Earnings Call: Q2 2017

Jul 20, 2017

We have a slightly new setting for the presentation, only having a webcast. So if we could try that out in the middle of the Swedish summer. Besides that, process is as usual. 1st, we talked with our CEO and President Johan van der Linde giving his thoughts on the quarter. And then we have our CFO, Christian Rilge, taking us through the numbers. But without further ado, Johan, please, floor is yours. Thank you, Andreas. It seems lonely here in the studio, but I hope you can see us in here as well, Alcon. Let me take you to a summary straightaway, starting with what we think is the focus of the quarter, which is the cost side of our business. We have launched earlier in the years and also earlier this year cost initiatives to keep our position through the transition years. But we also now launched new cost initiatives that will have effect in H2 2018. And I'll talk a lot more about that in a while. The other key note for the quarter, I'm sure you've seen that fiber one off revenues in Sweden are lower, quite a bit lower than last Q2, which has a big impact on Sweden and therefore also on the group. But we also have positive things in the quarter, which we'll also mention. I'll bring up Finland where we feel good and have a good trend on the mobile side and also improving EBITDA. You have seen us talking and doing things around our associates earlier in the quarter, coming to a dividend decision in Turkcell, obviously, very important for our cash flow but also for the dynamics in Turkcell. We also have a dividend decision in the Megaphone, which I'll come back to. And as you know, we divested the part of our direct stake in Turkcell during the quarter, which had a positive cash flow and negative P and L impact. On the Eurasia side, let me say what I can say. I know there is a lot of attention and interest still here. What I can say is the following. The sales process is progressing well. We have a structured process. We have a common view with our partner Turkcell in the FINTE process. We have an interest from several parties, and we have no reason to change our indications on being able to bring this to closure later in the year. On the DOJ and the Uzbekistan side of things, we have no reason to change our provision that we lowered in Q1 to $1,000,000,000 And we have no reason to change our view that this is nearing the final of this chapter. The exact timing and the details around the settlement proposals, it's nothing we really can talk more about as of now. But you have to take confidence in what we say that we think this is coming to close and to end soon. And then you saw we took some write downs not to be so in Uzbekistan due to uncertainty, currency and the interest in the Uzbek business and the valuation, therefore, lower than we previously thought announced on Friday, which obviously has a negative impact in the quarter. The positive thing, ending with that on the summary side, is the cash flow. We have a very strong focus on the cash flow side for the year, and that's yielding. And we are able to up our outlook on the cash flow for the year to about €7,500,000,000 rather than €7,000,000,000 mainly through strong execution on the working capital and the CapEx discipline. That's really the highlights. Let me take a few more moments and go through some of the key numbers. We are in negative growth than territory due to the Swedish, mainly fiber, one off fiber impact. About that, it would be approximately 0.5% service revenue growth. EBITDA negatively impacted by that or from that, but also due to somewhat higher cost saves than the €130,000,000 in Sweden, which I'll certainly come back to in a while. Just to put that in context on the cost side. We launched in 'fourteen our Invest to Save program, bringing gross savings of about €2,000,000,000 for the group and €1,300,000,000 for Sweden. At the same time, we have had increased costs for investments and other areas in the business. So the net effect is not as visible as we would like it. We have then complemented this earlier this year with our cash flow activities, which also includes OpEx, obviously. But we're now more explicit on the second half for Sweden. I'll tell you the numbers shortly. But we're also launching structural initiatives to have an impact in 'eighteen before we get the full benefit from the all the activities that we have been doing in mainly the Finnish and the Swedish operations transformation wise into 'nineteen. What that means in terms of numbers is that Sweden OpEx, to be very concrete, is we said earlier this year, it's going to be higher in the first half than in the second half. Now we put a number on it. It's going to come down around 5% in the second half versus the second half of 'sixteen. So that's a strong conflict around that. A lot of that coming from resources and consultants. Part of that is already in the plan. That was there are activities that are coming to an end. Investments are coming to an end and that close arms of legacy are being done. And therefore, we can let go of some of the people. Some are accelerated cost savings around the resource cost as well in order to meet our financial targets. If you then go to the 2018 focus, and now let's go from gross to net. We're talking net savings here, and we are addressing the full portfolio in the continuing operations. And we have put out a clear ambition and a target for ourselves to be at least 3% reduction on the cost base or targeted cost base, which is the SEK 38,000,000,000 for the year. That is the full cost base, COGS OpEx minus equipment cost. So nothing will be left untouched, and we are aiming for at least 3% in effect in 'eighteen, and it's net. So if you take all these initiatives into a summary slide, when it comes to the 2017 'eighteen then, we are going to have to take out around 850 resources in total, and we're adjusting the structural cost base before we get the full benefit of transformation. And for Sweden specifically, it is the 5%, as I said, H2 effect with about 650 resources, roughly 50 employees and consultants. And that's around 8% of the total resources in Sweden. The means for EBITDA