Hey, welcome to the Tele2 Q2 interim report 2018 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Erik Strandin Pers, Head of Investor Relations. Please go ahead, sir.
Thank you, Kevin. Good morning everyone to our Q2 results presentation. We have, as always, our President and CEO, Allison Kirkby, and our CFO, Lars Nordmark, on today's call. You'll find the presentation on our website alongside with our quarter numbers. Just a reminder, on July 10th, we published a few restatements to our financials for previous periods following the re-audits we made ahead of the submitting the merger documents in the U.S., just in case any of the historical numbers look slightly unfamiliar. With that comment, I leave the word over to Allison.
Good morning, everyone, and welcome to our second quarter results on what is a very warm and sunny Stockholm morning, and I can only apologize for the fans in the background. As Northern Europe is obviously enjoying one of its longest and hottest spells on record, mobility is critical to liberating a more connected life, and our mission is resonating very well with customers as we saw yet another quarter of solid growth. Revenue amounted to SEK 6.5 billion, up 5% on a like-for-like basis, driven by both strong data monetization, especially in our international markets, and from higher equipment sales. We also saw solid mobile end-user service revenue growth of 5%, with very strong momentum in the Baltics, Croatia, and Kazakhstan.
On the same basis, EBITDA was up by 12%, mainly driven by the top-line growth, which flowed through to an excellent 20% increase in rolling 12-month operating cash flow, excluding the Netherlands. If you include the Netherlands, operating cash flow was up 38%. The reason we're excluding Netherlands is, as you know, it's now classified as discontinued due to the impending transaction with T-Mobile. We are now halfway through a year of major transformation for the Tele2 Group, and the agenda is running at full speed. In parallel, we continue to deliver results ahead of expectations. This is our 12th consecutive quarter and one in which every market outperformed expectations. This is providing us with the confidence to raise our full-year guidance by around 5%, as Lars will explain in more detail towards the end of the presentation.
Before getting into more details, let me highlight some key successes in the quarter. Starting with our Baltic Sea challenger markets, Sweden showed solid underlying trends despite Roam Like at Home headwinds and vibrant competition, proving the resilience of both our B2C and B2B businesses. In the Baltics, we continued to deliver excellent revenue and EBITDA growth, up by 7% and 10% respectively in local currency. As a result, our Baltic Sea challenger businesses collectively achieved a 5% increase in operating cash flow on a rolling 12-month basis, amounting to SEK 4.5 billion at an outstanding 80% cash conversion. In our investment markets, we have excellent momentum, thanks to 4G rollout, fearless commercial offerings, improved brand perception, and our customers' insatiable thirst for data.
Kazakhstan delivered another excellent quarter, with mobile end-user service revenue up 20% in local currency on the back of continued growing ARPU and continued growing customer base. As a consequence, further repayments of the shareholder loan were received during the quarter, total repayments now amount to SEK 600 million. Croatia also delivered an excellent mobile end-user service revenue growth of 13%. A core pillar of our strategy is to have the most engaging, fun, and positively fearless brand that our customers love. A proof point for this customer-centric approach is that Comviq and Tele2 Sweden were placed number 1 and number 2 in the telecom segment in ServiceScore's annual survey where Swedish consumers rate the service provided by service companies.
Another highlight in the quarter was the nomination of Tele2 Lithuania's campaign, The Flying House, at the Cannes Lions Awards, a fantastic recognition for our world-class creativity and storytelling. In Estonia, we took another step on our customer-first journey, whereby we closed our Estonian telemarketing channel and redirected resources to better serving existing loyal customers. This initiative also paves the way for a new industry code of conduct to stop pestering unsolicited telemarketing. With respect to our upcoming mergers, a number of key milestones were achieved in the quarter. Starting in the Netherlands, the transaction with T-Mobile entered as expected into phase two, and we're having constructive dialogue with the European Commission. Moving to Sweden and the merger with Com Hem, we have now submitted the merger documents to the U.S. Securities and Exchange Commission and to Sweden's Financial Supervisory Authority.
