Earnings Call: Q2 2018

Jul 20, 2018

Good morning, ladies and gentlemen. Thank you for standing by, and welcome to today's Interim Report Q2 2018. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Friday, July 20, 2018. And in a moment, I will hand the conference over to your speaker today, Andreas Jolson. Okay. Good morning, everyone, and a warm welcome to Solna and Stockholm. Warm as in very warm weather that we have had here for the last month or so. Today, we are going to present our Q2 results, and we're also going to present another M and A deal. So we're going to have a slightly different structure. Johan will come up first with a few remarks on the Q2 report. Christian will go through the report in more detail, and then Johan will come back to discuss the Vonir acquisition that we announced today. We will have this meeting at 1 hour and 15 minutes sharp. We hope we will leave enough time for questions for you all. Johan, welcome up. Thank you, Andreas, and good morning to Lanthe and Soma and also all of you out there online. It is indeed a hot season, and this week has been a remarkable week for Telia with 2 milestone deals and a Q2, which I'll also try to get your attention on, even if I think you're more interested maybe in the deals itself. But really, when announcing 2 such big deals, it's very, very comforting to deliver a strong Q2. Our cost program is on track of meeting the SEK 1,100,000,000 net savings. We are at about SEK 700,000,000 for the first half year. So full comfort on the cost initiatives that we have ongoing. That has resulted in all markets reporting EBITDA growth, and we're at 7% reported, and about 4% organic. So very strong performance across the board on delivering on our key priority. This, of course, leads to an improved cash flow as well. So year to date, 6 months, we are at 12% cash flow growth, which is also, of course, extremely important given our ambitions to grow cash flow over time. This leaves us Q2 at a leverage of SEK 1.14 billion, which is, as you know, way too low and then liquidity about SEK 46,000,000,000 at hand. And this is comforting when we look for value creating deal, which we believe strongly we have found in 2 sweet spot strategic deals that we've been talking about for quite some time. It's become as no surprise as we have talked about our ambitions to get our hands into the value chain and produce better content, and I'll come back to that. The GET acquisition in Norway, NOK 21,000,000,000, the Bonnibel Castings deal at SEK 9,200,000,000 with a additional amount of maximum SEK 1,000,000,000, which we'll come back to later. So that's the highlights, and this is no small highlights. I think they're all the third time in itself. But let me start with, I think, what is really, really key for us here. We see a much stronger emerging Telia company after these acquisitions. And why do I say that? 1st of all, they are bringing cash flow and earnings straight away. More importantly, they're also bringing strong synergies when the deals are executed and have the run rate up and running about 2 years after the closing of the deals. That's SEK 600,000,000 each on the deal on the EBITDA side, so EUR 1,200,000,000 EBITDA improvement per year from synergies volumes and another EUR 100,000,000 on the CapEx side, which is coming from the GET acquisition. The net debt to EBITDA effect, immediate effect pro form a bank gives about EUR 0.7 for the GET acquisition and about 0.2 for the Bonnier acquisition. But with the run rate synergies, we also deduct or improve the EUR 0.1 per year just from synergies. So the combined pro form a, as you see, is a comforting EUR 3,500,000,000 improvement in EBITDA and EUR 2,700,000,000 on Ibera Minis CapEx. And also, we talked more about the net debt to EBITDA effects and the leverage effects further down in the presentation. But maybe the most important message on this slide is at the bottom. Our balance sheet target that we have announced through this thing and through the years and the shareholder remuneration that we have announced are fully intact. So we aim to grow dividend over time. We will deliver on our both buyback program, the 3 year program with EUR 5,000,000,000 per year, we will do that. And our leverage target is important to have to keep an eye on in order to keep our rating. So these are metrics that we fully stick to and are fully committed to. So just keeping a recapping on the guest acquisition that we announced on Tuesday, very much in the sweet spot, as I said, getting into broadband and TV in our 3rd largest markets up to now, which will probably go into 2nd place in size. It is a very strong best in class stand alone operation with both when you look at the expertise, the technology, but also the cash conversion that we see in this company. And I'll come back to some growth potential on GET. It is financially accretive, as we have discussed, and strong synergies coming through. I won't go through the details of the numbers here. You can have a look at them if you didn't catch that on Tuesday. But a few words on the fact that this is not just the gift side of the business, it's also the P2C business or enterprise side of things, where we have a perfect match to our existing TAVR from Aero position in the B2B space on mobile. So we aim, as we also said before, to drive convergence in the enterprise space, and we believe we can add strongly to the C side in bringing that faster to a turnaround in on the revenue side. And that is seen on the next slide where we break up Gethco and TD3 for you. The TD3 side has struggled with decline and the same reasons that we see in Sweden and Finland, and we believe we can help stabilize the enterprise side by the combination of mobile portfolio. We also believe strongly in the growth to continue on debt. They have been in growth territory for the last years, and they have all the prerequisites needed to continue to grow. They have just been through a large transformation, are being in the tail end of their own transformation, and they're just upgrading the speeds of the coax and the technology to be able to offer gigabit sheets in the footprint to the customers that demand that. So with the unmatched churn levels, industry leading churn levels that you see in Get, we believe there is very good room for growth in the Get stand alone. And you have the numbers on both broadband and preview to the right. And then, of course, adding the capabilities that we come with on mobile and brand and distribution, we have a perfect match and strong list synergistic with EUR 600,000,000 EBITDA per year. Let's spend a bit of time on quarter 2, the operations, and Christian will take you more through this. But I think I want to leave you with a couple of really important messages. We are in growth territory in EBITDA. We have been through a couple of quarters now where we have produced profitability, mainly, course, driven by our cost ambitions and cost program. We do still struggle with service revenue across the markets in where we had legacy portfolio. And the fixed and the B2B side is still weighing heavily on the growth side of service revenue, and that's why we still remain in negative territory. But this will not last forever. And we are working tirelessly to come through the transformation and make sure that we bring the customers into new solutions. We will ease the pressure on the legacy decline and that will leave room for growth going forward. Cost program, I mentioned briefly. It's nothing really breaking on this slide except that we are giving it up per country. And Sweden, of course, is a big chunk of the savings. They started their cost initiatives earlier, as you remember, last year. And this year, we continue doing that. In this whole mix of costs, which is all costs, not just the OpEx side, this is also including the COGS, the OpEx is strongly down, and I think we're down 