this year is that we are comfortable maintaining our EBITDA outlook. And for 'eighteen and 'nineteen, it is to drive further cost reductions in order to take us through the coming years with stability around our profitability. And the operational free cash flow, you can see that we have actually upped our guidance slightly for the year, and it's thanks to strong execution of working capital improvements and the CapEx discipline, and we now have better visibility on that. That's also important now heading into 'eighteen so we can support the operational free cash flow growth. So clear activities, strong focus and comfort on our previous guidance. On the fiber side in Sweden, as we have talked about already, there is a big impact when we miss on delivery of fiber. It is not connected to the fiber demand so much at this point. It is the delivery that we're struggling with. And it's a lot around permits and also around the new dynamics, the further out of the coal with the installation and implementation, we need new type of areas and intermediates that we need also to deal with. Of course, in general, we are coming to towards the end of the big pent up demand in fiber and Sweden even if we there's still a lot to be done. And we're sticking to our previous target of €1,900,000 end of 2018. And the mix, we can talk more about later. But we feel that we are executing on what we said earlier in this C and D context 2014. Let's turn to Norway, where a strong Norway is performing even better. We have an improvement both on revenues and EBITDA. And on top of this, we're including now going from 2 onwards the Fermira acquisition that will come with about €400,000,000 synergy impact into 'eighteen. We have, as you know, invested heavily in Norway over the years, creating a superb platform for growth in the bus network for 2nd year in a row, a very important part of our value proposition to enterprises, obviously. And we feel good about the Norwegian execution and the Norwegian prospects. In Finland, we see improvements. We had around 5% growth on mobile service revenue, which is solid or strong. We are also improving on our profitability side in next Q2 is somewhat impacted by still higher revamping costs and that goes away. So we should see an improvement in Finnish profitability second half of the year as well. Now also including the recent acquisition, Nibla, which is a strong ICT player, which will very much strengthen us in the SOHO position as the leading enterprise player in Finland. And of course, it comes with good financial accretive measures to the P and L for Finland. So forget about Finland. Then I will not take more time. I will certainly come back for questions later, but I'll leave the floor for our CFO, Christian Ligand. Thank you. Thank you very much, Johan, and good morning, everyone. I will take you through the cash flow and the impact from the CapEx that has decreased and will further decrease. Will also talk a little bit about the strong balance sheet. But before I go there, I'd like to talk a little bit more about Swedish results. And in Sweden, we have seen a decline in service revenue in quarter 2, 2.7%. And before I get into the consumer side, which is probably the most interesting one, I think it's very important to note and point out that the B2B segment is continuing to do well. It's 2.6% down. It's the 3rd consecutive quarter where we see a decrease of 2.5% to 3%. We had around 5% in the past. And the trend is there with Soho smear continuing to grow and the larger segment being down around 5%. On the 2.7% down, added primarily from the fiber, EUR 164,000,000 down, 2 percentage points on the service revenue. We also see a somewhat lower the growth in the mobile side, mobile consumer, and it relates to the VOS. Value added services growth is somewhat lower in this quarter. The TV pricing, we should also remember, was increased in quarter 1 2016, and that is now on a comparison level coming out. And that means we need to look at the pricing over time in TV if we want to compensate for that as well. TVC MVNO, we know that, that has moved, and it was a decline of DKK 25,000,000 in the quarter and will continue to be a decline for a couple of more quarters. Fixed LME went down SEK 119,000,000 compared to last year. It was bigger last quarter, but still on a percentage point, it is around the same level, somewhat better. We gained 45,000 new customers in the consumer side in this quarter. That is important for 2 reasons. Understand, it came very late in the quarter but also did drive costs And it's part of why the cost was somewhat higher in the Q2 compared to last year. And then moving into cost, you want to talk a little bit about that. The cost increase in quarter 2 comes from marketing sales, but also we have continued to have higher cost in service operation. With now the program of 650 resources, half internal employees and half external resources taken out. It's already been people leaving in July and will continue throughout the quarter. The bulk more at the end of the quarter due to union negotiations, it will be a 5.% decline in the second half compared to last year. That means also that the profitability profile will materially change in the second half compared to the first half. Moving into our countries in Baltics and Denmark. Denmark continues to be a little bit negative, but the 11%, EUR 150,000,000 profitability is on a low level, but doesn't change that much. And on a low level, the percentage becomes bigger. The big thing this quarter is to say, I think the market is quite stable on the larger players. The prepaid business have been taken out from Denmark. We have taken that out deliberately. It was not profitable, and then you should not continue with that. And it was a small sized part of our business, 86,000 customers therefore was taken out from our business. Estonia, stable. Mobile compensating for fixed, slight increase in profitability. Lithuania do have a good growth in mobile, and it is also impacted by a low margin transit business, which should be taken out. And that taken out, the revenue growth is around 2% in Lithuania. Overall, these countries