's growing by 1% every year. In this advanced market, Telenor have had a very solid position for many, many years.
On the mobile side, we have 56% revenue market share. On the fixed side, we have 37%, on fixed broadband, 37%. The more we are building out, the more our customers are using. Let's first take a look at what we have done on the mobile side. Telenor Norway has a proven track record on monetizing on the mobile data. As most other operators see, our customers are using more and more. We have an increase by 55% year-over-year by our mobile customers. We have built out 4G in Norway now, so we cover 98% of the population. Of course, we need to invest to meet all the demand. We need to build out coverage and capacity. What we have also done in the last years is to come out with new offerings every year.
We started in 2014 with a mobile data offering, and in 2016, we included EU roaming as part of our data offerings. We have been able to increase ARPU by around 9% yearly from 2013, and there are not so many other mobile operators in Europe that has managed to do the same. We plan to continue in 2017 to introduce new mobile offerings, offering even higher data packages or even more data in the data packages, and with new innovative services included in the offerings. On the fixed side, we see the same appetite for data as we see on the mobile side. The fixed side is 40% of the revenue for Telenor Norway, so the fixed side is very, very important.
We have had a stable customer base on fixed broadband for the last years, but it has been a huge conversion from low-speed DSL over to fiber connections. In 2016, we got 37,000 new fiber customers. And when we are providing fiber to the customers, the customers, they really like it. They like to have TV on top. We have become a TV aggregator, and we have been able to increase the revenue on fixed broadband and TV by 12% the last years. And we think this will continue going forward. The telecom market develops rapidly and has gone through significant transformation in the last years in Norway. There has been a huge decline in fixed legacy products like plain old telephony service and low-speed DSL.
Our customers are demanding more and more high-speed data, both on fixed and mobile, and we have been able to offer good mobile offerings with data included in the packages. We have, in this changing environment, been able to have very stable revenues, even if our customers have changed a lot during the last years. We have also been able to have a stable EBITDA the last years. I can also say that we think that we have a much more future-proof customer base than we had some years ago, because now we are really providing what the customers are asking for. We have delivered around 42%-43% EBITDA each year, and we also have a very solid track record of doing cost efficiency that I will come back to a little bit later in the presentation.
As I mentioned, the telecom industry is constantly changing, and so is the competitive environment. Telenor Norway is well-positioned to take part of the market development going forward. Today, we see a price competition in the lower segment of the mobile market. We see some emerging FMC activities in the market. The fiber market in Norway is very fragmented. It's a lot of local players, there are some regional, and some national players. Over-the-top services is very, very popular in the Norwegian market. Telenor Norway, we have some important strengths that we will utilize going forward. We have a superior network on the mobile side. We are building out a very good fiber network in Norway as well, both in terms of quality and coverage. I will come back to that a little bit later.
We will continue to deliver innovative solutions in the marketplace, and we will continue to re-drive the digitization journeys for our customers. I will also come back to that later, because our customers, they really prefer to buy more data in our Telenor app. Let's take a look going forward. In the rest of my presentation, I will focus on three different items about how we are going to create value going forward. The first one is, how can we create revenue growth opportunities? The second one is, how can we invest smart to support the growth going forward, but also to support being more efficient? And the last item I will cover is, how do we work with efficiency going forward? Because when Telenor is stepping up the efficiency agenda, Telenor Norway, as the largest VU, are going to do the same.
Let's take a look at the growth first. We start with the mobile side. I have already talked about how we have successfully monetized on the mobile side the last years. When we continue to build out, now we have around 98% coverage on the mobile. We will build out even more this year. We see that our customers really appreciate it. But what is a little bit exciting is that if you look at our median customer, that's the middle customer in the customer base, they are increasing the demand by 64% year-over-year, a huge increase. But if you compare it to Sweden, the Swedish median user are using double amount of data. So after this session, I will sit down with Patrik Hofbauer, the Swedish CEO, and ask him, what is he doing out there?
That can actually, you know, provide even more data towards the customers. What we will continue to do, as I mentioned, is to put even more data into the packages, is to come out with new offerings and with new innovative services. And right now, when we are selling to new customers, the new selling point is around NOK 399 for 30% of our new customers. So we have been able to monetize, and customers are using more, to be able to sell a little bit more data into the packages. And we will continue to do that. The next exciting growth opportunity is the fiber step-up in Norway. We see a rapid growth in the market the next years towards 2020. The high-speed broadband market in Norway will go from 65%-85% of the households in 2020.
We aim to increase our high-speed market share going forward, and target 45% in 2020, up from 37% today. On the fiber side, we have around 19%. We will come up to close to 40 in 2020. We are providing 200 Mbps on the fiber, and 500 Mbps on the HFC connection, the cable TV connection. TV, as I mentioned, is an important part of the business, and 80% of new fiber customers are taking our new TV offerings. We launched a new TV portal at the end of last year that was successfully launched in the market, with a lot of streaming services as well as linear TV. When we are upselling and getting more fiber customer in, we can see that we are able to increase our ARPU.
The ARPU of the multi-dwelling units for TV and fiber is, of course, a little bit less than the ARPU for the single-dwelling units, the villa segment. So the villa segment, highest ARPU, most profitable, and we can get up to 800 NOK per month for fiber and TV. I will come back a little bit later about the payback time for rolling out fiber to the SDUs. FMC. It has been a lot of talk about fixed-mobile convergence in the market for many, many years. Earlier, it was a lot about FMC for voice telephony, voice telephony across fixed and mobile telephony. Now it's more about what is it? We see some signs that FMC offerings are emerging in the Norwegian market. Some other players, they are talking about it.
They are launching fixed and mobile together, but we haven't seen yet so much out of it. We have a very solid position to take in the FMC market. We are already in over 800,000 households with our broadband offerings in Norway. Those 800,000 households, they have around 1.6 million mobile phones. And what has been very good in Telenor Norway for the last years, we have been cross-selling in our customer service. When customers are calling in for mobile service, we sell them fixed, and when they are coming in on fixed, we sell them mobile. That has been highly successful, and of course, we will continue to do that. We have, as I already mentioned, launched a TV platform with archive functions. You can stream television. It's video on demand.
But we also are offering something new, that you can take the TV content out of your home and have your mobile device or your pad. And that is also quite popular when people from Norway are going up in the mountains in the wintertime or out at the coast in the summertime. We think that type of FMC is going to be a success going forward. Also, a security type of functions, storage type of functions between fixed and mobile, that one we will assess going forward. This will create a greater value for the customers. There are other growth opportunities going forward as well, and Norway is the third most advanced country in the world regarding machine-to-machine communication. It's only Sweden and one other countries that are better than Norway.
Machine to machine, we have already 1 million SIM cards from Telenor Norway that is being used for machine-to-machine communication in the Norwegian market. And it's very common to warm up your summer or your winter cottage when you are leaving Oslo in the winter and going up in the mountains using machine-to-machine communication. It's also, of course, being used for industrial purposes. The next-generation machine-to-machine communication is Internet of Things, and since we have so good position within machine to machine, we of course think we can have a good position within the Internet of Things segment as well. And as Sigve mentioned earlier today, we will focus on the business segment. We have already started with some very exciting pilots, and what we need to do is to upgrade our mobile network.
That's a software upgrade with Narrowband IoT, and we have already started that, upgrading, and we see the growth possibilities going forward. We have a commercial pilot with Q-Free in Trondheim. It's a parking-as-a-service. 30% of cars in the city are driving around looking for a parking slot. That's not necessary, because with the new technology, you can get information into the car. Where is it available parking for the drivers? Another thing we are doing is a pilot of office area, using monitoring to optimize area utilization and facility management. Of course, we are also doing something within health. That's a very promising area that I will come back to, and, with mobile analytics. New standards are coming in 2016, making it even cheaper to provide all the things that are going to be connected to internet with the right technology.
Let's take a look at the health sector. It's another promising area. Telenor has for many, many years been a provider of connectivity to the health sector in Norway. Because we have a very good coverage position, we have a solid brand, we have been a preferred partner to the health sector in Norway. There are no other sectors in Norway that have more people employed. An aging population, not only in Norway, but in all Western countries, make it necessity to think totally different about how we are organizing and working in the health sector. When we get older, we all want to stay home longer, so assisted living is a perfect combination of new technologies, making it easy for elderly people to stay at home.... It's a lot of Internet of Things in that assisted living.