We are also in constructive dialogue with the EU on both deals. We expect to formally file our notification for the Com Hem transaction after the summer, both deals are still expected to close in the fourth quarter of this year. Let's move into the markets in a bit more detail, first, our Baltic Sea challenger businesses. In Sweden, following an eventful first half of the year, with new price plans launched in the price-conscious segment and increased competitive activity, our business is remaining resilient with both consumer and B2B segments driving after adjustment for Roam Like at Home, an underlying growth of 1% in mobile end-user service revenue. EBITDA was flat with difficult cost control compensating for a Roam Like at Home impact of SEK 77 million and a continued decline in our legacy fixed businesses.
Our rolling 12-month cash conversion continues to be outstanding and sustained above 80% with an operating cash flow for the same period of SEK 3.4 billion. Despite the strong competition, consumer mobile end-user service revenue showed a positive underlying trend up 1%, driven by continued strong growth in Comviq postpaid and also in Tele2 small screen, which had positive ARPU development on the back of rising data consumption. This was partly offset by continued declines in the prepaid segment. Periods of increased activity in the Swedish market, as we've seen in the last few months, have occurred before. As we have done before, we have leveraged our strong dual brand position and our strong customer value proposition to successfully navigate the competitive environment.
Comviq's new price list, launched in March, is working well, and also Tele2 has taken successful actions, including a number of targeted campaigns towards high data-consuming families, kids, and international travelers in particular. Far, these new campaigns are working, and in a metaphorically hot market, we ended the quarter in better shape than at the beginning of the quarter. Postpaid ARPU was up 2% in the quarter, mainly driven by Tele2, as customers continue to embrace the benefits of the connected life and in the process, consume more and more data with volumes per postpaid subscription increasing by around 50% over the past 12 months. Customer satisfaction, as you know, is our overarching mission to grow sustainable value in our business.
Our numerous new commercial propositions and increased service standards continue to improve our satisfaction, with Comviq Net Promoter Score reaching another record high during the quarter, and Tele2 despite the pressure from price-driven brands remaining stable. As in previous quarters, the B2B market continued to be price competitive. Revenue growth was as expected flat as high equipment sales and growth in mobile compensate for the continued price competition, especially in the large enterprise fixed segment. Service revenue was down 5%, with headwinds from Roam Like at Home and price erosion of the legacy fixed business was partly offset by underlying growth in mobile, which adjusting for Roam Like at Home, was up 1% as we increase our customer base and home ARPU is basically stable. Our B2B sales organization is building in effectiveness and confidence every month that passes by.
We again had a very successful quarter when it comes to winning new and retaining existing customers. A few new names in our customer portfolio include municipalities of Uppsala and Gothenburg, Ekerö, Getinge, and the Swedish Sports Confederation. We expect this growth in our customer base to enable continued and gradual recovery of revenue trends in the coming quarters despite the pressure on fixed-line services. We're therefore targeting a stabilization of service revenues before the end of the year. Moving to the Baltics, it was another strong quarter for data monetization. Mobile end-user service revenue growth was 7% in local currency, driven by excellent like-for-like growth in Lithuania and Latvia by 12% and 10% respectively. As expected, this was partly offset by a decline in Estonia, where we suffer from aggressive price competition in previous quarters and the loss of a mobile broadband MVNO arrangement.
For the region as a whole, EBITDA increased by 10%, driven by the top-line growth and continued excellent cost control, filtering through to a strong increase in cash flow, with rolling 12-month operating cash flow up by 12% and an excellent cash conversion similar to our Swedish business of almost 80%. In the quarter, we saw again a strong ARPU development of 6% as the transition from prepaid to postpaid subscriptions continue and customers trade up to larger data buckets. As in previous quarters, smartphone penetration continues to increase, which obviously supports the uptake of larger data buckets, but there's still room for even more growth there. Our Baltic teams are always fearlessly creative when it comes to advertising and PR, and so we were immensely proud of the recognition our successful The Flying House campaign received in Cannes as we promoted our fantastic 4G coverage in Lithuania.
Our Latvian network also received positive recognition in the quarter as it was named by the regulator as offering the highest internet speed in the country. In Estonia, our customer-first initiative to end unsolicited telemarketing led the way towards a new code of conduct in the industry with the aim of improving customer satisfaction and trust at the same time as redirecting investment towards our more loyal and our more valuable customer base. Let's now move on to our investment markets. In Kazakhstan, despite increased competitive pressure, mobile end-user service revenue was up by 20% in local currency, driven by strong monetization of increasingly larger data buckets as well as continued growth of the customer base. EBITDA was up by nearly 80% in local currency, and we continue to improve our margins, now at 34%, thanks to the benefits of higher ARPUs, increased scale, and operational efficiencies.
