Earnings Call: Q2 2017

Jul 19, 2017

Welcome everyone to Tele2's Second Quarter 2017 Results Call. I have with me here Lars Nordmark, our CFO and Alison Kurpi, our CEO. As usual, we'll do a management presentation followed by Q and A. And if you haven't got the presentation already, it's available at tele2.com. I start by handing over the word to Alison. Alison, please go ahead. Good morning, everyone, and welcome to our Q2 report. So let's get straight into the financials. Monetization of connectivity remains our key priority. And as you saw, we saw strong growth in the 2nd quarter. On a reported basis, mobile end user service revenue was up 18%. On a like for like basis, we were up 12%, which is the highest mobile end user service revenue growth we've had in many years and is driven by strong growth across the footprint with particularly double digit growth in Netherlands, the Baltics and Kazakhstan. Net sales amounted to around DKK 8,000,000,000, which is up 3% mobile end user service revenue growth is offset by lower fixed revenues and lower equipment sales in certain markets. But EBITDA on a reported basis was up 50% and 39% on a like for like basis with all of our key markets contributing. As a result of this momentum that you saw in the Q1 and again in our Q2, we are pleased to announce that we'll upgrade our guidance, our EBITDA guidance for this year, and Lars will discuss that in a bit more detail towards the end of the presentation. So just as a reminder, our results are always underpinned by our strategy and our purpose with enthusiasm for connectivity at the heart of everything we do to ensure we deliver on our short, our medium and our long term value creating ambitions. With that in mind, in the quarter, we saw the following highlights. First, on our Baltic Sea Challenger businesses, we continue to grow and deliver strong results with mobile end user service revenue up 3% in Sweden and in the Baltics up 18% or 13% in local currency. We also delivered double digit EBITDA growth in both Sweden and the Baltics. And even more importantly, considering the importance of this region to our group, we saw a 20% increase in operating cash flow in the last 12 months as our mobility for our strategy continues to serve us well with outstanding cash conversion. In our investment markets, we saw an acceleration of mobile end user service revenue. In the Netherlands, we grew 51% or 45 percent in local currency, helped by the launch of our new propositions and our new brand campaign on May 17. And we now have 91% of data usage and 50% of voice usage on our own network. In Kazakhstan, we also delivered another strong increase in mobile end user service revenue, up 21% on a like for like basis with just under 240,000 net adds in the quarter and continued positive ASPU development. These strong results were fueled by a strengthening of almost all of our brands having launched new commercial propositions in all our key markets in the quarter. In Sweden, the Power 2 campaign is surpassing our expectations for cut through, for brand recognition and in driving unlimited uptake. And in the Netherlands, we are seeing very early results from our new commercial offerings, including net intake of 51,000 for the quarter with already 70,000 unlimited customers in only 6 weeks. Our Challenger cost structure was strengthened in the quarter from continued TDC synergy realization, mainly from having migrated all the MVNO customers to our own network. And the integration of Altel in Kazakhstan also continues to progress well and driving the EBITDA margin further to over 22% in the quarter. And we had another strong quarter for the Challenger program, which is well on track for the DKK 1,000,000,000 annual benefits target in 2018 with moving on to our markets in a bit more detail. And first, our Baltic Sea Challenger businesses. In Sweden, we saw revenue slightly increase with mobile end user service revenue growth offset by lower fixed revenues. The mobile end user service revenue growth, which increased year on year by 3%, was driven by strong growth in the consumer segment, but partly offset by declines in the business segment. The growth in consumer is primarily driven by migration from prepaid to postpaid subscriptions and our customers opting for larger data buckets to support increased data growth. This has been a great period of growth for our Swedish business. But let's not forget, as we move into the summer season, we will no longer have the European roaming revenues that we had in prior years. That being said, our Swedish team have built a highly resilient business as this quarter yet again proves, with EBITDA growing well ahead of the top line at plus 12% due to Challenger Program and TDC synergy benefits as well as the higher service revenues. Looking at the Swedish consumer mobile business, trends were again strong in the quarter. We're seeing positive early indicators that the Tele2 Power2 campaign is increasing recognition for the Tele2 brand, especially when it comes to uptake of unlimited. Additionally, we recorded the highest Q2 growth intake of Comvri postpaid in its history, driving growth in mobile revenue up 8% or 5% adjusting for a nonrecurring item in Q2 last year. Our value champion strategy continues to attract higher value customers to larger data buckets with twothree of sales in both Tele2 and Convey now on buckets of more than 3 gig. And our increased network coverage and our focus on satisfying our customers are keeping customer satisfaction for both Conveq and Tele2 stable at very high levels. Looking into B2B, we have now returned the SME business to growth, but our Large Enterprise business was down in the quarter, admittedly compared to a seasonally high Q2 last year. The large enterprise segment in Sweden is experiencing somewhat increased price competition, and we also lost appeal some large contracts that we had won in prior quarters and that were expected to compensate for churning customers. As the nature of this business is long sales cycles with large contracts going in and out of the revenue base, it will probably take a few quarters to revert this trend. However, we are ahead of expectations on the TDC integration plan and therefore, ahead of the synergy plan with an important driver being the now completed migration