We have a slightly new setting for the presentation, only having a webcast. Thought we could try that out in the middle of the Swedish summer. Besides that, the process is as usual. First, we start with our CEO and President, Johan Dennelind, giving his thoughts on the quarter, then we have our CFO, Christian Luiga, taking us through the numbers. Without further ado, Johan, please, the floor is yours.
Thank you, Andreas. It feels lonely here in the studio, I hope you can see us and hear us well out there. Let me take you to a summary straight away. 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. We also now launch new cost initiatives that will have effect in H2 and 2018. 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 the fiber one-off revenues in Sweden are a bit lower than last Q2, which has a big impact on Sweden and therefore also on the group. 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, also for the dynamics in Turkcell. We also have a dividend decision in the MegaFon, which I'll come back to. As you know, we divested the part of our direct stake in Turkcell during the quarter, which had a positive cash flow, negative P&L impact. On the Asia 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 Fintur process. We have an interest from several parties, we have no reason to change our indications on being able to bring this to a 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 billion. 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 is nothing we really can talk more about as of now, you have to take comfort in what we say, that we think this is coming to a close and to an end soon.
You saw we took some write-downs, notably 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 is yielding. We are able to up our outlook on the cash flow for the year to about SEK 7.5 billion rather than SEK 7 billion, mainly through strong execution on the working capital and the CapEx discipline. That is really the highlights. Let me take a few more moments and go through some of the key numbers. We are in negative growth territory due to the Swedish, mainly fiber, one-off fiber impacts.
Without that, we would be approximately on 0.5% service revenue growth. EBITDA negatively impacted by that or from that, but also due to somewhat higher cost base than we wanted in Sweden, which I will certainly come back to in a while. Just to put that in context on the cost side. We launched in 2014, our Invest to Save program, bringing gross savings of about SEK 2 billion for the group, and SEK 1.3 billion for Sweden. At the same time, we have had increased costs for investments and other areas in the business. The net effect is not as visible as we would like it. We have complemented this earlier this year with our cash flow activities, which also includes OpEx, obviously. We are now more explicit on the second half for Sweden. I will tell you the numbers shortly.
We are also launching structural initiatives to have an impact in 2018, before we get the full benefit from all the activities that we have been doing in mainly the Finnish and the Swedish operations transformation-wise into 2019. What that means in terms of numbers is that Sweden OpEx, to be very concrete, as we said earlier this year, it is going to be high in the first half and in the second half. Now we put a number on it. It is going to come down around 5% in the second half versus the second half of 2016. That is a strong comfort around that. A lot of that coming from resources and consultants. Part of that is already in the plan.
There are activities that are coming to an end, investments are coming to an end, there are close ones of legacy that are being done, 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 go to the 2018 focus, now let us go from gross to net. We are talking net savings here, we are addressing the full portfolio in the continuing operations. 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 billion for the year. That is the full cost base called OpEx, minus equipment cost.
Nothing will be left untouched, we're aiming for at least 3% in effect in 2018, it's net. If you take all these initiatives into a summary slide, when it comes to the 2017 and 2018, we are going to have to take out around 850 resources in total, we are addressing the structural cost base before we get the full benefit of transformation. For Sweden specifically, it is the 5%, as I said, H2 effect with about 650 resources, roughly 50 employees and consultants. That's around 8% of the total resources in Sweden. What it means for EBITDA this year is that we are comfortable maintaining our EBITDA outlook. For 2018 and 2019, it is to drive further cost reductions in order to take us through the coming years with stability around our profitability.
The operational free cash flow, you can see that we have actually upped our guidance slightly for the year, it's thanks to strong execution on working capital improvements and the CapEx discipline, we now have better visibility on that. That's also important now heading into 2018 so we can support an operational free cash flow growth. 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, it's a lot around permits and also around the new dynamics.
The further out you go with the installation and implementation, you meet new type of areas and intermediates that we need also to deal with. Of course, in general, we are coming towards the end of the big pent-up demand in fiber in Sweden, even if there is still a lot to be done. We're sticking to our previous target for 1.9 million end of 2018, the mix we can talk more about later. We feel that we are executing on what we said earlier in the CMD conference 2014. Let's turn to Norway, where a strong Norway is performing even better. We have an improvement both on revenues and EBITDA. On top of this, we're including now going from Q2 onwards, the Phonero acquisition that will come with about SEK 400 million synergy impact into 2018.