As a result of this excellent momentum, Tele2 Kazakhstan's ability to generate cash continued to improve, and it's now at 59% cash conversion on a rolling 12-month basis. Further repayments against the shareholder loan of 15 billion KZT, which is approximately SEK 685 million, were made during the quarter. Accumulated repayments now amount to almost SEK 600 million, and the outstanding balance of our shareholder loan as of the end of June was SEK 2.6 billion. Looking at the Kazakh results in a bit more detail, our customer base grew by 4% year-on-year and ARPU was up by 14%, driven by our 4G advantage, improved network quality perception, and our dual brand strategy with new tariffs on both brands. As I said, despite the increased competition, our focus on improving customer satisfaction continues to drive positive net intake for both the Tele2 and Kcell brands.
As more and more Kazakh citizens discover the benefits of the connected life through our market-leading 4G coverage and our great value for money propositions, we're happy to see Net Promoter Scores continuing to improve for both brands and paving the way for further growth as we look forward. Before I hand over to Lars, we've had a lot of questions recently following the press release from the Kazakh antitrust authorities just last week regarding their decision to give a regulatory clearance for Kazakhtelecom to acquire 75% of the voting rights in Kcell. Just to be clear, and as far as we're aware, this transaction is still speculative in nature. To be even clearer, our shareholder agreement has a non-compete clause that is applicable in the case this transaction were to proceed, which means that our put option would be triggered.
With that, I'm going to hand over to Lars, who will go through the financials.
Thank you, Allison. I'll start by making a few comments on the P&L. We saw a 6% quarter growth of revenues, driven by mobile end-user service revenue and by stronger equipment sales, which more than offset the decline in fixed revenue. Reported revenues were held by an FX tailwind of approximately 1% due to the weak SEK compared to the EUR. At the adjusted EBITDA level, the reported growth was 13%, again held by an FX tailwind of around 1%. Underlying growth is mainly related to a strong contribution from Kazakhstan, with Croatia and the Baltic also producing significantly better figures on the back of strong growth in mobile end-user service revenue. The latter was partly offset by the drag from fixed services and the negative effect from Roam Like at Home.
Moving down the P&L, we see the items affecting comparability were a bit higher this quarter, which is mainly explained by more costs related to the Com Hem merger. On the line other financial items, we report the changes in the valuation of our earnout obligation related to Telia Company every quarter. This quarter's value has increased again to around SEK 560 million due to the good performance of our Kazakh business. As a result, this caused a SEK 54 million non-cash cost in our P&L as the value of our liability increased. As for the remaining line items, we saw no major change compared to last year, meaning that a large part of the increase in operating profit is still going through to net profit. Moving on to the next slide, you can see the changes in the cash flow compared to the same quarter last year.
Do note that the cash flow statement is on a total operations basis. Here, we'll make some short comments. Jumping to the middle of the table, we can see that taxes paid were a bit elevated compared to last year due to some timing differences. As for the changes in working capital, we saw some effects from timing differences, as well as high inventory from the increased equipment sales throughout the group, as well as both selling of more phones, as well as an increase in demand for more expensive phones. Looking at paid CapEx, the main difference to last year was lower investments in Kazakhstan and the Netherlands. Again, remember that one difference to the reported balance sheet CapEx is that we have Netherlands included in this cash flow table. The last line item is other cash items, which mainly includes items affecting comparability.
These are, as I mentioned on the last slide, a bit higher due to more costs related to the Com Hem merger. Let's turn to slide 16, one of my favorite slides, showing our operating cash flow defined as adjusted EBITDA less CapEx on a rolling 12-month basis. We have seen and are continuing to see a solid cash flow generation from our Baltic Sea challenger businesses and our smaller business units, which together threw off well over SEK 4 billion over the past 12 months. The remaining investment markets, Kazakhstan and Croatia, continue to go from strength to strength with an operating cash flow contribution exceeding half a billion SEK over the past 12 months. All in all, continuing operations are now at an operating cash flow contribution of above SEK 4.7 billion, with the Netherlands still consuming cash, although at a lower pace than before.
