Good morning, everyone. Welcome to Telia Company's Q2 presentation. Here to present today, we have the normal lineup. It is our CEO, Johan Dennelind, and our CFO, Christian Luiga. After the presentations, there will be time for questions, and we intend to close the session within one hour. By that, with no further delay, I would like to hand over to Johan, please.
Thank you, Jesper, and good morning to the few of you here and to the rest of you online or on the phone. It is very evident that it is in the middle of the summer, but nevertheless, we have a Q2 to report. Broadly speaking, we are in line with our own expectations. As we have been guiding you through the year, Q2 was going to be softer on the improvements in EBITDA, which we are now showing. Generally speaking, we are very close to having organic growth in the continuing operations. Actually, if you take away the interconnect effects and some non-margin revenues on the carrier, we are in positive growth territory.
EBITDA growth, 5% on the quarter and 7% for the first half is a solid set of numbers, especially considering we are almost improving EBITDA in all our markets and stable in one of our eight continuing operations. We are very happy with that. The cash flow clearly impacted by the non-dividend from Turkcell that we had last quarter, but still a SEK 1.8 billion cash flow for the quarter. Let us take a quick look through the highlights. Let me start on service revenue, splitting it up on Sweden, Europe, and the average continuing operations. Europe going from strength to strength, driven by Spain, but also generally across the markets, we have positive developments on the organic side. Sweden, slightly below, and as a continuing operation, it is also slightly below, but very flattish, you could say. EBITDA improvements, as I said, throughout the seven of eight markets.
Denmark is flat. Sweden coming in on 2% improvements, which is generally in line with what we have been expecting and also how we have been trying to guide you through the year. Tougher comparables, remembering 2015 was a year where the SAC spent for the year and also a storm effect were very present. Let us take a look at the Swedish operations more in detail. If you split up the consumer and enterprise segment, we have the same trends as we have seen before. I do not know how many quarters now we have been positive on consumer, but it is quite many. If you have the full effect with the one-time charges on fiber is 4%, removing the fiber one-off, you are still at almost 2% growth in the consumer segments. I will get back to what is behind that on the next slide.
We are still having a tough time in the enterprise side, as we also talked you through more in detail during the Capital Markets Day. The positive news are still there underlying. The SME and SOHO segments are growing. We're at 0.5% on the total service revenue growth for SOHO SME. We're 3% growing on mobile service revenue SME. On the other hand, large public is a clear drag on the growth numbers. On the fiber side, we are sticking to our plan and digging as fast as we can to hit our ambition of SEK 1.9 million in 2018. We're well on track. The quarter had around 42,000 new connections, and 50% of that approximately is SDU. We are progressing well on the fiber side. On our consumer and monetization or value loading, as we prefer to call it, we see a shifting mix.
This is one part of our strategy to get our customers to the right package and the price plans. Also we see that shift up in speed and up in value on our various products. This is a year-on-year comparison, it's a healthy shift towards more value from our customers, where we then also have an opportunity to optimize our pricing, which we've done through the year. A clear effect if you look to the right, you see the ARPU effect on TV, notably so where we have done some price adjustments. Also on mobile and fixed, this is the average ARPU both for B2B and B2C, clearly B2B is a drag on these numbers, where consumer is very much in the positive space.
I'd like to mention the mobile portfolio here, the launch we've had through Q2 has been very successful from a brand perspective, from a net promoter score perspective, also from a stabilizing base and ARPU perspective. We are happy with the progress on mobile side in Sweden. Moving on to Finland, where we continue to be well on track on our transformation through the next year or so. Meanwhile, we're stepping up slightly our profitability on EBITDA improvements. Not enormously, clearly a step-by-step improvement in Finland. This is driven also by the improving dynamics in the consumer space on mobile. We see that also on the billed revenues is almost 4%. Here you have a big gap on the interconnect, which is negative drag, as you see, down to service revenue.
The issues we talked about during quarter one on network has been stabilized. We're investing now to ensure that we give the customers what they expect and more. Finland, step-by-step improvements. Moving to Norway. Some really good news on the operational side following the integration with Tele2. We have recently been recognized for our investments, the payoff of that has been the best network in Norway, on the 4G side, which we're very happy with, that's also something that our customers are telling us. The new brand launch of Telia, from NetCom to Telia, has been very successful. The early signs of both top-of-mind awareness and recognition is very strong, that gives us great confidence now investing further in the Norwegian market. On the numbers side, organically, we have an improvement of around 5% on EBITDA.
Reported, of course, it's less negative because of the FX and the Norwegian kroner. Generally well on track in Norway and I'm certain that we come back to questions on Norway when it comes to our future ambitions. It's a solid platform for further growth in Norway. Taking a look into the Baltics as a cluster. We see generally stable or positive conditions following Lithuania merge into one company, doing really well, all companies improving EBITDA. Estonia into positive growth territory, even if it's just slightly. All in all, a fairly decent set of numbers from the Baltics, where I'm sure we will have more in the future to come from the two so-far mergers we have done.