are doing fairly stable. And we see also here, like we do in the rest of the group, that there is potential for efficiency, and cost will therefore also be an element in the agenda for these countries in the second half twenty eighteen. When it comes to Eurasia, we have said in the last two quarters that we see the trend shift. We have seen the turnaround. And the picture here we look at gives us the proof that continues. The operations in Azerbaijan is flattish on EBITDA, very well development in Georgia, Moldova. Kazakhstan is still on negative, but the trend is very good. We feel cautiously optimistic for Kcell in the second half, and we think that they are doing a good job. The market is improving, and the prices are increasing. So that is very positive. The profitability in Uzbekistan has been somewhat negatively impacted by a legal regulatory fee that we have been charged and that but that has not been still to be decided how that will end up with in the end. CapEx is very important. We have talked about CapEx for the last 2 years. We have been in a peak in 2016. We said we will come down in 2017. We said that the CapEx, excluding fiber, should come down in 'seventeen, and we have good visibility and good discipline on that. CapEx is down €600,000,000 the first half compared to last year. Half of that is Spain. Half of that comes from the continued operations. The €300,000,000 then that's remaining is primarily also related to Norway, where network has been a heavy investment and now has come down. And we should see further this trend continue further in the second half. Another thing that we have booked in this quarter is the LIGA CapEx of around SEK 1,000,000,000. That is a content light in Finland for the hockey rights, and it is to be paid from 2018 6 years forward. We do estimate and we plan for having a decrease in CapEx next year as well. And we have said that CapEx should go down now over a couple of years, and it will. And when we do that estimate, we include a cash CapEx and the cash CapEx from legal starting from next year. And I think that is also important for you to understand when you try to estimate our future. Operational free cash flow, SEK 7,800,000,000 run rate right now, last 12 months. Quarter 2, impacted by dividends. EBITDA, slightly down, compensated by CapEx working capital. We are doing what we are supposed to do. The dividend has now been decided in Megaphone and in Turkcell. Megaphone, euros 700,000,000 to be paid in the end of July, beginning of August. And for Bergsel, it's EUR 2,100,000,000 to be paid in 3 tranches, the first one paid already now in quarter 2 and the other 2 coming in quarter 3 quarter 4 and before the end of the year. Total, euros 2,800,000,000 and that gives us a good visibility on the cash flow also coming for the full cash flow, including the dividends, being then €2,800,000,000 higher. So I'll come back to that. Before that, on the leverage side, we are at 1.36 at the end of the quarter. The most important elements and the ones we know about is the Nebel acquisition, taking that into account, also taking into account the dividend I just talked about and then also the Uzbek legal settlement of $1,000,000,000 that we have made a provision for and not the least, the SEK 1 dividend that we will pay to our shareholders in October, that in total gives us still a healthy level of 1.8x net EBITDA on the pro form a June number. So a healthy balance sheet, including what we have decided on and what has been decided that impacts our numbers. EPS. It has been a difficult picture to look at in Kenya over the last years. And one reason is the takeout of the discontinued operation, also the impact of our sales and divestments in both Eurasia and outside Eurasia. We also have write downs that we have had previous years and this year. And in quarter 2, we had a couple of more write downs, the largest one in Uzbekistan. We adjusted the value of the Uzbek asset from €3,300,000 to around €1,500,000 And that is primarily based on what we see in the development in the country, FX risks and also regulatory risks, but also what we have got as indications on market valuations. Discontinued operations was impacted, of course, of this write down, but it's not so visible on this page, and that is because we had an impact from Nepal sales last year. A big impact that we had from Turkcell, which we made a loss of CHF 3,300,000,000 in FX losses when we sold the stake of 7%, which gave us CHF 4,400,000,000 in cash for the recycle of FX of €3,300,000,000 which made a loss in the profit loss but did not affect equity. So complicated, but most importantly, we do continue to have a somewhat better position then on our continued operation when it comes to the EPS development. Finally, supported by our Costa Dianda, we do reiterate our EBITDA guidance for the full year to be delivering on the 2016 level. With better visibility, and Johan mentioned on both CapEx and working capital, we are to be above €7,500,000,000 And together with the dividend from associates, it should cover dividend around 2016 level. Thank you, Andreas. I think I'm done there. Thank you, Christian. And if Johan joins us back again, we can open up for the Q and A. Operator, may we have the first question, please? Thank you. Your first question comes from the line of Terence Suri. Please ask your question. Good morning, everyone. I've got a couple of questions on Sweden, please. Can you talk about the trajectory to get to the 1,900,000 households by the end of 2018? Obviously, Q2 was a bit of a setback, but one of the reasons for it to rebound and also to accelerate to hit the market. And then secondly, just looking specifically at the Swedish headcount reductions, what sort of restructuring charges should we expect from this? And when should we expect that to be done? Okay. Thank you, Terrence. Thank you for the question. The 1,900,000 households, we still see that we will continue to build fiber even if there's certain delays and the timing effects may be more material in the past. But we do have still an ambition, and we see the potential to build further build up to 1,900,000,000 including, we should say, the M and A activity that we're doing. We did acquire some businesses in the first half, and we'll continue to do that. The restructuring charges, I can't give you a clear guidance yet until we have passed through the summer and had a dialogue with our unions also what it means. On the consultant side, of course, there's no restructuring charge. But on the employee side, it could be. Okay. Thank you. Thank you, Terence. Could we have the next question, please? Thank you. Your next question comes from the line of Sam Dillon. Please ask your question. Hi, guys. Thank you very much for the questions. 