9% in OpEx in Sweden for the quarter. So it is a strong execution from the Swedish team in balancing off the cost and while investing for growth in the business. What is pleasing though is if you look at the mobile side across our markets, we do have growth on our side. And I think it's really important to see that we focus the eye on bringing value to customers that they could pay for. And so far, that is paying off. On the service revenue growth side, we are still at growth, but of course, this includes both consumer and enterprise. But for Sweden, for instance, we are mobile growing 5%, but decline in legacy leads with the total growth on service revenue in mobile and Sweden of 2%. But that's looking across the competitors, pretty good. We're beating some of our key competitors on service revenue growth in the 3 d market. We're not dropping the ball on our strategy. We are integrating the sustainability into our business. We had very exciting discussions over the summer how this is impacting our agenda going forward and how we are integrating all the initiatives around UN SDGs 2030 into our business. And it's starting to get a lot of attention in investor communities. So we will be speaking more about this as we move through the year end of 2019. A lot of attention, which is good. Leaving you with my last slide. Outlook is unchanged. That's all I'm going to say. And we reaffirm the improved cash flow from last quarter that we guided up, and we are going to be above BRL 9,700,000,000 with the free cash flow. So let me then sit down for a while and leave Christian a few minutes with you, and then I'll come back for the acquisition of Bonnier. Thank you, Johan, and good morning, everyone, and welcome to my session. I'd like to start with saying that this is another solid quarter, and we are delivering on our ambitions. We have said clearly we want to grow our EBITDA. We want to grow our cash flow. We want to make acquisitions that are accretive, and they should add to that development and integrate them probably into our business. And I think we have done that, and we show that in our last 4 quarters results that we are achieving our targets. We have in the I'll find the slides here. We have in the Q1 a net sales that goes up, so that is driven by the equipment sales. This equipment sales that we see on this picture is primarily the B2B equipment that we sell to larger corporates, low margin or no margin ICT related equipment. And in addition to that, we have a decline in service revenue, and that decline is in most transit. Part of that service revenue decline is transit revenue, and that transit revenue is in Lithuania and in carriers, and that has pretty much no margin as well. If you take that away, the decline in service revenue is pretty much half of the 2.3%, so around 1.1% decline in service revenue. EBITDA is very positive and developing in the way we want. The organic growth is close to 4%, and we have 7% both on half year and on the second quarter. It was a little bit higher in quarter 1 and around 6.9% than in quarter 2. We do have the cost effects that we are driving coming through. And we also, of course, have a good momentum in the revenue side, which have come in through on each country. The SEK 700,000,000 cost reduction, as Johan talked about, is half coming from Sweden. It is primarily for the group in total, SEK 700,000,000 coming from resource costs, consultants and personnel. And the other part is the COGS side that is then related to network IT, etcetera. Those are the two prime reasons for the COGS production in this first half. If you look at Sweden, I will start with the most normal question that we have had for the last year. It's the fiber development. We have delivered in quarter 2 what we expected in the beginning of the year. So we have catched up a little bit in that sense, but it's still below last year. The OTC revenue is around 70% of last year at EUR 239,000,000. And we have guided, as you know, on a 60% to 90% revenue for OTC this year compared to last year. So we are within that range. And it still has uncertain as before, depending both on the permit side and but also on the delivery and weather side. When we look at the other metrics of Sweden, the service revenue on D2C is positive. The service revenue growth is in mobile in total, 2% and for the B2C area, 5%. And I think that's a very positive development. We have good intake in Q2 on Hable. Net on net, on the total consumer side, it's more flattish. We have increased pricing, and we have done things compared to last year that makes this growth happen. We also value added services that we talked about before, being pretty much half of this growth. The momentum in Sweden, we think, is good, and we will be able to capitalize that going forward, maybe at a somewhat smaller percentage. So the B2B side is a little bit weaker this quarter and it is effect of the price side. We have added some customers in this quarter. They will give effect going forward, but it is a competitive market, and we see that the price pressure is still there. And the 3.3% is a result of that situation. EBITDA growing 1% and then because of the decline in revenue, of course, is the cost management that is now coming through and it is an integrated part of the business in Sweden, how we drive our cost agenda. On Finland, let me start with saying on Finland that we have a competitive market. We see overall that the growth levels in mobile is declining. Even though we still have a growth in Finland, we are close to 1% in mobile growth. And the thing we do is that we do price increases. We are losing out a little bit on the subscription side, but that is something we have said. We're trying to actually use our capability to increase pricing because we believe there is an appetite for higher pricing. We are going to watch not what the consumers are saying, but what the competitors are saying about our price increases and how they react. We believe there is a possibility to grow over time in Finland if we do this right. And well, 2 things that we have tried to add then to do this right is the Liga coming in now in quarter 3. And the other thing is that we have acquired ourselves into gaming and esports with the acquisition of Assemblies. That is exactly the perfect match when it comes to digitalization and connectivity, and we will see how we can capitalize that also during the second half and into next year. On the cost side, it is not a significant year, it looks like. But you have to remember, we have acquired a lot of companies last year in the ICT area. And as we have a net cost reduction program, there's a national cost takeout still in Finland, but they're growing on the ICP side, and that net is becoming a flattish cost development. So rest assured, we are driving a cost agenda in Finland as well. On Norway, we have a solid growth on EBITDA, 6% organically and 12% reported. We have help of the currency impact. It is a enterprise segment that has a little bit lower customers year on year, but we actually added customers in the second quarter. It has been part of the transition of Fenero and others in, and we have worked with that and lost some customers on a year on year basis, but we are gaining more momentum now. It is a consumer market that is flattish for us. The R2 uplift is compensating for the expected loss of customers. And on top of that, we have an improvement in the wholesale revenue, continue to have a growth even though at the lower level. I just want to add on Norway as well on the number, the regulatory change, we have a special number that is impacted this quarter as well and will impact us up to on this regulatory change, will impact us up to the October trend where it is not to push down the pricing on our offerings. Baltics and Denmark. Baltics is like a speed train right now, and I think you see that in many aspects. In