We're also addressing the Latvian situation, where we're in discussions to see if there is an opportunity over time to also get our two companies together there. Ending off a bit on the portfolio side. There are no news really. You have seen the divestment and signing of Yoigo and Sergel and Ncell during the first half year and second quarter. You're seeing some of those effects now, notably so on the Ncell divestment in the lower part of the P&L down to EPS. The divestments are progressing according to our expectations here. Nothing that changes our minds on closing, both for Yoigo and Sergel. On the other remaining six countries in Eurasia, we have no reason to change our views that this can be done during the year.
Reminding you again that Uzbekistan is probably the last on the list, or in the queue, because there we have a clear dependency to having a need to get resolutions on the various investigations on Uzbekistan first before we go into more the final stretch of those divestments discussions. Progressing closer to some of the divestments, we will also reflect that in the valuation of the assets, which we have done this quarter, notably in our Tajik and Afghan operations, where we're taking an impairment around half a billion SEK to reflect what we believe will be the price of the assets that we will receive in the end. That's how it works when it comes to our discontinued operations. Moving to the more forward-looking agenda. Offensively, we are actively pursuing our strategy in the Nordic Baltics to become integrated operator across our footprint.
As we also lined up in the Capital Markets Day, a clear strategy to be active on the M&A side, on broadband, in ICT, to strengthen our propositions across. We also, as you know, launched a new unit to work on new business opportunities, new revenues and ventures to drive the new generation Telco into the next step. That actually brings me to my last slide. We're just summarizing a decent quarter, very much in line with our expectations. We have been telling you, it's going to slow down from the very strong Q1. We have stable service revenue development, which is not taken for granted, where you have a drag on some fixed and B2B, which needs to be compensated by mobile and consumer and internet and fiber. Executing on our strategy, optimizing our portfolio, and we're well on track on that.
handing over to Christian and coming back later to the Q&A. Thank you.
Thank you, Johan. Good morning, everyone. It's time for me to summarize and go through the numbers of the quarter. It is a stable service revenue quarter again. Very similar to quarter one, the same thing on the EBITDA growing, and the CapEx is on a flat level in this quarter. I will go through this and many other things, starting with the service revenue. Net sales is down 1% in organic terms. It's down 2% if you look at the reported. The main difference is the Norwegian kroner that has weakened substantially year-on-year on our numbers. If we look at the service revenue, we see that the service revenue is down 0.2%, but that, as Johan explained, is affected by two things. One, very similar also to quarter one, voice traffic in carrier.
Carrier is actually doing a slightly better profitability, so it's not impacting the EBITDA in carrier or the group. The voice traffic is down, and we have focused more on the IP traffic in carrier. That stands for 0.4% on the service revenue, and the other part is the interconnect, mainly in Norway and in Finland, which is also impacting 0.4% on the service revenue. Without these two effects, we would have had a service revenue growth of 0.6%, just slightly above the zero line. The Norwegian interconnect effect will go down from 1st of July, and the Finnish one from year-end. If we look at the EBITDA, 5.1% up, and reported it was slightly below 1% here, and the main effect was also here, the Norwegian kroner. The EBITDA is down from quarter one.
In quarter one, we had, as we've said both last year and this year, effects from higher SAC and giveaways and side costs in Sweden, inventory costs, but also Storm. That was a SEK 220 million impact year-on-year in first quarter, so that pushed around 4% on the EBITDA growth in quarter one. We don't have that effect in quarter two. We also know that Norwegian EBITDA was 30% growth in quarter one, very much the synergies effect coming through. We also said they will go down from now on. Norway, as you've seen, is a 5% increase this quarter compared to a 30% increase in quarter one. We expect the second half to be going down further. This is in line with our previous communication and our expectations. There are several things that will impact the decline. We have the increased spending on new business and go-to-market activities.
We also have a quite high spending right now in our efforts that we have been going on with in the security and privacy. As you know, privacy regulation is something that hits a lot of operators. We also have a pressure, which we talked about on the gross margin, mainly large B2B and fixed telephony. Europe doing very well in the second quarter. Growth in service revenue and in EBITDA. Six out of seven markets is growing the service revenue. Denmark is also growing the service revenue. Even if it's small amounts, it's growing. Denmark is the only entity that is making a loss in quarter two year-on-year. Not a loss, they are making a lower profit. I would not call it a lower profit, though, because it's SEK 3 million.
