Good morning, everyone, and welcome to Tele2's second quarter conference call. Speaking is Louise Tjeder, and with me I have our President and CEO, Mats Granryd, and CFO, Allison Kirkby. We're also sending the presentation live over our webpage, tele2.com, so welcome to everyone that has joined via the web. After the formal presentation, there will be, of course, a chance to ask questions, either over the phone and, of course, via the web. By that said, I will hand over to you, Mats.
Thank you very much, Louise, good morning, everyone, from a sunny Stockholm. I will start with the first slide, or slide number two actually, with the highlights from the quarter. We have a positive net intake across the group of just above half a million new customers joining us, 540,000. On the focused technology choices, we are now at 80% population coverage in Netherlands and growing roughly 50% indoor coverage, so well on the track there. Step change productivity. The Challenger program is now delivering results, and Allison will go through that in somewhat greater detail later on. In the winning and people culture category, we have happy to announce that we scored in the 91st percentile overall in the FTSE4Good Index. That is the highlights for the quarter. If we then go in on the more specifics, the monetization of data continues.
End user service revenue for the group is up 7%. Mobile EBITDA is up 2%, and a whopping 55% up on average data usage per mobile subscriber. For sure, the trend of ever-increasing consumption data is continuing. We just take a look at the history of our end user service revenue. As you can see, it has been a six, seven, eight percentage points quarter-over-quarter. This quarter, 7.4%. A CAGR of 7.5%. This is something that we track and we feel is an important factor. End user service revenue is, of course, a combination of two things. One is ASPU, and the second is subscriber growth. It's important to focus on both. Moving in to market year-on-year development. Start over in the east in Kazakhstan, we have a 65% end user service revenue growth.
The Baltics are doing very nicely, between 6%, 8%, and 4% in Lithuania. Croatia is up with 7%, and we see that continuing Q2, Q3. Of course, the strong quarters in Croatia being a summer destination for many. Austria is flat to slightly down, but that is total sales, so predominantly fixed. Netherlands up 8%, Germany 6%, and Sweden then is 1%. I will continue to discuss more on Sweden on the next slide, because I know that is something that everyone is eager to hear more about. If you take the right-hand graph there, the bar graphs, as you can see, we have a 70% data growth in our own networks. Almost 50% growth in Sweden as an example. For sure, our networks are becoming more and more filled up with data, and that is something that we welcome, something that is very good.
Moving then on to Sweden. As you can see, we have a sales that is flat. We have an EBITDA that is up 3%, giving us a 1% margin increase. Net intake to the right is up with 52,000 new customers, this is something we feel happy with. You can see the trend from Q4, Q1, and now Q2. The good thing with the net intake is that we are actually in all disciplines positive intake. Postpaid is positive, prepaid is positive, business-to-business, and mobile broadband is also positive. Those add up to 52,000. This is really important, and we believe that this is a tribute to the Value Champion strategy. Leading indicators in the Value Champion strategy is, of course, that we do want to come closer to our customers. Net promoter score, i.e.
customers that are already Tele2 customers, are they promoting the service? That is now taking a hike upwards. Consideration is as strong as the biggest brand now in Sweden. That means that everyone else, are they considering to go to Tele2? That is a fact right now. That is activities that we believe is really important going forward. Value Champion is all about changing the industry in Sweden to become continuously in a benign environment, but continues to become more customer friendly. We believe these early indicators are an example of that, and it's testimony in the 52,000 net intake. Moving forward. The mobile end user service revenue, as I said, is 1% in Sweden. If we divide that down on the postpaid segment, it is 6% up. Prepaid business-to-business and mobile broadband is either flat or slightly down, giving an average of 1%.
Postpaid, and that is the segment that we're focusing most on, is up 6%. That is something that we also think is a strong indicator. On the business side, we had a strong quarter, and it was primarily driven by the large enterprise segment, where we were awarded some really big and important contracts. By and large, we are okay with the Swedish progress. I would say that we're very confident in the Value Champion strategy going forward of not only big buckets, but also the consideration. Net promoter score is going in the right direction. Moving on then to the Baltic States, up 7% on sales, EBITDA up 3%, and a customer intake of 10,000 in the quarter.
Population coverage on LTE is now roughly 80% in Lithuania, and by year-end, we will have a 90% coverage in all the Baltic States on LTE coverage. This means that we are well-positioned for Value Champion launch in the Baltic States sometime in the future as well. Moving on to the Netherlands. Sales up 5%, EBITDA is taking a tumble downwards 45%, very much in line with what we have said previously. I think I've said that it's going to get worse before it gets better, and this is certainly one of those quarters. Out of the SEK 120 million in deficit on the EBITDA, roughly two-thirds comes from fixed and one-third comes from a continued focus on mobile. The two-thirds in fixed is of course an issue for us, and we have been taken somewhat by surprise over the rapid decline of our fixed business.