We have, as you know, invested heavily in Norway over the years, creating a superb platform for growth in the best network for second year in a row. A very important part of our value proposition to enterprises, obviously. We feel good about the Norwegian execution and the Norwegian prospects. In Finland, we are seeing improvements. We have around 5% growth on mobile service revenue, which is solid or strong. We are also improving on our profitability side, even if Q2 is somewhat impacted by some higher rebanding costs and that goes away. We should see an improvement in Finnish profitability second half of the year as well. Now also including the recent acquisition, Nebula, which is a strong ICT player which will very much strengthen our SOHO position as the leading enterprise player in Finland.
Of course it comes with good financial accretive measures to the P&L for Finland. Feel good about Finland. I will not take more time. I will certainly come back for questions later, but I leave the floor for our CFO, Christian Luiga. Thank you.
Thank you very much, Johan, good morning, everyone. I will take you through the cash flow and the impact from the CapEx that has decreased and will further decrease. I will also talk a little bit about our strong balance sheet. Before I go there, I'd like to talk a little bit more about Sweden's results. In Sweden, we have seen a decline in service revenue in quarter two, 2.7%. 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 third consecutive quarter where we see a decrease of 2.5%-3%. We had around 5% in the past, and the trend is there with SOHO SME continuing to grow and the larger segment being down around 5%.
On the 2.7% down, it's primarily from the fiber, SEK 164 million down two percentage points on the service revenue. We also see a somewhat lower growth in the mobile side, mobile consumer, it relates to the VAS. Value-added services growth is somewhat lower in this quarter. The TV pricing, we should also remember, was increased in Q1 2016, that is now on a comparison level coming out, that means we need to look at the pricing over time in TV if we want to compensate for that as well. TDC, we know that has moved, it was a decline of SEK 25 million in the quarter and it will continue to be declined for a couple of more quarters. Fix LFL went down SEK 119 million compared to last year.
It was bigger last quarter, 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 two reasons. I understand it came very late in the quarter, also did drive costs, it's part of why the cost was somewhat higher in the second quarter compared to last year. Moving into cost, you want to talk a little bit about that. The cost increase in quarter two comes from marketing sales, also we have continued to have higher costs 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%, SEK 150 million profitability is on a low level, but doesn't change that much. 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 size 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's potential for efficiency, and cost will therefore also be an element in the agenda for these countries in the second half and 2018. 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, the 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. That is very positive. The profitability in Uzbekistan has been somewhat negatively impacted by a legal regulatory fee that we have been charged, 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 two years. We have been in a peak in 2016. We've said we will come down in 2017. We said that the CapEx, excluding fiber, should come down in 2017, and we have good visibility and good discipline on that. CapEx is down SEK 600 million the first half compared to last year. Half of that is Spain. Half of that comes from the continued operations.
The SEK 300 million 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 this trend continue further in the second half. Another thing that we have booked in this quarter is the Liiga CapEx of around SEK 1 billion. That is a content right in Finland for the hockey rights, and it is to be paid from 2018 and six years forward. We do estimate and we plan for having a decrease in CapEx next year as well. We have said that CapEx should go down now over a couple of years, and it will. When we do that estimate, we include the cash CapEx, and the cash CapEx from Liiga starting from next year. I think that is also important for you to understand when you try to estimate our future.
Operational free cash flow, SEK 7.8 billion run rate right now, last 12 months. Quarter two 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 MegaFon and in Turkcell. MegaFon, SEK 700 million to be paid in the end of July, beginning of August. For Turkcell, it's SEK 2.1 billion to be paid in three tranches. The first one paid already now in quarter two, and the other two coming in quarter three and quarter four, and before the end of the year. Total SEK 2.8 billion. That gives us a good visibility on the cash flow also coming for the full cash flow, including the dividends, being then SEK 2.8 billion higher. 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 Nebu acquisition. Taking that into account, also taking into account the dividend I just spoke about, also the Uzbek legal settlement of $1 billion 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 1.8 times net debt to EBITDA on the pro forma June number. A healthy balance sheet, including what we have decided on and what has been decided that impacts our numbers. EPS has been a difficult picture to look at in Telia over the last years, 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 the previous years and this year, and in quarter two, we had a couple of more write-downs, the largest one in Uzbekistan. We adjusted the value of the Uzbek asset from SEK 3.3 billion to around SEK 1.5 billion. That is primarily based on what we see in the development in the country, FX risks, also regulatory risks, 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, that is because we had an impact from Nepal sales last year.