Moving on to the balance sheet on slide 17. During the quarter, we paid out a dividend of SEK 4 per share, amounting to SEK 2 billion in total, thus increasing our economic net debt to SEK 11.4 billion. This corresponds to an economic net debt to adjusted EBITDA of 1.7, which reflects the solidness of our balance sheet. Over the past 12 months, we have generated free cash flow of SEK 2.1 billion, plus a cash contribution from the sale of Austria. Against this, we paid dividends of SEK 2 billion, leaving us with a stronger balance sheet than 12 months ago. Let's turn to the next page, financial guidance. I'm excited to say that on the back of strong financial delivery in some of our markets, we are upping the full-year adjusted EBITDA guidance to between SEK 6.8 billion and SEK 7.1 billion.
Guidance for mobile end-user service revenue and CapEx remain unchanged at mid-single growth and between SEK 2.1 billion and SEK 2.4 billion respectively. With that, I'd like to hand over to Allison for an update on the merger and concluding remarks.
Thank you, Lars. Let me give you a brief update on the timeline for the merger with Com Hem. As it was mentioned earlier in the call, we have now completed an extensive re-audit of our financial statements for the year 2015, 2016, and 2017. Following that, we submitted merger documents to both the SEC and to Sweden's Financial Supervisory Authority. Additionally, the regulatory process has moved forward, Telenor can announce pro-competitive measures that it committed to at the time of the merger agreement. Looking forward, we plan to make the regulatory filing with the European Commission once these measures are effective. Following review and approval of merger documents in the U.S. and Sweden, we will make those public and announce the dates for the extraordinary general meetings, We're therefore on plan and expect to close the transaction during the fourth quarter.
Integration planning is also moving forward according to plan. We're doing as much as we're allowed to from a legal point of view and with great collaboration in the various work streams. As a result, we are now confident that the OpEx and CapEx synergies from the merger will be higher than the previously communicated annual target of SEK 450 million. To conclude, let me briefly end on our priorities. First and foremost, it all starts with our purpose to fearlessly liberate people to live a more connected life, enabled by the four key strategic pillars of positively fearless brand, connecting with our customers' love, a digital-first customer experience, and a winning cost structure. By continuing to leverage these strategies, we will return Sweden to growth despite the headwinds in B2B and home under home.
We will fuel instituting momentum, likely continue to see in the Baltics, Croatia, and Kazakhstan. Alongside that, and in parallel, we prepare to close both mergers in the Netherlands and in Sweden. As you can see, we will not lose focus on driving excellence in financial discipline and operational execution. Our upgraded guidance is a tangible result of all of our strategies, but most importantly, the confidence that we have that our focus on monetization of connectivity will deliver long-term value, first and foremost to our customers, but ultimately to our shareholders and our employees. With respect to our employees, I am hugely proud that in parallel with running our transformation agenda at full speed, we continue to deliver quarter after quarter of solid progress. A huge thank you to all of them for their continued commitment to fearlessly liberating people to live a more connected life.
Now, Lars and I will be very happy to take your questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. A voice prompt on the phone line will indicate when your line is open. Again, press star one to ask a question. We'll pause briefly for a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Mr. Stefan Gauffin of DNB. Please go ahead, sir. Your line is open.
Yes, hello. It's a really solid EBITDA development for the mobile operation in Sweden. At the same time, there's, at least compared to our forecast, some weakness in other operations in Sweden. Can you explain this development? What's behind this? Thank you.
Sure, Stefan. Lars here. It's a combination of a few factors, I would say. One is on the top line. We see a reduction in wholesale carrier revenue and an increase in equipment revenue, and their margin on the wholesale carrier is higher than it is on equipment. In addition to that, we also had slightly different marketing activity this year versus last year. If you remember, the mobile segment was quite active last year with the Tele2 campaign on power tube. That was quite high. That's the second contributing factor. The third one is that we obviously have allocation between the mobile and the fixed segment, so that adds a little bit of it to it as well. I think net-net, we'd like to see this margin obviously improve multiple times, but it's only Q2. That's our ambition.
It's mainly a mix effect in the quarter.