We have worked hard on a deal called the VULA, Virtual Unbundled Local Access, and that is reselling KPN's fixed network across the Netherlands. As you can see on the graph to the right there, we have not a great coverage, and more importantly, we do not have a great speed in higher segments. With VULA, as you see Q4C, this will take some time, but we will be able to offer as good of a coverage and speed as KPN in the Netherlands. This will be a mitigating factor and be a factor of us using that network to upsell and cross-sell into our mobile business as well. This is something that we're very proud of and we believe is going to give the fixed business a reinvigorating life going forward.
As I said, the network is now at 80% population coverage, and we have done the first voltage test, and that is completed successfully. We are, as we speak, transfer our 4G customers over to our own network, i.e., putting them on our CRM and billing system. We also see a data offloading on our own network on small numbers, but it at least is going in the right direction. It's always encouraging to see that the thought process is actually going in practical terms as well. Moving on to Kazakhstan. A great sales of 54% up. EBITDA is up to 200%, but that's from very low levels. Maybe more importantly is that we see a net intake of close to 500,000, 470,000 net intakes. Equally important is that these customers are paying customers.
They are not ones that we had before, just warm bodies coming in and then leaving us. These are customers that stay with us and actually use our service. You can see that we have a voice traffic of 124% up and data 195% up year-over-year. Previously, we have been regarded as a data provider and not much of voice. As you can see with 124% up on voice, we are now becoming more of an established player in a way or more credible operator in Kazakhstan, and that is something that we are happy and proud of. The network rollout is on track, and we continue to build out geography as well as capacity coverage. We have a coverage of roughly 85% today, and we're going to continue to build that out. With those words, I would like hand over to Allison. Allison?
Thanks, Mats, and good morning, everyone. In terms of the financial headlines, total sales were up 4% to SEK 6.61 billion, mainly driven by strength in mobile end-user service revenue, which was up 7% to SEK 3.32 billion, with all regions contributing to the growth. EBITDA was down 5% to SEK 1.39 billion, mainly driven by continued declines, as we expected in the Netherlands. CapEx was up by a third compared to last year to SEK 1.13 billion, driven by geographic expansion and LTE investments in almost all markets. In terms of mobile end-user service revenue, all markets are contributing to growth. As you saw earlier, growth in Kazakhstan was the real highlight of the quarter from a revenue perspective. Excluding FX gains, mobile end-user service revenue was up 4.5% bang in line with our guidance for the year.
In EBITDA, all regions showed a growth in EBITDA except the Netherlands. The decline in EBITDA, as Mats said, is mainly due to the decline in fixed revenues. Recall, we did have a positive impact from the KPN settlement in Q2 last year. About half of the fixed decline was a one-off in our base last year. Obviously, a third of that SEK 120 is still costs that we're incurring in advance of our full MNO rollout. In terms of CapEx, we are investing for the future. CapEx grew by a third, and you saw investment across almost all markets. Continuous investment in the Netherlands for the MNO rollout, geographic coverage in Sweden and Kazakhstan, and of course, our network swap in Croatia.
As you would expect, moving on to free cash flow, lower EBITDA and higher CapEx investments are having an impact on our free cash flow in the quarter as we expected. Additionally, working capital was a net outflow of SEK 251 million in the quarter compared to the same period last year, mainly due to encouraging handsets across the group and in Sweden as a result of timing of payment runs and from impact of the Tele2.0 launch. For perspective, however, first half 2015 working capital compared to first half 2014 is significantly lower at a SEK 52 million cash outflow. A bit of timing effects of payments going on in there. That takes us to our debt position, which is just over the SEK 10 billion mark at the end of June, placing us right in the middle of our new leverage target of 1.5 to 2.
Before I hand over to Mats, and as promised, I'd like to give you an update on the status of our Challenger program. The program has now been up and running for six months with 30 kicked-off live initiatives, and we are very happy with the progress that we are making so far. As a reminder, our overall objective is to generate productivity improvements of SEK 1 billion per annum by 2018. We'll deliver those benefits via four key metrics that underpin the productivity improvements that we aim to make. First, we will simplify by doubling the amount of harmonized products to around 60% of all products managed from one common shared platform. Second, we will enforce discipline, particularly in our procurement area, by doubling the amount of spend that we strategically source and procure to around 80% of the total that we procure.