Some of the municipalities in Norway has already started to buy services for assisted living, and we just won a big contract nearby here for providing the municipality with that type of technology. Only 20% of the employees in the health sector, they are carrying a mobile phone, and of course, they need to increase their productivity going forward. We think we can support the health sector being more productive, providing new solutions. We have put up an own program called e-Health, that will be a focus area for Telenor Norway in the years to come, and as I said, the contract has already started to come. Now, it's time to look at how we are going to use our investment, both to support the growth going forward, but also to support our efficiency initiatives. Let's start with the mobile.
Telenor Norway, we have a world-class mobile network, and a very, very strong position if you compare us to our competitors. If you look at our coverage, right now, we have 50% more sites than number two in Norway, so we have a much more extended mobile grid than our competitors. That's the coverage. If you look at the capacity, it was a speed test from a third party, an independent third party, and if you look here, Telenor is at 55 Mbps, and number two is at 47 Mbps. We are well ahead of our competitors regarding both coverage and capacity. We will, of course, continue to build out 4G, and we have made a promise that we will build out the whole 4G network within 2017. We literally have to build out everywhere.
This is one of the more difficult places we have built up out. This is up at, in Spitsbergen, at the high mountains, and you can see here, so it's really harsh weather conditions. By the end of this year, we will have 4G on every 2G site in Norway, meaning that you will get excellent mobile internet every place where we today have 2G voice. That is 99.8% population coverage and 85% area coverage. We have also started to build out 4G+ and 4G++, where each plus is to combine more and more frequencies on the site, so you provide even better capacity, and we will continue to do that. And we have built out a very, very good network now, so for the next 4-5 years, we have very, very good capacity in the network.
At around 2020, we think that we will evolve gradually into a 5G network, around 2020. Let's go and look at the fiber side. But before we do that, I will say that 70% of our mobile 4G sites is fiber-connected, excellent capacity. The 30% rest is connected via radio links with Ethernet capacity. So we have very good capacity on our mobile sites as well. Let's take a look at our fiber investment. We have, as Jørgen was saying earlier today, we don't have unlimited access to investments, so we need to prioritize in a good manner. On the mobile side, we will continue to build out in 2017, but after that, it will be a possibility to move more of the investments over to the fiber side.
I know that you don't like that we are building out for many, many years without looking at profitability. So what is very, very important is that the business case here is that we get payback time in five years, and if it's not profitable, we will not continue to build out. But right now, we see huge profitability in the fiber cases in Norway and in Sweden as well. In 2016, we invested around NOK 2 billion in fixed broadband and TV in Norway, and we will continue, as we see it now, to invest the coming years. We will go from homes passed of around 300 to 800—300,000 to 800,000. And as I said, it's a very solid business case.
Even if we are paying NOK 26,000 per connection for rolling out fiber, after 5 years, we have the payback time. And average yearly EBITDA contribution of each connection is around NOK 7,000. So this is what we are planning to do on the fiber side going forward. And as I said, this will increase our fixed broadband market share in Norway from 37% up to 45%, making us a very, very solid fixed broadband player in the Norwegian market. That was fixed on mobile investment, and how can we drive efficiency measures going forward? Telenor Norway has a proven track record of cost reductions. We have continuously reduced costs for the last years. We have an OpEx base in 2016 that's quite similar to the OpEx base we had in 2012.
But we have increased our cost by around NOK 3 billion that we have taken out, and we have increased the cost by volume increases, building out new technologies in network inflation. But we have been able to reduce the cost by the same amount, so it's quite stable. What we have done, as Sigve mentioned earlier today, is reduce the number of employees in Telenor Norway by around 150-200 each year. If you look at the pie here, you see that our largest cost is coming from operational maintenance, and we are working continuously with the contractors to get even better contracts, to roll out network in a better way, to have a network that has less fault than earlier.
That we have been working continuously for many, many years, and we will also focusing on going forward, of course, to automate even more of what we are doing. As Sigve and Jørgen mentioned, Telenor will step up the focus on cost efficiency going forward. Of course, Telenor Norway, as the largest business unit, we will do the same. There are three or four areas that we will look into that I'm going through in the presentation today. The first one is to digitize the customer journey. You know, we can save a lot of money when our customers are going more and more digital, but we can even give them a much better customer experience, and that is even more important. We are doing the fixed line transformation, as we talked about in London in 2015.
I think we had a Capital Markets Day. We will continuously improve what we are doing going forward. What we are aiming for is a net OpEx reduction every year towards 2020. Let's take a look at the different agenda points here. Digitizing the customer journey is very, very important. Telenor Norway, we developed at an early stage a new app called Mitt Telenor. The other business units in Telenor have taken that into use as well. It was developed for our customers to have control of their data usage. What we have done now is to put in functionality, so our customers, with one click, can go in and buy more data. And of course, a lot of our customers use that functionality. They get immediately access to more data when they want it, and over 1 million of our customers...
So we will continue to develop the app, and we think we can move even more up. As Sigve mentioned, you know, we have reduced number of failures in our network. Our customers are not calling in to the customer service for buying, some of them, for buying anymore because they are doing digitally. It means that we can are able to take down some of that capacity on the physical customer service. Going forward, in 2020, we have a goal, Telenor has a goal. Actions will be driven digitally in 2020. Of course, Telenor Norway, we have the same goal as Telenor. More efficiency, improvements. We introduced a new offering in the market last year, it was the swap. They don't like, the binding regime. The majority of our customers don't like that.
A lot of our customers are also having problems when they are losing their mobile or their mobile phones have a problem with the. If the mobile phones are being broken, they will, of course, like to get a new mobile phone. And we took that into account when we designed the new swap. So here you have a 24-month installment program. You are buying a new handset, but if you like, you can get a new handset, you can get a new one, if you want, after when you decide. And if the glass is broken, you get a new mobile phone. And our customers are quite happy with the new service. Shops. When we are selling it in external third-party retailers, we have to pay a commission in kroner.
We are saving that each time we are selling a handset. The profit and loss effect is around 400 NOK for each handset. We think that in 2017, two-thirds of all the handsets will be sold through this program. So it's a new way of selling that take customer expectations into consideration. Let's take a look at the fixed value chain. As we talk about in this customer at Capital Markets Day in London in 2015, we started a program on the fixed legacy. When our customers are moving away from fixed telephony and from low-speed DS, where the revenue is becoming less and less. We had to do something. We put up three different programs that were aiming to take out NOK 900 million towards 2020. We have succeeded with two of the programs.
We have done a lot of business process offshoring, where our partner in India is taking over a lot of the tasks that we earlier did in Norway. It is being performed with better quality and less expenses. The other one is, the AD and AM on our fixed legacy. That's also being done by our Indian partner. But as you know, doing IT project is sometimes very hard. We have struggled a little, but we still believe we will be able to take out NOK 900 million, as promised, in 2020. So we are delivering according to plan. The next thing I will talk about is the possibilities in the Scandinavian clusters. As Sigve talked about earlier today, we have created 4 different clusters in Telenor, and I will be heading the Scandinavian clusters. We are still in very, very early days.
What we are doing now is we have put up a lot of work streams that are identifying synergies across Norway, Sweden, and Denmark. We think we can take out a lot of synergies across the three countries. We are working on an OpEx base of around NOK 16 billion. It's too early to come out with more details now, because we have just started, but I can promise you that we will talk a lot about these initiatives at a later stage. We are very excited about working more together with our Swedish and Danish colleagues. Now, I'm coming to the last slide. I will sum up and say there are huge growth opportunities in the Norwegian market going forward.
We are positioned to take our part of the growth coming, both in the mobile area, on the fixed step-up on fiber, on the Internet of Things, in the health sector, and on the FMC side. We have exciting initiatives, and we will continue to develop them. Stepping up our fiber, as I mentioned, with around 800,000 homes passed in 2020, from 300,000 today. We aim, on the efficiency side, to reduce OpEx year by year towards 2020. And it's a net reduction we are talking about. To sum up, solid position, growth opportunities. We focus on being an efficient operator, and I'm really looking forward to what we are going to do together with Sweden and Denmark the next years. So that ends my presentation.
Thank you, Berit. I guess there are some questions for Berit as well in the audience. Let's start with Russell Waller, and after that, Christer Raadt from DNB.
Yeah, thank you. It's Russell from New Street. Just on the fiber rollout in Norway, could you talk about the 7,000 NOK contribution a year on EBITDA from fiber? Is that from price increases? Does that include efficiency savings? Does that include upfront fees, for example? If you could just give me a color. And then on the cost of rolling out, I think you said 26,000 NOK per connection. Obviously, you're not gonna connect 800,000 new customers. So could you tell us a bit about the cost to home passed versus cost to connect as well, please? Thank you.