Okay. Thank you.
Thank you, Stefan.
We will now take our next question from Lena Österberg of Carnegie. Please go ahead, ma'am.
Yes, good morning. Congratulations on the very good numbers. I was wondering a little bit about the Baltics. You mentioned already before this quarter that you raised prices last year around Q2, that you were going to have a comp and maybe revenue growth would come down. Now we've seen another very strong quarter of further revenue growth. Are you still concerned that the price hits will come down in H2, or are you now more confident that you can keep growth rates up at the levels we've seen in the past quarters?
Thank you, Lena. Yes, regarding the Baltics, during May, June last year, we took pricing, probably more pricing in Latvia than the other markets. Definitely that, the pricing benefit that we've had through until June of this year will diminish in the second half. That being said, we are making great progress, particularly in Lithuania, outside of steady price increases through trading up to larger data buckets. Making great share gains in the fixed and mobile broadband segments, where we offer faster fixed wireless alternatives in parts of the countryside where fixed lines are very slow. We're making great progress in the B2B segment across the region. We do expect the growth rate to soften in the second half, but it's not all been driven by pricing in the first half of the year.
Whereas we're at the double-digit level at the moment, that will get closer to the mid-single digit over time.
Can I just maybe also ask you if you can remind us if your put call in Kazakhstan will be triggered early, what is the valuation mechanism to set the value for your stake in Kazakhtelecom?
As I said, as far as we're aware, this is all speculation around a resale deal with Kazakhtelecom. Within our shareholder agreement, if it were to proceed, we would be able to reserve the put option earlier than March, if it was to proceed earlier than March. In terms of the valuation, we currently now have an outstanding shareholder loan worth SEK 2.6 billion. We've just revalued our 18% that is outstanding as an earn-out to our Canadian partner, and that's now just under the SEK 600 million level for an 18% stake. A 31% stake, which is our fully diluted level, is obviously getting close to SEK 1 billion over and above the SEK 2.6 billion shareholder loan.
It's based on the same valuation you actually achieve value there. There is no other way to value it?
Well, no. We've always valued the business under a DCF valuation metric since we went into the JV, and how you look at it going forward. Of course, at the point of serving the put option there will likely be a negotiation around that valuation.
Okay. Thank you.
Thank you, Lena.
The next question comes from Mr. Terence Tsui of Morgan Stanley. Your line is open. Please go ahead, sir.
Yeah, thank you. Good morning, everybody. I was just wondering if you could give us a few more comments about the competitive dynamics that you're seeing in the Swedish consumer mobile market. Obviously, there's been a lot of focus about the low-end competition. I was just wondering if you can give us a bit more forward-looking comments about what you've seen or what you expect to see around the summer campaigns. It seems that everything is doing quite well from a Tele2 execution perspective. I'm just wondering when you expect to reach perhaps the low single-digit mobile service revenue growth that you've talked about in Sweden. Secondly, also just speaking of Sweden, has there been any impact from a competitive push by your competitors on converged products in the quarter?
I think Com Hem mentioned that Telenor and Telia are making greater marketing efforts on that front. Just wondering if you've seen any impacts there. Thank you.
Thank you, Terence. As I said, the competitive dynamics in the Swedish market is like the weather. It's hot, but it has been for quite some time. Certainly, we are very happy that the interventions that we have put in place on both Comviq and Tele2 seem to be resonating well with our customers so far. We haven't seen any change in the dynamics. They remain hot. Our campaigns to really push unlimited into wider groups, into kids, offering a broader range of international roaming, is really helping Tele2 move back towards stability. It was Tele2 at their lower-end price buckets that was suffering, because they are probably more price-focused customers than our higher-end customers. So far, so good, and obviously, we watch the market every day. In terms of looking forward, we obviously aim to get Sweden back to low single digits.
We're still in a transitionary phase with our B2B business. As I mentioned in the call, our team are building more confidence with the successful large enterprise customers that we continue to win. FMC is back to growth as well. We are planning for sequential and improved progress in the B2B business over the coming months, too. With regard to FMC, we are seeing no change in the churn pool for mobile customers as a result of FMC. We're seeing no increased churn towards Telia and Telenor with respect to FMC. It is an increasing reason for why a Telia or a Telenor customer churns, but it's not increasing their churn away from either Tele2 or Comviq.