Third, we will continue to consolidate our IT and network operations with an objective to reduce IT OpEx by 20% as a share of revenue, taking it down to around 2.5% of revenue. Finally, we will transform our back office and non-core activities to leverage scale and skills by doubling the amount of staff we have in shared operations. How will each of these contribute to the SEK 1 billion? 5%-10% of it will come from simplification, 40%-50% of it will come from discipline, 30%-40% of it will come from consolidation, and 10%-15% of it will come from transformation. What progress are we making so far? The simplification area is the one that takes that bit longer, but we are making very good progress.
We've already identified 8,300 billable products, with only around 20% of those products accounting for 95% of our revenue. We plan to close at least 20% of our current products, obviously the lowest revenue-generating products to reduce product complexity and increase profitability across all our markets. Product harmonization will run alongside simplification, and that is focusing first on our mobile products. We've so far identified 4,000 products that are in scope for harmonization. Harmonization will realize benefits in IT by a reduction in the number of applications we have, in network by standardized platforms, in customer service by improved quality and efficiency, and our product organization by getting synergies through less complexity and slim lining of organizations scattered around the group. In terms of discipline, this area is already ramping up, and we expect to see benefits in the second half.
We're seeing benefits accruing in how we monetize app-to-person SMS, taking advantage of the central team that was already focused on roaming here in Sweden. We've now built that team to take advantage of this growing opportunity for us. In addition, we are improving our customer analytics. By better targeting of our marketing investments and online targeting, we will be seeing benefits from those hopefully towards the end of the year. In the area of consolidation, we have started to relocate non-roles to our shared service center operations in Riga, and we've also installed a new group-wide purchasing platform that has already been launched in our Latvian operations and will be rolled out throughout the group in the coming months. Finally, in the transformation area, things have already started to happen there, particularly in the back-office operations.
A finance shared service center will be established in Riga in Q3, and tasks will start transferring from Sweden to Riga and India in the second half. We've also announced our intention to move non-customer-facing back-office tasks to a partner in India from Sweden, also in the second half. In line with our mobile-only strategy operating on our own network, we have made the decision to restructure our German operations with some redundancies already announced in June. Where does that take us? Well, we remain confident in our ability to deliver the SEK 1 billion annualized productivity improvement by 2018 as a result of a SEK 1 billion investment over the next three years. We expect each market will improve its productivity by at least 5%, with high complications, Sweden, Netherlands, Austria, and Germany, obviously contributing slightly more. Benefits will accrue predominantly in OpEx, but also in revenue.
Of that SEK 1 billion, you can assume 90% will be in lower OpEx and 10% will be in higher revenue. We also expect CapEx and working capital benefits to accrue, but that will come on top of the SEK 1 billion. In terms of the investments to get there, the investments will be skewed 67% OpEx and 33% CapEx, although in this year it's predominantly OpEx investment that we're making, and it'll be more like a 90%/10% split. That's the Challenger Program. I hope you see now that momentum is building. We are confident in our SEK 1 billion benefits that we will accrue by 2018. We have more than 30 initiatives that are already in progress and kicked off since December, and we will continue to update you quarterly on our progress.
Thank you, Allison. Once again, the summary of Q2, only one slide. The priorities going forward is for us to continue to focus on the monetization of data and getting ready for the 4G launch in the Netherlands and in the Baltics. Also, as Allison said, continue to execute on the Challenger program. With those words, I would like to hand over to Louise for any Q&A.
That concludes the formal presentation. We open up for questions. Operator, let's start with the first question, please.
Perfect. We have the first question coming in from Mr. Peter Nielsen from Kepler Cheuvreux. Please go ahead.
Thank you very much. A couple of questions, please. Firstly, Mats, if I may return to the Swedish mobile revenue growth. I guess, as you said, we'd all be interested in a bit of elaboration on why the end-user service revenue growth has slowed so sharply in this quarter, and whether you're happy with this and expect this to continue. Is what you're telling us basically that what you have gained on the postpaid subscribers you have lost on the prepaid? Perhaps if you could elaborate a bit, that would be useful. Also secondly, you talk about continuation of growth in customer intake in Dutch mobile, but obviously the intake has slowed down significantly in this quarter. Again, considering your process there, 4G launch, et cetera, are you happy with this, and do you see any near-term changes? Finally, just a very quick question.
The VULA agreement with KPN, does that involve any upfront investments, any shared investments on your part? Thank you.
Yes, Peter. Good. Thank you for your question. The first question on Sweden mobile growth, if we could elaborate on that one and how we expect that to continue. That will be Mats taking that question.