I would say it's flattish, if you look at the numbers, it's a minus still, a very small minus, SEK 3 million. There's a quite big increase in Spain. Spain is doing well on EBITDA, both from the 6.3% revenue growth, also on lower marketing. As you know, in Spain, we've talked about that before, we have a machine where we can actually very much work on the marketing and SAC, then we take in customers or not, and that we don't do because of the sales right now. It's actually in our plan to drive in certain periods of the year campaigns to get the customers in. This is a good quarter from that perspective. Looking a little bit at the Eurasian entities and performance. This also has an impact on our EPS on discontinued.
The discontinued operations, I wanted to highlight in two pages. First, looking at what impacts the reported numbers for discontinued operations. There's three elements. One is the organic development, our operations, how we're doing in the operations that we still have there. Another thing is the Ncell deconsolidation. This year, we only had Ncell in the numbers in one month, in April, last year in three months. That is the difference that is a significant impact. The third one is the FX effects, primarily in Azerbaijan, Kazakhstan, and Uzbekistan. Two of these effects impacted service revenue. Service revenue was quite flat on the Eurasian operations overall, both the Ncell deconsolidation and the FX impact had significant impact, in total down 39% due to these two effects. In EBITDA, all three parameters or reasons had an impact.
Operations Impact 16 percentage points, the FX and deconsolidation had a somewhat higher, also impact on this number. In total, 54% down. That's why it's important that we understand what is the reasons behind. We take this with us and talk about the operations only, talk a little bit how they did, go to the next page, we can see that the service revenue being down 0.2% or being flattish is actually a mixed bag. We have Kazakhstan going down, we have Azerbaijan going down a little bit less, Uzbekistan compensating for most of that decline. In Kazakhstan, already in quarter three 2015, we were hit by competition and market conditions, we have been working hard to see how to do something about that.
In Kcell, the work on new offerings, changing our offering portfolio, the work on the off-net cost, which has been a big effect on the result, has improved quarter by quarter. It's better and better each quarter, and we believe, based on both some improved market conditions and some smaller price increases, that we will continue to improve in the two next quarters, but probably more in the later part of the half year. Uzbekistan doing well, up 3.5% on the subs, and the ARPU is also increasing. The service revenue in Uzbekistan is eaten up by sales taxes. Uzbekistan profitability is not increasing based on the revenue growth. Meanwhile, the Kazakh and Azerbaijan revenue decline is impacting the EBITDA, and that's why we have a total EBITDA decline, meanwhile, we have a flat service revenue. Moving into our Invest to Save and cost development.
At the CMD a month ago, we presented more details around our Invest to Save program. A program where we invest two billion to save two billion run rate going into 2018. We are on plan. We have increased our run rate from SEK 0.6 billion at year-end 2015 to SEK 0.8 at this point, and targets SEK 1.1 billion by the end of this year, going into next year. Remembering that this program contains two main parts. One A is the overall cost efficiency work we do, which we can do also much faster short-term with procurement, with trimming customer operations, SAC, and general operations. The other one is to simplify our legacy. More automated processes that will drive lower IT and resource cost over time. Both these two things are hard work ongoing as we speak.
On the right side of the picture, we can see the cost decline on the OpEx side. This is excluding the cost for handsets and for the network. Here we can see that we have had a decline since quarter four last year, working on our cost programs giving effect throughout this year. This is nothing we will stop, even though the comparisons will be harder going into quarter four, we're not stopping our efforts within the Invest to Save program to drive cost. Good to know on this picture on the right is that we have excluded Norway, the reason is that the Tele2 effect would make these numbers very hard to understand. Also good to know is that if you would exclude Spain from this picture, it will look very much the same. CapEx.
CapEx is pretty much flat, just a little bit slightly up 2% in this quarter. Have to remember, in the first quarter, we were up SEK 600 million, so on the first half year, we were up close to 10%. The share of fiber in Sweden is increasing. It was around 35% in the first quarter, it's up to 50% in the second quarter, and will increase in the second half based on our guidance that fiber will increase for the year. Our run rate is now at SEK 14.9 billion, and that is in line with our forecast where we have said in our outlook SEK 14 billion-SEK 15 billion. However, we have also said that we will be in the upper part of that guidance. EPS. We had some dramatic effects on EPS in this quarter. I want to go through them.
This picture shows the EPS in total for the group, and then EPS for discontinued operations. Clearly, we can see that EPS is down 42% on the group. Meanwhile, the continued operations is up 17%. Continued operations is up 35%. A big chunk of that is associates, but also coming from the operations driving actually an improved EPS on the continued operation. The negative discontinued operation is explained by a couple of factors. First of all, we have the EBITDA effect. The operations we just went through with Kazakhstan and Azerbaijan, Ucell, Moldcell, et cetera, where the operations is declining due to different reasons, and that has a negative effect. Then we have had SEK 1 billion in impairments in this quarter. One is related to the Tcell and Roshan assets. Roshan is 12% ownership in Afghanistan operator, and the other part is related to Uzbekistan.
