Good morning all, welcome to this sunny morning in Stockholm and the presentation of TeliaSonera's first quarter results. I'm Jesper Wilgodt, Head of Investor Relations, and with me to present today, I have our CEO, Johan Dennelind, and our CFO, Christian Luiga. After the presentations, we will have a Q&A session as usually. We intend to close this session within one hour. By that, I would like to hand over to Johan, please.
Thank you, Jesper, good morning to all of you. I think the picture could be a live picture, actually, from sunny Stockholm, so that's good. Let's take you through the highlights of the quarter, then, as Jesper said, go through some questions. We were looking for a number to symbolize the first quarter. Last quarter, we actually had the number four. This quarter is number five. We'll see what next quarter will be. On February 5, we had the approval of the acquisition of Tele2, which I'll come back to, has been a very good start. As you know, we also had a very good resolution on the five-year problem, resulting in a SEK 5 billion gross dividend to TeliaSonera from Turkcell.
This year we are stepping up our fiber ambition even more, 25% higher delivery of fiber-villas per hour, which is still not meeting the full demand, which is exploding in Sweden. Let's go a little bit deeper than that, look at some progress and challenges. We see a solid demand in Sweden mobile and the data drive in Sweden. We'll come back to what that means also to some extent in relative terms. Very strong continued growth in Nepal. I should also add Uzbekistan, but we'll come back to that. Turkcell dividend, as I mentioned. On the more negative side, we have a group margin that is impacted, as you have noticed already, by higher equipment sales. Almost one percentage point of the drop in margin is related to equipment sales on group level, which we'll cover more in detail by Christian.
We still have our macro challenges in many of our footprints, and I don't think we'd need to dwell on that, but the Russian ruble and the impact and the uncertainty is still spreading across many of our footprints. That is impacting our numbers as well, and I'll point you to those later on. Especially Kazakhstan, we have issues, not just macro. It's a smaller part. We have a competitive problem in Kazakhstan where we're not yet up to our potential and still losing market share. If I should add one arrow on this slide, it's the one that is kind of according to plan. That is the numbers on group level. We're roughly on our plan. It is a slower start Q1 as we have highlighted, and we're sticking to our plan, and we expect it to improve over the year.
Let's look at the headline numbers for group. We are still in negative growth if you look at the organic service revenue. Of course on reported it looks strong, but again, a lot related to FX. We have currency tailwind. Almost two-thirds of the reported net sales growth is related to that. We have equipment sales helping up, and then some M&As. If you remove all of that, you get to a negative 1% service revenue growth Q on Q. Slightly better than last quarter, by the way, which was 2.2% negative, so it is improving on a sequential basis. Group EBITDA also down on local organic, which we will cover in more detail. Sweden in focus in this report. Let's start with some of the good things. Consumer side in Sweden is, if you combine fixed, mobile, and TV, still delivering solid numbers.
Whether they are superb or not, we can debate, but they are growing. Q on Q, it is up in growth pace. Obviously, this is a combination of fixed and mobile. Some parts of fixed are declining. The fiber revenues are increasing, and notably here, you have the one-time charges for fiber installation included. Removing them, you still have an improved growth trend on the consumer side, which we are happy about. On the contrary, on the enterprise side, B2B, we are still in negative growth territory. We are seeing, though, some improvements in some core segments, SME and SOHO, but still quite rough on the competitive side and price erosion side on larger and public segments.
As you know, I have said that repeatedly, that is something we are aware of, and we are defending share and taking our customers into future-proof solutions, which has a short-term negative impact on our revenues. Moving to profitability in Sweden. We see a pretty big impact on the EBITDA side, and Christian will break it further down in detail, but the highlight here is it is a lot related to our increased market investment in Sweden. Both equipment and marketing is a large portion, I think around SEK 180 million of the drop in EBITDA. I also like to remind you that the fixed decline is resulting in an SEK 80 million per month impact on EBITDA, which we do not have to compensate, which we do to a large extent with mobile. The product mix is impacting us also to some SEK 40 million extent.