2, if I may. So my first question is on cost cutting. You and the sector at large seem to be in a perpetual state of cost cutting, which is a good thing. After Telia, it just doesn't seem to have a result in sustainable EBITDA growth. Are you saying based on these new initiatives that post-twenty 17 you'll be on a track to really deliver sustainable group EBITDA growth? And secondly, on fiber connection, comment on that its results even seems to suggest that the problem does not turn the thing, but it was finding that operators were competing the way the actual size of the fiber connection fee. Is that what you're seeing in rural areas? Thanks, Sam. On the savings side, I mean, everything equal, which is never the case really, but this is net saving we're talking about for 2018. So the at least 3% of the €38,000,000,000 that we're aiming for, for 2018 should be seen then as a net reduction. Then of course, we need to come back to you on the guidance for EBITDA in 'eighteen onwards. We do remind you though that we are still in the legacy pressure in the major part of the operation, Antalya, which is Sweden, And that we're not through yet. So as long as we have the legacy pressure, it takes a lot to get to growth on service revenue and therefore also on EBITDA. That's how we need these extra initiatives in this transition phase. On the fiber, I think it's the dynamics that we described. For us, it is about the delays and a lot related to permits and less about the actual competition. Of course, as further longer we go and further as we grow, the competition increases naturally. But in this quarter, it's mainly the delays. Okay. Cheers, Geraint. Thank you. Thank you, Jan. We move on to the next question. Your next question comes from the line of Lena Ostenberg. Please ask your question. I just have a few questions. First of all, you mentioned something that you see now, a lower interest in the Uzbek asset, and that's one of the reasons for the write downs. Could you maybe elaborate a little bit on what your options are if you find no acceptable buyers for that asset and how much that would cost? Also, if you could touch a little bit on EU roaming effects into the second half of the year. You haven't really specified any guidance. So maybe if you could say something about what the sort of early indications are in terms of volumes, how much have they come up and what do you think the impact will be in the second half? And also, you talk about a decrease in CapEx in 2018. But could we maybe have a more specific number on that, please? Thank you, Lionel. Let me start in the CapEx course Christian's way. Take it from the top view style. Well, as we said, there is we have had an interest before, and we've had an indicative value, which has been in our books. And we have written down, as you know, used so along the way. So we've kept it at a value where we thought we would be able to divest it at. That has now been reduced. And what's remaining is €11,500,000,000 €1,000,000,000 We think we can then get that value from 1 of the buyers that we're talking to. If we don't, if it goes the other way, if we don't, well, then worst comes to worst, and you have 1.5 building that we can't realize. But at this point, we think we can. So that's why we have that in the books. Roaming, very costly for our customers, great feedback, and we are the most generous offers in most of our markets for our customer bases. We should be competitive edge. Obviously, it also comes with higher traffic. We have very good agreements that take care of a lot of the risk mitigation. However, we have said that it may have a slight negative impact on the EBITDA as such, but it's included in our guidance for the year. So we're not taking that out separately in any way. No need for that. CapEx 'eighteen, we're not going to give you a firm number on, but take Christian's comfort that it's coming down further from this year where it's already coming down from last year. And that's the trajectory that we have set out, and that's what we're delivering on. And then maybe just follow-up on If you can't find a buyer and you have to close it down, will you incur closing down costs? Or have you put a provision for that in your write downs as well? No, nothing as such is provision 4, and we don't believe that needs to happen. Otherwise, we would have taken a different type of approach on the impairment or reassessment of value. So let's not get ahead of the situation. We think we can divest. We think the value is 1.5%. It do it does take a bit longer with respect because it also has at least a perceived impact related to the ongoing investigations that we have. So once we get that closed, then I think we'll also be able to get the U. S. Cell into new hands. Okay, Leonard, are you fine with that? Yes. Thank you very much. Thank you. Thank you. If you're like a pilot, could you have the next question, please? Next question comes from Sita Nielsen. Please ask your question. Thank you very much. I'll take 2 questions, please. Firstly, you obviously extrapolating, so to speak, your cost reductions and mentioning the Investor Save program, which included quite significant CapEx investments. Can I just ask the new programs sort of for further cost reductions to come in 2018 2019, would they also involve some incremental CapEx investments compared to your previous plans? And then just secondly, if I can return to the fiber. And you stick with your €1,900,000 target. Is your own internal targets for failure connections also unchanged? Thanks, Peter. On the