We have an increase in EPS, and that is the depreciation. Why do we have such a big increase in depreciation? Well, when you put assets for sale, you are not allowed, according to IFRS, to depreciate in the local businesses. On all our fixed assets, we do not depreciate fixed assets. However, we value these at the fair value we think we can sell these companies to. If the carrying value for these entities go above where we think we can sell them for, we need to impair them. In Uzbekistan, we have had an increase, of course, in profitability of not depreciating, but we also be very clear on what we state we think we can sell the company for, and that's what we have valued for, and that has resulted in an impairment. Then we have the Ncell deconsolidation.
I went through that one month this year, three months last year. We have a capital loss from the result of the divestment. Here, the overall effect for the group is SEK 1.2 billion plus for the divestment of Ncell. SEK 2 billion is a positive effect on the minority, and SEK 1 billion negative on the parent company. The total effect for the equity is actually positive, meanwhile for the parent company is negative. The main reason is that the part for parent company is the only one you allocate goodwill to, is where you also have your provisions for warranties, et cetera. Finally, we did two transactions. We sold both our local shares and we sold shares together with a former co-owner, Visor. The local shares were sold at a lower price, and that hits only the parent company. That's the reasons.
Therefore, all these explanations together gives a big impact on EPS, and I hope I gave some clarity on that. Moving on to cash flow. I want to point out two things on this page. It's down year-over-year, it's down by SEK 3.2 billion, but the biggest impact comes from a dividend from Turkcell that we received in Q2 2015 of SEK 4.7 billion. Excluding that dividend, we have an increase of SEK 1.5 billion in free cash flow. That leads me to the second point, that that increase stems from working capital. The working capital is improved by two elements. Firstly, in our business, we have swings between the quarters depending on when customers pay and when we have campaigns on warehouse. It doesn't mean necessarily that we have a continuous improvement.
Part of this comes from that. The other part comes from the continued improvements we're doing in all countries where we have activities ongoing, as we have spoken about before as well. Looking at the rolling 12-month free cash flow, we see it's down. The main reason it's down is the dividend from associates Turkcell from last year. The rolling 12-month right now is SEK 8.9 billion. We know that MegaFon has announced a dividend that at today currency rate should give us around SEK 1.1 billion coming through in quarter three, similar to last year. Leverage, 1.6 at the end of the quarter. In this number, we have, of course, paid out dividend in April, SEK 6.5 billion, which was the first part of our SEK 3 per share dividend for this year.
The second part, SEK 1.5, is coming on the 28th of October, another SEK 6.5 billion. In this number also, we have taken out Ncell. We are including still in this number, however, the part of the funds we have received now for the divestment that is belonging to our co-owner, Visor. It's around SEK 2.9 billion. We have also divested or signed agreements for a divestment of Sergel and Yoigo. Our current estimate is that these two together would impact positively with 0.2 on the leverage, i.e., lower the leverage with that amount. Finally, my last slide, the outlook for the year. We've talked about the EBITDA, where we see that the second half will have tougher comps. Sweden and Norway was two important countries.
We also see the fixed telephony and B2B as challenges. We have somewhat higher cost in go-to-market and our efforts in security and privacy. Also, the CapEx SEK 14 billion-SEK 15 billion in the upper range.
Thank you very much.
Thank you, Christian. I think it's time to open up for some questions. I think we start here with the crowd in the room and start with Stefan here perhaps, if we have a mic.
Yes. Stefan Gauffin, Nordea. A couple of questions. First of all, just to understand the impairments in Eurasia. You make an impairment of SEK 1 billion, Ucell, Tcell, and Roshan. You also showed that you're not making any depreciation of fixed assets in the region. Is the write-down based on ongoing price negotiations so you have a clearer picture of the value? Secondly, what is current book value of the remaining Eurasia assets? Looking at the broadband subscriber development in Sweden, you report a loss of broadband subscribers. Do you think this is the result of your competitors pushing harder into the SDU market, so they are taking more ADSL subscribers? Com Hem, Telenor, et cetera, are pushing harder into this segment. Thank you.
Well, let me start generally on the sales discussion in Eurasia. As we progress through the year, we of course discover and explore value expectations on the assets, that's when we also need to reflect that in the accounting. Christian can go into deeper explanation of what that means. Notably here, Roshan and Tcell in Tajikistan are in such a phase where we're starting to get an understanding of the value. That's a correct observation, Stefan.
Okay. I'll start in the end. On the book value, we have reported around SEK 17 billion for the total Eurasian assets in the quarterly report. That includes the cash element that Visor has also. You should remember that also reflects 100% of the shareholdings, not our indirect share in the end of this shareholding. This is 100% grossed-up value of the assets. We have also declared before the value on Uzbekistan, as you know.