Moving over to Europe, a little bit brighter picture, even if local organic is down. We have a Finnish situation there where basically it is flat if you remove the MTR effect on service revenue. Reported, it is down. We have Spain, who is out with a very interesting data proposition with EUR 29 for 20 GB, which is working well so far. It is also seen in the EBITDA improvement for Europe. Spain contributes quite a lot. If you remember, Q1 last year was a negative EBITDA, and Spain is now stabilized, where we have a formula to grab share and maintain a run rate on EBITDA. Norway. As you know, we closed the transaction in the mid of February, and we have since then moved 1 million customers over to our networks. Improved coverage and the network quality to 1 million customers coming over to NetCom and TeliaSonera.
We're around 40% market share now, looking forward to drive the real alternative to Telenor in the Norwegian market, with a new CEO on board from June 1st. We will see synergies now coming through in Q2 onwards, and we're still expecting at least SEK 800 million as an effect of the synergies with the full run rate effect in 2016 and onwards. Sticking to our plan and a good start in Norway. Looking at Eurasia. You could say we're back to growth in Eurasia, which is good. We still, though, have some challenges in the Eurasian market. The big effects on that re-entering into growth territory is a couple of things. Nepal is stronger than before, and Azerbaijan has stopped the decline. The turnaround in Azerbaijan is happening.
Kazakhstan is better than last quarter, but not good enough, obviously, with 10% service revenue decline, and I'll come back to that a bit later. The mix is back in growth territory, but facing a lot of macro challenges in these markets, as I mentioned. Notably so, the remittance markets from Russia into some of Tajikistan, and those markets are impacting a lot on the numbers. Kazakhstan, I mentioned a couple of times, it doesn't look pretty at all. It's -10% and losing share. I would say the good thing in Kazakhstan and Kcell is that we have a new team in place, very focused on the turnaround plan, and they are confident to step up the performance from here onwards. They're also reporting the numbers to the market today, obviously, and feel free to listen in to them directly.
We feel also confident that during the year this will turn, and get back on grabbing share. Today, or actually yesterday, Kcell launched a new proposition in the market as part of this regaining the share, where Kcell now includes also off-net minutes in the bundle, which we haven't had before. I think that will help to stabilize the decline. The big news in the quarter obviously was the agreement on dividend, and that's obviously the headline and the great news. I'd like, though, to remind you that this is far from the full resolution that we're looking for in Turkey, but it's a very important step where we have shown over the last 18 months or so that the dialogue that we have with our key partners and stakeholders is working.
I think we also need to be hopeful that we can do more progress together resolving the two major outstanding issues. Of course, the obvious one is to get back on the board, where we don't have presence, and also to eventually solve the deadlock on the ownership issues is something we are working intensively on, as you know. I'd also like to mention that, as you know, Turkcell have gotten a new management in place, and we're working closely with them to see if we can help in any way as a large shareholder and sharing best practices. I think that is enough said on Turkcell. Well, maybe one note that you will see in Christian's presentations later is that in the reported numbers, we are reporting, of course, Turkcell's Q4, and have a pretty negative effect on the EPS from Turkcell and MegaFon.
I think it's about SEK 500 million plus for the quarter that is relating to our associates. We had an AGM recently, where we published our combined annual and sustainability report, an important step towards a fully integrated report one day. This has been well received. We also had, in conjunction with the AGM, a sustainability update with key updates from some of our experts and engagement around important topics to us. That was very well received, and we appreciate all the feedback we have gotten. This gives us great encouragement to continue the hard work that we're doing in many of these markets to stand up for instance, freedom of expression, but also to improve our governance and compliance across the footprint.