of around 200,000 TDC mobile customers onto Tel-two's network. And we remain excited about the ability of the Tel-two and TDC combined platform to create value in the large enterprise market over time and delighted that towards the end of the quarter, we signed several large contracts, including 3 municipalities in the Skane region, WFP Sweden and Post North Sweden. Moving to the Baltics. Commercialization and monetization of our 4 gs investments just continue to drive quite a stellar top and bottom line development. Net sales growth of 21% was very strong, thanks to an ever increasing demand for data and premium handsets. Mobile end user service revenue growth was up 18% or 30% in local currency, largely driven by higher data consumption and growth in mobile broadband. And EBITDA increased 23% or 18% in local currency, driven by the healthy revenue growth and benefits from the Challenger program as we continue to consolidate certain tasks and skills into our shared operation organization. Looking at the Baltics in a bit more detail, we saw strong ASPU development of 13% as the transition from prepaid to postpaid subscriptions continued, smartphone penetration increased and customers traded up to larger data buckets, very much encouraged by our new propositions, which we launched to support Roam Like Home. Additionally, the focused investment into mobile broadband has fueled a revenue increase of more than 50%, albeit from a low base, but is now establishing Tele2 as the liberator of connectivity both in the home and on the go in those parts of the Baltics where home broadband speeds lag that of the speed in our excellent 4 gs networks. In general, we are very proud of and excited about the continued growth and opportunities in our Baltic business units, Which now leads me into our investment markets. And first, our Dutch operation is now aggressively accelerating its growth. Net sales were up 3% due to strong mobile momentum, offset by fixed broadband and telephony declines and lower handset sales following the VFT regulation earlier this year. More importantly, mobile end user service revenue was up 51% or 45% in local currency as the mobile customer base increased by more than 19% and ASPU grew by more than 20 percent. Our mobile network economics continue to improve rapidly, providing a strong foundation for continued price leadership. This and the mobile end user service revenue growth contributed to EBITDA being slightly positive in the quarter despite a DKK 64,000,000 provision related to a legal dispute regarding historical copper line rental fees, which we plan to challenge and to appeal. On May 17, we successfully launched our new commercial propositions, taking advantage of our unique 4 gs only network, which has now reached a par with its competitors, only 18 months since its commercial launch. We saw increasing net intake growth to 51,000 and have quickly doubled our market share of new SIM only subscribers because prior to that launch, we were only taking around 8% of the SIM only market. As I mentioned before, we're also delighted to see the quick uptake of the new unlimited proposition with nearly 70,000 customers taking it in the 1st 6 weeks from a combination of new intake and upgrading our existing customers. Consideration has continued to progress on the back of the new campaign, and we won further marketing awards in the quarter, including an AMA Award for Media Advertiser of the Year and Esprit Award for one of the most impactful and creative campaigns and a spin award for the best digital concept. Data on loading reached 91% by the end of the quarter, and we now have almost 500,000 active VoLTE users, resulting in 50% of the voice traffic now on our own network. On the network side, we continue to expand our excellent LTE Advanced 4 gs network, which is now at 99.6% outdoor population coverage and 91.7 percent indoor population coverage. As earlier communicated, we expect the rollout to be completed by the middle of next year. So looking forward, we will continue to invest in growing our subscriber base in the coming quarters. And we do, however, expect a slightly softer growth due to the impact of Roam Like Home in the immediate Q3 quarter. However, we remain very excited about what we can achieve in the Dutch market now that data and voice is increasingly on our own network and with our unique challenger brand that is obviously resonating well with Dutch consumers. We have a fairly empty network and the opportunity to now push them only and an ASPU that is well below the dollars in the market, but increasingly higher than what we have in our base. So we continue to believe that our disciplined investment strategy will deliver as we further establish ourselves as the preeminent challenger in the Dutch market. And then moving on to Kazakhstan, our other investment market, where net sales were up 35% year on year, and we continued our strong momentum in mobile end user service revenue growing by 39% or 21% in local currency. This momentum was built as a result of strong customer growth reaching 6 700,000 customers and increasingly larger data buckets. EBITDA more than tripled year on year as we reap the benefits of higher ASPU, improved scale and from JV integration synergies. So now you can see that our JV is delivering on what we promised, enabling a stronger and more sustainable platform for growth and value creation to build from in the future. Looking at the CASBAC results in a bit more detail, our customer base grew by 5% year on year to reach more than 6,700,000 customers and ASPU was up 16% as we focus on selling higher ARPU at higher margin propositions, while staying true to our price leadership position in the market. In April, we relaunched the Altell brand to strengthen its premium position, and we're happy with the initial response from the Kazakh population to this new, more premium look and feel to the brand. And finally, integration is progressing according to plan with a little more than 1400 sites merged out of roughly 1700 that we intend to migrate and integrate, and the work to complete the integration will continue throughout the rest of this year, and it will be an enabler to further margin expansion in the months ahead. And just before I pass on to Lars, a quick update on Challenger