That's great. Thank you.
Our next question comes from Julio Recenas of Royal Bank of Canada. Your line is open. Please go ahead.
Yes, good morning. Thank you for taking my question. Actually, the EBITDA upgrade has been driven by better performance in the international operation like Kazakhstan, where the performance has been driven by mobile data or tariffs upgrade. Basically items that are related to top-line growth, hence why the company didn't upgrade the revenue guidance if the company expected further pressure in other markets, like for example, Sweden. Thank you.
Hi, Julio. Thank you for the question. You're right, the EBITDA upgrade is very much driven by significant outperformance across the international footprint in the first half of the year. The top-line growth, mid-single digits, covers a wide band. Obviously, we think the mid-single digit target is the right target to have, considering, as I mentioned earlier, we'll be comping price increases in the Baltic markets in particular, once we move into the second half of the year. I think mid-single digit is the right parameter to give, but it gives a wide band.
Yes. Thank you.
Our next question comes from Mr. Sunil Patel of the Bank of America. Please go ahead. Your line is open.
Yeah. Thank you for taking my question. I just had one, and it was on Sweden B2B. You've clearly started to see sort of improvement in service revenue trends. I think in -8% last quarter and -5% this quarter. I just want to know the outlook for the second half and really into 2019. Is this a business that we should think about as actually coming into growth in the second half of the year? Or will it take longer than that, and we should be patient into 2019? Thank you.
Right, Sunil. No, you're right. Sequentially definite improvement. We expect that sequential improvement to continue in the coming months. That being said, we still have a very price-competitive market, particularly in the fixed legacy segment. We expect to move into stabilization during the second half and get back into growth in 2019.
Thank you.
Very happy with how the teams are really resonating with our challenge to our converged proposition for the large enterprise segment. It'll be great once we have all that new business actually in our revenues.
Yeah, that's great. Thanks.
Thanks, Sunil.
Our next question comes from Usman Ghazi of Berenberg. Your line is open. Please go ahead.
Hello. Thank you for the question. I just had a question on Sweden again. If you look at the consumer mobile service revenues, excluding the roaming impact, I think the growth was around 3% in Q1. This is also excluding the one-off kind of reclassification in Q1. This quarter, that's down to 1%. Are you expecting consumer mobile service revenues to kind of recover ex roaming drag in the second half? Is there going to be continued moderation on consumer with slightly improving trends on the business side? Thank you.
Right. Well, in Q2 last year, we had a very strong prepaid campaign. That's why you saw some slippage from Q1 into Q2. If you look at our underlying postpaid momentum, it's very consistent quarter on quarter. We do expect recovery as we move into the second half of the year because we don't have the Roam Like at Home drag, and we don't have that same strong prepaid quarter that we had in Q2 last year.
Great. Thank you very much.
Thank you.
Our next question comes from Johanna Ahlqvist of SEB. Your line is open. Please go ahead.
Thank you very much. We've been discussing Sweden a lot. Just a sort of minor question maybe on Sweden on the Tele2 brand. Can you comment anything? Is the intake positive or negative on the Tele2 brand isolated, where you sort of had some impact from recent price wars in the Swedish market, if you express it like that? Then second question related to the Com Hem merger. You state that you feel confident synergies will be exceeded. I'm just wondering what type of synergies are you seeing more of? Is it on the cost side, revenue side? If you can give any clarity on that, it would be helpful. Thank you.
All right, Johanna. Tele2 brand intake was negative in the quarter, but the negativity reduced during the course of the quarter as we put new campaigns into play. It was very much focused at the smaller bucket end of our Tele2 business. Hence, why ARPUs on the Tele2 brand actually grew year-over-year in the quarter. Despite negative intake, revenues actually went up. In terms of the Com Hem merger, yes, we have got great collaboration across all of the work streams. We're seeing an over delivery kind of everywhere, whether it be customer service or SG&A or in marketing as we get clearer on how we want to contextualize new propositions in the future. It's basically across the board. Obviously, once Anders takes control of the company post-closing, I'm sure he'll be very happy to give you more details.
Thank you.
Our next question comes from Mr. Nick Lyall of Société Générale. Please go ahead. Your line is open.