Let's start with the fiber installation. It's around NOK 26,000 to install a fiber. We have a payback time of 5 years. On the villa segment, we see that we can have an ARPU of NOK 800. And the result that you were saying, that NOK 7,000 is the P&L effect, yes, that's what we see. And that is proven because we have done it the last years.
I think that the EBITDA contribution, you mentioned that you saw on the ARPU graph that the customer, SDU customer with the TV has an ARPU of around NOK 800.
Eight hundred.
Yeah. And the majority of the SDU customers are taking fiber by some percent.
Yeah.
Just, sorry. I'm wondering about the expectations around the EBITDA for Telenor Norway over the next few years in light of the net OpEx reductions that's been stable for the past few years. Is that what you're expecting also going forward? And secondly, with a few quarters of experience with the roam like home subscribers, do you expect that there is a risk to ARPU going into next year if subscribers start trading down to other price plans when they're not on vacation?
We are not guiding specific on EBITDA for Telenor Norway going forward. But, we see that we have a solid position in the Norwegian market, and we will, you know, utilize the growth opportunities. And of course, we will also continue to focus on OpEx efficiency. In line with what we have done the previous years.
And there, there was also a question on the mobile tariffs with roaming included. What do you think will happen when that's for free anyway? Will they trade down?
I think, you know, that's a very good question. I think, you know, most of the or not most, but a lot of the development in the mobile market in Norway will depend on what is going to happen when the new offerings from the different players with EU roaming included, is coming out in the market. I think, you know, that's one thing that's important to watch going forward. We know what we are going to do.
Mm-hmm. But you see that on the new tariffs, most of the customers now, they will take a 3-5 GB package, and to step down to a 1-2 GB in mid-2017. I'm not sure that so many will do that after they have, in the meantime, increased their data usage quite significantly.
Most of our customers are really, you know, buying up, but there are a few that are going down. You know, it's the majority, they are using more and more, so we don't see the trend.
Okay, then I think it was Peter Kurt, and after that, Usman from-
Thank you. Just on the 40% fiber target for now, is that all organic, just to clarify, or do you hope and expect you can make some minor acquisitions? And just secondly, on the FMC, as you test that out, and historically, your view has always been no discount, so you have not pushed this offering. Is that still your view? And if so, how do you plan to drive FMC in Norway? Thank you.
The first one was about organic rollout of fiber. As we see it now, you know, most of the growth will come from organic rollout, that we will do it by ourself. But we, we have every opportunity open. But earlier, we have had some difficulties to buy larger players in Norway... with the authorities. Yeah. And the second one, there were one, one more?
Convergence.
Convergence. Now, regarding FMC, I think the most important thing we do is to roll out fiber, continue to roll out fiber. Because when you have that beautiful position about providing fiber and mobile services into a household, you know, there is opportunities we're continuing to develop. But it's a lot of talk about FMC. We haven't seen any successful, profitable offerings yet that should be copied into Norway. So we are just assessing it. We are seeing, but we have a very solid position if any of the other operators are starting to roll this in another way.
Hi, it's Usman from Berenberg. I have two questions. Just on your strategy on Norway broadband share targets. So you said that you want to take share from 37% to 45%. However, you know, if I split the Norway market shares that Telenor has between B2B and consumer, when you got a 31% market share in the consumer market, the area Telenor seems to have a low market share in Norway is in the business market, but we haven't heard anything on that. And then, in the consumer market, if I then split the shares between the SDU and the MDU market, Telenor basically has a duopoly in the MDU market would get. In the SDU market, Lyse has already rolled out 1 million homes of fiber.
Your target is to go from 300 to 800. So that still doesn't... You know, there's still a big gap between you and your competitors. I just wondering if you could address that. Thank you.
... Oh, I had a little problem-
As far as I know, it's actually the consumer market share on broadband that is relatively low, and that needs to be improved. But I think these are details that we can also, if you don't want to also know, that we can also get back to that in the breakout session with Telenor Norway, and let's check the numbers. But what we did in 2016 was to shift the focus towards the SDUs, the villa segment. Because we are seeing, you know, it's much higher ARPU, it's much better profitability than in the MDU segment. So we have shifted the focus.
Just one, could you say anything on the business market? I mean-
Of course, there's a huge demand on the business market as well. You know, when the municipalities are going digital, they are asking both for fixed and mobile coverage from the best network. So, so it's a huge demand also in the business market. But in the business market, we have a very good market share on DSL, and our customers are, of course, in the same manner as they do on the consumer, asking for fiber.
Yeah. Okay, I have now noted Ulrich Rathe, Håvard Nilsen, and Irina Idrissova . After that, we might have to move on to the next speaker. Let's see.
Yeah, thank you. Thank you. I mean, you called the profitability in fiber huge. So why limit? Why limit the opportunity to the target? What has driven this? Is this sort of your capacity? Is it the business case gets worse in the more rural areas, or what element of it sort of limits you to the particular targets you put out when the opportunity is huge? And then the second question related to that is, could you just summarize how this is actually regulated in Norway? Because I'm not entirely sure how this is regulated with regards to wholesale access, and also how the competitors are regulated, if they are at all, I'm not sure. Thank you.
It was a good observation. When we see it's good profitability, I will say good. All the other players are saying the same. So it's a huge race out there now to fiber up, you know, most of the homes in Norway that is profitable. So we are meeting one or two competitors when we are trying to fiber up, and we need to go places, you know, when you are the first mover. If not, they will not be profitable. So I think, you know, the market is going to be there for the next three to five years, but after that, the window will be closed, because then most of the households in Norway that can be fibered up, are fibered up.
On the regulation then?
On the regulation. We are the only player in Norway that are regulated both on copper and fiber, and we have to provide a type of local loop unbundling on fiber that we are doing on DSL. It's not so many operators that are using our service, but there are some. So we have to open up as the only one, even if we only have 19% market share on fiber.
Mm-hmm. Next is Håvard Nilsen from Carnegie.
Hi, Håvard Nilsen from Carnegie. Working under the assumption that the Norwegian market is going more and more towards FMC, have you so far seen any tangible evidence that this type of offering can materially increase ARPU? Or do you see it more as a churn prevention for the longer term?
You know, it's a good question, because on the mobile side, our customers are buying more and more data. And what we have done the last years is to put more data and more innovative services in the packages. And then, of course, when the customers are using more data, they have to pay a little bit more. But how this will play out on the FMC arena, it's a little bit early to say. You know, as I said, it's a lot of talking about FMC, but what, what is it? What is a smart home? Is it home automation? Is it, you know, more type of safety or security type of services? You know, everybody is assessing, but we haven't seen so commercially viable solutions yet. But we will continue. We have a solid position, and we will continue to assess it.
If things are going to happen or we find a very, very good solution, of course, we will put it out in the market. We are testing out, by the way, that you can order your groceries on the net and get it delivered into your fridge. Then you need a digital key lock at home. That type of service we are testing out.
Okay, and the last one goes to Irina, sitting in the middle there. I know there are others who would have liked to ask questions, but keep in mind that Berit and others from her team will be available in the breakout session that will start not too long from now.
Irina Idrisova from RBC. Thanks for taking the question. Just on TV, can you just talk about the trends you're seeing in OTT, and what are you seeing in terms of cord-cutting in your base and maybe ARPU, or spend down in the prices that people are willing to pay, and how you're addressing this?
You know, we, we unbundled TV and broadband before Christmas. So now it's possible also on the Canal Digital brand to buy broadband only. It's a very, very few customers that are taking that opportunity, but it's still in the early days. What we see in Norway is that streaming is very, very popular. So, so when you are combining, you know, streaming with linear TV, I think you have a very good position.... And even when you have that functionality, that you can take your TV content out of your home. So, so we are, we are meeting those trends with new functionality. But of course, the trends are there, but we haven't seen so high signs of that yet. It's following the path that we have forecasted.
Thank you, Berit. The next speaker here today is Lars-Åke Norling, the CEO of dtac in Thailand. Please, Lars-Åke.
Okay, hi. Nice seeing you all here today. I'm gonna talk a little bit about the Thai market, and also, of course, the plans for dtac. But first, a little bit update on Thailand might be needed. It's actually a pretty big country, 70 million population. It's also very well-placed in ASEAN economic communities, as a center point in ASEAN. When it comes to the economy in Thailand, it's pretty resilient. We see a growth of around 3%-4% in the coming years. Of course, a country with a big organization and also a rising middle class. When it comes to the industry, three mobile players, still very competitive. Very strong growth on data, very strong growth on, smartphone penetration. And also the users, the smartphone users in Thailand are very advanced.