program. We're now moving into the final stretch of the program, and it very much remains on track and delivering benefits slightly ahead of our own expectations. In fact, we now expect to have achieved around DKK 850,000,000 in annual benefits by the end of this year. One of the key drivers of our strong momentum recently has been a result of the focus that was put into operational efficiency and productivity over the course of the last 2 years. The Challenger program and our Challenger cost position continue to be a top priority for us and will continue to be so even when the Challenger program ends in 2018. So on that note, I'll now pass you over to Lars to take you through the financials in a bit more detail. Thank you, Alison. So let's take a look at what this sums up to on a group level. We start with mobile end user service revenues, which drives much of our business momentum, where we had exceptionally strong growth at 12% in local currencies. In addition, we had some currency tailwind this quarter. So as can see, the growth was 18% in Swedish kroner this quarter and landed at SEK 3,900,000,000, an increase of around SEK 600,000,000 dollars The unique combination of both strong customer growth and strong ASP growth in the Netherlands made this market the best contributor this quarter. But also Sweden, Kazakhstan and the Baltics made significant contributions. Moving on to EBITDA. We had a 50% increase in reported currencies with 11 percentage points coming from FX and M and A and 39% being the underlying growth in local currencies. Sweden was the strongest contributor here and posted an increase of $194,000,000 with a little less than half of that being the acquired EBITDA from TDC. Sweden was also somewhat helped by nonrecurring items in 2016. In addition, the Netherlands, Kazakhstan and the Baltics made significant organic bottom line contribution driven by solid top line development. If we look at the CapEx for the quarter and indeed for the first half of the year, we can see that the CapEx investments have been low recently. Sweden increased its CapEx versus last Q2 and is expected to increase spending further in the rest of the year, and the same is true for CapEx. And as you know, we continue the network rollout in the Netherlands until mid-twenty 18. So all in all, we expect a clearly elevated CapEx level in the second half of the year. Please note that the cash CapEx for the first half has been at $1,700,000,000 whereas the balance sheet CapEx was at 1,400,000,000 dollars That takes us to free cash flow. We had a good cash flow contribution this quarter, driven largely by higher EBITDA, but also significant improvement from working capital, much thanks to Sweden, which improved its working capital position meaningfully this quarter. We have a focused effort to reduce our working capital in the group and see several opportunities to do so. Keeping in mind, however, that last year, we implemented handset financing in Sweden, which had a significant positive effect on working capital, which will not repeat itself this year. Overall, we would expect working capital changes to be approximately neutral for the full year 2017. To give you a longer term overview of the evolution of the group's cash flow, we turn to Slide 22 showing the operating cash flow defined as CDK less CapEx on a rolling 12 month basis. The blue bar shows the contribution from our mature businesses in Sweden, Baltics, Germany, Austria as well as headquarter costs. We are pleased to see that the operating cash flow has risen from a level of around $3,500,000,000 to a little more than $4,100,000,000 This is driven partly by low CapEx, which will be higher in Q3 and Q4, but also by significant increase in EBITDA. The gray bars show operating cash flow in our investment markets, Kazakhstan, the Netherlands and Croatia. And as you can see, the net investments we are doing in terms of cash flow has declined significantly in recent quarters. This is driven primarily by the gradually improved scale that we are realizing within these growth geographies. While we expect the negative operating cash flow from the investment market to diminish and turn positive over time, we do expect the contribution in both investment markets and our established markets to take a step down in the second half of the year as we increase our CapEx levels. Slide 23 shows our net debt position, which, as you can see, has risen somewhat after the dividend in the second quarter, but remains well under control in relation to our growing EBITDA. I'd like to conclude this section by talking about our financial guidance for the full year. We maintain our guidance for net sales of SEK 31,000,000,000 to $32,000,000,000 as well as for mid single digit growth in mobile end user service revenues for the group. While we have been executing above this level in the first half, the effects of Roam Like at Home and tougher comps will slow us down in the second half. When it comes to EBITDA, we can conclude now that we have been delivering ahead of our expectations in the 1st 2 quarters of the year, and we are upgrading our full year guidance to SEK 6 200,000,000 to SEK 6,500,000,000, driven mainly by strong performance in Kazakhstan and the Baltics and reflecting the Challenger program being ahead of previous expectations. Please note that in regards to Roam Like Home, we have included an impact of $200,000,000 to $300,000,000 in our guidance. Also, we will expect expansion costs in Sweden and the Netherlands to be elevated in the second half when you compare it to the first half of this year. CapEx will, as we said, most likely increase in the second half, but due to timing effects, should be somewhat lower than we expected at the beginning of the year, which is why we update the guidance to $3,600,000,000 to $3,900,000,000 for the full year. And with those words, I'd like to hand back the word to Alison to summarize the quarter. So thank you, Lars. So in summary, the quarter is very much built on the priorities that we've had for quite some time now. And they are to be the customer champion and enthusiasm of connectivity, liberating our customers to live a more connected life. As a result, we will continue to monetize data despite the headwinds ahead from Roamoke Home, and we believe that this strategy and