Yeah, morning. It's Nick at Soc Gen. Could I just ask a couple, please, Allison? On Swedish costs, firstly, can you just give us a quick update on where you are on Challenger and the TDC synergies, please? I'm assuming from your comments, it doesn't sound as if you're saying marketing was low in the quarter, it was more that comp was high. There's no suggestion that marketing has to rise, for example, for second half versus this quarter. Could you just clarify that, please? Secondly, on the Dutch business, the subs seem pretty weak for the quarter. Is it sluggish? Is it tough competition? What's going on in the Dutch business at the moment, please? Thank you.
Okay. Thanks, Nick. We're kind of moving towards the end of the Challenger benefits. There was some benefit in the quarter, but we'll annualize most of those during Q3, really. There is still, obviously, some TDC synergies coming through. Again, they will peter out as well. The big opportunity coming forward is the Com Hem synergies and the restructuring that we can do as a company as we become a much more seamless Baltics operation going forward. In terms of marketing, yes, Lars mentioned that Q2 last year had the launch of the School of Power. The second half of the year always has more campaigns around new handsets. Obviously, when we close the transaction, we'll be launching some new propositions into the market as well. We're not expecting any major change in marketing spend outside of when we close the transaction with Com Hem.
I think we're slightly, Nick, we're slightly higher than SEK 150 million year-to-date the first half year on TDC synergies. Like we said in Q1, we're targeting now higher synergies than the SEK 300 that we communicated at the inception of the deal.
Right.
In terms of the Netherlands, yes, the duopoly is continuing to shrink the available churn pool for the mobile-only brands. They are pricing their fixed lines and using that to defend their mobile businesses and getting back into mobile. The MVNOs have been pretty aggressive since the beginning of this year as well. Yes, it's a tough market.
That's great. Thank you.
Thank you.
Our next question.
Hopefully answering your other question.
Our next question comes from Ulrich Rathe of Jefferies. Please go ahead, sir. Your line is open.
Yeah, thanks very much. I have two sort of clarifications, really. The first one is on Sunil's question. I think you sort of highlighted the B2B trends improved. I think last quarter you actually did say that the underlying B2B trend, excluding some write-offs, was actually minus 5% as well. Now, in answer to the question, you sort of suggest that yes, B2B is getting better. On another line, it looks very much as though it's the same trend in the second quarter compared to the first quarter. I'm just wondering, what were you referring to in terms of things getting better in B2B at the moment? The second question I have is on the operator revenues in Sweden. That seems to have actually gone a lot better this quarter than last quarter and the quarter before.
I'm just wondering, is that roaming in or what's happening on the operator revenue line? I know it's a small line, but still sort of big enough to be relevant. Thank you.
On the B2B trend, you're right. If you take out the one-offs, the underlying was 5%. What is getting better is the mobile revenues are getting better. We are continuing to win significant new business and retain existing customers as well. The mobile business is substantially much better. In terms of operator revenues?
It's related to visitors, which is coming through more of the Q2 .
Yeah.
Sorry, I didn't hear that. What is that?
Visitor revenues. It is mainly related to visitor revenues coming through Q2.
Okay. Thank you very much. Thank you.
Our next question comes from Mr. Henrik Herbst of Credit Suisse. Your line is open. Please go ahead.
Thanks very much. I have a couple of questions on Sweden. Firstly, in terms of maybe give an update on where you are on data usage and data usage growth year-over-year. Also maybe if you can, I think you said low teens uptake on the unlimited plans. Is that changing as data usage sort of goes up and more and more customers are on bundles closer to the unlimited plans? Then secondly, I wanted to ask about CapEx. You have been talking about CapEx going up in Swedish business for quite some time. You are still sort of mid-single digits. Have you just found a very good way of running it quite efficiently, or should we still expect Swedish CapEx to increase? Thanks very much.
Thank you. Lars here, I think on the CapEx, we are saying that we will be indeed around 55%, maybe lower at the moment, but we're still sticking to the fact that 55% is probably the number for the Swedish business. We're not holding back on anything. If we see the thresholds being reached in terms of kind of sales, we obviously have to put capacity. We're not holding back on investments that drive revenue growth. On data usage in Sweden, and this is consumer mobile postpaid, we're at seven gig on average per customer per month, and that's up from slightly south of five a year ago.