On the broadband side, I think we have perhaps seen a little bit higher churn on the DSL side. We have made some price adjustments on that side, and I think it's a little bit too early to say if it's competitive pressure in the SDU area that explains it. It's a small decline that we report there. Next question. Thomas.
Thank you. Thomas Heath with Danske Bank. Two questions, if I may. Firstly, on Sweden and cost development in Sweden. What are the big moving parts? You talked a bit about it in the presentation, but where is the battle over cost in Sweden from a management point of view? Perhaps also going into next year when we see SEK 900 million in the savings program, what are the offsetting other items that might take the net savings figure on EBITDA below that? That's my first question on cost in Sweden, how much we get to keep there. Secondly, on B2B, also in Sweden. You mentioned not just this quarter, but a quite tough situation in the corporate market. What can you do in terms of value, in terms of offers?
What more can you offer a business-to-business subscriber to keep corporate spending what they've historically spent, and particularly perhaps in a future where consumers use a lot more mobile data than corporate customers do? Thank you.
Thank you, Thomas. Let me begin, leave it with Christian on the details on the cost for Sweden. Generally speaking, the B2B side in not just Sweden, but across the board, there is clearly a change in customer behaviors and in the way corporates consume our services. That trend shift we are in, and that goes through the whole industry. Since we are a quite strong B2B player in both Finland and Sweden, we're more exposed through this transition. Our ambition is to maintain the strong customer relationships that we have throughout these markets and take the customers through this journey. That comes sometimes with price adjustments, which we clearly then are prepared to take to help our customers into the future.
We've also spoken about broadening the value proposition and offer more services that are now increasingly in demand from corporates, such as cloud security, privacy, but mobility, as you point out as well. That's where we see a good opportunity because also, as you pointed out Thomas, the usage of mobile data in corporates are lower, and there is no real reason for that, to be honest. Here we want to stimulate that for our customers in the enterprise segments. I think it's just a little bit delay in the way it's consumed, and we see that as an opportunity going forward. We see that already now coming through in the SME/SoHo, where mobile service revenue growth is clear in Sweden. We see similar trends across the footprints.
As the overall picture still is negative, there are some clear positive signals which we pointed out also in the Capital Markets Day around SoHo/SME. When you add new services and when you broaden the portfolio, it is appreciated and keeps showing in the numbers. On the cost for Sweden, generally, we have said that don't expect significant changes in cost base through this transformation phase. Expect us to try to take out and stay efficient all through an optimized spend and SAC, et cetera, and that's what's happening now. You don't see any structural cost effects in Sweden yet.
That goes back to actually both Europe and Sweden, we have the similar pattern, which we have said also before, is the resource cost and the sales and marketing efficiency. It's not big structural changes, but that's where the everyday work is giving an impact. On the cost side, we talked about also before field maintenance, et cetera, where we have renegotiated contracts that started to hit our numbers in quarter three last year. This is the kind of way of working with cost also going into next year.
Thank you. Thanks so much. You need some more water? We have one in the back there. Johanna?
Yes. Johanna Ahlqvist from SEB. Thank you. Two questions, if I may. The first one relating to roaming. We see some impact in this quarter. Can you say what you expect given the fact that it will likely get worse in particularly Norway and Finland? My second question relates to your overall guidance, really. Spain was strong this quarter, and I guess you will not have Spain included in numbers for Q4. Do you expect to reach growth in EBITDA this year, excluding Spain as well? Thank you.
I'll take the roaming one. You can talk about the guidance. Well, as we see it, roaming, it's really positive for our customers. They love it, and they're starting to use their services when they travel, like they should. That stimulates the usage of our services also when you get back. The search for Wi-Fi is decreasing, and the staying on the networks and appreciating the speed and quality of the 4G is increasing. Of course, it comes with some dynamics in the numbers, and that we're not going to see a dramatic one-off effect here and there, but we're taking steps to prepare for what's going to come also next year when new regulation kicks in in EU. We're taking the gradual effect, and there is no major impact Q by Q so far.
If it is, we will talk about it. We don't expect it to be a major one-off impact.
Okay, on the guidance on the EBITDA, as I said, we feel comfortable about that. It is an organic growth guidance. That means if Spain would close before year-end, we'll take it out. We will not include it in comparison when we look at the year-on-year growth. I would say that I don't think we would have changed the guidance with or without Spain at this current point.
Good. Thanks. Maybe we should open up for some questions from the conference call. Operator, could you open up, please?
Thank you very much. As a reminder, if you wish to ask a question, please, it will be star one on your telephone keypad. We currently have a few questions. The first one is coming from the line of Roman Arbuzov from UBS. Please ask your question.