Estonia, we definitely have taken market share in all segments, very positive to see. In Lithuania, we are also doing a great job in taking customers and markets, and it is a very positive place to be right now The development is good, and there is more to come in this area. We can see double digit growth almost in both countries and good momentum in all areas. The Danish side, it's been tougher, of course, but they have done a good job on the cost side, and that has compensated for the revenue side. You can see here Lithuania having a negative revenue development, but it's all transit revenue. So without that transit revenue drop, it would have been a growth in Lithuania. So getting to the cash flow. We ended last year at EUR 9,700,000,000 in operational free cash flow. In addition to that, we should add the dividend from associates as we have an expectation on EUR 1,000,000,000 right now for this year. We are at the run rate right now, EUR 10.4 percent. We clearly said in the beginning of the year, we gave a guidance that the EBITDA plus the working capital and the CapEx will make the improvement and there will be a decline on the other items. We are on that path. Working capital will not be as successful in the growth rate in the second half, but it is a positive trend and I'd stay firm on my €5,000,000,000 that I believe we can take out in working capital over time. And we have good initiatives ongoing. And as I said before, we stay firm on the commitment over time, but there wasn't capital sometimes between the quarters just a little bit. So good momentum, and it's exactly as we have told you where it's going to come from, and we foresee that it will be the same in the second half. We started this year with the best balance sheet we've had in 10 years' time, 10th year, and we started this year with a net debt to EBITDA as one. And that is also a good base for how to use the balance sheet to do accretive acquisitions and still feel comfortable. I'll try to illustrate first on this picture the pro form a net debt to EBITDA, with the EUR 1.14 billion, we start here now. I'm sorry, I'll illustrate the EUR 42,000,000, $1,400,000,000 but also the breakdown of the net debt position. We have $46,000,000,000 in liquidity. It's cash at hand. It's short term, within 3 days, bonds that we can sell that we will use to finance acquisitions that we have made. The yield on that is very low. We have negative yield on some of the assets, and we have positive on some of them. And on average, we have around EUR 0.2 billion right now. And then we have a gross debt, which is EUR 83,600,000,000 and that we pay an interest on, of course, on average around 3.8%. And then we have funds, which is not included there, both some borrowing and some funds in Eurasia of a net SEK 5,000,000,000. And we will get that liquidity back as soon as we have finalized the sales of Kazakhstan and Uzbekistan and then can reshuffle that money back to Centro. We have also low refinancing levels this year and the coming years, which gives support to how to handle the debt side of the company. Here is where I then try to illustrate a pro form a of what we have done. I want to start to say that it's a rounded number. If you look at some of these, you say it's the same number for 2 different amounts that you know. But we have decided to show this picture with rounded numbers because in the end, everything nothing will be exact anyway because it depends on the timing and it depends on the EBITDA at the time. And therefore, this is to illustrate that with rounded numbers how we look like at this. We believe solidly that we will be within our 2.5% range doing these acquisitions, keeping the buyback program and our dividend policy. And with the if you take this 2.2%, what we have here including GET, we have illustrated in the cash flow from the operations. We're not giving guidance. So here, we have put in the last year's performance on cash flow, the SEK 9,700,000,000. Percent. So if we would reach the 9.7 percent, what will be the pro form a for this year? And we have said, of course, that we will be above that, but that's up to you to make a judgment what you think. And then on top of that, we do an acquisition of Bonnier Broadcasting that we then have also said that we will say later on, you all will get into that, will come in not this year, but probably in the second half of next year. And then we have cash flow generation from these 2 units, GET and Donner. In addition to that, you, of course, have the buyback program, and it shows that we are still within the SEK 2,500,000,000. We solidly believe that we can do all this within the SEK 2,500,000,000. And then you add what you think is the operational cash flow less dividend for the group. We also feel comfortable about this because we get a more diversified group. We get a strong cash flow generation from the acquisitions on top of that we already are a strong cash flow generating organization. And that has been important our view on handling this situation. Yes. That is everything from me. And Ali, do you want to talk a little bit about it? Yes. Before I head into the acquisition of Bonnivolta, can I please ask all of you online to mute your phones because apparently, it's very noisy online? So thank you very much. So pioneers in bringing true convergence into Is it a selling line now? Once the first of its kind, we hope it will go through. And the valuation of multiple companies. They just got the numbers here. The strategic rationale is to be clear. We have talked about content being very important part of our offerings for consumers. And I will explain why in this case, it makes sense to also own and offset the contract. And exposed to same trade. The value of the deal, as I said, SEK 9,200,000,000. And then there is an additional amount tied to the performance between signing and into mid next year. So making sure that we have a performing asset when we close the deal. This is the multiple that are more relevant for this type of business that has no CapEx. The EBIT multiple is around 7 when you include the synergy. 17 now. The financial effect, it is I'll show you soon. Cash flow accretive as it comes in because it generates cash flow. But more importantly, it also will bring the opportunity for synergies, which I'll also take you through in more detail. And as we pointed out in the previous presentations, the balance sheet impact is EUR 2.2 on the net debt, and we're using cash in hand to fund this and pay for this. There is condition for this to be closed. It is going to be a process that will take some time. It is the first vertical integration to be viewed, and I'm sure there will be a lot of discussions and opinions on this that we will the rationale behind this deal, why it's good for consumers in the markets that we're in. And that would probably take into second half of next year. Since we can't buy what we cover. At the moment. So we think this is redefining the industry, and it is with the customers in focus. We have, as you know You want me to buy a full subscription, but that's actually Your strong base that we can offer more to with the services that we now will be acquiring. And content is a scale gain. So largely, content is fixed. But the larger base you can amortize it on or sell to, the higher, of course, the user leverage will be. So there, I'll also come back and show you the scale effects that we see coming. And again, it is earnings, cash flow positive day 1 and the run rate synergies we'll take you through. The one question that I think has been hanging out there and I've been getting a lot from you while talking about this is why do we have to own Comfort. And you don't have to, but in this case, it makes sense, financial sense. It is getting increasingly difficult to give the customers what they want on their terms. The customers today want to see premium content, local