In terms of unlimited, the uptake remains in the low to mid-teens.
All right. Thanks very much.
Thanks, Henry.
Our next question comes from Richard Jones of Towerhouse. Your line is open. Please go ahead, sir.
Yes. Hi, Allison. Actually, this is Paolo on behalf of Richard. Couple of questions, please. The first one is on the Com Hem merger. Initially, in the early stages of the announcement, there was a bit of a mixed reaction from shareholders on both camps. My perception is that actually now the deal is better understood both from an industrial and a financial standpoint. Maybe if you could characterize how the investor landscape is evolving in merit of the support of the deal. That's the first question. The second question has more to do with your reference to data growth and this medium-term question on what you think the structural impact of this data growth could be, particularly with respect to some of your competitors in the MVNO space and competitors like Three. Thank you very much.
Thank you, Paolo. Yes, there was a mixed reaction in the beginning of when we announced the deal. We had two very different shareholder bases. Tele2 was a very Swedish shareholder base who had become accustomed to us being very focused on mobile and going on a journey of decreasing our footprint and returning proceeds from asset sales to shareholders. Then we obviously had the Com Hem shareholder base that were used to a very domestic-only story, a very strong shareholder remuneration story as well, but based on returning more than 100% of FCF cash flow to shareholders year after year. There was obviously a surprise around some of the synergies as well. Both Anders and I spent significant time with different shareholder bases, and the story has become more and more understood. One of the big pieces of education that was required was here in Sweden.
Swedish investors had not bought into the Com Hem story. We didn't have any Swedish shareholders. A lot of them had not really understood what a great job the Com Hem management team had done in improving customer satisfaction of Com Hem, increasingly turning it into a connectivity company that was less reliant on the TV piece and was investing in higher broadband speeds and improved technology to deliver both linear television, cable television, and OTT television. With more understanding and with the new shareholder remuneration policy that we announced alongside our first quarter results, we have felt a very positive reaction from both sets of shareholders now. The industrial logic clearly makes sense for Tele2 and Com Hem together.
We are increasingly confident that the synergies will be more from an OpEx point of view. We're still confident on the revenue synergies as well going forward. I would say at this point in time, both sets of investors are looking forward to the combination as our employees are as we really start to create a new converged connectivity challenger for the Swedish market. In terms of data growth and the structural impact, Tele2 is structurally advantaged in that it shares its 2G and 4G network with Telenor. We will go into spectrum auctions, and we'll go into new technology investments such as 5G in partnership with Telenor, which gives us a structural advantage versus the others. We aim as a company to have a winning cost structure more efficient than others.
What 5G brings is the opportunity to make the network even more efficient and support continued data growth. It also gives you the opportunity to slice and dice the network services so you can monetize different quality of service to different customer bases dependent on what they want. Certainly with 5G and its lower latency and higher speeds, that will bring us new commercial propositions for the future. Particularly now that we're in partnership with Com Hem, we'll be able to work that around video solutions and perhaps other solutions as well. We have a structural advantage. In terms of competition, I think in general, 5G and fiber rollout, and in general what's happening in the industry, will drive the next round of consolidation at some point. Increasingly, you need scale to be able to offer data at a lower cost per gig.
We're in a strong position. I think ultimately there will be further consolidation, like we are proposing in the Dutch market at this point of time to properly defend against the FMC operators there. I hope that answered your question, Paolo.
Thank you, Allison.
Our next question comes from Fredrik Lithell of Danske Bank. Your line is open. Please go ahead.
Thank you. My questions have been answered. Thank you.
Thank you, Fredrik. Have a good summer.
Thank you.
Operator, any further questions?
There's one remaining. I'm just going to do a prompt. Once again, press star one to ask a question. We'll now take our next question from Mr. Usman Ghazi of Berenberg. Again, please go ahead. Your line is open.
Thank you for the follow-up. I just wanted to ask about the investigation into mobile price fixing, et cetera, that made the news early last year. Is there any update on that? Has the investigation just been closed, or is it ongoing, et cetera? Thank you.
We have no updates. They came, they went. We've not heard anything else. We're not aware that the investigation has closed. It's just there's been no communication.