Thank you very much. It's Roman from UBS. My first question is on the guidance and Swedish profitability. You've already addressed, to some extent, these points. Looking at the Swedish margins this quarter, they're perhaps a little bit below expectations, and the comps are clearly getting tougher in the second half. Do you think that the efficiency measures that you've been talking about can come to the rescue? Do you perhaps view your guidance of flat organic EBITDA as somewhat conservative, or we should expect a material slowdown in Sweden in the second half? That's the first one. The second one is on Denmark. The trends in Denmark still seem to be quite tough, and I think this correlates also quite well with what TDC has reported yesterday.
Can you just comment on what you see in terms of competition on the ground and perhaps explain why the price increases in the market are not helping you to perform somewhat better?
Thank you. On the Danish situation first, believe it or not, competition is increasing. More players coming in, MNOs stepping up, prices going down in some segments. Even if I think the four network operators, broadly speaking, have started to try to move the prices To yield the base better. It takes time. Denmark is a special market when it comes to contracts and churn and stack. It's not going to happen overnight. Even if you change prices overnight, it takes time to flush through the base. Even when it flushes through our base, we have said that it's not going to dramatically change the profile of the return on capital in Denmark, and that's where we have also flagged our strategic challenge. How do you stay in Denmark and remain or create value also by staying in Denmark?
That's an equation we still haven't found the answer to. On the Swedish side, as you know, we don't guide country by country. We have almost a percentage points improvement in margins. As I said, initially, it's broadly in line, and we have flagged that you will see a slowdown from the strong Q1 of 10% plus on EBITDA improvement. This is broadly speaking in according to our expectations. You have to just go back to the comments that are made on costs in general for Sweden, that we're trying to balance the equation of growth and cost to create a positive development. Some quarters are tougher than others, and that we also flagged that the quarters ahead of us from Q1 were going to be tougher and still are going to be tougher for Sweden this year.
More than that, we're not going to talk about it at this time.
Okay, thank you.
Your next question is coming now from the line of Ulrich Rathe from Jefferies. Please go ahead.
Yeah, thanks. I have two questions. One, to really follow up on this and maybe just ask for one thing a bit more explicitly on Swedish margin that is. Was there anything that happened in the second quarter that would have been different in your assumptions when you guided for the year or indeed when you sort of reported your Q1 numbers? Was there anything in this margin that you feel is an issue or is this simply that we all didn't quite understand the phasing of the comps here? The second question is on Eurasia and these operating trends. These ongoing negotiations and talks that you're having over these assets, do the operating trends play a material role when you talk about value, or is this all a bit removed from the operating trends and we're talking about strategic positioning and market structures and these sorts of things?
Do we have to think about each quarter how the trends progress and what impact this might have on value? Thank you.
Thanks, Ulrich. When it comes to Eurasia, the interested parties are very well aware of the markets and the conditions that we have in respective operations. There are no surprises as we see it. On the contrary, what we are looking for are signs of improvements. As Christian pointed out, there are some early signs of recovery and improvements in some of our operations. That's more to the positive side than the negative, in my view. We have been very open with the fact that we see a very red situation for the last 12 months and also this quarter. No direct impact on those discussions that we're having.
When it comes to Sweden margin, Christian, if you want to maybe just give one example of the margin squeeze, or not squeeze, but the difference between the expectations that the market has and the delivery that we see, which is, as I said, broadly in line with our expectations.
I think we talk about quite small numbers here, and I don't know how much to chase here. As we said, if you take around SEK 300 million we had in quarter one and take off SEK 220 I explained and the difference, the difference between the expectation according to what we get in on the consensus at least and what we have in our numbers, which I have to assume is your expectation, is quite small. It's around maybe SEK 50 million or so. Therefore, I cannot talk for your expectation, but Sweden is quite in line with our expectation in quarter two, as we said. Back to an earlier question, we feel comfortable with our full-year guidance on the EBITDA.
We have a cost base that is still decreasing and challenges on B2B and fixed telephony, and we're doing a great job every day to make something better, and that will continue.
Thanks very much.
Thank you.
Your following question comes now from the lines of Maurice Patrick from Barclays. Please, sir, go ahead.
Hi there. It's Maurice from Barclays. Just a quick question. Sorry to keep coming back to your guidance. I'll try and make it slightly more indirect. On your OpEx slide, on slide 17, you show a development of OpEx, which was up in Q2 2015, Q3, and then gradually been improving to -4% in Q2. Just to double-check, when you talk about the tough comps in second half 2016, you mean more fourth quarter, I think, than the second half per se. Just is there any reason why we shouldn't expect that OpEx reduction to continue into 2017, given all the sort of strong statements you made around longer-term cost transformation of the business? Thank you.
Absolutely. We are continuing with our Invest to Save program that should give results going into next year. We need to then separate between next year and this year, and the clear question was on this year results. There you're right. Quarter four is a bigger number negative than the positive in the third quarter.