but also international, anywhere, anytime, anyhow, on any device. And there are restrictions to that today from the content owners. We can't give our customers what they want, where they want, when they want at a reasonable price. When you now get content, and that's moving to the 2nd box, we are part of the media value chain. It means we are at the table of the content negotiations with content ourselves that we control and that we can deliver to the customers on their terms, not just to our customers, to all customers in Sweden. This also gives us the opportunity to barter content, which is a common thing in the industry. So it's a ticket to play, and we are acquiring what we think is the most skilled TV crew out there. And of course, we believe this still will enhance the customer experience with all the data analytics and insights that we have of our customers and that the Bonnier Broadcasting team has on their customer, the combination on the customers' terms when opting in, we will be able to deliver a lot more tailor made offerings and unique offerings that will enhance the TV experience. This we can do when we own the content. It's not necessarily the case when we buy content. So that's why we like, in this case, to buy not just the content, but the competence also going into this value chain. Let's take a look at what we're acquiring. Omnia mainly consists, if you want to simplify it, of 3 things. It's the PV4, it's the C More and it's the MTB in Finland. The TV4 is the number one commercial broadcaster in Sweden. It has the commercial share of viewing of about 38%, 40%. It's a wide range of formats and very popular program, I'll show you soon. And it's bringing entertainment to millions of Swedish homes every day. C More is the fastest growing SVOD service in the region and is very much in a turnaround situation after merging C More and TV 4 play has started to pick up momentum in the very, very interesting local content, domestic content, series, dramas, space. We believe strongly that Seymour has a potential to grow into the future, and I'll show you that briefly soon. And then MTV, number 1 commercial broadcaster in Finland, also a strong commercial share of viewing and is a strong brand in the Finnish market with also a see more like SVOD, which is also well positioned for growth in a local content context. So very strong portfolio of not just technology and skills, but also formats and content. Little bit more on us. We have we shouldn't forget that we have we're a leading TV distributor. We have been awarded the best TV platform and most happy TV customer for the last few years. We have the best network. We're the P3 leader in Sweden and we're side. And we're investing heavily to bring even better connectivity to all our users. Of course, perfect to bring also more of TV into the users. And we're growing our TV base across the region. We're coming closer to 2,000,000 homes of our TV stock. CV4 in a bit more detail. I think this is a really important slide even if it's a bit busy, but let me try to walk you through it. 1st of all, very attractive content. Out of the 10 most watched shows in the commercial TV space, they all come from TV 4. You cannot ignore TV 4 if you want to have broad reach in the TV space. And no, the linear TV is not dead. In the contrary, it's growing. And TV4 is very well placed in a growing market where they have taken share. As you can see at the bottom of the slide, there is a growing market share. On top of that, it's also seen that this position brings growth. There's only 1 year where TV4 has not been able to grow the TV ad ad revenues. And that's the crisis here in 20. After that, it's been growing or flat and now back to growing. And that is a very credible strong position. And at the bottom, you can see the fact that the domestic Aboard is growing faster than the international ABL. That's important because here, TV4 is very well positioned, 60% larger than the 2nd largest player in ABL, is TV 4 Play. So again, very well positioned in the transition from old to new and can control the pace to some extent from old to new. And this gives, of course, cost control and leverage, as you can see on the right, growing revenues and actually getting costs under control, which is the key formula for the results that C4 has produced over the years. See more, not going to disclose the details of the numbers here because we don't own this business yet, but I can show you some trends. C More, after the reshaping of the new strategy and the new leadership with 1 person leading both, has really kicked off the growth pace on SVOD. There are 700,000 of customers on C More, and they're growing with several 100 users today. And SVOD outpaced the TV, the pay TV market in Sweden right now. It's growing at 16% versus the pay TV market at 1%. And again, the pay TV market is much bigger, of course, but the growth is faster in SVOD and CV4 is very well placed with the balance CV4, CV4 Play and C More in the Swedish market to capture this transition and the growth. Moving to Finland, slightly more challenging market, but same trends underlying where you see ABOB market growing 12%, while LINE Air is declining slightly. But on the SVOD side, gaining momentum, strong growth from lower levels, admittedly, but still the trend is there and the company MTV, with its platforms are very well placed to take part of this growth with the portfolio that they have and recently acquired as well, strong portfolio of content. And adding that we have some content as well in Finland since recently, I think it will be a brilliant combination for consumers across skidlock to watch hockey and Formula 1, for instance. Briefly on the numbers. We understood from rumors and speculations that this was a leading company. It's not. It is actually turning around. It's generating EUR 600,000,000 on the rolling EUR 12,000,000 on EBIT, and you see the breakdown per company. CB4 is clearly the profit generator and cash flow generator, but C More is in a turnaround and has turned and starting to build momentum on that growth, while MTV is still to come to the point where we can say it is has hit the turnaround corner. But I'm sure that we will see that through the year as between signing and closing, but also with the fact that we come in, we'll be able to bring more oil to the engine, so to say. Cash flow is around EUR 300,000,000, rolling 12,000,000, and it's a working capital difference there on the negative side that makes the profit that goes up not following through all the way to cash flow. I'm sure we will be able to take a closer look at that as we take over this business. Synergy side. I know synergies is difficult to bank, and I know that this is a discussion we will have in detail how we aim will connect and produce these synergies. But we have done tons of work. We know this business. We know our customers. And we are very committed to these synergies in the teams that we have, and we will our mission is to convince you that these synergies are real and will come through. Whether you put it in the spreadsheets or not at this point, it's up to you. But if you want to trust us and the fact we have delivered on all the synergies that we have had in all our deals so far, then you should put it in. It comes from maybe 3 buckets. One is enhancing our core, one is selling more and see more TV for play to our base and one is from cost. Smallest, yes, from cost, about EUR 100,000,000 that you should easily be able to see and count on. The fact that we will use C More and CD4 Play and sell that in our this is an example from Sweden, in our marketing machinery in Sweden and our big investments that we have in online and retail, we think we can sell more of C More and 3v4 Play to our 6,000,000 customers in Sweden. We have an invoice relationship or a paying relationship, billing relationship with 6,000,000 customers in