So smartphone user in, on average, uses smartphone five hours a day. Of course, a lot of people in Thailand are stuck in traffic, especially in Bangkok, so that's part of the reason. But five hours a day, that's a lot. And what do they use it for? LINE, absolutely number one, then it's Facebook and YouTube. And especially with 4G now, we see that streaming is exploding, so YouTube traffic is increasing very, very rapidly. So overall, mobile market is pretty big, 250 billion THB. Converting this to NOK is basically dividing by four. And this market is growing. I'm gonna talk more about that later. 90 million mobile subscribers, of course, more than one SIM per person in the country. Smartphone penetration rise all up to 70%, increasing roughly 10 percentage points per year.
Three mobile operators, AIS number one, and dtac and True is about the same. But a very competitive market, and most of the competition is actually on spending. So it's very high spend level on spectrum, high spend level on network, high spend level on subsidies, and also marketing. When it comes to regulatory and political highlights, I think the Thai market has been going through a big shift from the concession regime to a license regime. And in a concession regime, all the mobile operators actually rented spectrum or leased spectrum from the state-owned operators. AIS and True has already left that regime. We're gonna leave that regime in 2000 and... Then there's also government in Thailand.
They have a very clear ambition, to be leading when it comes to the digital economy in ASEAN, and they put quite a lot of effort, around this. And of course, that's also beneficial to the mobile industry. And it is a market that's growing, like Sigve said before. We see a growth of around 3%-5%. The majority of the growth comes from, of course, mobile data, but then it's also postpaid. So looking at postpaid, we actually see a double-digit growth in the years to come on postpaid. And especially customers now moving to 4G, they move also to postpaid for convenience, but also a lot of them will want to have some handset subsidies as well. Prepaid, on the other hand, we see flattish to negative.
Of course, it's from conversion, from prepaid to postpaid, but also voice revenues on prepaid is going down quite a bit, very dramatically, and cannot be fully compensated by data growth. When it comes to dtac, you would say we have a very strong position in Thailand. We have around 25 million subscribers. Five of those, roughly, is on postpaid and 20 million on prepaid. We have a nationwide coverage, both on 3G and on 4G. When it comes to financial development, when it comes to service revenue, we had a slight dip in 2016 versus 2015. And the main reason for that is pressure on prepaid due to very high handset subsidies in the market on prepaid. Also gonna come back to that. Postpaid on the other hand was very strong with a double-digit growth.
Also margins are increasing now to 34%, two percentage points up, and thus from very high focus now on operational efficiency. The main growth driver is, of course, data. So you see the data growth here. We were growing 15% on data, 2016 versus 2015. More than 50% of the revenues are now from data. The smartphone penetration, like I talked about, is around 70% in the market and also for us. The focus areas for dtac, three main. One is, of course, to continue the strong postpaid growth that we have, but also stabilize the prepaid development. We, of course, focus a lot on the network, both network investments, network rollout, and not the least spectrum. In Thailand, it's key to have a good network.
That's a fundamental, that's a ticket to play. The last part, of course, efficient operation. The core business that we have, but also a reduction of regulation. So I'm gonna start talking a little bit about postpaid and prepaid first. Because of postpaid, we have had a very good development in 2015 versus 2014, but the double-digit growth now in 2016 versus 2015. So quite a big turnaround in postpaid. A few things there. We have invested a lot in the network, and we see satisfaction in our own customer base increasing dramatically. And of course, what we do now is drive pretty broad perception campaigns also towards the competitors' customers. We have a good value for money position, we have the best offers in the market. And on top of that, we also work with device bundles and device of postpaid.
Around 50% of our postpaid gross add comes from prepaid. We see by converting a prepaid customer is actually a very good business case. We see that the ARPU goes up about 3 times from prepaid to postpaid, but also, you know, churn is going down in postpaid versus prepaid, 9 times higher for a postpaid customer versus a prepaid customer. Of course, if you want to increase sales in postpaid, you also have to work with the channels, and that we also do extensively. It's increase the footprint, the store footprint, but of course, we also work in new format, especially online, that is very important for us going forward. So overall, a good development for postpaid and, and of course, a strong focus to continue this. When it comes to prepaid, it's been more challenging. A few things.
One is device subsidies on prepaid, which is not really common in most markets. The other part is, of course, pre to post-migration that I talked about. And the third part is decrease of voice revenues. But what's hit us the hardest last year is prepaid device subsidies. Both our competitors, in the beginning of last year, started giving away free smartphones if you join them. So if you're a prepaid customer porting to AIS and True, you get a free smartphone on prepaid. And we decided not to join that war, because if you do the business case, it's very negative. So we'd rather spend our subsidies on postpaid, where we have a very good return on investment.
But to just show the magnitude of spending on subsidies, both AIS and True, for the first nine months, spent around THB 8 billion each, around NOK 2 billion each, and most of that is on prepaid handset subsidies. Focus areas, anyway, I mean, we work very hard with prepaid. Also here, the network investments we've done is paying off. We getting more satisfied customers. We drive perception. Also, very clear value for money, best offers in the market. Of course, channels here as well. Also for prepaid, we try to dive online now over time, as much as we can. And, what we also work with is personalized offers, real-time personalized offers, both to drive ARPU and reduce churn in prepaid, and it's quite good effects on those kind of campaigns. So that was a little bit about prepaid and postpaid.
Now we're going to move into network. I'm going to talk a little bit about the concession regime first. As you know, dtac, we have been leasing part of a spectrum from a state-owned company called CAT. We leased the 850 spectrum and 1800 spec beginning of the 1990s. As part of this concession agreement, we need to pay a revenue share of 30% for leasing this spectrum. What we build the entire network, so we build the towers, we build the active equipment, we build the fiber, and we operate that network as well. But the assets we hand over to CAT, so the active and passive. This has been going on since the 1990s, but what's happening now, this comes to an end.
Like I said, AIS and True is already out of concession, but we go out of concession in September 2018. And then we need to secure a couple of things. One is, of course, access to the infrastructure. Since the towers and the fiber now belongs to CAT, we want to, of course, use those towers also going forward. And what we plan to do is, set up a joint venture with CAT for both fiber and for towers. Then spectrum. The 850 and 1800 spectrum is now expiring in September 2018. And of course, we need to reacquire, spectrum, get more spectrum to compensate for this. On the upside, of course, is reduction of regulatory fees. We don't need to pay the 30% revenue share, when we get out of this concession agreement in September 2018.
A little bit overall what we've done on the network. I mean, we've been investing quite a bit, the last couple of years. We stepped up the investments. I think what you alluded to also say we were a little bit behind, invested a bit too little, but we've been catching up quite a bit the last two years. And just last year, we increased the number of base stations with 70%. 70% in one year, that's quite a lot. And of course, majority of those base stations is on 4G. And what we see on the chart to the right there is that the satisfaction in an old customer base with the network, both for voice and for data, is increasing quite a bit. So the own customers are getting definitely more satisfied with our network.
What we now need to secure is, of course, that the AIS and True customers also perceive this. We drive a lot of big network perception campaigns now in Thailand as we speak. Focus areas for us, of course, like we talked about setting up a JV with CAT for infrastructure and fiber. Then it's a 4G, continued 4G rollout, both for coverage and capacity. It's densifying the network as well. So we build more towers now in the network, and thus to not be as dependent on having low-band spectrum going forward. So we actually plan now a network grid that can be sufficient only for high-band spectrum. Focus not to optimize the network where the data users are.
I mean, in the build, where the data users are, basically 85% of the revenue is as well, and there we need to have a super network, no coverage holes and no capacity issues in big campaigns. When it comes to spectrum today, we have a strong portfolio, it's no problem. We have 50 MHz, currently the same. But our 850 and 800 MHz band will expire, so we need to compensate spectrum in the years to come. Fortunately, there are quite a number of opportunities coming up now in the Thai market for spectrum. In this year, we see the first process is probably the 2,300 MHz spectrum. That spectrum is currently with the state-owned operator called TOT, and they look for a partner to use the spectrum.
They look for a partner to build out the network, and as compensation, pay a spectrum fee. It's not concession, because we still own the network, and we build the network fully. This is our network, but we need to pay a fee to TOT and they're looking for that partner, and it's probably going to be an RFP out in February for this. Might also be an auction on the 2,600 band in 2017 or early 2018. Then, of course, in 2018, we see the re-auctioning of our current spectrum in the 850 and 800 band, which is, of course, of interest for us as well. But to be clear, we need to acquire more spectrums in the coming years to compensate for the loss of 850 and 800.