focus will enable us to sustain our unique Baltic Sea Challenger status and strength, and we do expect the significant growth opportunity in the Baltics to continue. We will also continue to leverage our Challenger strategy in the Netherlands and Kazakhstan as we accelerate towards cash flow breakeven in those markets and take significant market share in a financially disciplined manner. Recognizing that our market positions require excellence financial discipline and operational execution, we will continue to execute on our Challenger program and our synergy programs so that our top line momentum continues to flow down to bottom line momentum and improved cash generation. Our upgraded guidance reflects all of this, but most importantly, the confidence we have that our focus on monetization of connectivity will deliver long term value for our shareholders, our customers and our employees. So that brings us to the end and of the presentation. And Lars and Eric and I will be very happy to take your questions. Thank you. Thank you, Ernesto and Lars. Operator, we're now ready for questions. We will now take our first question from San Dhillon from Exane. Please go ahead. Hi, guys. So my first question is on Swedish B2B and specifically your commentary on large enterprise. Who is being incrementally more aggressive in this segment? And do you expect B2B to remain in negative growth territory for the year for the remainder of the year? Secondly, on roaming, I think you had previously guided to a drag of around SEK 200,000,000 for the year. So it appears you've increased by up to SEK 100,000,000. Does that suggest your early experience of Roam Like Home has been that you've seen a higher roaming demand from your customers than previously thought? And finally, on the Netherlands, you've done about $230,000,000 of positive EBITDA adjusting for this quarter's one off. Do you still believe you'll be EBITDA breakeven for the year? Thank you. Thank you, Sam. So taking each of those in terms. Swedish B2B, yes, it was no we did have a very strong Q2 large last year, and it was seasonally strong. But that being said, we are seeing more price pressure in the market as the market leader, in particular, has tried to retain some of its large contracts by a lower price. And so with that and some contracts that unfortunately lost appeal, we are expecting trends to be fairly muted in the second half of the year because as you know, this business has longer sales cycles. So that's what that and that is built into our guidance for the year. So slightly softer than we would have wanted, but we are very confident that as the 2 organizations have now come together and we'll have a combined product portfolio later in the year, that we will build the business opportunity that we expected as a result of merging with TDC. And as I mentioned, we've already won some great new customers just towards the end of the quarter. Moving on to roaming. As we assess the great momentum we've had in the first half of the year and look forward into the second half of the year, It's early days on roaming. Certainly, consumption and the cost of that consumption is coming in line with our previous forecast and expectations. But as we were taking the guidance up, we decided to give ourselves a bit more room in that guidance for roaming to be even higher than the original 200 $1,000,000 And so in our guidance, we've allowed for up to $300,000,000 just in case consumers consume even more than what we're seeing today. But what we're seeing at the moment is very much in line with our original forecasted expectations. And then in the Netherlands, we've had a strong start to the year. Some of it has been driven by one offs. Don't forget we had a $95,000,000 positive one off in the Q1. And some of it has been fairly much lower investment in handset sales. And some of it is we're just getting much improved network economics. In our guidance, we are still assuming breakeven for the Netherlands for the year because we want to hold back the potential to continue to invest behind the great momentum that we now have. And it's still a very competitive marketplace. So in our guidance, we're still assuming Netherlands will revert to a roundabout breakeven for the year. Okay. Thank you very much. We will now take our next question from Lena Osterberg from Carnegie. Please go ahead. Yes. Good morning. Some questions on TDC, first of all, in Sweden. You say that you had an accumulated effect of 70 for the full quarter in Q2 so we can see how much sort of if there is a for the full quarter in Q2 so we can see how much sort of if there is a spillover effect into Q3? And then also if you could please elaborate a little bit, I know you said it's still early days, but so we understand what has the consumer behavior been for Roam at Home? Did you have an sort of uptake? Do you think some of the extra uptake you saw this quarter was ahead of Rome at Home that you may have some benefit now already on revenues, but maybe not the cost, just so we understand how consumers have acted in Q1 and what you see early in Q3. Okay. So on the first question, yes, Lainie, you're right. It was $19,000,000 in Q1 and the incremental amount in Q2 was $53,000,000 So that will be more like a standard run rate going forward will be the $3,000,000 per quarter because the vast majority were transitioned during Q2, yes. On roaming, it's listen, it's only we've only had 15 days in the quarter, and obviously, we're looking at the early behavioral patterns these 1st couple of weeks of July. We have seen significant uptake. I think our Swedish team are seeing 5x increase, but that is pretty much in line with what we were forecasting. In the quarter, there is a little bit of an impact from that where but it's not material to pull out, but there is a small impact. And so at this stage, it's very much in line with our forecast. But as I said on the previous answer, as a result of the strong momentum in the first half of the year, we've accommodated for a little bit more roaming impact now in the second half in the We will now take our next question from Thomas Heath from Danske Bank. Please go ahead. Thank you. A few questions, if I may. Firstly, on Unlimited in Sweden, you mentioned brand recognition. Is there any actual intake? And in that