cost side, now these are not in less to say, and there is no incremental additional CapEx that we're announcing for this cost program. These are part of the things that we have invested in that will also bear fruit. There is also a more structural cost OpEx COGS reductions that we can that we see that we can take out with addressing the business at this stage. So that's net savings, no extra CapEx that we need to talk about. On the fiber, we haven't disclosed any more internal targets, if you want. This 1.9 is an important one because it sets the investment pace really to the market and also to ourselves and our partners. And we're on track, as we spoke of earlier, of the €1,900,000,000 But there's also been a €1,100,000 sort of target for 2 year clinicians. Is that correct? That's the number that we had in the SG and A and we haven't changed any of those. Okay. Thank you. Thank you for your question. Your next question comes from the line of Maurice Patrick. Please ask your question. Good morning, guys. Maurice here. Enjoyed looking at the webcast, by the way. Thank you for that. On the Eurasia, given the improvement in EBITDA trajectory that you're seeing in the recent quarters, does the urgency of leading percent decline? I guess, I think what I mean by that is given the assets are performing better, maybe you're not such a rush in there, but in the past to sell it? Morning, Maurice. We have never been in a rush as such. We've always said that we will reduce our assets over time, find the balance of risk and value and the timing. Then we have made an assessment that we think really can happen within this year. We still think so. And the performance is actually only helping improving the prospects of getting a better mix of those pre risk components that I mentioned. So what Christian showed you in the slides earlier is a very important part of our sales story, obviously. And we're happy that we're able to maintain focus and improve the businesses in difficult times out there. So very pleased with the team's performance in rough times. And just related to that, if I may, you've made a decision to sell down stakes in some of your associates' positions. Is that something we should expect to see more of? I think we've been clear on the Turkcell side that we debundle or decouple the 2 holdings we have there. 1 is the direct flake, which is now reduced around 6.5%, 7%. And one is the indirect stake, which is around 25%. So it shouldn't be in no surprise. We have that is that. And also if we decide to do so in the future, it should be in no surprise. For Megaphone, we also saw that, that's an asset we are it's a different type of asset even if we can see in the future that we could possibly also lose megaphone, but that's nothing that we will speak about ahead of actions. Very clear. Thank you. Thank you, Maurice. Next question please. Your next question is from Urie Horat. Please ask your question. Thank you. I have a number of questions, if I may. The first one is on the cost reductions, both for Sweden from the second half for 20 eighteen-nineteen. Could you describe separately for the 2 the visibility you have on this, I. E, where you are in identifying measures, maybe even executing having executed measures already. Just interested to see at what stage of the planning we are as its top ton goal without sort of specific measures has been agreed with the operating units and so on. Second question would be Eurasia on the sales process. It seems that sort of you have these write downs from time to time in a pretty regular fashion. At what point would it stop being completely insane to think that you might actually keep these operations if the values you're discussing with potential buyers simply aren't there? Is it politically completely unacceptable and you just kind of get rid of it? Or is there a point at which you would decide to even keep it? 3rd point is, Romain Comer, I understand you don't want to give figures for the cost. Would you be willing to share volume trends that you're seeing? And the last question is, again, on the fiber. What I don't fully understand about sort of these permitting issues and the lead times is that there should be an interest on the side of the municipalities to actually get this done because I assume there's some demand They stand in the way between end customers getting a high broadband speech service. Then they are sort of the party to blame. So I'm just wondering how that politics plays out. Why do they have the luxury to sit there with their constituents and essentially hold this up? Good morning, Orest. Thanks for your comprehensive list of questions here. Let me start and to agree with you on the fiber side. And for those of you not maybe in the Swedish context, I knew the other day. This is a hot potato that's been discussed and driven from all players, not just us because this is a lost opportunity and a lost potential for the Swedish digitalization and leading Europe or the world even in penetration of high speed connections. So this is something we are very vocal on, but we still have some issues to deal with on local levels, which we're pushing. And that's one part of the delays, not all obviously, but one part. But I believe that it should be the same incentive for all players here. Now let me go back in the list of order and order of your cost sense. Well, cost, Christian, I'll come back to the sales, Eurasia sales. So this is not a political decision. This is our decision to divest and reduce the presence in Eurasia over time, and we are behind that. We are not panicking and running away. We're taking the time that's needed to get that balance of risk value and timing that we said. And if that's why we also haven't sold some of these good assets yet because we haven't been happy with some of the those time leaders. So we have no reason to change our view on our excess strategy. On roaming, we're not going to give you details more than that. We said it's a great consumer offering in our countries now where we are taking a lead in the way this is being offered in terms of the bundles and the opportunity to be roaming on the go and also in the Swedish