So that was a little bit about network. Now I'm going to move into operational efficiency. And this is the OpEx development, split in other costs and regulatory costs. And I think in 2016, is the first year ever in dtac's history, where we actually managed to have lower costs in absolute terms year-on-year, so we actually broken the curve. Of course, what we need to secure that, that, trend continues in the coming years. And the, the focus areas for us, number one is, of course, like we talked about, digitize the core, to move more expensive physical transactions over to online. Then there's regulatory savings... percent revenue shares. That's, of course, going to save a lot of money for us. Frequency and IT, we also talked about.
We looked at different models, but especially to leverage in our group scale in this area. Last, but within dtac is business simplification. What should we focus on, and what should we not focus on? And some examples what we, where we will not focus is, one is the Happy brand. That was a prepaid brand we had. It's going to be phased out. dtac is now the main brand, also for prepaid. We have had a pretty long range of not that profitable services that we closed down, and especially price plans with few customers, those we phase out. Marketing, I think, over the years, we spent spread too thin. A lot of small campaigns. Now we go for the big-ticket items. That's where we're going to focus.
When it comes to fixed, even if Noi is pushing through, I think Thailand is a really mobile-first market. It's a very big mobile market. It's a growing mobile market, and we want to focus on that market. We focus our investments and our operations in mobile, at least for now. Talk a little bit about digitizing of the core, where we are and where we want to be. If you look at sales, currently, online sales in dtac is 3%. It's quite low. Here we have a big, big opportunity, and we at least want to reach 30% of the sales to be online in 2020. When it comes to service, around 16% of our service transactions are now digital, and we want to move to at least 40%. Hearing Sigve, it might be even higher.
Marketing, 23% of the all the marketing spend is today online, and that's going to be at least 50% in 2020. So we're talking a pretty big shift in both sales and service over the year. And of course, to do this, we need some tools. One is, same as Per talked about, the app, which is very, very important for us. I think we are the leading app in Thailand, and we started for a service focus on giving customer service, but now we also introduce sales. So we see more and more sales is now coming through the app. Currently, around 1.3 million active users per month, and we want to move to at least 50% of our customer base using the app every month in 2020.
We also introduced, same as Malaysia, a retailer app. You know, register a customer and do top-ups and refill takes quite a bit of time. And this app digitize all those transaction ability very fast. And that, of course, increase that customer satisfaction, but also reduce cost and commission. Launched that in, I think it was in October, and already 13,000, and of course, we want to have all our 100,000 retailers using the app. What's also good with the app, since, when you do a refill, you punch in the number, and since it's online, you can also give personalized offers through directly in retail to the customers doing a top-up. Online. I think, like I said, we have 3% of our sales online today, not a lot.
But, I still think we want to be recognized as absolutely the best operating partner when it comes to online sales. But to manage all need a strong analytics platform, because if you're going to be successful in online sales, you have to be able to give personalized real-time offers to the customers, that talk to the customer directly. And fortunately, we have a good base. We have a good analytics platform. So right now, we run a project with Tapad in Thailand to basically build a profile for all the mobile customers in Thailand. And with this platform, we can know what device or what devices the customer is using.
We know what operator the customer has, we know the usage, and by correlating those customers also with our own customer base, we also basically know the ARPU profile of the customer. And that, of course, means now that we can give now personalized offers to all customers in Thailand, not just our own customer base. So for example, if a competitor customer is on Facebook, we might know that a customer has an old handset, but a pretty high ARPU profile. And then we can shoot an offer to that customer directly online, directly in Facebook, with a very aggressive handset offer just for that customer. And in the pilots we've done this fall, we managed to do 500 port-ins on postpaid from the competitors per month. That's around 5% of our port-ins total.
Now we're live, now we're running this live since January, and in January, we managed to do 1,000 port-ins. Postpaid port-ins via this platform. And the ambition is an increase of the port-ins that we have on postpaid. So that was a little bit about the prepaid postpaid, the network, and also the efficiency. Now, a little bit about the guiding as well. We reported in the beginning of this week, and the revenue, service revenue, the ambition here is to maintain same level as last year. Like I said, we had a slight drop in 2016 versus 2015. EBITDA, with the efficiency agenda that we drive, we have an ambition to increase the EBITDA in absolute terms from 2016.
When it comes to CapEx, it's a little bit broader range from THB 17 billion-THB 20 billion. The reason for this is because it's a little bit uncertain when we get new spectrum, and we need to time the rollout of the network, also when we get new spectrum. That's why it's a bit uncertainty. I think the big uncertainty on EBITDA is basically handset subsidies in the market. The key question, will those super high subsidy levels continue in Thailand or not? So in summary, very interesting market, a growing market from data from postpaid. It's for us, strong growth in postpaid. We need to stabilize prepaid and especially see what's going to happen with the handset subsidies. Concession coming to an end, so we need to secure access to the infrastructure. We need to secure more spectrum.
A pretty offensive, operational efficiency agenda, and there's definitely room for cost savings, both from digitizing the core and also regulatory cost savings. So that was a short summary of the Thai market, and feedback, and a lot of hands in the air.
Yes, thank you.
Thanks.
Okay. Lots of hands in the air, and Håvard Nilsen.
Yeah, hi, so I'm Maurice from Barclays. So on your point around spectrum CapEx, in the earlier presentations, focused very much on that mix of cash flow, and you highlighted the upcoming spectrum auctions. If we're looking down the higher frequency route, so buying 2.3 gigahertz rather than the 800, 850, 1800 megahertz bands, do you have a significant requirement for additional CapEx? You mentioned earlier you've gone through identification process, which perhaps insulates you somewhat. But if you do end up going down the route of higher frequency because you can't or don't want to bid for expensive lower frequency, should we expect CapEx to go up from here, or how do you think about that? Thank you.
We only guide for CapEx this year, but like I said, we in the plans now until end of concession, we plan for densifying the network. So of course, we did quite a bit last year, large part is this year, and then it's next year. So that's already in the plans.
Hi, this is Nick from Société Générale. Can I ask you on the, a potential agreement with, with TOT that was out now, correct? How would you, if you were to get the agreement with TOT, how much spectrum would you then need, do you think, in 2018 from the auctions? It sounds like you still think you'd need some. And also, is it feasible to have an agreement with TOT for spectrum only with the CAT for infrastructure? That sounds very, very complicated. Can you just sort of talk us through how that would work in practice?
... and I think when it comes to infrastructure, you need to separate it a little bit. I mean, that's a separate deal we set up just for the towers and the fibers, like a tower company. So it doesn't have anything to do with spectrums. We can use that, those towers for anything, basically, and we already use it for. When it comes to the 2.3 bandwidth TOT, if that happens, of course, it reduce the necessity to absolutely win in, in the coming auctions. That's correct.
So just come back. Is, is 1 by 60 enough, do you think? There's anything about that spectrum, especially at 2.3, what like knows this question. It's a very high frequency spectrum, probably great for city centers.
I wouldn't comment exactly on the mix we're gonna have on the spectrum going forward, but of course, getting 60 MHz on a 2.3 band will take us quite a bit on the way.
Mm-hmm. And next was Håvard Nilsen, and after that, I think we had Dominik Klarmann at this side of the audience.
Hi, Håvard Nilsen for Carnegie. Could you give us an indication of where you're seeing subsidies going in your guidance? Is it going significantly down or same, or?
Yeah, that's a million-dollar question. I mean, like I said, we spend our... So I have the return on investment. What's gonna happen with the prepaid subsidies now, this year, we will see. But it's been extremely high level of experience. We have and the business case we've done is not a profitable case. So let's see what's happening now, over this year.
So you assume it will decline then?
I can't comment for the other guys, but let's see what's gonna happen with the prepaid subsidies.
Okay, the next question was over there, and then I think we will have time for a couple of more questions from Jakob Bluestone and Matthew Bloxham. The rest will then have to wait till the breakout session.
So on the number of base stations, that massive growth that you give there-
Can I just clarify that the number of physical sites is basically the number of 3G sites, so 28,000. And if I'm not mistaken, that's not that far away from your competitors. So I'm just wondering, is your network really already so much denser than that of your competitors, so ready to do, to go on those high frequencies? Thank you.
I don't, I don't think you can see 3GS one to one with towers, because we have 850 and 2.1. But, but again, we have increased the number of towers already last year. We will continue to increase this year and, and part, also next year. But we, we don't comment specifically on how many towers we have, but we are definitely increasing.
Mm-hmm. And the next one was Jakob Bluestone .