Yeah.
Number 2, continuation, of course, of the growth in customer in Netherlands.
Netherlands.
Yeah. The third one on the VULA agreement for you, Allison.
All right. Hi, Peter. Good questions. Yeah. If we start with Netherlands, 7,000. Honestly, I think we would have hoped to have a slightly higher customer intake than in previous quarters, been around the 20,000 or so mark. It is of course a pacing exercise not to continue the bleeding, as you can see that we are doing. I would have hoped to see a little bit higher growth there. On Sweden, 1%. As I said, on the postpaid segment, we have a 6% growth. If you dissect that further down, you can see that the lower segment, Comviq, is growing faster, and hence you have an ASP that is 15%-20% lower in Comviq postpaid than on the Tele2 brand. That is why you see a combination is only 1% growth.
The trick here is to continue with the Value Champion launch, continue to position ourselves as the operator that has the closest relationship to the customer. We continue to see net promoter score and consideration going up, and also making sure that we have a positive customer intake. Remember, Value Champion and our ambition to change the market in Sweden is not done in a quarter. It is going to take, of course, many quarters, and we have been blessed with the first couple of quarters now, with a very strong underlying service revenue growth. Going forward, I think it is going to be somewhat moderated. We see the continued trend as we have seen this quarter in Sweden, that it is the lower segment that is growing faster. Again, remember, this is not a quarter-over-quarter exercise. This is a long-term strategy that we are embarking on.
Vula, maybe, Allison.
Vula. Yes, there are some upfront investments required of around EUR 7 million, and that is in our CapEx guidance for this year.
Okay, thank you.
Next question, operator.
We have our next question coming in from Mr. Stefan Gauffin from Nordea. Please go ahead.
Yes, a couple of questions. Continue to elaborate a little bit on the end-user service revenue growth in Sweden. You have earlier provided how much data top-ups added or contributed with, and that would be helpful. A detailed question. The interconnect revenue is up 13% year-over-year. Just wondering what is driving that. A little bit on the Netherlands. There is an improvement in the EBITDA quarter-on-quarter. Given the slowdown in subscriber intake, how much of the delta is driven by lower SAC, and how much is due to lower network cost after migrating customers onto your network? Thank you.
Yeah. Number one, further elaboration on the mobile end user service revenue in Sweden, and a little bit more details on the top-ups development. Mats will take that one. Number two, the interconnect levels year-on-year will be explained by Allison. The third question on the NL EBITDA improvement, Q on Q, or of improvement, sorry for that, and more detailed breakdown on the SAC and network cost, et cetera, for Allison.
If I start then with, again, elaborating on Sweden. I understand that this is a hot topic, obviously. You must remember that Value Champion for us is a strategic change. We see, again, net promoter score going up, consideration going up quite sharply. This is something that we feel is the right thing going forward. People are considering and promoting us as an operator. Therefore we see churn going down in the quarter, and we also then see net intake going up. That is the proof points, we would say, of Value Champion. We will have end-user service revenue comparing to last quarters going up and down a little bit. Again, postpaid up 6%, and the other disciplines, the other products, flat or slightly down. In Q3, Q4, remember, we're coming up against really very strong comps in those two quarters.
That's why I'm saying that I don't think that we're going to see a massive growth in Sweden on end-user service revenue. Also remember, we have taken now this to the next level. I do believe that Q2 is the highest Q2 ever when it comes to end-user service revenue in modern times. Yes, the comps are very tough, and that's why you might not see such a huge growth, but the level we're playing on now is on a different level than what we have played before. Top-ups in Sweden is also up year-on-year. I think it's around SEK 28 million, and that is up 20%.
7% up.
7% up Q2 over Q2. It is holding up nicely. Allison, do you want to talk about the interconnect?
Okay, interconnect, yes, it's up strong. It's mainly due to strong SMS volumes. Some of our Challenger program initiatives coming through in there. In terms of the Netherlands question, could you repeat that again for me, Sven?
Yes. Looking on the mobile side, the EBITA loss is lower this quarter, and just try to understand what is driving the development. How much lower is subscriber acquisition cost this quarter, and how much is driven by you moving 4G subscribers onto your own network?
The vast majority of it is lower subscriber acquisition costs, because we're very much focused on retention and transition of existing customers at the moment, rather than bringing in massive amounts of new customers, which we're waiting for later in the year. Then there is small amounts from base offloading as well. The material amount is mainly lower subscriber acquisition.