case, is the new customers or customers up trading? And sort of how it is performing compared to what you expected? And then secondly, I believe there was a tax case issue you press released earlier this summer. I believe it's already taken a provision on the P and L. I was just wondering if there is any cash impact on that unless you win in an appeal. Thank you. Thank you, Tobin. So on unlimited in Sweden, as I said, it's INR 500 crores. So it's a big bucket. And the early indicators are that it is both selling and so both new intake and upsell within our existing base is ahead of plan. So very happy with the early indicators and how that all the whole unlimited positioning is really reestablishing ourselves again as the challenger in the market being the first one to launch that. And it's really helping drive the messaging of Power 2 and the Tele2 brand in general. In terms of the tax case, I'm going to pass that over to Lars. Yes. Hi, Thomas. So you're right, we have provided for it and not just the period that is indicated that we lost, but also up until the report. And we plan to appeal the case to the next instance. If we would lose, it would have a cash impact. It's too early to say when that would be, but we would expect TFP to take at least a year. That's very helpful. Thank you. Thanks, Thomas. We will now take our next question from Johanna Alquist from SEB. Please go ahead. Yes. First of all, you mentioned the that the expansion cost will increase in Sweden in the second half. And I'm just wondering sort of if you can give any flavor of the magnitude of that increase. And then Kazakhstan, I know this was a very, very strong quarter and do you see no reason to sort of expect these strong trends to continue? And what you are you more confident now in that you will have an equity value in the end from Kazakhstan? And then maybe thirdly as well, just on Dutch intake, around 50,000 subscribers this quarter. So do you expect this intake to be sort of the run rate going forward? Or are you more optimistic given what you see now with the traction from the unlimited offer? Thank you. Thanks, Joanna. I'll take them from the last first, and then Lars can finish off with the expansion costs. So Netherlands intakes, so the new propositions were just launched on 17th May. So we've only got about 5, 6 weeks of the impact of that in the quarter, but helped accelerate us back above 50,000 in the quarter. I think our aim is to be consistently taking around 20 percent of the available market, which is around 50,000 to 60,000 net intake per quarter. And that is what we are continuing to aim for in the balance of the year. So we're not revising that estimate at this point in time. In terms of Telxan, yes, it's been it was a strong Q1. It was an even stronger Q2. Really happy with what the Kazakh team are doing down there in terms of integration and the commercial funds as we really drive the dual brand strategy. And as I've said before, we want to build towards a 30% market share business and a 30% EBITDA margin business around about the time that we would have the opportunity to serve our put option. And that would, of course, enable further growth in the equity value. And in fact, you'll seen in the quarter, we have again reserved an increase in the earn out due to our partner because we are recognizing that the equity value has again would expect it to be elevated in the second half versus the first half. Yes. So, Johan, on the Swedish expansion cost, we would expect it to be elevated in the second half versus the first half this year. As you know, Q1 was slightly down compared also to Q1 in 2016. So just to give you a little bit of indication going forward and also coming back to in relation to the guidance. We're not going to give you an exact number there, but we would expect a slight increase in order to continue to fuel the very good momentum we got on the Power 2 campaign. And remember, Q3 last year in Sweden was fairly low from an expansion cost point of view, and then it spiked up in Q4. So think about that if you're doing your quarterly estimate. Perfect. Thanks a lot. Thank you, Joanne. We will now take our next question from Maurice Patrick from Barclays. Please go ahead. Good morning, guys. Maurice here. A couple of quick ones for me. First one, Netherlands NPS stats. I think you gave some numbers at for the Q1 showing your NPS versus KPN. Just wonder where that's tracking in the Q2? The second question, can you share with us please the mobile data usage in Netherlands and Sweden as you often do? Thank you for that. And then just a third question, I see your share of SIMONI in the Netherlands is now 15%. It was 10% a year ago. Do you think you can grow up beyond 15%? Is that realistic? Thank you. Thank you, Boris. I don't have the latest on NPS in the Netherlands, but that is something that I'm looking at Eric if he has it. If he doesn't, then we will get it over to you after the call, Morris. Of course, we updated that early June, so we might not even have had an update yet, but we'll get back to you. Mobile data usage in Sweden, Pillar 2 brand is now on average 5 point 4 gig per month, up from 4 in the same period last year. Netherlands is now 2.1 gig per month, up from just under 1 in the same period last year. So still very low but increasingly showing that with the right pricing and great net accessibility to great networks, we can start to drive Dutch consumers away from WiFi and on to 4 gs networks that we can monetize. And then share of SIM only in the Netherlands, we've seen great momentum to 15%. That 15% was the average for the month of May. And so it only reflects 2 weeks of the new proposition. So it is our ambition to get to around 20% of the intake of both sim only and handset, although we're still well ahead of 20% on handset at the moment. So we think we can build it further, Morris. Thank you. Morris, we can add perhaps that on your first question regarding NPS. We have had some positive results on consideration following the after the end of the quarter. So that consideration level you're seeing at 52% the end of in Q2 has risen to the higher 50s in the last few weeks. So that's a positive trend there in brand perception. That's great. Thank you. That will drive NPS up, but we will start to try and report NPS more