Welcome to the Schibsted conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jo Christian Steigedal. Please go ahead, sir.
Hello, this is Jo Christian Steigedal, the Head of Investor Relations in Schibsted Media Group. Thank you for dialing in to this conference call in connection with this morning's release. Sorry for the late startup because there was a queue of people dialing in, but now hopefully we have most of you on the line. Here in Oslo, I am here together with our CEO, Mr. Rolv Erik Ryssdal, our CFO, Trond Berger, and Terje Seljeseth, who is the CEO of Schibsted Classified Media. Before opening up for questions, I will hand the word over to Rolv Erik Ryssdal for an introduction. Please go ahead, Rolv Erik.
Thank you, Christian. We have today announced that Telenor will be our equal partner in expanding with an online classified in selected markets in South America and Asia. At the same time, Telenor enters also as an equal partner with Schibsted and Singapore Press Holdings into 701Search, the company in which we're building online classified operations in Southeast Asia. I believe this is an important day for us. Through this agreement, we have partnered up with Telenor, who is one of the globally leading mobile companies, and they got particularly strong positions and a great track record in emerging markets. They have in total more than 150 million mobile subscribers. We see already that consumers are moving towards mobile Internet consumption. We also see that this trend is actually much stronger in emerging markets than anywhere else.
Telenor as a partner, they possess deep insight into mobile technology and the user behavior. At the same time, they also have many years of very valuable experience in emerging markets. When it comes to Singapore Press Holdings, we have a long history of collaboration with them that's worked very well since for more than five years. We know that they are important contributors when it comes to extensive local insight and strong regional network in Southeast Asia. When it comes to the financials of this agreement implies a significantly strengthened basis for us going forward. The assets that Schibsted contributes to the new company, SnT Classifieds, mainly in Brazil and Chile, are valued at EUR 170 million. Schibsted frees up capital by selling half of this to Telenor.
Not only are we demonstrating good value creation in the region so far, we're also securing the future financing of the venture because both parties are committed to financing this to break even. The same goes for 701 operation on the financial side. Telenor acquires one-third of the company, and that company is then valued at EUR 180 million. 701 has a leading position in Malaysia and is investing in several other Southeast Asian markets. That's why I said this is an important day for us. At the same time, however, I'd like to point out that these two new joint ventures, they only comprise a limited part of Schibsted's total online classifieds operations.
You know, our big leaders in Norway, Sweden, and France will not be affected, and the same goes for all of Europe. None of the European assets we have will be part of this, of any of these joint ventures. To sum it up, we believe that we'll succeed in bringing our popular products and proven business models to those rapidly developing economies in South America and Asia. We believe that these ventures, formed by three knowledge-driven and industrial players, I'd like to stress that, give us even more financial and operational strength to pursue those attractive number one positions. In short, we can do more, and we can move faster, and this will improve our chances to succeed.
Jo Christian, I think, I won't go into any more detail at this stage, but rather, let's hear what we can discuss during Q&A questions. I suggest that we'll open it up for questions.
Yes, please, operator. We'll, then ready to take the questions.
Certainly. If you would like to ask a question at this time, please press star one on your telephone keypad. Please ensure that the mute function on your telephone is switched off to allow your signal to reach our equipment. If you find that your question has already been answered, you may remove yourself from the queue by pressing star two. Again, please press star one to ask a question. We'll now take our first question from Jerome Ramel from UBS. Please go ahead.
Hi, good morning, everyone. thanks for taking my question. I think I have three questions probably. first one would be on so the mobile aspect of it. Can you tell us a little bit more about what you sort of expect to learn from Telenor in the sort of the mobile space? Like, can you maybe give us some example of how successful they've been in Bangladesh with CellBazaar to sort of monetize the mobile access which-I think it's something very difficult to do and probably somewhere you can learn a great deal from them. The second question would be on the level of investment.
Does that mean that because you've you're going to share the investment with them, so should we expect the investment to kind of, you know, go down a bit sort of next year? Does that mean it's gonna free up some capital to invest somewhere else? I'm thinking maybe about Myanmar, given that Telenor is developing in that area. The last question, like does this agreement with Telenor, do you have any sort of put or call options to buy back your share at some point? Yeah, your share at some point, or it's just really a JV as it is, like 50/50? Thank you.