We issued our second transparency report, which is also part of our freedom of expression ambition to show the dilemmas that we're facing and talk about it openly. We also, as the last bullet says here, we continue to upgrade our framework for responsible business. The last quarter and going forward, we're a lot focused on the supply chain, making sure that all the parties and partners that work with us also adhere to our new standards of doing business. We're also very much focused on health and safety. We're early there in our work, but a very important piece of work that not only will help our business improve, but will help societies improve and save lives. All in all, we're pleased with the progress, but as always, when I talk about our sustainability work, it is a long journey.
Another area where we, in the Capital Markets Day back in September, talked about our new journey, how we are aiming to be at our full potential in 2018. A core part of that is our transformation journey, where we have put out a SEK 2 billion investment program over two years in order to save SEK 2 billion with full effect from those investments. It's mainly related to Finland, Sweden, and technology when it comes to group technology, when it comes to invest to save. We are progressing. Somewhat slow start. We have only invested SEK 100 million in these programs. We are confident that these programs are overall on track, where we're aiming to improve the customer experience, which we measure with Net Promoter Score.
Both Finland and Sweden have aggressive targets on really measuring that, committing to that, and getting the customers happier through some of these results that we're showing here. Fewer IT systems, easier to deal with, more sales and service online, et cetera. Those are really important parts of this transformation, where we need to have patience. This we will continue to update you on as part of our commitment. I will end with our outlook. I don't know if it will be smooth sailing as it looks. There may be some rough seas, but we're sticking to our guidance for the year, where we have EBITDA around the 2014 level, CapEx around SEK 17 billion , and hopefully also a dividend above at least SEK 3, I should say. At least SEK 3. With that, Christian, I will hand over to you.
Thank you very much. Good morning, everyone. I'd like to start with just a small detail in our report around our number of customers. We have changed our definition, what we report to the market this quarter. We have now a three-month activity that is the limit for if we include them or not in the reporting. We did increase the number of customers, 2.1 million since last year, over a year, and 0.6 million during this quarter. You will see that the base has changed, but also this has been recalculated for all periods, it shouldn't be difficult to understand the trend. In Spain, we still have four million customers in our system, but we report three and a half million right now. The first quarter, as Johan said, is very much as we expected.
We have a slight decline in service revenue growth, on total revenue, the increase is 1.5%, it's very much related to equipment, I'll come back to that. That is also one of the main reasons why the profitability is down in the quarter compared to last year. The EPS is fairly flat on this picture, -6%, it's a lot of swings in it, I will come back and explain a little bit around that later on. The cash flow is improving, which is positive, working capital is one of the items that helps us to bring cash flow up 12% in the quarter. Currency effects are significant in this quarter, I think this picture illustrates this very well, 5.6% on revenue of the 8.8% reported comes from the currency effects.
Even though we have countries like Azerbaijan that have made a devaluation, the Swedish krona has been quite weak for the recent year, therefore, we have a strong impact from currency. Euro is one large currency in our portfolio, of course, with the 5.9% increase towards the Swedish krona, that impacts reported numbers as well. Also Nepal, Kazakhstan, and [Azerbaijan manat], even though they have made a devaluation, has an increase towards the Swedish krona. The Russian ruble is down 30%, that is affecting the reported number of MegaFon's income in our reporting, of course. That has deteriorated quite a lot from that. The equipment sales is up, as I said, this is one reason for the lower result. If we look at this picture, we can see that 2.4% of the increase comes from the equipment sales.
If we just stop for a while on the bill and service revenue, we can see that mobile revenue, bill revenue, is flat. We have countries like Spain and Kazakhstan that is negative, we have countries like Sweden, Norway, and also Lithuania, Latvia, that is positive. They balance each other out. Interconnect is fairly small on a group level. If you look at Kazakhstan and Finland, it will have a major impact or a significant impact, we should remember that. On the fixed side, it's primarily in Sweden. It's slower this quarter on comparable notes. It's both a little bit around the price increases we had in the first quarter last year that we did not have this year yet, and also on some of our three months for free offerings that we have had in the market on both broadband and TV.