context with free social media surfing, which is much appreciated. And as I said, this has had some slight impact for the total growth for the year, but nothing that needs to be guided separately on. Christian? Thank you. Thank you, Ulrich, for the question. Needless to say, it's been very hard work during the first and second quarter coming up with the identified commitment to our shareholders and to ourselves on a cost reduction. The cost reduction for the second half, of course, we have very good visibility on, and these are things that have been initiated and started. And there, we will deliver on our reduction in second half without any issues. The 2018 are identified. If we wouldn't have identified them, we wouldn't have come out with a commitment of 3% down on the 30 €8,000,000,000 cost base. These are identified, and some have started and some have not started. Some are more difficult and some are very easy. So that's how it is in nature when you do these kind of programs. And therefore, the longer you go, the visibility is less on how you're going to achieve it. But of course, we feel very comfortable to deliver 3% down on the €38,000,000,000 cost base. Otherwise, we would not have announced it today. Thank you, Ulrich. I think we have about 10 questions left. That leaves 2 minutes for questions. So could we have the next one? Thank you. Your next question is from Henrik Please ask your question. Yes, thanks very much. Firstly, I just I can ask 2 questions if that's okay. The first one is on fiber regulation and the PTS review of how to regulate fiber and in particular the SDU IAS. Just want to hear your thoughts really how likely you think it is they will start to look at it on a more sort of regional or network by network basis and what that would mean for you and your bill out plans. The second question, I just want to ask if you could give any your new roaming tariffs, how popular have they been? Have you is it mainly with new customers? Or are you seeing your existing base upgrade as well? Because I think you got a bit more data, but you pay a little bit more as well. So just wondering if you could give any color on that. Thank you, Henrik. Just on the 5th regulation, reminding us we did have a deregulation on price for wholesale in December last year. And of course, this is a market that always will be monitored. The fiber market is quite fragmented with different structure of city networks and players like us. So it's not an easy overview. And we're working, of course, closely with the PTS to give our views on that. We do see no risk as such, negatives on the negative side of OPTAVIA in this regulation process as of now. And I think that's important to mention. On the roaming, yes, we are upgrading, migrating our customer base to higher buckets in the Swedish context. And the other ones are different slightly different pricing style of this market. But all in all, we are able to price up many of our bundles and offerings on the postpaid side as they include a more generous roaming. Thank you, Henrik. We move on to the next. Can I just follow-up actually on the fiber regulation? So I mean, would you I guess what they're looking at is to regulate all the city networks as well. I mean, could that be positive for you? And how likely do you think it is that they will actually go ahead and do it that way? So I don't want to speculate and go ahead of be ahead of the curve of the regulator. We have good discussions. And as I said, we don't see a negative impact of potential regulation on the fabless side in the near and medium term in the Swedish market. The next question is from Sunil Patel. Just one question for me. On Sweden EBITDA dilution in the second half, I mean, I noted your, I think, 5% cost reduction on the €4,000,000,000 days, which is a €200,000,000 tailwind. But it seems to me that Sweden EBITDA will still be down for the full year year on year, which basically has struggled to sort of hit the group guidance of flat EBITDA. Is that sort of down trajectory what your internal thinking is? Or do you think we're going to get quite a strong rebound in the second half of the year in Sweden? Well, we don't guide, as you know, Sunil. So unfortunately, I can't give a clear answer to your question. Sweden will improve second half, as we all understand. And we reiterate our guidance for the full year, and we have a portfolio of companies also in our group, of course. So that's the only thing I can say, unfortunately. Next question is from Keval Hiroya. Please ask your question. Thank you. Two questions, one on Denmark and also one on Norway. In Denmark, I think as you alluded to, the margin performance is a little bit weak. Just from an organic basis, do you feel there's anything you can do to improve the profitability of this asset? And Terminal, for example, has seen quite good margin improvements. And if not, how close are you to finding some form of strategic solution for the Danish asset? And then on Norway, could you just ask, how much are you earning today from National Roaming Payments for MICE? And how should we think about how these payments evolve going forward? On Norway, the quarter and the year so far has been helped clearly by wholesale revenues from mines. That's been part of our guidance in general. But we also see now a good track trajectory and support on the retail, which is, of course, more important for us going forward with the rationalization of brands and also the inclusion of Foneero in the business. So at some point, of course, those improvements of wholesale revenues, which we're seeing year to date, it will start to reduce, which then will be overtaken by improvements in retail and all that. So that's how you should think about it. On Denmark, strategically, we have that on our list for the year to come back to you on what we what our plans are. We need a solution that puts us in a better position in Denmark where we can create value in one way or another. There's a lot of work on that going on. Meanwhile, we focus on improving the operations this quarter, hampered by the B2B mainly. We see some signs of stabilization in the consumer side, but nothing