Thank you for your questions. I think I'll start, I'll start with the question number two, then I'll hand it over to Terje and Trond. Your question there was on the level of investment. Our policy has been not to guide on investment spend specifically because what we've said is that it'll be higher this year than for last year. The reason we're holding this information back is because of the competitive landscape. That will be also the policy for the new SnT Classifieds. But obviously our part of the spending will go down. On the other hand, we've said that this joint venture will enable us to do more and do it faster.
I think when it comes to what Telenor will add as a partner, I think I'll leave it to you, Terje, as the head of Schibsted Classified Media.
We see the combination of user insight that Telenor has with mobile marketing is an area that they can actually contribute a lot to our classified operations. We also see in product development that it's very useful to actually both use the user insight, but also some of the product knowledge that Telenor has. As you mentioned, also on the monetization side, we can learn something, perhaps not especially from Schibsted side, but from some other operations.
Trond.
Well, I.
Final question was about the deal specifics.
Yes. No, the, I mean, we're not going to disclose of course the specifics when it comes to the JV. I would say, however, that it's a more normal type of JV, and meaning that there is no standard put-and-call mechanism as such in this. There are of course different elements into it going forward. How to run these operations and what can happen in the future. No straight put and call. I, and we're not going to disclose any further information at this point.
Okay. Thank you.
All right. We're ready for the next question.
We'll now take our next question from Mark Brawley from Deutsche Bank. Please go ahead.
Yeah, good morning. Just two questions. The first one, could you just clarify whether Telenor contractually provide the JVs with any particular services? When you're talking about sort of insight and expertise, we're just talking about sharing that at a board level in terms of direction of the group. I guess what I'm wondering is, you know, they've got a large installed base of subscribers in some of these markets, are they actually through the JV committing to marketing the JV's products to those subscribers or is that a separate commercial discussion that the JV has with Telenor going forward? That was the first one. The second one was just to come back to CellBazaar. Can you just give us any feel for the scale of that and the relevance to that, to the valuation?
I mean, it looks as if it's effectively being treated roughly a 0 value asset. Is that correct?
Terje?
To the first question, we there are of course business plans and other product development plans and other plans on how to do this together with Telenor behind this this venture. To go into the details of that is perhaps not something we should do because of the competitive landscape.
I think actually the same goes for our valuation of it.
Well, yes. What we can say is that the cash consideration that we are receiving being disclosed in the stock exchange release is that that is of course net of everything that we receive, and we're not going to disclose the value of the different assets that came to this.
Right. Okay. Just to try again on the question of the, of what Telenor are providing. Is there, are they doing anything contractually as part of this agreement, or do you now have a commercial discussion between the JV company and Telenor as a potential provider of services to the JV?
Telenor, they have a lot of knowledge and competence here. Some items have been discussed, others will be discussed now, but I don't think it's right to go through to say at this stage any status of exact relations between different companies.
Yeah. I think it's fair anyway to comment that this goes deeper than on the board level on the different companies.
Okay. Okay. Thank you.
We'll now take our next question from Rishi Maliah from Citi. Please go ahead.
Hi, good morning. Just two questions. Firstly, are you going to deconsolidate any of your assets from the P&L as a result of the changes in the Southeast Asia joint venture and the new joint venture today? Secondly, you said that you're committed to investing behind these assets to get to break even. Just within your business case, again, I know you won't want to give anything away that's commercially sensitive, but what would you say is a sort of best case and worst case on a time horizon to aim to get those assets towards break even? Thank you.
When it comes to the, I mean, the IFRS are firming up when it comes to, of course, being able to include JV both on top line and or partially consolidated. We have to, of course, take into that into consideration from 2014 onwards. Of course there are rather strict rules if you're really going to take it partial, line by line. When it comes to the break even, I mean, there is nothing new there. Of course, we have different business plans that we have discussed between the partners when we have entered into this. The business plans we're not going to disclose.
Normally, I mean, as we have always said, it's four, five years to break even in many of these countries, after we have launched. I mean, that's the situation.
Thank you.
We'll keep you. Of course there's this founder. Some might be profitable earlier and some a little bit later. That depends on the competitive situation and the emergence and how fast the market is maturing. What we'll do is that we'll keep you informed during the way how the this portfolio is developing as we have been doing with Malaysia and other countries.
Thank you.
We'll now take our next question from Martin Stenshall from Danske Bank. Please go ahead.