I think that comes back to the earlier question from Peter on growth in Netherlands, where I said that 7,000, we would have hoped to have some more. It is a balancing act of making sure that we contain some of the money, not spending it continuously on getting more customers in before we have our own network.
Could I add a question on the VULA agreement, just to understand the impact of that? What kind of impact will that have on the margins, if you would have your customer base on the fixed broadband migrated to the VULA agreement? I understand that you want to retain them on the current platform.
Yeah. Our priority is to retain customers on our own network. If they are at risk of churning or if we are failing to attract new customers, we will then move them on to the VULA offer. Obviously, the margins of those customers will be lower than our on-net customers, but they will be better than our off-net customers today, because the margins will be better as a result of the VULA deal. We'll be selling some products at higher speeds, so we'll be moving up to higher ARPU levels in that area as well.
Okay. Thank you.
Thank you. Next question, please.
Our next question is coming in from Mr. Nick Lyall from Societe Generale. Please go ahead.
Morning. It's Nick from Societe Generale. Can I ask a couple, please? Firstly, on Swedish mobile costs, it seemed as if the costs were up a bit underlying this quarter. Is there anything going on either in one-offs, or would it be possible as well to tell us what the Tele2.0 impact is or benefit is this quarter, so I can get to sort of back to an underlying number? Secondly, on the Dutch business again, what % of subs now are on the net? I think you said 35% of subs were 4G and could be moved across. Would it be possible to give us a % of subs over there? How much more CapEx should we expect from the network as well? I think you spent just over EUR 200 million now versus the original EUR 170 million target.
Is there a lot more to do or is this CapEx being used for something else? Thanks.
Thanks, Nick. The first question on Swedish mobile, if there are any costs up, what's the underlying, if there's any one-offs, that's Allison. Number 2, on the Dutch business, percentage of subscribers, that is Mats. The third one, how much more CapEx we will spend, that is Allison.
Good morning, Nick. In terms of Swedish mobile, basically the uplift you're seeing in this quarter is very much driven by the lower expansion costs that we communicated last quarter. Both lower subsidies, we're also getting lower commissions at the moment because we're doing a better job of channeling. The underlying revenue uplift is however being offset by increased production costs in the quarter. As a result of us increasing our geographic coverage of our network, we are seeing a slight increase in our network costs this quarter, and we've seen that going forward as well. I think the big difference in the bottom-line improvement this quarter is the fact that it's only a 1% end-user service revenue rather than a 5% that we've seen in previous quarters.
The cost structure, and the benefit we're getting from lower subsidy is still going through to the bottom line. I think mobile EBITDA was up 8%, and mobile margin was up 2.2% versus the same quarter last year. Still a good solid progress in profitability.
On the Dutch situation, 800,000 mobile customers, of which 45% or so and growing are 4G-enabled, have 4G-enabled handsets. We have migrated roughly 20% onto our own billing and CRM system. That is something that will be completed during early second half of this year to have all the 4G-enabled customers that we have on our own CRM and billing system. As I said also, we are now seeing money not spent on T-Mobile, but actually on our own network, and that is encouraging. That will also continue to grow from very low levels today, but will of course continue to grow in the future.
Okay. On CapEx in Netherlands. In terms of the original guidance we gave, the EUR 350 million, that was related to the license and the radio network on its own. We're about 80% of the way through the spend of that. We're around the EUR 275 million mark of the EUR 350. On top of that was obviously the cost of the other elements of launching a network. The sites, the IT systems, the vault pieces, which add up to just over EUR 100 million to EUR 150 million, and we're probably about a third to 40% of the way through that investment.
That's great. Thanks. Just, sorry, on the Tele2.0 number, is there a number of further saving you could give us this quarter roughly?
In line with last quarter.
Was that about 80-ish?
That was correct. It was 50% of the SEK 150 million, yes. Correct.
Absolutely.
Around the SEK 70 million mark.
That's great. Thanks very much.
Thank you.
Yeah.
Thanks, Nick.
Operator, could we have the next question, please?
The next question is coming in from Lena Österberg from Carnegie. Please go ahead.
Yes. Good afternoon or good morning. I was going to ask you on the cost-cutting program, just to understand it a little bit more in detail. You said that it's a net program, and that you're halfway through this year's savings for SEK 50 million, you said now. I'm just trying to understand how we should look at this, because if we look at the OpEx base so far this year, it's up SEK 600 million, in the first half versus the other half. Could you maybe say something a little bit about the addressable costs, the not addressable costs? How much are the not addressable costs growing? Do you include expansion OpEx in this, or should we actually say that in 2018, your OpEx base on flat revenues will be SEK 1 billion lower than in 2014? Just to help us model this.