For 2017?
Yeah. We will continue, of course, to drive our Invest to Save program, and that should give results.
Okay. Good. Thank you.
Your next question comes now from the line of Terence Sio from Morgan Stanley. Please go ahead.
Yeah. Thank you. Good morning, everyone. I've got a question on the changing TV landscape in Sweden. I just wanted to know your thoughts on whether Com Hem's acquisition of Boxer raises some antitrust issues in your view, as it leads to some quite significant changes in the Swedish TV market. Secondly, just continuing with the theme of Sweden, how confident are you going forward that you can continue to make positive price adjustments, particularly in broadband and TV? Maybe you can remind us what you're giving customers more in return for some higher prices. Thank you.
Hi, Terence. Thank you. The TV market in Sweden is consolidating, as you say, which is not necessarily bad. We have a strong position in TV, improving the numbers, as you've seen. Also have optimized a bit of our pricing, which I think was not appropriate in all the segments, in all the bundles that we have. We see a clear ARPU increase. We have no reason to believe that the change that's happening on consolidation will put us in a worse situation. We'll continue to push for more TV and better experience for our customers. On the price adjustments, going back to my slide and my observation on value loading, that's really the mindset of the Swedish team, to give our customers more, and include that in the various bundles that we have.
At the same time, see if there's an opportunity then also to charge for it in a different way, and get the customers to the right bundle. So far that has been successful on most of our price adjustments, and if they're not, then we listen very quickly and see if we can do it better next time. There, going forward, this will be a part of our growth story, has to be a part of our growth story, how we do smart pricing and value loading for our customers.
Just back to you on the earlier picture on value loading on broadband, we have increased the speed for our customers when we have increased the pricing.
Great. Thank you.
Your following question comes now from the line of Christopher Kurz from Credit Suisse. Please go ahead.
Thanks very much. I had a question regarding your fixed voice line loss in Sweden. Maybe you can give us a little bit of color in terms of when customers go from DSL to fiber, how many of your customers kind of continue to take a voice subscription? The second one on the same topic is on your DSL price increases. Customers no longer need to take a fixed voice subscription. I know it's still quite early days, but have you seen or got any indication on how many customers are cutting their voice line on the back of that? Or if you haven't seen anything yet, maybe you can talk a little bit about your expectations around that. Just basically on the back of the acceleration in voice line loss we saw in Q2. Thank you.
Just one comment there. When it comes to the fixed side and when it comes to DSL, that most of the customers we have on the DSL, they are bundled in some way on the voice side as well. The price change that you referred to is for the broadband only. I think that's one comment. Then on what share that has voice on the fiber versus DSL, let us check that and come back to you.
Just a general comment that when it is free, as you say, on the fiber, I don't have the number yet, we'll come back to that.
Yeah
taken.
It is.
It's going down in that sense.
Is it materially less? I guess even if the customer is bundled on DSL, now there is an option where you can take broadband only. I guess you didn't have that before.
No major impact as of now.
No.
No, no major impact.
Okay. Thank you.
Your next question is coming now from the line of Peter Nielsen from ABG. Please, sir, go ahead.
Thank you. You discussed the key issues. Just a couple of questions, please. On the free cash flow, the contribution to free cash flow from the discontinued operations in Eurasia has basically collapsed this year and is now negative. Is that the sale of Ncell, and should we expect negative free cash flow contributions from these businesses until they're out of the books? Secondly, just on Norway, you improved network precision and the recent surveys on 4G, et cetera. Is that becoming a positive selling point for you in Norway? Are you seeing this having an impact on customers' decision on the consumer and on the business side in Norway? Thank you.
Thanks, Peter. I'll take the Norway question. The answer is yes, it's been very positively received. We see that both the rebranding to Telia Norway and the network experience before we were awarded the best network already showed positive traction as the customers discover a better network, a better quality than we've had ever before. Yes, it is impacting customer decisions. Of course, that's going to be challenged hard, but we intend to use this to our favor now in the coming quarters.
The majority of the impact on the free cash flow and discontinued is on the operations and FX.
Basically, we can expect this to continue on Telia Company?
Well, they had a quite high cash flow from negative on working capital and CapEx. It swings in this entity as well.
Okay.
They're still making profit.
Okay. Thank you.
Next question. Your next question is coming now from the line of Alan Nicholson from Morningstar. Please go ahead.
Hi. In Estonia, revenue increased 5%, yet EBITDA margin declined slightly. Usually, the two move in the same direction. What's hurting margins enough to offset revenue growth in the country? Thank you.
Important.
I-
Alan, I don't have that on top. I think then it's handsets, because the service revenue was up.
EBITDA was up.
EBITDA was up. Or you're looking at reported numbers and not local organic. Sorry, I have to come back on that then and maybe we can call you up afterwards and see where you got those.