Yes, thank you. First, congratulations with this announcement, guys. I got basically two questions, and the first one relates to one particular, the joint venture in South America revolves Bom Negócio and Yapo. You know, I can, I can naturally understand that Bom Negócio in Brazil is a very interesting market, considering the size and also the other KPIs of Brazil. That one is basically fine. When it comes to Yapo, I can see that most KPIs actually point in a very healthy direction without too much competition from OLX. I guess my question is then why aren't you throwing in more assets into the JV in South America?
The second question is, do you got any thoughts, when it comes to what kind of reactions you could get from competition on the back of this? Thank you.
To the first question, Yapo and Bom Negócio is of course important assets, but there are other markets in South America that also is very exciting. We see this new venture as the main vehicle for investing and launching in these markets.
On your second question, I would like to say that we have, we're confident of what we're doing, and we have, been pleased with the progress we've made in these markets so far. I believe that, with the new joint venture, which will give us, more competence and also a stronger financial base, I believe will our chances to win those markets will improve, even more. We're confident that we're having a good position that now will get even better. I think it'll be hypothetical For me to go into what the competitors might think of it.
Okay. Is that fine, Martin? Or. Then we should go to the next question.
We'll now take our next question from Robin Olsen from Carnegie. Please go ahead.
Yes, thank you. Good morning. Two quick questions. It would be interesting to know who approached who. I mean, is there something in these markets where you're joining forces with Telenor that made you seek a partner like Telenor? That's one question. The other one is, it's also interesting to know how much money you've put into each of these markets when it comes to marketing spend, and especially in Malaysia and in Brazil. We can see that up against the potential price you're getting so far. Thank you.
Yeah. I think, you know, I don't think I'm going to give a clear answer to the first questions. You know, there are many big companies in the TMT sectors that know each other quite well and talk about common opportunities and challenges. we have a dialogue with several other players. I'm sure Telenor has the same. So that. So I don't think I would like to comment anything more specific on that.
When it comes to the second question, I mean, we, as you know, we don't disclose spending per market. What we can say is that, of course, this gives a really great return on what we have invested in these markets being included in this deal. We are very satisfied and very happy with the valuation as such, giving us a great return, but sorry, I'm not going to disclose exact figures.
Okay. Next question, please.
We'll now take our next question from Nicholas Dubber from JP Morgan. Please go ahead.
Good morning. Two questions. First, the proceeds are quite significant on Schibsted's scale. Are your leverage targets unchanged? Are you going to use all the proceeds, to invest in businesses? If so, is it mainly in Europe? Secondly, I didn't hear the answer for the put-and-call question on exit provisions from the JV. Is there a put-and-call mechanism in place?
When it comes to the proceeds, I mean, we have the same financial targets as we have had, of course, meaning that, when it comes to the dividend policy, when it comes to the gearing and the gearing target, as we have disclosed, net interest bearing debt to EBITDA in the area of 1%- 2%. Of course, this gives us more flexibility, reduces the risk, and gives us, of course, also, more flexibility to go forward. It's right to say that we, as we have stated before, that we may allow ourselves to be slightly overcapitalized for a certain period, although we do see also, different opportunities.
The spending going forward will certainly depend on that we see there are interesting opportunities, and when it comes to the second question, what I said on there is a more standard type of JV, and there is no straightforward put-and-call mechanism as such in this situation.
Thank you very much.
Next question, please.
Ask a question today, please press star one on your telephone keypad. Can I take our next question from Cameron Robertson from Platinum? Please go ahead.
Hi. Could you explain why you've decided to do this now? Was there a change in the market which meant that you needed some sort of help from Telenor or anything like that? In the past, you've been very positive on some of these markets, so I'm a bit surprised you've decided to do this.
Right. The reason we're joining forces with Telenor is because we think it's a great match. Because we think that they are adding a lot of expertise and competence, which is going to be important specifically in emerging markets. I think it's also creating a even stronger financial base to move forward. It's because we think it's a perfect match between two parties.
Okay, great. Thank you.
As a final reminder, that's star one to ask a question. At this time, there are no further questions in the queue.
Okay. We'll just, thank you all for, joining this conference call this morning, and, we'll just wish you a nice day. Goodbye.
That concludes today's conference call. Thank you for your participation. You may now disconnect.