Sweden. So we feel very comfortable that the EUR 150,000,000 of revenue synergies only per year is coming from this. We feel extremely confident about that. Then it's about enhancing our core, which is, yes, a bit harder to be tangible on. This is probably where we need to prove you before you put it in, but we feel also very strongly about this. It's about making the offerings more unique, making the offerings of the TV experience better through the content that we now can package the way we want and sell it to our customers when they want it, where they want it and how they want it on any screen. That we can't do today. So we believe we will enhance the TV experience for our customers. And we know for sure that when a customer in the TV are footprint in Sweden, they have broadband and TV, the churn is about 5 percentage points lower. So the TV business is very important for our broadband business, which is very important for our overall business. So by having a TV services even better and undoubtedly this will be a better to experience, we will be able to keep this distance of churn or even improve this churn. That is something you should trust us on. So all in all, EUR 600,000,000 will come through full run rate after 2 years of closing. And I we will keep you posted on this as we go along, of course, if we see more and more of this comfort coming through. So summarize synergies, it's really it's going to be stepping up the synergies. We also have an integration cost that you should put in. It's about EUR 200,000,000 per year, the first and the second year after closing. And it's for integration of platforms, we also should be able to take out some of the cost synergies, but also creating the common IT and infrastructure to produce these services. Just repeating then again. We if we add Bonnier Broadcasting's total revenue of 7,400,000 dollars to the business and then we have the EBITDA of Bondyard Broadcasting's total revenue of Bondyard 1,000,000 to the cash flow that we have, running up with a combined pro form a. This is a simplified picture. Yes, it is. But it's just to give you a feel that you get the full effect of the run rate into the EBIT of 14.8 synergy run rate. And also on the EPS and operational free cash flow, we're moving from previous stand alone around 1.92 to 2.08 and the cash flow from 9.7, as we pointed out before, at least 9.7 to 10.4, adding the full synergies of 500. So this in all aspects, when we look at this, is very synergetic. The synergies are clear for us and very lined up for our management teams and ownership fully in the organization to deliver on. So we look forward to preview on this one. Process ahead is a bit lengthy, we think. It will take a year approximately or maybe more, as we say, second half of next year. And it will go through the 1st phase, obviously, and be reviewed. And then if the 2nd phase is needed, it will take another period of time. So we should expect this to be studied in detail. And I think that's good because what's happening now out in our space is not just the local competition. We all know about the global competition moving into the domestic space, and we cannot ignore that anymore. That Facebook, Google, Amazon are also part of Netflix, are part of a local context. And this is our position that we will put forward clearly into this process going on. But we'll keep you posted on the regulatory process as we proceed. So summarizing this deal, we think it's a great combination. We think it's value created. This is because we are convergence believers, and this is true convergence going deep where we deliver what the customers want, and we are part of shaping a new industry, which is changing very fast. This gives us the chance to really be part of influencing this going forward. I've showed you that it is a strong solid stand alone business that is turning around. C More is improving and TV, we think, will be improving and TV4 stands strong in a very solid position in a cash generating position. When it comes to sizable synergies, so this is our proposition, and we're very happy that we could bring this to closing today or signing at least to deal. And then with the other deal we have talked about this week, it has been a great week for Telia. And as a finishing comment, I would say, we remain fully connected to our early communicated capital allocation plan with the buyback, dividends, as Christian was pointing to. Thank you very much for your attention. We took somewhat longer, but we still have time for questions. So I'll welcome Andreas and Christian back up. And we also have later here our Swedish CEO, Anders Ouson, available for questions as well. Very good. Thank you, Juan. And now everyone that should be muted are muted. So we do apologize for that. Very annoying, but now it's better. We'll start with some questions from the floor. Robert, please. Thank you very much. Robert Schall from Handelsbanken here. Just curious on the Bonneville housing deal. What's the initial indication from your main owner on the view on this purchase? I guess we've seen some negative comments a couple of months from the Swedish government on this. And also on the same on the Bonn and Broadcasting deal, the need for to spend more money on content in the coming few years to kind of beat up the premium content offering in the joining TV business? Thank you very much. Thanks, Robert. I will not go into commenting on the main owner. Obviously, we have done a thorough review of the prospects of getting a deal through the competition clearance process. And we launched this deal because we think we will get it through even if it's going to take time. And we believe this is kind of value created for all our 500,000 shareholders, and that's up to us to deliver that. When it comes to the investments in the local content, as I said, local content is very important today for the SVOD side of things and the local the TV business in the country. Is not going to be less important going forward. So already today, Bonnibel County is investing heavily in the domestic local content and we will continue to do that. So how much and how that goes, that will, of course, come back to when we take over this company. But everything we do is about investing in good business cases. So every investment we do, for instance, in content in Finland is value created and we're prepared to do it. So we'll take it case by case. Stefan? Yes. Following on there, Robert ended, on content and what's right, how do you view on the broadcasting Sports Rights portfolio, especially considering that they will lose unsound gun Sports Rights? And have you considered how that will impact the C More business in this turnaround phase? Secondly, both Seymour and MTB have struggled for a number of years. What makes you better positioned to turn around these operations than what Vonir has accomplished? Thanks, Stefan. On the spot chart for C More and VIVIZ 4, yes, we know what the existing portfolio is. We know the length of these contracts. And obviously, the Alfvenska and the Swedish Football League lead the portfolio in a couple of years. And the strong right of FHL, Swedish Hockey, is still there. So of course, when you have sports content as part of your portfolio, you have to have sports content in some shape or form. So it's very important that SHL is part of Seamore going forward. But as I said, local content, domestic content for series, dramas and other type of formats is going to be even more important for Seymour to continue its turnaround that is on. So we feel very comfortable about both the content knowledge and competence and the portfolio and the opportunity of investing in other assets to keep going on this turnaround. And that's to the second question, why we would be a better owner or we can turn this around. First of all, they are in themselves in a turnaround situation. And let's see how