that would excite us or you talk about at this stage. Thank you. And so may I just ask, so within the other mobile service revenue line in Norway, so the SEK 166,000,000 growth in the first half, is it fair to say that most of that is due to ICE? That line, which line do you refer to that? Other mobile service revenues within Norway. It should be that line. Maybe we have to come back to you and answer all that just to make sure we actually have this right. Your next question is from Irina Drisova. Please ask your question. Hi, good morning. Just a follow-up on the new cost saving initiatives for me, please. When you compare the new structural cost initiatives that you're planning for 2018, 2019 versus the original items in the Investor Safe program, could you just maybe give us more color, perhaps some examples on what's changed since 2014 launch of the program that brought to light these new opportunities? And then also in terms of timing, how should we think about the pace of the savings for 2018? Are you able to tell us at this point whether you expect most of these to come through in the first half? Or is it small backdated? Thank you, Irina, for the question on cost saving. This is a continuation partly, and there's partly new things coming through. The Investor Save program was, again, as we talked about earlier, connected also quite large investments in Sweden and Finland. And they have been made, and that platform will help us going forward as well. And I have mentioned before that our new mass market platform will be ready during 2018 in Sweden, where we can have all our consumer customers on one platform. That will, of course, be part of an earlier investment that has started to give some savings and give more savings. And then we have also looked at other means coming through both the, you could say, the robotics and process side. This is something that has developed quite rapidly in the last 2 years, not only in our company but in other companies. We can also see the continuation of working with service operation based on our new platforms but other elements as well, including near shoring that can help that and product side. The guidance for 'eighteen on this, I want to wait until we get closer to the end of the year and we guide for next year. And we leave it as flat right now. Okay. Thank you. Thank you, Irina. Next question, please. Next question is from Thomas Heath. Please ask your question. Thank you. Two questions, if I may. Firstly, if you can clarify a little bit, you made some comments about when the employee reductions will kick in during this year. Is it correctly understood that most will be at the end of Q3? And if so, are the cost savings in this year more related to reduction in transformation projects, IT and so forth, with the employee reductions benefiting 2018? Or are the employee reductions, of course, for H2 being lower in terms of costs as well? I'm just trying to understand what sort of impacts were. And then the second question on fiber. If we're seeing slower fiber additions, what do you expect for CapEx? Or put differently, as you now expand more into rural areas, is the CapEx per sub, if you like, increasing or decreasing as you reach further out? Thank you. I'll take both questions. You want to? Yes. I'll do that. I'll start with the last one then on CapEx side. The if we would have a lower with a lower fiber installation fee, we also have a lower CapEx, and that compensates definitely for the lower profitability. So cash flow should not be affected. When we talk about the reduction, the reduction of both employees and external resources of 850 is impacting 'seventeen as well, of course, giving a good headwind into 'eighteen, but it will be impacting 'seventeen. The external resources, of course, much easier to move out of the cost base, and that is why that can start earlier. The others, we have respect for the union negotiations and dealing with those. And that is why it takes a little bit longer time. Thank you. And for installation fees, or is there for CapEx relating to fiber side. Basically, could we see CapEx falling before EBITDA contribution as infill connections in cases where you've already expanded CapEx or network is already done and you just add the occasional hold? Well, when we go into an area where we already have built the home's cost, there is no CapEx per se. And on your other question, just to answer it, when you said is CapEx becoming more challenging, yes, it becomes more challenged when you go out to smaller areas, rural areas. We have a very clear business case model, and we work within that. And as long as we complete the numbers within that model, we will continue to build. Thank you. So it sounds like it's a fair assumption that CapEx and EBITDA go relatively hand in hand as the sort of tables are a little bit. Yes. We will not have a negative impact on cash flow from a if we would get a lower OTC. That's very helpful. Thank you. Thank you so much. Next question, please. Next question is from Andre Lee. Please ask the question. Good morning. It's Andrew from Goldman. I just want to ask some questions around your cost cutting. This is coming in a week where you had quite a lot of your peers also stepping up cost cutting targets, beating the EBITDA. Can you talk about your the cost cutting targets and kind of what's changed to unlock this? I mean, an 8% reduction in total resources is pretty sizable. What are the kind of fundamental shifts in your kind of economic model that's changing that and unlocking your ability to reduce costs? Secondly, I wonder if you could just talk about labor force flexibility. What happens when you take out the resource? What's the timing of the atom? And how much flexibility do you have to do more of it? And then just certainly, I wonder if you could just talk about management incentives and kind of how this how the kind of free cash flow generation correlates with management incentives? I know they've changed over the last couple of years. And any kind of any input into the consequences of that on your strategic decision making would be great. Thank you. All right, Andre, thanks. I think we have