Yeah. Okay.
Also, I understand that you're nearing a launch in the Netherlands, but you have so far not said anything about how much that launch will cost. Could you please give us some more details on how much we should factor in for that?
Okay. The first question, Lena, could you just elaborate on your interpretation? You said something about halfway through.
No, no. You targeted, for this year, I think SEK 100 million of savings, right?
We never gave a number, but if you try to work out on the chart, it is less than SEK 100 million, yes. That will mainly come in the second half, Lena. It won't be in the first half. The first half has really been more about planning.
It's very hard to hear you. There's an echo when you're speaking, so it's very hard to hear.
We said roughly SEK 100 million this year, and that will build up during the year, but mainly in the second half of the year, in Q3 and Q4, are where those benefits will come through. In terms of how do you view that SEK 1 billion benefit between now and 2018, we're basically aiming to get SEK 1 billion. SEK 900 million will come from lower OpEx relative to our 2014 cost base, and SEK 100 million will come from higher revenue. As I explained earlier, it's 90% OpEx base and 10% revenue base.
Say then, just to understand for comparison reasons, you have an OpEx base in 2014. Assuming you would then have flat revenues, your OpEx base in 2018 should be SEK 1 billion lower net.
Yes, exactly.
All the revenue growth on top comes with additional OpEx.
Yes. How we are modeling it is we have our own five-year plan. There was a five-year plan before the Challenger program that starts in 2014 and went all the way through to 2018. That SEK 1 billion comes out of that new plan, that base plan. It's a real SEK 1 billion benefit to the bottom line relative if we had not done the Challenger program.
Okay. Also to understand for this year, your OpEx base is up, I think SEK 640 million so far in the first half of the year. Do you still expect your OpEx to be down net this year?
The SEK 100 benefit is offset to what the underlying growth was going to be anyway. The SEK 100 billion benefit was always within our SEK 5.8 billion-SEK 6 billion guidance range. We already knew that we had an underlying increasing cost base because of expansion, and that SEK 100 million is coming out of that higher cost base. Year-on-year, our cost base will still go up because of our expansion, particularly in Netherlands and Kazakhstan.
Okay. Also one final question then on data per user in Sweden. If you could say how much the average data usage is up versus the last quarter.
Hi, Lena. Mats here.
Thank you.
Up significantly. We are now on an average of 2.9 gigabytes. 2.2 in the first quarter, fourth quarter was 2.0, and now we're up to 2.9 gigabytes. That's a hefty uptake.
I think you had one last question on the Netherlands launch, Lena.
Yes.
We've obviously not announced a launch date yet. I can't give you any guidance on launch costs either.
It's not included in this full year guidance?
We haven't announced a launch date yet.
We'll have to come back to you on that, Lena.
Thank you.
Okay. Thank you, Lena. Operator, do we have one more question?
Yes, we have another question coming in from Mr. Henrik Herbst from Credit Suisse. Please go ahead.
Thanks very much. Just going back to Swedish Mobile, I was wondering what you're seeing in terms of migration of customers on your new Tele2.0 plans, or are you seeing a lot of customers from three gig going to five gig, for example? A little bit on the trends there. Then also, now you've had the Tele2.0 strategy in place for almost two quarters. Is there anything in there that surprised you, also with your doubling of data on the Comviq brands? Then secondly, on Swedish EBITDA, I guess some of the impact is low subsidies. Can you also give any color on what's going on with working capital in the Swedish business, and maybe versus what was happening a year ago, if possible? Thanks very much.
The first question on Swedish Mobile and the migration of our customers to the bigger buckets, that is for Mats. Then the Swedish EBITDA development and specifically working capital, that is for Allison.
Good. I can start, I will try to answer a little bit or elaborate a little bit more on the Tele2.0 also. On the mobile side, it's still too early to see how customers are migrating back and forth. The big bucket launch, we did that in February, we are only a quarter and a half or so into it. What we can see is that the average, again, it's fairly boring because it has been the same all across, that we tend to use roughly half the amount of data that the bucket size is. 50% of the five gigabyte bucket is being consumed and roughly 40% of the 20 gigabyte bucket is being consumed. We also know that roughly 30% of our new customers are opting for bucket sizes bigger than five gigabytes. It's 20, 50, and 100 gigabytes.