regularly. Yes, very helpful. Thank you. We will now take our next question from Ulrich Rat from Jefferies. Please go ahead. I think I have actually follow-up on some questions that have been asked earlier on raw mic home. First of all, Telenor comers is yesterday on a slightly slower growth, but to a very material growth in usage, similar to what you're talking about there in Sweden. But they actually said their costs were essentially flat on the basis of significantly lower negotiated wholesale rates. Was just wondering whether you would be able to comment on the unit cost and whether that has come down and whether that could come down further for Tele2 as well. Second question is on Swedish B2B. You sort of indicated the future here for the large enterprise pressure. But obviously, the another big news here is that you have now turned the SmeeHo segment into growth. Just wondering, were you willing to comment on sustainability of that area now remaining in growth from here? My last question is coming back to the Netherlands. You did say that you want to retain the target of sort of roughly 20% of the market per quarter. Could you just sort of outline again what the reasons are why you wouldn't push this a bit harder now given that you have this fairly empty network. The network seems to be very good according to third party network surveys. So what's the reason not to push this slightly harder at this point? Thank you. Okay. Thanks, Ulrich. So first on Roam Like Home, I guess Helenor did launch Roam Like Home last year. So they're already comping a period where they had taken an early adopter approach to it. So I guess they are we did not. We've just launched Home Like Home. So it's team continue to do a fabulous job of negotiating the cost down and continue to do so. In fact, so much so that we actually provide MVNO outsourced MVNO services to MVNOs in countries around the world. Sky in the U. K, for example, we do all of their MVNO traffic for them. So we keep working on the costs to manage it down, but Teladore already launched early last year, so it's not going to have the same impact on them as it's having on us. In terms of Sweden B2B, yes, I've commented large enterprise pressure. SME is back to growth. We want to sustain that growth. It's a highly competitive market, but a lot of things are starting to come together. And we have just launched the Power 2 campaign now into the B2B segment. And that's really pushing the messaging on both for the SME segment and the large enterprise segment. So I'd like to see that segment get back to sustainable growth again, and that's our ambition. And in terms of the Netherlands, why not push harder? I'll be happy if we get more than 20% in any one quarter. As you see, we're well ahead of that in the handset market. And but I think for now, we're just saying 20 percent is a good target, but I always hope that my team will slightly overdeliver on that. Can I follow-up Just on that Romelac Home thing? I mean, Telenor had a almost fourfold increase in volumes. And it's true that they started earlier, but still they had a year on year fourfold increase in volumes. And again, the costs they say were essentially flat. So they're implying a 4% sort of a significant drop on a year on year basis to the wholesale rates, which isn't really related to them starting earlier. Are you seeing the same type of unit cost reductions by sort of a factor of 4? Or is that something that Tele2, maybe because of scale differences or other reasons, is not achieving? Thank you. I don't have those numbers at my fingertips, and we will not guide on that anyway. So but we've seen a 5 times increase in volumes in Sweden, so very similar trends. Thank you. We will now take our next question from Nick Lyle from Societe Generale. Please go ahead. Yes, good morning. It's Nick at SocGen. Could I ask 2 on the Netherlands please, Alison? The first one on the mobile business and on the current sort of run rate of EBITDA, which is quite a bit below where we were last year. I mean, I was quite surprised your on net voice was up by about 10 percentage points from last quarter, particularly given the SIM only push. So could you maybe comment on that first? And then with the NRAs being down, is there any sign of a move back to handsets at all post the VFTA legislation? And was this a full marketing quarter? So should this be the run rate for EBITDA on the mobile side from here if this is sort of where we're going to stick up for the next few quarters? And the final one was on the fixed business. The ARPU is still quite substantially down about 7%. I'm a bit surprised about that given the Vula incorporation. So could you just mention really what you're doing on pricing? Are you slashing pricing on broadband as well because subs are still falling? Thank you. Okay. So on the mobile business, the network economics are improving all the time as our network expands outdoor and indoor. And so that is one of the positive factors that you're seeing in the quarter. What's happening to handsets post VST is what you're starting to see now is the use of handsets in promotions, which is allowable within the regulation that you can do the odd promotional campaign. And I think all operators are taking advantage of that, including ourselves. Is this therefore a good reflection of a run rate going forward? No. We're still within our guidance, assuming that for the full year, we'll have EBITDA around breakeven for the year. So we have got room in our guidance to increase expansion costs and investments behind good quality customer acquisition in the balance of the year to keep up our momentum. In terms of the fixed business, was that the Dutch fixed business you're talking about? Yes. So is it the ARPU still seem quite ARPU affected by some of the one offs? Or is there no, there's no one off effect. I'm looking at my team here, and I'm not really getting large. Yes. Nick, there could be a mix effect here. So we have some business customers in there as well. So the consumer pricing is obviously different than we're having in the some of the smaller business segments there. So it's probably something going on there. And then we obviously have different price points for single package, dual package, triple package. So there may be some movements there as