Hi. Jakob Bluestone from Credit Suisse. I think you exited Q4 with service revenues at GlobalConnect down 4%. So can you maybe sort of talk through how you get to flat for the full year? You know, what are the things you expect to change? I think you said on your conference call earlier in the week, that the sort of competitive intensity had spilled into Q1. You said normally Q4 is the most competitive quarter, and some of that had continued into this quarter. And then maybe just following on from some of the questions on spectrum, could you maybe give us a sense, is your customer base predominantly urban or rural, or pretty even mix of the two?
Yeah, I think quarter four, you know, since the king's passing, especially October, November, was a little bit weak in the market overall. We saw it started picking up quite a bit in December, especially the last half of December. We see that momentum also now going into January. Of course, competitive pressure is always there, but I think what's unique a little bit with quarter four was the king's passing and the mourning period. When it comes to the distribution of our customers, it is, like I said, the revenue, if you look at that, we have 85% of the revenue in the top 37 city clusters in Thailand. So we predominantly, revenue-wise, in the cities.
Thank you.
The next one is Matthew Bloxham, and after that, I think we have to continue to the next speaker.
Yeah, hi there, Matthew Bloxham, JP Morgan. Could you just give a bit more background on how the prepaid subsidy situation initiated? Was it the number three player that starts things? I guess they must see things a bit differently to you, if you think it's not economic, but they're really pushing on it. And I guess it is interesting, you said that 50% of your postpaid growth has come from prepaid. So I guess to what extent is that threatening your pool of opportunity for your own postpaid growth?
Yeah, I think it's a lot of focus on revenue growth from some players in the market. And as long as they get the growth, they might not look at the full business case. But yeah, I hope they stabilize in the market, and we see, I mean, some momentum now in prepaid also picking up, also on our side from the actions that we do. But of course, there's a big question, how much money will we see on prepaid subsidies this year?
Okay. Thank you.
Okay.
Lars-Åke.
Thank you.
Again, there will be breakout sessions starting in some 45 minutes from now, and dtac's CFO, Sara Pedersen, will also join Lars-Åke for that session. Our next speaker now, last speaker here today, is Dilip Pal, the CFO of Grameenphone, our market-leading operator in Bangladesh.
Thanks, Marianne. Good afternoon. I'm very pleased to present to you Grameenphone, the number one brand, the most successful and the most admired company in Bangladesh. Before I dive into the specifics of Grameenphone, let me just start with a little overview of the country and the mobile industry. With 160 million people and 1,131 pop per square kilometer, Bangladesh is one of the most densely populated country in the world. Now, a high-density population puts an enormous pressure on the infrastructure of the country. But let me tell you, this is also a very good opportunity for the telecom industry. Higher the density of population, higher the revenue per base station. Grameenphone's revenue per base station is 2.5 times that of the leading mobile operator of India. It's a young country, and it's getting younger.
With median age of 26, half the population is less than 24 years old. This is also a very unique opportunity for the telecom industry, as you will see later, the faster adoption of internet and faster adoption of digital services. In terms of macroeconomic parameters, the country has been growing and over a decade, 6+% GDP growth. Inflation has been moderate, about 6-7%, and central bank in Bangladesh actually has done a wonderful job in the last four years to keep the currency also at a very stable level. So overall, the country's story still holds good. In terms of mobile industry, it's despite having presence for the last 20 years, the country still penetration level is very low. The SIM penetration is about 70%. As Sigve was mentioning in his presentation, there are a lot of deal seekers.
They love to keep multiple SIMs. If you adjust the multiple SIMs, the real penetration in Bangladesh is still about 51%-52%. The market structure is very healthy, and that, too, especially after the recent merger of Airtel and Robi. The top three operators now account for 97.5% of the total subscription base the country has. And with a clear number one, which we are, Grameenphone, and a number two and a number three. With a ARPU of around $2, it's, it's very low, but at the same time, all three operators have very healthy EBITDA margin. Late auction for 3G, which happened sometime around Q4 of 2013, rollout started happening, and really, the 3G data rollout and the usage of mobile data started in early 2014. Despite that, the penetration really leapfrogged.
In less than three years, the industry internet penetration is now 30%. A little bit about regulatory environment. I know, I'm sure some of you are following our results. This has always been one of the sore points for the industry. There are demands, there are regulatory frameworks which has not been very favorable for the industry, which led into litigation and court cases. But at the same time, let me also assure you, things are changing, and we also see a lot of consultation with the mobile operators for any change which the regulator is proposing. Now, about Grameenphone. We have the best voice and the best data network, and with the widest coverage. We built a strong distribution point. We outperformed all our competitors over a long period of time, having a significantly higher EBITDA margin than others.
We maintained 53%+ EBITDA margin over 5 years period. Jørgen, in his presentation, talked about cash. Grameenphone at 83% of the total cash that industry generated in the last 5 years, so we are a very cash flow-focused company. We lead in NPS, and the gap between the number two and number one is increasing year by year. Also to tell you, very recently, Bangladesh Brand Forum awarded Grameenphone the number one brand in the country, considering all the segments of the industry. Just to also mention here, none of the other telecom operators are even in the top 10 list. Now, about a little bit about our 2016 performance. We are really proud of our recent performance. It's been the best year in the recent history.
Seven quarters of sequential revenue growth, and a growing company in a growing country. You may find this is why this is so unusual. Let me tell you, this is unusual, given that these countries have seasonality. Seasonality based on festivals, seasonality based on weather. But we have been able to successfully beat all this and continue to grow consecutively for seven quarters. Subscription and traffic revenue grew double digit all four quarters, all four quarters of 2016, which resulted in a 12% subscription traffic revenue growth, 2016 over 2015, and a total revenue growth of 9.6%. This has also resulted in our EBITDA growth of 14% and a margin expansion of 200 basis points on a year-on-year basis. We increased our earnings growth by 14% and also increased our cash flow growth by 16%.
ARPU grew by 4.3% year-on-year. There is one important development that has happened in 2016, and which could have impacted the industry significantly, which is about biometric verification that regulator and the government had to push to all the operators because of security reasons. I am very happy to tell you, when we started, we thought that this is the biggest threat that we have, because we have the largest number of subscribers, as 56 million, but actually converted this threat into an opportunity, provided all the focus towards verifying all the customers in a very short span of time, and we lost the minimum number of customers when the finally biometric-led verification ended.
You already got a flavor of the emerging Asia, which is going to be the growth engines, and we strongly believe that this growth momentum that you have seen in recent past is likely to continue. We believe the dominant segment, which is the voice, which has grown in 2016, will grow. The emerging segment, which is data, which is still very small, which has been growing over 70%, is also continue to grow in future. I mean, voice growth is something I'm sure you, you have not been hearing for Europe, but let me tell you this, with such a low penetration in the market, there is opportunity to grow. We have been adding 6%-8% to our base every year.
The affordability for the marginal customers are increasing with the growing income, the per capita income, and mobile services are also becoming cheaper day by day. And on top of that, with data still not at the level where... Still the opportunity to grow, the OTT services has still not impacted the voice growth. And there is less competitive pressure of late on pricing. Apart from that, there are two important segments which we get a lot of inspiration from other BUs, especially Europe, on the business segment and postpaid. Business segment is a real opportunity. We don't think we have done enough in this area. More so because of, I think, we really wanted to focus on our mass market prepaid, which is the bread and butter. But as a market leader, we see that as an opportunity.
The small and medium enterprise segment has been booming, and this is on the backdrop of the economic development, which has happened for a long period of time. We believe that the, with the proper solution that we can provide to the small and medium segment, we can grow and exploit that opportunity. Postpaid, you have all seen the, the engine of growth for many of our other BUs, double digits growth. That inspires us a lot. We are almost insignificant when it comes to postpaid. It's about 1% of our base now. As you have seen, when customers move from prepaid to postpaid, their ARPU tends to grow. But the challenge that we have faced here is the availability of reliable credit data and also sophisticated credit scoring model.
We are working on currently to provide a true postpaid experience to our customers, to make sure that we are able to grow this segment as well. So overall, as I said, voice segment, we still see opportunity of growth in near future. Data. It's been very early stage of data in Bangladesh, with very low PC penetration and also almost nonexistent broadband. This is not a surprise at all that 95% of internet access is through mobile broadband. Data volume per user is exploding, despite a significant increase in the database itself. Our end of 2016 data, the subscriber base on data was 24.5 million, which was a 50% increase in 2016 over 2015. Despite that much of 50% increase in the base, the data usage per customer grew by 71%, and that's phenomenal.