they continue to do that. They're on a good trend. C More is on a good trend. MTD is still fighting to get to the positive momentum. So we think when we hand over the when Vonni hands over Vonni Broadcasting in a year or so, I think we will be in a better space than we are today. And then we come in with our very strong distribution, with our broader portfolio, That thing we as I showed you in the synergies slide, we'll add to these businesses, making them even more profitable. So we feel comfortable about the to turnaround as is and the synergies coming. Good. Can we have a question from the conference call? Certainly. Your first question comes from the line of Peter Nielsen. Please ask your questions. Thank you very much. Thank you. Johan, it seems it's quite clear also from your presentation that the Bonnier Broadcasting content is sort of focused on Sweden and Finland. You've obviously just beefed up materially your TV exposure in Norway. How do you view that? How can you capitalize on synergies related to content in Norway as well? Should we expect, as you're indicating, that there's more to come in terms of acquiring content? And then just secondly, please, there are some signs in Europe and the U. S. That the TV advertising market is in decline and has peaked. Are you concerned that you are perhaps acquiring this asset at a time when the advertising market is peaking? Thank you. We have just announced to be in Norway. That's going to pass through competition clearance, and hopefully, we'll be the owner there towards the fall. And then we have just announced this deal today with Bonnie Brosnan. It takes some time to get back to. That's our focus now. We don't have anything else on the later on the bigger scale of acquisition. We're going to make this work first and then we'll see what we need to take us further from there. As Christian pointed out, we're now on the upper side of our range for net debt to EBITDA. It does not leave room for big acquisitions anymore. We're very clear to that because we are now also delivering on our buyback program and our dividend. Therefore, these are the 2 big acquisitions that we'll talk about for the next few years. We're not we don't have anything else on the radar. And can we then compete in the Norwegian market? Yes, we believe so. Get this very strong, strong distribution, strong presence, strong brand and still the market there does not, in our view right now, require us to own content. So there we can continue to work like we have done in Sweden for the last 10 years and Finland for the last 10 years without owning content. Then we have the TV ad market. Right. The TV ad market is, as I pointed out, I don't think we should expect the commercial TV market to grow fast. It is in a different shape now, but people that say that, that's a dead market alone. This is a market that is very, very healthy. And actually, as I showed you on a slide, growing. Where I see before, it's very strongly positioned with 40% market share. So just the fact that the market is flat or slightly increasing gives the opportunity for further growth actually as we speak now. Of course, we don't expect that to continue. Our business case for TV4 does not include a significant growth. Rather on the contrary, over time, we, of course, understand that TV 4 stand alone will start to come into decline on the old side of the business, but it's compensated with the new OTT brands and platforms that we have. And the transition capabilities is in house going from old TV to new TV, but may say so. But we see it as total TV. Okay. Thank you. Good. Thank you, P. K. Next question, please. Thank you. Your next question comes from the line of Maurice Patrick. Please ask your question. Yes. Hi. It's Maurice here from Barclays. Thanks for taking the question. If I could ask a question about your results rather than Bonnier. In Norway, you cited increasing B2B churn, I think, on the Fanero side. Can you just talk a bit about what's actually happening competition wise on B2B? Is that just a natural phase of buying an asset and then some customers leaving? Or is there something more structural going on there? And as a maybe a couple of comments on you're seeing increasing competition from ICE. And just the last thing on Norway, on EBITDA, I think in the Q1, so your organic EBITDA didn't include the Fanero synergy, but I think in 2Q it does. Is that correct? Have you changed the definition of organic in terms of EBITDA in Norway? I'll start, Maurice. So we have now integrated Foneera into the business. That has been a big project where we have, of course, transferred our customers from other networks into our network. Some of those we have made sure that if we don't have coverage in that specific area, we will not claim we have it, and therefore, some of the customers have decided to leave us. But now we have also invested in the network even further, so we are more capable of dealing with this going forward. So the churn in the B2B base is relating to some of the migration effects. That's done now, and we're all set for growth again into the next phase of Telia Norway. Ice is nothing new. We saw some price activity on another player that rocked the market potentially, but everybody has kept, I think, the propositions out there without responding in a surprising way. So we feel very confident that we have a rational market also going forward. On the EBITDA side, Christian, or on the Yes. On the organic definition, there's no change to the definition. We consolidated Fronera in Q2 'seventeen. So it was not included in the comparison in last quarter, and this quarter, it is included in the comparison. Great. Thank you. Next question please. Next question comes from the line of Lena Osterberg. Please ask your question. Yes, good morning. Going back to the new broadcasting. I'm just I saw your synergies and what do you expect it to get out of the transaction, but I'm still not 100% certain what the acquisition brings you that you didn't have access to earlier without owning the company other than maybe that you can bundle things, package things and be more flexible. But if you do that exclusively to your customers, will you not risk revenues from some of the other players in the market, which contribute quite significantly into content broadcasting such as Com Hem, the pace also for that content and their services? And then maybe as a second question, we've seen in other markets that when telcos go in and start to own and pitch for sports rights as well, that content cost significantly increased. I was previously asked, I mean, a lot of the sports rights have expired, and you will have to buy more content ahead. So how do you ensure that not a lot of the synergies that you expect will go away in higher content costs? Thank you. I think I picked up both questions. It's a bit hard to hear that. Let me start on the synergy side and on the content is distributed, on what platform, when and how and to especially when you go from the Lanier into the OTT side. There are a lot of restrictions from the content base into the distributors. That will not be the case when we have the content on our own. That's a very important feature. And you also got at the table of content negotiations in a completely different way. Then another one is that when you are have the content and competence of Bonnier and the competence and insights of Telia, there's a lot of things that we can do to make the bundle snowflakes unique, not exclusive. This will be offered to all customers. But if you are a leading customer, there will be unique features that we can offer and we can make that experience better that we think will attract our customers to stay on longer or even join us quicker. On the content cost question, that is not a synergy. So that is excluded from synergies or dis synergies. It's a stand alone valuation. What does it take to