well. So that's probably the reasons for that. We will now take our next question from Henrik Herbst from Credit Suisse. Please go ahead. Yes, thanks very much. I had a few questions as well. Firstly, in terms of the uptake of the larger than 3 gigabyte bundles, so it's up a bit year over year, but it does seem like it's down from, I think, it was 69% in Q1 to 66% in Q2. So if you could just explain that a little bit. It seems like a slight odd move. Also, if you could maybe talk a bit, which of your bundles or which data bundle is the most popular on the Tele2 brand? Then I just also wanted to follow-up on Road Market Home. So as I answered, it was just a very small impact from Road Market Home on end user service revenues in Q2. So if you could just confirm that. And then last question on CapEx in Sweden, which you're saying is picking up a little bit. Can you maybe talk a little bit about what you're investing in? Or are you starting to see congestion in some areas of your network? Or are you still building out coverage? Thanks very much. First question, you're right. The average went down from Q1, and that's because we were particularly driving some kids products in the quarter, and they're about 1 gig. So there was quite a good intake of that particularly kids focused bucket. In terms of which bucket sells the most, it's somewhere between the 5 gig and the 15 gig in Sweden, have driven the most intake in the quarter. And then room at home, yes, confirming very small impact this quarter. There were some positive benefits in Croatia. Looks like Swedes and Baltic people like to go to Croatia and partly Bulgaria on holiday. And but that was offset by some negative impacts in Baltics and Sweden. But overall, it was a small impact in the quarter. And on CapEx, Lars? Yes, it's mainly related to capacity, Henrik. So we obviously see an increase in our U. S, which is positive because we can monetize on it. When you look at the CapEx increase, mainly capacity and also some in IT. We talked about that before that we are pushing the digital initiatives within the company. There's also some investments going into that area. Thanks very much. Can I actually just follow-up in terms of the usage as well? Is the average or the growth in average usage per sub, is that accelerating the growth rates? Or is it It's up to 5.4 gig in the Swedish Tele2 brand in the quarter from 4.7 last quarter. But year over year, is the growth rate accelerating? Yes, it is. Yes, it is. It's everywhere. Great. Thanks very much. Thank you. We will now take our next question from Irina Ercedova from RBC Capital Markets. Please go ahead. Hi, good morning. Just a couple from me, please. First on the Challenger program, could you please quantify for us the contribution from the program this quarter? And also on the CapEx guidance reduction, could you give us some more granularity on the items that drove the change in guidance? And are there any timing effects that we should be considering? Or in other words, is there a chance that some of the CapEx will be pushed back into 2018? Yes. So on the contribution in the program, what is another €250,000,000 then when you look at the annual benefits. So the annual benefit was €600,000,000 in 2016, and now we're running towards €850,000,000 So I would say it's about we're on track to deliver half of those benefits, so about $125,000,000 for the first half year when you compare it to last year. CapEx guidance. So could you repeat the second question, Irina, on CapEx guidance? Yes. Just some granularity around the items that drove the change in guidance. And are there any timing effects that we should be looking for? Is there a chance that some of it will be pushed back to 2018? No. I think, I mean, what we have indicated is that we would see elevated levels in Sweden and also in Kazakhstan. And I think from a timing and pushing over into 2018 within the guidance of 3.6% to 3.9%, that's not foreseen to push in a large portion into next year. Basically, we build more capacity into our CapEx planning for the year in most of our markets, and we haven't needed as much as what we were planning. And some of our digital and IT transformation projects are not costing us as much as we expected either. Great. Thank you. We will now take our next question from Peter Millsen from ABG. Please go ahead. Thank you. Yes, a couple of questions, please. First one, if I can return to the Netherlands to Dutch Mobile as you say. Peter, you're breaking up. Peter, we can't hear you. It's very poor connection. I'm sorry, Ed. All right. You're right, no. Okay. Thank you. First, firstly on Dutch Mobile. As you said earlier, Alison, you're running at significantly better run rate on EBITDA than previously guided. And I guess that the new regulation has lowered acquisition costs and you have better network economics. Why would this go up materially in the second half if you expect slightly softer mid adds? And just secondly, I think I just previously talked about not on the It's Eric, we're losing you again. It's a poor line, and I don't think there's much I can do about. Can you hear me? Okay. Right. Do you want me to take that first question then? So Dutch Mobile, why would it go up in the second half of the year? Well, we only launched the new propositions halfway through the Q2. And we are seeing in the early part of the year, people were really avoiding pushing handsets. We should expect that there will be some promotional campaigns and handsets, particularly around the October, November period. And so we're allowing for that. We're also in the process of completing our network rollout over the next 12 months. So our own internal network costs will go up as a result of that. So we're just allowing for continued investment in a disciplined way in the second half of the year within the guidance. Okay. Thank you. Thank you, Peter. We will now take our next question Firstly, on the Netherlands, when you look at your net adds, can you talk about a little bit about which operators those come from? And has that changed through this year, especially with your recent launch of Unlimited? And I mentioned sort of is it more KPN, Vodafone, T Mobile and which are the splits there? And my second question is, you've increased the challenge of savings. Will we see a return of