A big impact, though, we had from Turkcell, which we made a loss of SEK 3.3 billion in FX losses when we sold the stake of 7%, which gave us SEK 4.4 billion in cash with a recycle of FX of SEK 3.3 billion, which made a loss in the profit loss but did not affect equity. Complicated, but most importantly, we do continue to have a somewhat better position than on our continued operation when it comes to the EPS development. Finally, supported by our cost agenda, we do reiterate our EBITDA guidance for the full year to be delivering on the 2016 level. With better visibility, Johan mentioned on both CapEx and working capital, we are sharpening our operational free cash flow guidance to be above SEK 7.5 billion. 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. If Johan joins us back again, we can open up for the Q&A. Operator, may we have the first question, please?
Thank you. Ladies and gentlemen, please press star one if you wish to ask a question. Your first question comes from the line of Terence Tsui. Please ask your question.
Yeah. Good morning, everyone. I've got a couple of questions on Sweden, please. Can you talk about the trajectory to get to the 1.9 million households by the end of 2018? Obviously, Q2 was a bit of a setback, but what are the reasons for it to rebound, and also to accelerate to hit the target? Secondly, just looking specifically at the Swedish headcount reductions, what sort of restructuring charges should we expect from this, and when should we expect it to be booked? Thank you.
Okay. Thank you, Terence. Thank you for the question. The 1.9 million 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. We do have still a ambition, and we see the potential to further build up to 1.9, including, we should say, the M&A activities 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. The next question comes from the line of Sami Sarkamies. Please ask your question.
Hi, guys. Thank you very much for the questions. Two, if I may. 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. For Telia, it just doesn't seem to ever result in sustainable EBITDA growth. Are you saying, based on these new initiatives that post 2017, that you'll be on a track to really deliver sustainable group EBITDA growth? Secondly, on fiber connection, Com Hem at its results even seem to suggest that the problem was not permitting, but it was finding that operators were competing away the actual size of the fiber connection fee. Is that what you're seeing in rural areas? Thanks.
Thanks, Sam. On the savings side, everything equal, which is never the case, really, this is net saving we're talking about for 2018. At least 3% of the SEK 38 billion that we're aiming for 2018 should be seen then as in a period net reduction. Of course, we need to come back to you on the guidance for EBITDA in 2018 onwards. We do remind you, though, that we are still in the legacy pressure in the major part of the operation of Telia, which is Sweden, and that we're not through yet. As long as we have the legacy pressure, it takes a lot to get growth on service revenue and therefore also on EBITDA. That's why we need these extra initiatives in this transition phase. On the fiber, I think it's the dynamics that we did describe.
To us, it is about the delays and a lot related to permits, and less about the actual competition. Of course, as longer we go on fiber rollout, the competition increases naturally. In this quarter, it's mainly the delays.
Okay. Cheers, guys. Thank you.
Thank you, Sam.
Thank you.
We move on to the next question.
Your next question comes from the line of Lena Österberg. Please ask your question.
Just a few questions. First of all, you mentioned something that you see now a lower interest in the Ucell 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. Maybe if you could say something about what the 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? Also, you talk about a decrease in CapEx in 2018, but could we maybe have a more specific number on that, please?
Thank you, Lena. Let me start and maybe CapEx goes Christian's way. Maybe from the top, Ucell. Well, as I said, we've 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, Ucell along the way. It kept it at a value where we thought we would be able to divest that. That has now been reduced, and what's remaining is around SEK 1.5-ish billion. We think we can then get that value from one 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 we have SEK 1.5 billion that we can't realize. At this point, we think we can, that's why we have that in the books.
Roaming, very positive for our customers, great feedback, and we are the most generous offers in most of our markets for our customer bases, which should be a competitive edge. Obviously, 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. We're not taking that out separately in any way. No need for that. CapEx 2018, 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. That's the trajectory that we have set out, and that's what we're delivering on.
Can I maybe just follow up on Uzbekistan . If you can't find a buyer and you have to close it down, will you incur closing down costs, or have you sort of provisioned for that in your write-downs as well?
No, nothing as such is provisioned for, and we don't believe that needs to happen. Otherwise, we would have taken a different type of approach on the impairment reassessment of value. Let's not get ahead of the situation. We think we can divest. We think the value is SEK 1.5. It does take a bit longer with Uzbek because it also has at least a perceived impact related to the ongoing investigations that we have. Once we get that closed, then I think we'll also be able to get Ucell into new hands. Okay, Lena, are you fine with that?