It's roughly 30% in that category, 70% is opting for five and half a gig bucket size. On the Tele2.0, I think we are experiencing pretty much what we anticipated. Again, I would like to highlight the fact that net promoter score and consideration is taking a short turn upwards. That is unheard of if you go back in time. We have always been struggling. We've always been very strong on the perceived price leadership, but not so strong on the consideration net promoter score. That is changing dramatically with Tele2.0, and that's exactly what we wanted it to do. We are becoming more of a value player, not only a price fighter, but a value player as well. I think the strategy is paying off.
We are seeing that consumers are choosing us for the right reason, the reason is a fantastic network, freedom to choose, and freedom to return if they're not happy with our service and not being locked in for 24 months. I think we just need to be patient and continue this journey. We are changing the industry in Sweden, that needs to take some time. We can also see that data is being consumed at a larger pace than what was there before. Our large bucket initiative is a way to respond to that craving for more data. 2.2 in the first quarter now up to 2.9 gigabytes, that's a hefty uptake. I wouldn't be surprised if we continue to see an uptake of 15%-20% quarter-over-quarter or so. It's going to be a great run.
We need to position ourselves to continue to be able to monetize the data. Over to you, Allison, I think.
Yeah. Hi, Henrik. Swedish EBITDA, as I explained, mobile is up 8%, very much driven by continued lower expansion costs, the higher revenue is being offset by increased network costs as a result of our geographic expansion. At total level, we're up 3%, that's because we have continued declines in our fixed telephony business, we also had a small one-off last year. The footnote case, I think, is referenced in the notes to our account. Regarding working capital trends, the Tele2.0 launch had two impacts, but just timing impacts on working capital. Basically, we moved to billing in arrears instead of previously billing in advance so that we would become in line with our competition and our peers. That's one impact.
The second impact, as a result of decoupling our handsets from the monthly subscription, we now have to pay the VAT on the handset up front rather than paying it over the course of the contract, which has always been a bit of a delicate thing for the tax authorities anyway. We now just pay the VAT right up front on the handset.
Okay, thanks very much. Just if I can follow up, Mats, on Swedish mobile and net promoter scores. You're saying that churn is coming down. Can you give any numbers on churn, what churn trends are in Swedish mobile, please?
No, I don't think that we give that out. It's very much in a positive trend. Sorry for that.
Okay. Thank you.
Okay, operator, do we have another question?
Yes, indeed, we have. This question is coming in from Ms. Johanna Ahlqvist from SEB. Please go ahead.
Thank you. Yes, two questions from my side. First of all, if you can have the post and prepaid split in Swedish mobile, you report a net intake of 52,000. If you can say something in Sweden again on why you saw Comviq was so significantly better in terms of intake, and if that was a surprise to you, and if the reason is a migration from Tele2 to Comviq, or what is the reason behind this? Secondly, or thirdly perhaps, Kazakhstan, if you can say something what you expect in terms of the EBITDA contribution ahead, given the fact that we've seen Telia reporting stating that competition has intensified, and if that is your experience as well. Thank you.
Okay. The first question, the postpaid and prepaid split in mobile of the customer intake of 52,000. Mats will take that one, and then also elaborate on why Comviq have a bit of a stronger customer intake, and if there's any migration issue there between Tele2 and Comviq postpaid. The third, that is Allison, sorry, and then Kazakhstan, our view on the EBITDA development is also Allison.
Yeah. I can comment maybe a little on Kazakhstan on the telemarket there.
Yes, of course.
Okay. The postpaid, prepaid, hi, Johanna. I think you can say that two-thirds of the intake comes from postpaid and one-third from prepaid. If you combine postpaid and prepaid, out of the 35 or so, 20 plus thousand comes from postpaid and 14 or so comes from prepaid. We do not think that there is, and then back to Comviq then, why they have such a strong on the lower segment, why that is the case. We do not think that there is a huge cannibalization from Tele2 postpaid to Comviq postpaid, but rather a migration from prepaid into postpaid. This is something that we encourage. We do want to have a longer-time relationship with our customers, so not only a prepaid relationship, but also have a longer-term billing relationship. That is something that we welcome.
Just 2 seconds then on Kazakhstan, I think we concur with what I heard you said, that the market in Kazakhstan is now becoming fairly bloody. Previously, we had a price war between us and Altel being the mobile arm of Kazakhtelecom, and both of us are very clearly the price fighters. As you can see in our numbers, we've had a very strong customer intake, and we have been anticipating a reaction from both Kcell and Beeline, and that is now the case. They are also joining in on the price-fighting activity in Kazakhstan. This will subside after a while, but it's going to be most likely during 2015, a continuous fairly bloody market. Now we are fairly well-positioned. We are a very cost-conscious setup in Kazakhstan, still it's not going to be a brilliant market.