keep TV4, MTDC more going? What's the constant cost profile going into the years ahead? And that's, of course, taken into account in the stand alone valuation, which is not very demanding, by the way. And that's also included that you have to buy content and rebuy content. And at some point, you will be expensive. Next time, you will be less expensive. So that's all factored in, in a balance of content that you have, not just sportswear. You cannot just be dependent on sportswear in the local export market. Okay. I didn't mean that it was included in the synergies. I was just wondering that if we see the same trend that we've seen in other markets, the cost of content has increased significantly and that will then ease up maybe a big portion of your synergies. But you're not concerned about that? No. Okay. Thank you. Thank you, Leonard. May we have the next question, please? Your next question comes from the line of Ulrik Raff. Please ask your question. Yes, thanks so much. I have a couple of them in the business. First one is, as you mentioned, you made this comment about the legacy revenue drag, which is obviously relatively high last year and this year, I suppose. And you talked about that this would not last forever. Could you sort of give us some sense? I mean, I realize you wouldn't want to sort of say a date, but could you give us some sense on what time scale this could sort of stabilize or drop out effectively of the mix? And second question is on these fiber OTCs. I mean, there is a lot of activity, I understand, by the government, by the authorities trying to sort of remove the hurdles to construction permits and all that. Do you anticipate fiber activity, fiber build activity to actually reaccelerate in the second half of this year? Or is the old guidance that's still relevant there? Those will be my 2 questions. Thank you. Thank you, Ulrich. So a few inputs to the first question on legacy. It's hard put a deadline, obviously, with time frame to the decline. It is as long as we have a copper base and old Datacom solutions in place, we have to go through the transition, and we are in that transition. And it's taking, in some areas, somewhat longer. In some other areas, it's probably is pretty much on track. But if you couple this with the transformation that we are in as well, then investing in the new system to get the old legacy out, that is the complicated formula that we have for Sweden. That's why we say Sweden will not grow EBITDA for this year. We have said that hopefully, we're back to growth prospects for the period Sweden for EBITDA next year, but we have to guide you on that coming closer to next year. We are, I can say also in the transformation, somewhat delayed on some areas, and that is not unexpected when you indeed pick programs as you have some delays. So some of the delays will also then probably delay some of the benefits that we will hope for and invest for in 2019. On the fiber side, there has been progress on the authority side. And finally, I think it's good that all stakeholders take this seriously. And unfortunately, we haven't seen the big effect in the output side yet that we are getting the permits in a better pace. So therefore, we have changed nothing in our expectations for the year on the rollout, but the demand is still there. It's a pent up demand, and it's pity we cannot deliver what the customers are asking all of us to do and are actually paying us to do. But we're working hard to make that work. Next question comes from the line of Andrew Lee. Please ask your question. Good morning, everyone. I just had a question on sourcing out Denmark and then a question on Swedish fixed line. So in sourcing out Denmark, I think you made a couple of comments in the press overnight or this morning, where you talk about sorting out it out after the summer. Can you talk about what your plans are? And in a scenario where you stay in the market, does that necessarily involve an acquisition, do you think? I think you mentioned earlier in this call that you probably can't do this now given the 2 acquisitions you just made. And does this mean can you just confirm that this does mean the end of major acquisitions for you? And then just secondly on the Swedish line market, just wondering if you could comment on the scope for price rises this year. You did it last year, you saw no change in churn. We've had common hand price rises earlier in 2018. So when should or when could we expect the same from you? Thank you. Thanks, Andrew. I think the Denmark comment that I made this morning was when will you sort out Denmark. And I said, let's start working on that more intensively after summer. And I was referring to my couple of weeks coming up on holiday. But joke aside, we have been working on that market a lot, and we obviously don't see any need for big acquisitions or we don't see the opportunity there anymore for big acquisitions. So as I said, if you cannot make money in Denmark, then we have to find a partnership way or accept the organic route. But the organic route is very hard to get return on investments on. So we're looking at our options here how to maneuver Denmark into the future. But it is not solved, but we will get on it and get back to you as soon as we know more. That's for me in Sweden. You know we did a significant increase in pricing last autumn, beginning of the autumn. And we have said clearly that we believe in that philosophy of doing it seldom, but there is more significant and then handle the customer base over time in that way. And when we will do it next time, we will come back to when it's fine for that. Okay. Thank you. Happy holidays. Thank you. And likewise, Andrew. Next question, please. Next question comes from the line of Terence Tsui. Please ask your question. Thank you. Good morning, everyone. Just a couple of regulatory process? Like what do you think will be the key thing that's being discussed? I'm just interested whether you think it could be a concern that the government could be the dominant shareholder in TV4 when it already indirectly controls SVT? And whether you think there's any risk potentially that the government can look to sell down part of its stake in TDL? Thank you. Good morning, Terence. Thanks. Yes, you've been reading Swedish presser here. And yes, that's a debate going on. Let me say my focus has been to come to a conclusion on a deal that makes sense for us and our shareholders that have a manageable deal certainty. We think we have that. Having said that, I think the process of getting approval is going to be scrutinized and it's going to be important to go through all arguments from all sides, but it's going to be from a competition point of view. And that's the focus we have. Any other focus should not be influencing this process. Telia is a listed company with 500,000 shareholders or more, and we're working for all our shareholders and creating shareholder value for everyone. So we believe this is a good deal for all of you. Okay. Thank you. Next question please. Your next question comes from the line of Nick Lyall. Please ask your question. Yes, good morning. It's Nick from SocGen. Can I just ask a couple on Bonnier, please, then one on Sweden? Just is it possible to give us the cost the current cost of sports rights that Bonnier pays, just to get an idea of the starting point? And then on exclusivity, please, Johan, what's your thoughts on exclusivity of some of this content? Will you aim to keep as much as exclusive as possible? Or is it going to be in a full wholesale deal this is as quickly as you can? And then secondly, on the Swedish business, B2B seemed to tip-off a little bit this quarter. Should we be concerned about that? Or is it just something that a one off and there are contracts that have maybe hit us in the quarter and won't rebound once you see? Thanks, Nick. No, I'm sorry, I can't disclose any content. Carter