Yes. Thank you very much.
Thank you.
Thank you.
I feel like a parrot, could we have the next question, please?
Next question comes from Peter Nielsen. Please ask your question.
Thank you very much. I'll take two questions, please. Firstly, you're obviously extrapolating, so to speak, your cost reductions and mentioning the Invest to Save Program, which included quite significant CapEx investments. Can I just ask the new programs for further cost reductions to come in 2018 and 2019, will they also involve some incremental CapEx investments compared to your previous plans? Just secondly, if I can return to the fiber, you stick with your 1.9 million target, is your own internal targets for Telia connections also unchanged? Thank you.
Thanks, Peter. On the cost side, no, these are not Invest to Save, there is no incremental or 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, it's also a more structural cost OpEx COGS reductions that we see that we can take out without risking the business at this stage. 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 clearly to the market and also to ourselves and our partners, and we're on track, as we spoke of earlier, of the 1.9.
There's also been a 1.1 million target for Telia connections, is that correct?
Yeah, I think that's the number that we had in the C and the-- We haven't changed any of those, no.
Okay. Thank you.
Thank you for your question. The next question comes from the line of Maurice Patrick. Please ask your question.
Good morning, guys, Maurice here. Enjoying 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 needing to sell it decline? I guess what I mean by that is, given the assets are performing better, maybe you're not in such a rush than you may have been in the past to sell it. Thank you.
Morning, Maurice. We have never been in a rush as such. We always said that we will reduce our assets over time, find the balance of risk and value, and the timing. We have made an assessment that we think it 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 three risk components that I mentioned. 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. Very pleased with the team's performance in rough times.
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 de-bundle or decouple the two holdings we have there. One is the direct stake, which is now reduced around 6.5%, 7%, and one is the indirect stake, which is around 25%. It should be no surprise we have done that, and also if we decide to do so in the future, it should be no surprise. For MegaFon, we have said that's a different type of asset, even if we see in the future that we could possibly also leave MegaFon, that's nothing that we will speak about ahead of actions.
Very clear. Thank you.
Thank you, Maurice. Next question, please.
The next question is from Ulrich Rathe. 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 and for 2019. Could you describe separately for the two, the visibility you have on this, i.e., where you are in identifying measures, maybe even having executed measures already? Just interested to see at what stage of the planning we are as its top-down goal without specific measures has been going through the operating units and so on. Second question would be Eurasia on the sales process. Since that you have these write downs from time to time in 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 this politically completely unacceptable and you just got to get rid of it, or is there a point at which you would decide to even keep it? Third point is, [inaudible] , I understand you don't want to give figures for the cost. Would you be willing to share volume trends that you're seeing? The last question is, again, on the fiber. What I don't fully understand about 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. I assume there's some demand. They stand in the way between end customers getting a higher broadband speed service.
They are the party to blame. I'm just wondering how that politics plays out. Why do they have the luxury to just sit there with their constituents and essentially hold this up? Thank you.
Good morning, Urich. Thanks for your comprehensive list of questions here. Let me start to agree with you on the fiber side. For those of you not maybe in the Swedish context, for me the other day, this is a hot potato that's being 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. This is something we are very vocal on, but we still have some issues to deal with on local levels, which we are pushing. That's one part of the delays. Not all, obviously, but one part. I agree, it should be the same example for all players here. Let me go back in the list of order of your questions.
Well, Christian, I'll come back to the sales, Eurasia sales. This is not a political decision. This is our decision to divest and reduce presence in Eurasia over time. 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. That's why we also haven't sold some of these good assets yet, because we haven't been happy with those timings. We have no reason to change our view on our exit strategy. On roaming, we're not going to give you details more than that.
We say that it's a great consumer offering in our countries now, where we are taking 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 the free social media surfing, which is very much appreciated. As I said, this has had some slight negative impacts for the total group 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, these are things that have been initiated and started. 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 SEK 38 billion cost base. These are identified, some have started, some have not started. Some are more difficult, some are very easy.
That's how it is in nature when you do these kinds of programs, therefore, the longer you go, the visibility is less on how you're going to achieve it. Of course, we feel very comfortable to deliver 3% down on the SEK 38 billion cost base. Otherwise, we would not have announced it today.
Thank you.
Thank you, Ulrich. I think we have about 10 questions left. That leaves two minutes per question. You could go on the next one.
Thank you. The next question is from Henrik Herbst. Please ask your question.