And what we see that the level at which we are, which is 488 MB average per customer per month, is still very low. And you have seen already in the other presentation, 900 MB, or 1 GB, or 2 GB even. We see that this will provide us the significant growth opportunity going forward. Currently, we have covered the entire country in our 3G footprint. 93% of our data volume is now on 3G. In terms of the usage, it's, it's, it's Facebook, followed by YouTube. If you, if you go to Bangladesh, if you ask customers whether they know internet, some of them actually might say, "No, we don't know internet." But if you ask them, do they know Facebook, most of them will say yes. 80% of our monthly active users use Facebook in Bangladesh.
We believe smartphone will fuel the next the next growth of the data, and affordability will play a key role here. And we've already seen the early sign of that in from 2014 to 2016. Sigve was talking about in his presentation, if you look at a smartphone which was costing $60 in 2014, is now costing about $33. Grameenphone is actually also actively pushing a smartphone penetration through co-branded handsets promotion and also allowing promotions with other handsets. In 2016, we saw very good success while doing this through the co-branded route. And I also must tell you, this is no subsidy. On the contrary, on the devices that we sell in Bangladesh, we have a small gross margin, so on the cost side, we are fairly secured.
We are also preferred as an exclusive provider or the operator when a new flagship brand is launched in Bangladesh. We see that as more and more customers move from feature phone to smartphone, there is an ARPU uplift, which we can foresee in the near future. Now, for the future, there are four critical success factors that we are going to talk about. One is to remain the best data and voice network, as we already have. Have the best distribution, radical simplification in several areas, in our several processes, and the most important, to remain the most efficient operations. Now, let me first. On the network side, Grameenphone had early mover advantage when it invested in 2G, and it has paid off. It has paid off.
Most of the competition has actually done a catch-up job, so we get the, we get the most of the value-added customers, most of the high-value customers in our network, and that loyalty still continues. We are following the similar footsteps when it comes to 3G data network. As you can see from the slide, the nearest operator is almost at a 50% level on 3G network, and this, we believe, is going to give us significant head start when it comes to exploiting the first mover, new customers, who are coming in 3G network. We want to be the first when it comes to 4G/LTE launch, which has not happened yet. Now, a little bit on the spectrum side. We are comfortable on the existing portfolio that we have.
In fact, all the operators are pretty comfortable there, and that's one of the reason, also combined with some other issues, when government tried. The regulator tried to do the auction in 2015, it didn't work. There was lack of response from the operators, and this has put us in a very good position now. We hear that government is going to do auction in 2017, and those are the unsold spectrum in 1800 and 2100. But the issue that we see here is on, and the most important demand from our side, is technology neutrality. Just to little explain you, the spectrum holding that we have, the 900 and 1800 MHz spectrum, is locked with 2G technology, and 2100 spectrum that we have is locked with 3G technology.
Which means that with growing data contribution, we are not able to really use the 1800 spectrum efficiently, and this has been an industry demand, and we are in this discussion with regulator to find a solution. We believe that this will give us significant edge if we can refarm part of 900 megahertz for 3G, which gives very good indoor quality coverage. Sibi spoke about fiber, but let me tell you, we do have challenge, we have challenge in terms of the current regulatory framework. So we are working towards it, as we don't have a license to build the last mile fiber to home. But things can change, and we believe that if we're allowed to operate a fiber in Bangladesh, it's a big opportunity because there are no big players yet. In terms of spectrum funding, we are comfortable.
Our operating cash flow is very healthy, and our net debt to EBITDA for Grameenphone is 0.29, so which means that we have significant headroom and various funding options, if at all we have to buy more spectrum. Physical distribution has been the core strength of us in the past, and we had very good distribution. On top of that, in 2016 alone, we expanded our distribution points from around 120 to 380. The retail points we increased from about 250,000 to 360,000. And this is to take the servicing closest to the customer's door, where customers live in.
While physical distribution has been our core strength, the digital distribution is emerging, and I'm very happy to tell you that in a very short period of time, if you can see on the right side, the recharge sales, prepaid recharge sales through digital channel is now contributing 10%, and this is our last two years' development. This is happening in two ways. It's happening through our own digital channels, and I'm going to talk about that a little later, and this is also happening through third-party wallet, which, if you're familiar with Bangladesh, there is a bKash, which is very popular. That is also driving our digital channel recharge sales. We believe, this has huge potential, and we have strong ambition to double this in 2017 alone. We have around 5,000 GP Express store.
These are physical store, but of course, not provided by us. These are... There are independent franchises without any subsidy. But these express stores are bridging the gap between the digital and the physical. The more and more customers, they prefer to order online to buy our devices or the accessories, but they prefer to come to a store to take deliveries and also to make payment. And we see a very interesting development happening there, here. And let me tell you, this is not coming at any cost. This is cost for the franchisee. They earn margin based on the sales they do. On our simplification journey, we are extremely proud and happy what we could do in a very short period of time.
When I took digitizing the core as one of our key strategic ambition, we realized that Grameenphone, with its 20 years legacy, has created a lot of legacy systems and processes which needed to be simplified. And it's very important, before we digitize, we first have to simplify the processes. Towards that, we have done several things: reducing the number of products, standardizing processes, giving offers to customers without any conditions, uniform internet pricing between 2G and 3G, having one port of self-activation, which is one to one, which is to be multiple for customers. With all of that, what we have seen is a remarkable reduction in the customer complaints, which has come down by 75% on a year-on-year basis. What we believe is, is this is, this is a journey that we have started, and this is going to continue in 2017.
We have simplified our processes, now we are in the process of digitizing them. We have also a strategic intent to become customers' favorite partner in digital life. Towards that, we have seen some early success. There are several new initiatives that we have done. And just to remind you, these are all one year or less than one year development. Sigve spoke about WowBox. This is actually a platform where young stars, they interact as a lifestyle platform. This is the number-one platform app in Google Store in Bangladesh. In fact, all the other apps that we are talking about, the services we are talking about, they, they are either number one or number two in Bangladesh, in Google Store. I'm going to talk about FlexiPlan. I'm going to talk all of this.
FlexiPlan is a unique platform where customers are able to make their own plan, whether it's voice, data, SMS, all of that. This has given a significant traction, and this is one of our good contribution to our digital channel on recharge sales. This has 5 million more downloads, and almost BDT 1 billion of revenue has come through this channel in 2016, and this is growing. MyGP is what Varit mentioned about the MyTelenor. That's the version we have launched in 2016. It's, it's about 3 months, 3-4 months now, and we already have seen 3 million downloads. This is also going to give us significant leg up in our digital distribution when customers start buying products and also do their services from this. Now, the most important on our operational efficiency. Growth with efficiency has been the cornerstone of success for Grameenphone.
Our OpEx to sales has come down by 5 percentage points over a 5-year period. We reduced our OpEx by 11 billion BDT through structured operational efficiency program in 5 years. A.T. Kearney Global cost benchmarking study, where Telenor, all Telenor BUs participate, we are among the top 3 Telenor BUs. In fact, in 2015, we were the number 1.... As far as the cost gap is concerned, the several initiatives around IT and technology has given us benefits. Some of the recent changes, some of the recent numbers that if I can share with you, we reduced our overheads and discretionary spends by 27% in last 3 years. We reduced our marketing spends by 30% in last 2 years. We took off, or we took out 10% of our FTEs, which is about 350 FTEs only in last year.
This is what we believe is a strong foundation that we are in, which is going to help us more in future. Now, OpEx for future, I think Jørgen keeps talking about that the best time to rationalize OpEx when we are doing well. I think we don't have a lot of other challenges that some of the other BUs have, wherein the choices are limited. But I think with the financial flexibility that we have, with strong financial performance which is backing us, there are priorities, there are prioritization that we can choose from, variety of choices. Towards that, I think Dilip mentioned about clusters. I think we are extremely excited and looking forward to the emerging Asia clusters, how that's going to give us synergy.
There are operating model change, which is already, we have started embarking, for example, on our call center, which used to be completely in-source, we were managing ourselves. We started moving them to third party. We are going to finish that in 2017, and that's also going to give us a very good benefit. We are extremely efficient when it comes to network, but we believe there is... Those are actually basically on the energy side. We believe with the some of the operating model discussion that we are having, it could lead to further efficiency. I already mentioned about the digital channel, sales to digital channel, which we have an ambition to double in 2017, is also going to give us significant cost benefit.
Just to tell you, we have a commission advantage of 2.5% when it comes to digital versus physical distribution. Now, growing business is very important. Growing business with responsible business conduct is also very important, and it will remain a very important part of the focus that Grameenphone will have in future. Towards that, this will also mean that there will be more focus on adherence to policies, there will be more awareness, more training, not limited to only employees, but our supplier base and also bigger stakeholders. And we believe Grameenphone will be able to promote a stance on a responsible business conduct in Bangladesh, and we are truly committed to that. Now, in summary, Bangladesh is a fast-growing, resilient economy. Mobile telecom industry in Bangladesh is providing world-class services and is contributing significantly to the development of the country.