has been the most secret part of this whole deal, and that's apparently very common in the content side to keep our close, of course, to your chest. So we will do that as well, especially since we don't own this business yet. We're at least 12 months away from owning this, and then we can decide whether we want to share that or not. We'll come back to it. On the exclusivity side, it's not this is not driven by exclusivity. I think we first of all, TV4, it's a broadcast that reaches everyone and will continue to reach everyone. What I'm talking about is unique packaging and offering on the OTT side mainly, inclusion in our various bundles where we can enhance that customer experience in ways that we can't do today. That will be coming out with, of course, much clearer as we move along. So it's not the exclusivity driven here, On the U. S. Fleet side, Sweden is 3.3% down this quarter. It was around 2.5% the previous quarters. And as I said, it's on the price side. We do continue to bring in the new customers on the large side in quarter 2. It is not worrying from a point of view becoming worse, but it's signal that the path back to or the path towards a flat development on B2B is long. It's not going to be this year. Then. We've said that before. It will take a couple of years to reshape this site. Okay. Thank you. Thank you, Nick. Next question, please. Thank you. Next question comes from the line of Keval Khiroya. Please ask your question. Thank you. I've got two questions, please. So firstly, just in terms of content, can you give us maybe a little bit more detail on the overall level of content inflation you've seen in your Swedish business over the past year? Or if you can't give that level of detail whether you've seen much of an acceleration in the rate of inflation? And then secondly, when we look at the wireless trends in Sweden, Finland and also Norway, we did see a slowdown in all three markets. I think Sweden, you have explained why. When it comes to second half, do you have enough confidence to say that those revenue trends should start to improve again? Yes. Thank you. I'll take the first one. So yes, there is content inflation here and there, not across the board. But in some places, we do have that, and that's where we have a strategic challenge today, not having a seat at the table of the content discussions content inflation, which we normally talk about, like we had in Finland, for instance, a year or so ago. We had a big increase in content cost on the Finnish TV side that actually was very visible on our COGS. We've been managing that fairly well on the series side so far. But it's not just about price, obviously, when we negotiate content. It's about what I said before, how that is packaged and are allowed to be consumed by our consumers. And that's the big benefit also here, except the fact that you get the ticket to the content table. Christian? On the market side, yes, we discussed freedom. In Norway, we have increased the ARPU to compensate for the customer loss that we expected. We also see, as you may have also noted, the unlimited packaging coming into the market. We do not we will see how that is through the reaction comes from that, but I don't think it's sustainable model for that company to drive that they have today. But we'll see also how the rest of the market reacts. But in top of that, what I said, we had regulatory impact on the revenue growth from the special number, and that will come out in October. In Finland, it is slower growth, but it is still growth, and we believe we should be able to manage to have a growth in Finland over time. And we have done select price increases, and we will continue to do that. And we will see how the market reacts on that. Thank you. Thank you, Kiran. Next question, please. Next question comes from the line of Henrik Herbst. Please ask your question. Yes, thanks very much. I had a couple of questions. Firstly, on the Bonnier acquisition and your assumption that on a stand alone basis, free cash flow is doubling over the next couple of years. I was just wondering if you could sort of explain a little bit where that, I guess, is it coming from top line growth or cost savings ex synergies? And then also how the loss of the rights to Alsens can ties in with that? Have you assumed that there would be a bit of revenue loss, but I guess you'll lose some OpEx as well? Have you sort of assumed that to be a free cash flow neutral impact? And then also in terms of your free cash flow calculation, if I can just ask what sort of assumptions you've made on interest costs? I know you've got cash in your balance sheet, but have you sort of assumed that there is a cost of debt or not really? All right. Thank you very much. I'll take the first two, and Christian will take the cash flow one. So the cash flow that comes in from Bonne Broadcasting stand alone as we move 1 year through at the closing is already than EUR 500,000,000. And the improvement from today's level will come from a couple of things. One is that we see, as I mentioned, see more continuing their improving trend, and that will be a part of that improvement. And then you see TV4 with its extremely strong position right now and momentum in the market It will also continue in the short term to increase its cash flow. We have not counted short term on the turnaround stand alone for MCDs. That will not be part of the improvement. But all in all, you see an improvement up to DKK 500,000,000 that will have a direct cash flow effect as we bring this into our group. And you're absolutely right when you say that we have assumed a neutral effect on losing Alsenscan, but this is something we'll speak more about. But in our case, of course, you need to invest to grow, and that's part of our case. And we are not really getting details of that. But of course, we got to have a portfolio of attractive content rights to continue to grow. So we are not just taking that out and say, that will save some money. We continue to invest and that's part of the growth story. So on the interest calculation, just let me make it very clear. When we do our business case and when we calculate the business case and what we can pay for a company and also place that business case in the hands of the owners internally how to drive the business, we use a VAC that is substantially higher than we pay as an interest for our bonds. And that is on the upper level of the single digit. So that's how we do our business cases. And then when we calculate what it actually will look like in the numbers that we show you when we report, we do the actual calculation of how much less liquidity we will have, how much more bonds we may have to add for different things. And that is the mixed interest additional cost that we add for this transaction, and that is substantially lower. And that's why I showed also the numbers today on what we have in yield, on the liquidity and what we pay in our bonds. So that's how we do it. And therefore, it will be a much lower interest cost on that actual number. And then of course, when you put in your number, you will put your VAT on our statements in the future and you will get to your number of the discontinued cash flow or the devalue of our company. Very good. So thank you. Can I just follow-up on that question? It's a short one, Henrik, very short one. Yes. So on the €600,000,000 have you assumed basically just interest you pay on your current bonds? Or have you assumed was it based on the cash on the bank? Yes. It's somewhere between the two numbers in the presentation you had, the yield and the cost. Okay. Thank you. Thank you, Henrik. That concludes this presentation. I hope you all enjoy your summer vacation, and we look forward to hear and see you back in the autumn. Thank you. Thank you very much. Thank you. That does conclude our conference for today. Thank you for participating in the now