Okay, great. Thanks.
Your next question is coming now from the line of Sunil Patel from Bank of America. Please go ahead.
Yes. Thank you. I have just two questions. One is, can you just remind me on the phasing of the fiber connection fees? Is it right that although digging takes place in Q2, Q3, your fees are collected more with a one-quarter delay, so we should see some collection in Q3 and Q4? I recall that was the case last year, but I just wanted to clarify that. Then the second thing is just with regards to Uzbekistan, we're rapidly approaching August. Is your goal still that we'll settle the fine, if there is any, with the DOJ by the end of this year? What's your view on how the elections play into that in the U.S., and could that potentially delay any dialogue? If not, are you seeing that already? Thank you.
Thank you, Sunil. On the fiber CapEx and how it works, generally two parts to it. One is that you deploy fiber into neighborhoods and areas and streets, and that's CapEx. Of course, you don't immediately connect households to the fiber that is passing your house. When the customer is connected, that becomes a revenue, but also comes with a COGS, which is the last mile cost for implementation, and that's not CapEx. You're right in a sense, there is a phasing of the CapEx and then to the revenue. That hasn't changed dramatically or hasn't changed notably at all in terms of phasing delays or acceleration. Don't expect any dynamic change there. When it comes to DOJ, well, I would have mentioned it as part of my first sentence today if we had any news, and we don't.
We continue to cooperate with the three authorities that are looking at this Uzbekistan matter. We are still hopeful that this will be brought to conclusion during the year. We don't have any reason to speculate that there may be delays or not because of this and that. We have a positive progressive discussion with them, that we still hope will be brought to a closure during the year.
Thank you.
Your next question is coming now from the line of Lena Österberg from Carnegie. Please go ahead.
Yes. Also if, given that it's the government that now holds the disputed shares in escrow, if this also impacts the relationship with the government and with the other related parties.
Yeah. Thank you, Lena. With regards to Turkey, first of all, we have about 30 employees working in Istanbul, responsible for our Eurasian portfolio, and there has been no impact on that per se. That's positive. On the broader, bigger question for Turkey and Turkcell, we of course follow this closely. There's been nothing out from Turkcell in the public, and therefore we don't know anything more than you do on that side. We're of course offering our expertise and support in various areas if and when they need it. It's a little difficult, or we shouldn't speculate if it has any impacts beyond the obvious uncertainty that's been seen. With regards to Turkey and Turkcell ownership issues, nothing has changed. It's still a complicated situation. I don't think it's necessarily easier now, but I don't think necessarily it has to be any worse.
We'll have to update you along the way on Turkey.
Can I just have a follow-up on the former question on Department of Justice investigation?
Yeah, please go ahead.
At the beginning of the year, you said that you were hoping you would at least get a timeline, an indicative timeline from the authorities. Have you received that yet?
We don't go into the details of those discussions. Of course, there are frequent dialogues with the various authorities, that's continuing through the last time we spoke about this to now. That's why I am comfortable saying that we think this will be brought to some type of conclusion, some type of progress during the year, there is no firm deadline set, no, because then it would have constituted also much more clear expectations on whatever conclusion that would be, that would have to lead to communication activities. There is no firm timeline per se.
Okay. Thank you. You have a final question coming from the line of Usman Ghazi from Berenberg. Please go ahead.
Hello, thank you for taking my question. I have two questions, please. One on Sweden and one on Eurasia. On Sweden, I can understand that the comps are tough. If you look at your guidance on SDU installations, fiber installations, you're going to have higher fiber installations in the second half of this year versus last year. You have price increases that will benefit as well. Yes, the comps are tougher. They're only tougher because of the fiber installs in the second half of last year, and you have a higher number of fiber installs in the second half of this year versus last year. Just trying to understand why so conservative on Swedish EBITDA in the second half.
My question on Eurasia was just that, you mentioned that the book value of the Eurasian business is being written down to SEK 17 billion, which includes SEK 2.9 billion that needs to be stripped out, I guess. Are we to believe that the Eurasian business ex Nepal, based on sales feedback, is worth around SEK 14 billion now?
First of all, on Sweden, we don't give any guidance on Sweden. You are right, we will have an increase in SDU year-on-year in the second half, but we also had that in the first half. That's not a big change between the first and the second half in the guidance. On Eurasia, the SEK 17 billion represents our book value for 100% of the assets in Eurasia to start with, including those amounts, as you said, for Nepal. Also, it is a book value that is the lowest of what we have booked originally or what we think is the fair market value. That's the only thing we will go into.
Okay. Thank you.
I can just come back to that question on Estonia that we had higher equipment revenues that explaining the margin drop while absolute EBITDA was up.
Okay, good. Thank you.
I think that was the final question, so excellent. Thank you very much. Have a great summer.