Yeah, thanks very much. Firstly, I can ask two 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 areas. Just wanted to hear your thoughts, really, how likely you think it is they will start to look at it on a more regional or network by network basis, and what that would mean for you and your build-out plans. The second question, I just wanted to ask if you could give any, your new roaming tariffs, how popular have they been? Is it mainly with new customers, or are you seeing your existing base upgrade as well? Because I think you get a bit more data, but you pay a little bit more as well. Just wondering if you could give any color on that. Thanks very much.
Thank you, Henrik. To simplify the regulation, reminding us, we did have a deregulation on price wholesale in December last year. 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. It's not an easy overview, and we're working, of course, closely with the PTS to give our views on that. We see no risk as such on the negative side of our tier in this regulation process as of now, and I think that's important to mention. On the roaming, yeah, we are upgrading, migrating our customer base to higher buckets in the Swedish context. In the other ones, they have slightly different pricing strategies per market.
All in all, we are able to price up many of our bundles and offerings on the post-paid side as they include more generous roaming.
Thank you, Henrik. We move on to the next.
Can I just follow up, actually, on the fiber regulation? I guess what they're looking at is to regulate all the city networks as well. 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?
I don't want to speculate and go 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 fiber side in the near or medium term in the Swedish market.
All right. Thank you.
Thank you.
Thank you, Henrik. Next question, please.
The next question is from Sunil Patel. Please ask your question.
Yes, thank you. Just one question from me. On Sweden EBITDA evolution in the second half, I mean, I noted your, I think 5% cost reduction on the SEK 4 billion base, which is a SEK 200 million tailwind. It seems to me that the Sweden EBITDA will still be down for the full year-on-year, which makes it a struggle 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? Thank you.
Well, we don't guide, as you know, Sunil. Unfortunately, I can't give a clear answer to your question. Sweden will improve second half, as we all understand. We reiterate our guidance for the full year. We have a portfolio of companies also in our group, of course. That's the only thing I can say, unfortunately.
Okay, thank you.
Thank you.
Thank you, Sunil. Next question please.
Next question from Keval Khiroya. 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 still 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? Telenor, for example, is seeing quite significant margin improvements, and if not, how close are you to finding some form of strategic solution for the Danish asset? On Norway, could I just ask, how much are you earning today from national roaming payments from Ice, and how should we think about how these payments evolve going forward? Thank you.
Thanks. On Norway, the quarter and the year so far has been helped clearly by wholesale revenues from Ice. That's been part of our guidance in general. We also see now a good trajectory and support on the retail, which is of course more important for us going forward, with the rationalization of Danske and also the inclusion of P honero in the business. At some point, of course, those improvements of wholesale revenues, which we have seen year to date, will start to reduce, which then will be overtaken by improvements in retail in Norway. 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 our plans are. We need a solution that puts us in a better position in Denmark where we can create value 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 to talk about at this stage.
Thank you. May I just ask, within the other mobile service revenue line in Norway, the SEK 166 million growth in the first half, is it fair to say that most of that is due to Ice?
That line, which line did you refer to now?
Other mobile service revenues within Norway.
It should be that line. Maybe we have to come back to you on that.
Sure. Thank you.
Just to make sure we actually answer this right.
Sure. Thank you.
Andreas, you will take that for you?
Thank you.
Thank you. Your next question is from Irina Adrisova. 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 Invest to Save program, could you just maybe give us more color or perhaps some examples on what's changed since 2014 launch of the program that brought to light these new opportunities? Also in terms of timing, how should we think about the pace of the savings to 2018? Are you able to tell us at this point whether you expect most of this to come through in the first half, or is this more back-weighted? Thank you.
Thank you, Irina, for the question on cost saving. This is a continuation partly, and there's partly new things coming through. The Invest to Save program was, again, as we talked about earlier, connected also quite large investment in Sweden and Finland, and they have been made, and that platform will help us going forward as well. 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. 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 two 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 nearshoring that can help that and product side. The guidance for 2018 on this, I want to wait with until we get closer to the end of the year and we guide for next year, and we leave it as at 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? 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 the cause for H2 being lower in terms of cost as well? Just to understand what sort of impacts where. 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.