the mid-30s margin target in Sweden anytime soon? Thank you. Okay. So the first one on Dutch net adds. They're coming from all operators, slightly relatively more from T Mobile than the others, but we've been taking good intake from Vodafone recently as well. And yes, it's so I think KPN is always the lower of the 3, but there is good broad base coming from kind of everybody, but slightly more T Mobile and slightly more Vodafone than KPN. And on Challenger, Lars, you want to take that question? Yes. On the Challenger benefits and Sweden, I mean, we obviously see the benefits coming through in all countries. Sweden is the largest country. It's around 40%, 45% is coming through in Sweden. And then when we look at this, the Challenger program, we also talk about the Challenger cost structure internally. So going above and beyond the Challenger program, we will obviously continue to focus on making sure that we have a very efficient operation and operate at the lowest cost possible because we believe that's part of our DNA, that's headed to Challenger. And that will drive us to higher EBITDA margins across our footprint. Thank you. We will now take our next question from Robert Florent from Handelsbanken. Please go ahead. Thank you. A couple of questions on costs in Netherlands and wireless there. Could you say something about the percentage of gross adds that take a handset now and the difference maybe between Q1 and Q2? And also, maybe I missed that, but the roaming cost to T Mobile in Q2, if you could give us any number on that, that would be great. Thank you very much. Okay. It's about fifty-fifty handset and SIM only intake in the quarter. And obviously, that probably accelerated a bit more towards the end of the quarter, but it was fifty-fifty in the quarter. In terms of the cost of T Mobile, it's in line with our forecast, and we're going to stop disclosing that now because it's obviously commercial sensitive. Robert, the trend we showed at the Capital Markets Day in Amsterdam, a flattish to slightly falling overall network cost, including our own network cost and the international roaming and a falling network cost on a per subscriber base that continues. Okay. Thank you. We will now take our next question from Osman Ghazi from Berenberg. Please go ahead. Hello, everyone. Thank you for taking my question. I've got 2 questions, please. Firstly, in Sweden, are we to expect that the end user mobile service revenue growth because of the pressure from B2B and the Roam Like at Home is going to go to flat to slightly negative in the second half? That's what seems to be implied in your guidance. And then the second question was just on the Netherlands again. Breakeven for the entire segment for 2017 implies mobile business doing a loss of around SEK 600,000,000 in the second half versus a positive SEK 140,000,000 in the first half. I mean, that implies quite a huge increase in marketing costs in the second half. I mean, is that the right way to think about this? Or if you could give any comments on that, that would be great. Thank you. I'm not sure about that second question, how I'm going to look at Eric and Christophe to maybe get back to because those numbers don't sound right, Osman. But certainly, I don't see that significant change. Profitable in the first half. We have made losses in mobile in the first half. In terms of Sweden mobile engine as a service revenue, yes, you're right. It will go flat to negative as a result of room like a home in Q3 in particular. That's what we've been expecting all along because we had significant roaming revenues in our headline numbers in Q3 last year and 3rd. Okay. Just on the Netherlands, again, I mean, your guidance for breakeven applies to the entire Dutch business. Is that correct? Is It's a fixed and mobile. Yes, that's correct. Okay. So I guess the question would be Mobile in the first quarter was around €50,000,000 loss. Yes. And the second quarter was around about €95,000,000 loss roughly. Yes, exactly. So the first half, you've done around $140,000,000 loss. I mean that needs to go up by 3 to 4 times for you to hit a kind of overall breakeven number for all of Netherlands for 2017, right? So that's quite a big It goes up, but maybe not to the extent that you're talking from N from Nordea Bank. Please go ahead. Yes. Well, I was mainly looking into the same type of calculation on the Netherlands as the previous speaker. But I could follow-up on the Challenger program. So the raised impact for the Challenger program this year, is this only that you are ahead of plan? Or is this an indication that the plan can be exceeded? So Stefan, that is an indication that we are ahead of plan, and we're still shooting for the SEK 1,000,000,000, but we're moving a little bit faster. Okay. Thank you. Thanks Stefan. We will now take our next question from Max Hallum from New Street Research. Please go ahead. Hi, there. Mine's similar to the last question actually. I was just wondering with the good progress, is there any scope for a new program over and above the existing Challenger program? And whether you could maybe quantify some of those cost savings after this program ends? And also with the progress made on synergies to date, whether there's any room for further synergy benefits coming through? So obviously, within our new guidance, we've reflected the higher Challenger program benefits this year and the great progress on synergy benefits, particularly in TDC and Alt Health. Looking forward, we have cost consciousness as one of our values in the Tele2 way, and cost consciousness is a key part of our DNA. So I would like to end the program when it ends, but we will always keep pursuing to have the best lowest challenger cost structure in the markets that we operate going onwards, and that is very much a key part of our strategy beyond a Challenger program. And I don't want to start talking about synergy expectations outside of 2017, but those Challenger and Integration is very much benefiting us this year, and we hope to build from that in future years. Operator, we're approaching the end of the calling time. Let's take one more question, please. There are no further questions from the telephone. Perfect. Well, thank you all. I wish you all a great summer. Thank you very much. That's the end of the call.