They have ended now in this quarter, we're not giving out any more free months for free offerings in those segments. The equipment sales in Sweden is illustrating a driver for our bundle offering sales, and these bundling offering sales are actually carrying quite a lot of SAC. We have a high equipment sales cost to this, and it makes the offerings around equipment negative. Of the Swedish sales, this is pretty much, it's more than one-third of the cost difference. We have also FX impact on the purchase of equipment that also brings higher costs to the Swedish operations in this quarter. All of them actually, but primarily to the Swedish one because of the increase of equipment. That is why this is important to see this.
The other thing with this picture is that you can see already in quarter three it started to pick up. We believe strongly therefore also that with our view for the future that the comparables for the second half will be much easier when it comes to equipment sales. The profitability, otherwise with the OpEx and service revenue balance is okay. We have worked with our OpEx, and we have countries like in Finland, where we have the increase in the service level cost in quarter four. We decided actually to continue with that to make sure we have a good customer offering and think it's worth it. Meanwhile, we have in other countries a decrease in OpEx. That balance is working out well. The main reason for the EBITDA decrease is the gross margin. On the gross margin, one percentage point comes from equipment.
We have some storm costs in Sweden. It's not a big part, but it's 40 million SEK. We also have some changes in the fixed side. With the fixed side is going down, and that impacts the gross margin. Those are the three elements to remember on this. We believe, as I said, that the comparables on equipment will be much easier. We also have a strong view that the performance will be better in the next three quarters on a comparable note. This is a little bit according to our plan. EPS. We have an interesting income statement this month, this quarter. Associates are down, mainly currency effects. These are known numbers. It's the quarter four reporting from MegaFon and Turkcell. We have FX impact on the operations. We have net financials.
We had actually positive impact from currency effects in our financial net from the devaluation in Azerbaijan. We have a lot of our cash, as we have said before, in dollars. The impact of the dollar increase have actually given us FX effects on the net financials. We did an intercompany transfer of assets in the quarter, and that gave us a positive effect on the tax side of around 500 million SEK. CapEx is up, one reason is the change in Eurasia. Last year, we had a very slow start in Eurasia. We talked about that, but now we have a better start and the start we want. In Sweden, it's quite flat. This quarter, 50%, close to exactly 50% comes from fiber rollout, and 20% comes from the best network that we are getting into in Sweden when it comes to 4G.
In Region Europe, the increase and the biggest part of the CapEx comes from the 4G rollout, both in Norway and in Finland, also from the capacity build-out we are completing with the Tele2 acquisition on our network in Norway. In Eurasia, it's primarily Uzbekistan and Kazakhstan and Nepal that stands for the biggest shift here, it's three areas where we have growth, we want also to have a superior network to be able to be competitive. That's where we have the CapEx. On the best network in Sweden, we work with three elements, Wi-Fi, which I keep out a little bit now, 4G and the fiber investments. On 4G, we have said that we want to have 92%. We will have 92% area coverage and 99% population coverage we already have.
Today, we are around 60% on our area coverage, we are expecting to be around 90% at the end of the year. This is progressing as expected. The fiber rollout is going very well. We have good weather conditions. We have less a problem with the supply on the sub-suppliers that we have in this part. We have a 48% sales for sales on our penetration on our sales in the first set, last year we had 42%, we've increased the number of hit rate and number hit rate when we have our sales in fiber this year. That's good. We are today having two-thirds of the orders closed on the fiber-villas per hour that we are going to deliver this year. It feels good.
I think this is all as expected maybe even a little bit better, it feels good that we will deliver on our targets for this year on the fiber. Cash flow generation has improved. Two main elements on this picture is the tax. We have a tax refund in Sweden that impacts the tax part, also we have a working capital shift upwards. These are then negatively impacted by the cash CapEx from the higher CapEx that I just talked about. The change in working capital is primarily Spain, which is positive. We had a lot of handset equipment impact before we moved over in between quarter one and quarter two last year to an off-balance sheet model, that starts to give an impact in the numbers. Also in the Nordics, we have a general improvement that is coming through now.