Should I take both questions if you want? Yeah, I'll do that. I'll start with the last one then, on CapEx side. If we would have a lower fiber installation fee, we'll also have a lower CapEx, and that should compensate definitely for the lower profitability. Cash flow should not be affected. When we talk about the reduction, the reduction of both employees and external resources of 850 is impacting 2017 as well, of course, giving a good headwind into 2018. It will be impacting 2017. 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. For installation fees, also for CapEx relating to fibers, basically could we see CapEx falling before EBITDA contribution as infill connections in places where you've already expanded the CapEx or network is already done, and you just add the occasional home?
Well, when we go into an area where we already have built the homes cost, there is no CapEx per se. 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. As long as we can keep the numbers within that model, we will continue to build.
Thank you. It sounds like it's a fair assumption that CapEx and EBITDA go relatively hand in hand as the sort of tables are pretty good.
Yeah, we will not have a negative impact on cash flow if we would get a lower OTC.
That's very helpful. Thank you.
Thank you, Thomas. Next question, please.
Next question is from Andrew Lee. Please ask the question.
Yeah. Good morning, everyone. It's Andrew from Goldman. I just want to ask some questions around your cost cutting, because this is coming in a week where you've had quite a lot of your peers also stepping up cost-cutting targets, beating the EBITDA. Can you talk about the cost-cutting targets and what's changed to unlock this? I mean, an 8% reduction in total resources is pretty sizable. What are the fundamental shifts in your 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 a resource? What's the timing of that and how much flexibility do you have to do more of it?
Certainly, I wonder if you could just talk about management incentives and how the free cash flow generation correlates with management incentives and whether they've changed over the last couple of years, and any input into the consequences of that on your strategic decision-making would be great. Thank you.
All right, Andrew. Thanks. I think we have got to summarize a bit what we already said on your two first questions around 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, et cetera. That we can take out as planned. We're also accelerating some of the takeout and terminating consultants earlier, accelerating some projects, taking slightly higher risk. That's a calculated risk we're taking in order to also give comfort to our run rate mainly into 2018, because 2017, EBITDA we feel good about. Timing, of course, employees 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, and notice has already been given to the unions earlier in the quarter. This is already being executed on. That comes slightly later, as Christian pointed out, and consultants are when you terminate and the contracts run out, they leave on the day.
All in all, for H2, that is about 650 people or resources/consultants. 50, we would estimate today, 50% consultants, 50% employees. 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. The managers clearly measured on our EBITDA and cash flow. Those are our 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. Clearly the same target as the rest of the teams. That's how we measure. Nothing has changed. It's just increased focus on the cash flow, as we talked about earlier this year.
Thank you. Can I just do one follow-up? 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 2018 program, the 3% of the SEK 38 billion, that will be a structural reset of some of the things that we have been doing, and we can stop doing and start 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.
Oh, hello. Thank you. First of all, just on Norway, looks as though the billed service revenue trend has slipped. Is that to do with roaming? If it is, can you tell us what sort of underlying trends are doing, please? Secondly, just on the cost cutting, you've said that the program for the second half of the year in Sweden, some of it's new and some of it is as sort of an extension of the previous plan. Can you try and quantify that, please? I suppose what I'm really asking is, have your expectations for EBITDA generation in Sweden gone up, everything else being equal as a result? Finally, just on the cost cutting plan 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% of the SEK 38 billion cost base as net savings when you look at your numbers and model. What it means for margins, let's come back to that. We, by the way, don't guide on revenues and margins. That's something we probably won't do for 2018 either. Let's think more about 2018 as we go through the year or close in on that year. On 2017, 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 5% versus H2 2016.
Some of it is already in the cards, like we talked about in Q1 and Q4 already, that 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 takeouts and savings because as you see and we have expressed, it's one 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 a question?
We are extremely happy with the Phonero acquisition and strengthening our position on the B2B side. So far so good, we must say. Underlying Phonero is doing quite well. We are pleased with our improved market position, and look forward to further integrate Phonero and realize the synergies.
We can say that we think around SEK 400 million in synergies for next year, that we have a clear but tough second half of moving over the customers to our own base.
Okay, sorry. I was asking about build service revenues. Are you saying that the slowdown is because of B2B and on the B2C side things are actually not so tough?
No, it's actually the B2C side is a little bit weaker than B2B. That comes from a continuous sloping customer base to Ice and others. We have increased ARPU, and we have compensated that quite well, and we do continue to compensate with, of course, the wholesale we get. As I said before, we lose a customer, maybe another player loses a customer, and we get the wholesale back. That is more than we lose out. That formula still matches, but we've been also growing in the past for own base, but we're not doing that any longer.
Got it. Thank you.
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. 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 participating. You may now disconnect.