sort of summarized a bit what we already said on your 2 first questions on resource costs and timing. Part of the reductions that we're doing now are already in the cards, already in the plans because of projects coming to an end, investment coming to closure, systems closing down, etcetera. So that we can take out as planned. But we're also accelerating some of the takeout and terminating consultants earlier, accelerating some projects, taking slightly higher risk, but we're that's the calculated risk we're taking in order to also give comfort to our run rate mainly into '18 because 'seventeen EBITDA, we feel good about. And timing, of course, entry is a bit more difficult. And as Christian pointed out, negotiations, but also finding the right balance where to go and that we know now. It's not like we're starting today and thinking what should we do. This has been planned, but a notice has already been given to the unions earlier in the quarter. So this is already being executed on. But that comes slightly later, as Christian pointed out, and the consultants are when you terminate and the contracts run out, they leave on the day. All in all, for H2, that is about 6 50 people or resourcesconsultants. 50, we would estimate today, 50% consultants, 50% to employees. And then the cost impact reduction of 5% on the OpEx as a consequence, H2 versus H2. Incentives. We haven't changed our incentive models for managers and employees. And managers feel it's measured on our EBITDA and cash flow. Those are key components of our bonus and incentive programs for Level 2 and below sorry, Level 3 and below, I should say, because my team and I, of course, don't have that financial incentives, but it will be the same targets as the rest of the teams. So that's how we measure. Nothing has changed. It's just increased focus on the cash flows we talked about earlier this year. Thank you. Can I just the one follow-up would be, I guess you're suggesting there's quite a few one off projects that are coming to an end? Is that the case? Or is it that there's something more structural going on with your ability to reduce reliance on headcount? It's a mix, Andrew. I think when we look into the 'eighteen program, the future samples, say, EUR 8,000,000,000, that will be a structural reset of some other things that we have been doing, and we can stop doing and stop doing differently. In the short term, it's a mix of them, projects coming to an end and accelerating some of the savings that we need to have to get the right run rate into next year. Thank you. Thank you, Andrew. Next question, please. Thank you. Next question is from Russell Waller. Please ask your question. Hello. Thank you. First of all, just on Norway. It looks as though the build service revenue trends have slipped. Is that to do with roaming? And if it is, can you tell us what the underlying trends are doing, please? And then secondly, just on the cost cutting. I mean, you've said that the program for the second half year in Sweden is some of it's new and some of it is sort of an extension of previous plan. Can you try and quantify that, please? And I suppose what I'm really asking is, has your expectations for EBITDA generation in Sweden gone up, everything else being equal as a result? And then finally, just on the cost cutting plans for 2018, should we think about margins rising domestically as a result of the overall group cost cutting plan? Thanks a lot. Well, thanks. On it, we haven't gone further than to say that the at least 3% €30,000,000,000 cost base as net savings when you look at your numbers and model. What it means for margins, let's come back to that. And we, by the way, don't guide on revenues and margins. That's something we probably won't do for 'eighteen either. But let's think more about 'eighteen as we go through the year or closing on that year. On 'seventeen, we're not going to break down the mix of what's new, what's old. I think you need to take comfort in our plan for the second half for Sweden, and the cost is coming down five percent versus H2 'sixteen. Some of it is already in the cards, like we talked about in Q1 and Q4 already, but the shape of the year is higher cost in H1 and lower in H2, and that's what we're executing on. We're accelerating some of those safeguards and savings because as you have seen and we have expressed, it's, 1, for Sweden, the costs were slightly too high versus our expectations. And therefore, we need to accelerate the savings. On Norway, Christian? On Norway B2B, maybe Andreas, do you want to answer your question? I think they would know, but We are extremely happy with the Fenero acquisition and strengthening our position on the B2B side. And so far, so good, we must say. Underlying Fenera is doing quite well. So we are pleased with our improved market position and look forward to further integrate Foneuro and Real Life Technologies. And we can say that we think we want €400,000,000 around €400,000,000 in synergies for next year and that we have a clear but tough second half of moving over to customers to our own base. But Okay. Sorry. I was asking about build service revenues. Are you saying that the slowdown is because of P2P and on the B2C side, things are actually much better? No. No. It's actually, the B2C side is a little bit weaker than B2B. And that comes from a continuous sloping customer base to ICE and others. And we have increased ARPU, and we have compensated that quite well. And we do continue to compensate with, of course, the wholesale we get. I said before, we lose customer, and we get the wholesale back that is more than we lose out. And that formula still matches. But we've been also growing in the past for OnBase, but we're not doing that any longer. So that is unfortunately what we have time for. If you have further questions or more questions, reach out to the IR team. We will be here to support you and serve you. And with that, we wish you a pleasant summer, and we will be back in the Q3 report in October. Thanks a lot. Thank you. Thank you very much. Ladies and gentlemen, this does conclude our conference for today. Thank you very much for your participation. You may now