On the negative side, that actually takes this down a little bit, is the handset sales in Kazakhstan. The net debt, I have decided here to illustrate the quarter one compared to last year to see one-year perspective on this. If we look at the one year from last year, we started with about SEK 53 billion in net debt. We have a free cash flow that has been positive of SEK 13.3 billion. Then we have made a dividend payment of SEK 13 billion. They match each other quite nice there. Then we have net M&A activities of SEK 4.2 billion. Then recently we have announced, if we go a little bit further on the picture to the right, the SEK 4.5 billion we got in dividend from Turkcell.
The small shift we have had in Q1 2014 to Q1 2015 is actually the FX effects on our balance sheet and our loans. It is around SEK 2.9 billion. It is a quite stable situation compared to last year. We are at 1.72 in net debt to EBITDA. Good. Thank you.
Okay. Thank you, Christian. It is time to open up for some questions, and I think as we start with the floor. Do we have some microphones over there? We can see some hands. One in the front.
Yes. Hi. Johanna from SEB. Two questions, if I may, related to Sweden. First of all, if you can comment anything on service EBITDA, if you exclude handsets, the development year-over-year, the EBITDA margin, that is. Then if you can give some proxy on how much of EBITDA that is related to the B2B side, where you face challenges currently. Thank you.
Yeah, I am sorry. We do not go into the B2B or B2C margin here, we will not reveal that today either to you. On the EBITDA for the service business, I would sort of push you back and say, as I said, the equipment sale has had an impact of pretty much a little bit more than one-third of the comparison for Sweden. The loss between the years is coming from equipment. The rest is coming from the rest of the business.
All right. Any more questions here? How about that, Thomas?
Thank you. A question on CapEx. With so much more CapEx going into Eurasia, while at the same time, perhaps a little slower growth than we've seen in previous years. How do you balance that on a process basis? How do you look at investment in a country, say, like Kazakhstan? Should we expect the similar levels we have today as we move into data also in those regions? Can we take down CapEx a little bit in coming years, given that revenue growth is slowing a bit? Thank you.
There's a couple of points on the CapEx for Eurasia. We have started earlier with the implementation of many of the build-out programs in Eurasia already late last year, or Q3 actually last year, for approvals and process. That's why you see the Q1 coming up better this year. Also reminding of what we've been talking about when it comes to some of the networks in these markets. Some places we have been under-invested actually, and we need to invest up to the expectations of our customers, and a lot now driven also by the data demand that is picking up. The third point, obviously, we're not giving guidance on market by market for CapEx, but we are in a bit of an investment phase for some of the key Eurasian markets. That's for sure.
Okay. Any more questions here, or should we perhaps move on to the tech conference call? Operator, could you please open up?
Of course. We do have some questions. The first question comes from the line of Maurice Patrick. Please ask your question.
Yeah. Hi there, guys. Maurice here. A quick question on the Spanish market. You've seen some recent price increases from Telefónica and Vodafone in the marketplace. You obviously talked yourselves about your high 20 gigabyte package there, but your thoughts on general pricing in the Spanish market overall, and if you could touch on potential remedies from the proposed Orange-Jazztel merger, that'd be helpful as well. Thank you very much.
Thanks, Maurice. On the last question, that's not something we really can go into any details about. We're active in providing our views on that merger. Yoigo performance, as I mentioned, is fairly predictable, I would call it at this point, where we have launched an attempt to continue to gain market share against the big three, which we are doing. That's seen in the porting statistics. We have a slight decline versus the MVNOs, but against the big ones we're winning, and this new proposition helps to further strengthen our position in the data market in Spain, which still is, to some extent, immature. There's more to do in the internet space in Spain, and we will drive that market and grab share in the internet space.
Okay, great. Thank you.