GP is a very strong market leader in an attractive growth market. Now, let me conclude my presentation with an old story. The story begins with a Bangladeshi having an idea. The idea was to bring mobile telephony to Bangladesh for its people. The person traveled throughout Europe, spoken to various mobile operators, trying to build a mobile networks in Bangladesh, and the answer from all those mobile operators was a resounding no. Then he traveled all the way up to north, to Norway, and then spoken to a operator called Telenor, and Telenor said, "It sounds interesting." That was 1997, and that's how Grameenphone started its mobile operations in Bangladesh. 20 years, 58 million customers later, the adventure still continues. For the people of Bangladesh, that was love at first call. They just loved mobile phone all the way. Thank you very much.
Thank you, Dilip. Let's have a-
Can I take this water? Is it mine?
That's for you, yes.
Thank you.
We have time for a short Q&A for Dilip as well. Fredrik Thoresen, SEB. Start.
Thanks. First, could you give us some more details with regards to the refarming process of spectrum, kind of the timeline and costs potentially associated with that? And, do you see any inflection point as to improving the internet penetration in Bangladesh, kind of to the same line as your neighboring countries? You kind of alluded to a younger population, and then Sigve's remarks also talked about some $30 smartphones. When you do you kind of see this happening?
Yeah. Okay, on the first question on the refarming, I think I tried to talk about that. The current regulatory framework is not allowing us to do that. We don't have any timeline approved by regulator yet, but what we believe, the industry is working very closely with the regulator to see a timeline by which the spectrum can be made neutral, technology neutral. We are hopeful. I can only say that maybe 2017 it can happen, but we don't know. On your other questions, I mean, we can only draw inspiration over the examples that we have from the neighboring country. I don't think we are still at the inflection point. The megabytes per user is growing, and we see every year we make our own projection, and we, it just, we just exceed that by few percentage points, significantly higher.
The fraction that we see on the price reduction, I think is going to continue, and actually, we are at the forefront of driving that. We didn't want to leave this to only the operators who are in the business of only selling devices. We believe that unless we push the envelope, this is not going to get done, this is not going to be done faster. A GSMA study actually gives some indication that by 2020, the current smartphone penetration, which is about 25% for the industry, is likely to be 45%-50%. In our mind, I think that can even happen much earlier. So from now till 2020 is when I think we are expecting inflection point when data revenue really, really moves. It's currently contributing only about 15% of our service revenue.
Roman Arbuzov , after that, is Usman.
Roman Arbuzov from UBS. Just a question on longer-term growth prospects. In one of the slides that you showed on rural penetration, it was 51% in both 2015 and 2016. There's probably something funny going on with the numbers, 'cause the number of SIM cards has reduced in 2016, but nonetheless, it looks like it's maybe somewhat flatlining in terms of the rural penetration. So can you maybe tell us if there is a certain chunk of customers that are not really reachable for some structural reasons, you know, in the foreseeable future?
No, I think this number is reflecting so because of the... As I said, 2016 was the biometric-led re-verification of the entire base. So a lot of customers or the same per se gone out of the system. So when you're trying to rebase, I think these are estimated numbers. What you have to do, probably go one more time when the numbers come to a more stable base post re-registration time. So 52% is our estimation based on the past formula that we applied, but these numbers can change.
And then there is no reason why you can't basically take 50-100-
Yes, it,
-with time.
As I said, you know, it's the, it's the income level. You know, the—it's still a poor country, the per capita income is low, but that's growing. And as I said, the affordability is improving with the per capita income increase, and there is a pace at which it will grow. It has grown faster, and also in the past, the cost of acquisition of a new SIM was very high through the incidence of SIM tax. That regulator or the government has reduced. That has also helped in the past, but I think there is still a SIM tax on every SIM that customer buys in Bangladesh as we speak today.
Mm-hmm. Okay, and the next is then Usman Ghazi from Berenberg. And I also saw Georgios from Citi with hands in the air, and I think that will have to be the last. So Georgios will have the last question today.
Hi, thank you. I just had a question on the market. I mean, you said that, you know, this is a market where, people arbitrage a lot with pricing. You know, Bangladesh has seen price wars in voice in the past. I guess one of the remarkable things right now is that voice price per minute has basically been quite stable. You said everyone's making good margins. Grameen is sitting on a 53% market share. I mean, what is preventing, you know, there to be kind of more price tension in voice, such that the guys with the low market share take more share, particularly because of, you know, like you said, the churn pool of price seekers is quite high in this market?
I think, the answer lies in the other point, which I mentioned. None of the... They have a high margin, but they still had a high CapEx, which was more of a catch-up, because of which, if you see, I mentioned 83% of the operating cash flow of the industry was actually... It actually went to Grameenphone. So I think they are also under similar pressure on shareholder return, and they are also asked questions that, "Where is the return?" And only one operator is actually make net profit. The other operator still doesn't make net profits. So there, there is a-- there is also a... I mean, these are, these are our, you know, estimation or our assessment, but... I think, driving.
The other point is on Airtel used to be the fighter, and their price war did not really materialize, because they didn't get much of market, kind of reduced the overall market size to much lower, but didn't work really, because we have a very, very strong loyal base for Grameenphone. Yes, we responded, we had to respond when competition does some things, but we have not destroyed value in that market and we're in a much better position than we were before, from one year or two years back.
Hmm.
Maybe two questions, actually. Primary SIM, obviously, we've seen in other markets, I think it's high market share of primary SIMs is, given that the official coverage is much better. And then there's several questions around taxes. Even though competition has never been a major issue for Grameen, taxes have. So any specific Grameenphone taxes, either in 2016 or 2017 that we may see in Bangladesh Telecommunications ?
We have industry published same numbers, which are done every month. That we have a share of 46.1%. It's a six-player market, so we have a 46.1% market share. But we can also tell you, this used to be around 43% before the biometric re-registration happened. So through the biometric re-registration process, what happened is a lot of second SIM didn't get registered. So it came down, the usage came down to the primary SIM, which we are. So there is no separate way of identifying a market share on only the primary SIM, because that's - we don't estimate that. But we believe it will be higher than the same market share that is published by the industry.
And taxes?
On taxes, sorry. On taxes, I think we have a, we have past cases, and, one of the big case that we are fighting in the court is on SIM tax on replacement SIM. This is the demand is roughly about, fifteen billion BDT. Just for your, understanding, you just divide by ten, then you get the USD. It's fifteen billion BDT, and we have to pay, one billion BDT in 2015 to go to the appeal stage. So it's going to be a very strong case. We're going to the re-appeal, and therefore, it will be High Court and the Supreme Court. It's an industry issue. All the operators have been given, demand to pay SIM tax.
We believe it's a very strong case that we will be fighting, and we have a reasonable success of winning that as well. Apart from that, these are all part of our disclosure. Also, if you go through our Q4 publication, there are other cases. But these are all old cases going in the court system for a very, very long period of time. There is nothing that which worries us that which is going to happen in 2017 or 2018, that I need to mention you right now.
Okay. Thank you, Dilip. We are now approaching the end of the presentations here today, and we are very keen to also kick off the parallel breakout sessions with management from Grameenphone, Norway, dtac, and Sweden. That will take place in the cafe area upstairs. But before that, please let me introduce Group CEO Sigve Brekke to do the concluding remarks.
Yeah, thank you, Marianne, and just some few remarks from me before we end. Thanks to Berit, Dilip, and Lars-Åke for giving a little bit deeper insight in what we actually do. And I hope that you all saw that the story. Yeah, there's a story from what I said through the Group CFO, through the three business cases that we gave you. The ambition is set, and let me just briefly summarize. An ambition of a continuous revenue growth through a mobile revenue growth, but also to take some more steps on the fixed opportunities. There's an ambition of taking a position within digital products, being partly some own products, but mostly platform for third-party enablement, and through that, building a relative platform.
There's an ambition of a significant step up in terms of cost efficiency through digitalization of the core, and it's an ambition of prioritization and simplification of our portfolio. I firmly believe that what we have presented today is a way for us to strengthen our cash flow generation, and also a way for us to deliver on the commitment of value creation and a continuous dividend growth. So with that, we end this session, and as Marianne said, we hope that you will have time to go into the work sessions and go deeper into some of the issues. Thank you.
Thank you, Sigve. Thank you all for attending our Capital Markets Day. Thank you.