We're coming from a very different base from Telia, from a cost ability point of view anyway. At today's pricing levels, and market share levels, we can start to generate a positive momentum in EBITDA. With the FTR cuts that are due in 2016, that will make that EBITDA contribution even more. Obviously it's very dependent on what happens in the marketplace, and whether if pricing was to come down further, then obviously that would be a challenge. We've not got much to lose there when you're generating such a small amount of EBITDA.
No. With experience from other markets, these price wars, they come and go, and after a while, everyone realizes that it's really not that fun anymore, and then everyone stops. It's important to note what you said, Allison, that the termination rates will go down from the 8 tenge as we have today, down to 5 tenge, in 2016. That's going to have a positive impact, obviously, on our EBITDA.
Thank you.
Okay. Do we have another question before we go into questions asked on the web? We have a final question. Operator, please.
Yes. The final question is coming from Mr. Sam Dillon from RBC. Please go ahead.
Hi. Thank you very much, guys. Sorry to press the point on Swedish end-user service revenue growth. Perhaps you could give us the prepaid, postpaid revenue split or even a high-level guide so as to make it easier for us to forecast what prepaid revenues are doing versus the postpaid growth of 6% you mentioned. There was a question earlier on top-up revenues. I think there were SEK 27 million in 2Q 2014 and SEK 38 million in the prior quarter. It would be great to get that figure for 2Q 2015 as well.
Okay. Thanks, Sam. Both questions, both the Swedish mobile end-user service revenue development for Allison, and also the second question on the top-up development for Allison.
Yep. Okay. Postpaid revenues in Sweden were up 6%, and prepaid revenues were down around 5% in the quarter. Top-up revenues were up 7% to SEK 28 million in the quarter.
Okay, wonderful. Thank you very much.
Okay, we have some further questions. Terence from Morgan Stanley. First question is, what are Tele2's plan for fixed broadband and TV in Sweden when your comps start to push triple and quad-play more aggressively?
Yes, should I take that one?
Yes, that's for Mats. The second question, what are your expectations for EBITDA losses in Dutch mobile for the full year as Q2 losses were lower than in Q1? That is for Allison.
All right. Almost the same.
We have a third question from Terence, do you have any update on core versus non-core assets, whether you have any news on potential disposals in Austria and Germany? That is for Mats.
Yeah. The quad-play discussion in Sweden is not very high on our agenda, we don't see many or much movement either in the marketplace. With our 4G capabilities, we believe that we can handle the fixed broadband threat, if you like, through our Wi-Fi router on 4G. If this becomes a real deal breaker, i.e., that we just have to have a quad-play offering, let's say Sweden will go the same direction as Spain or France, we have plans in place on how to handle that. There are plenty of fixed operators that we can either team up with, acquire, or buy capacity from. We don't feel a need now to do a move from that angle. It's more important for us to continue the geography build-out on 4G up to 90% geographic coverage, for instance, and continue to intensify the higher density of the network.
When it comes to the disposals or acquisition of new countries, I think we are right now, as I've said before, fully booked. We do believe we need to focus on Kazakhstan and Netherlands. Also to continue to foster good climate here in Sweden with the value chain. We're not actively looking for new countries to go into. As we have said as well, Germany might not be as core anymore as it has possibly been before, and we have taken some redundancy costs out there and starting to become much more cautious when it comes to aggression and sales in that market. I think you had a question.
Yeah. On the Dutch mobile office, I think you can expect that Q3 and Q4 will more be aligned to Q1, because there will be a point that we'll start to increase the expansion cost and subscriber acquisition cost again.
Okay, thank you. Now that we take the last question. This says, "In the Netherlands, who are you losing customers to on the fixed-line side?" That's the first question. Mats, would T2 be pushing VULA high-speed services more aggressively than before?
Yeah. In Netherlands, on the mobile side, T-Mobile lately has become more aggressive. That has subsided in June, but they were very aggressive previously in the quarter. On the fixed side, we are losing customers to literally everyone, and to KPN and to Ziggo. When it comes to VULA, we will be more aggressive on pushing that going forward. This is, however, quite far out in time. The contract is not in force until 1st of January of 2016, so we need to pace ourselves a little bit. We're going to primarily use it as a retention tool in the beginning. We do want to have customers on our own network as long as we can, since we are enjoying a higher margin on that network. It will be over time migrated over to VULA, where we will have higher speeds and a significantly better coverage.
Okay. This will conclude the conference call for the second quarter. We will release our results for the third quarter on the 21st of October. Thank you all for participating in today's conference call, and have a very nice summer.
Thank you so much, everyone.