Thank you. Your next question comes from Sam Dillon. Please ask your question.
Yeah. Hi, guys. Just a quick question on Swedish fixed. Com Hem has been pretty open about moving its strategy from an ARPU growth strategy versus the market share strategy it has had. Have you seen any early signs of that, and do you believe there is scope for a period of price increases going forward as you launch fiber? Thank you.
No, thank you. I think given the demand out there, I'm sure there are segments that are prepared to pay more, which we will have to find in a smart way. We're doing our attempts, as you know. Last year, we had a price increase in some of our core propositions and in broadband, and we're looking to see whether we can adjust some of the prices also this year, but it remains to be seen. For the others, obviously, I can't really comment.
Okay. Cheers, guys.
Thank you. Your next question comes from Terence Tsui. Please ask your question.
Thank you. Good morning. Just got a couple of questions on Swedish mobile. You mentioned that the B2B market's still seeing challenges, but on the other hand, you're seeing some green shoots of recovery. Maybe you can just elaborate on some of the bits where you're seeing a bit more optimism. Secondly, still related to Swedish mobile, just on the consumer side, obviously the big change was Telia to increasing their data bucket allowances. I was just wondering, when you look at your KPIs in terms of subscriber net adds and ARPU, what will be the trigger point for you on your KPIs for you to actually respond with more permanent reductions in your pricing strategy? Thank you.
Thanks, Terence. Let me start with the consumer one. Actually, as you saw from our numbers, it was a 2% increase I think we mentioned on mobile overall. I can point you to the consumer segment being 6% in Sweden, which is strong, maybe not winning out there. We've seen some other results today, but it's a strong momentum on consumer mobile. This is driven by a couple of things. One obviously is the increased investment that we have shown, which has a price tag. The other one is the strengthening of our brand, and the network perception again, where we are leading, and we're seeing an effect of that. When it comes to price decreases, I'm not sure that's how we're thinking. We are thinking again here to see where people are prepared to pay and what they're prepared to pay in the respective segments.
I'm sure there are areas where we can also work on some upwards adjustments. A comment there as well, I think when it comes to this doubling of data mania, that's something we are not very keen to join, but of course have to be part of in one way or another when it happens. Now we're working closely internally here to see if we can change the dynamics somehow. We'll come back to that as we move along. On the B2B side, as you say and as I say, it's a tricky situation. We are looking for the positive signs, and there are some segments where our new way of addressing these SME and the SOHO are starting to work, both stronger, clearer messaging and branding, and also now introducing better products. Some key launches also in Q2 will help.
We have seen a stabilizing trend on the porting side versus key competitors, which is positive. I'll stop there.
Great. Thank you.
Thank you. Your next question comes from Stefan Gauffin. Please ask your question.
Yes, good morning. First of all, I would like to comment that please, if you make larger restatements, please inform of this ahead of the report, which would help make the correct interpretation. Then I would like to move into Kazakhstan. First of all, I think that we saw a large improvement in Azerbaijan, and I would like to hear if you are seeing a real improvement in the market, or if this is due to that you had quite an easy comparable quarter for last year. Secondly, you talked about changing the strategy in Kazakhstan in order to start to gain market share again. If you could just comment on what type of actions you're making in Kazakhstan. Thank you.
Let me lead off the Kazakhstan and then leave it to Christian with some of the details. I agree, by the way, on your first recommendation. We'll take that on board. Kazakhstan, as you know, is pretty much the size of Europe. Very regionalized, where in some segments we are very dominant and some other geographical areas we're more of a challenger. That's how we need to go to market as well. You will see more of that in the coming quarters. As I mentioned yesterday, was the launch of a new tariff plan aiming at first stabilizing the trends because they are still declining. Then phase 2, start working on the improvements there in the core areas of Kazakhstan. To the details there, Christian, on Kazakhstan, there was a question on, wasn't that on the, I didn't pick up.
I think it was a customer question.
I was asking more of what type of actions you're making in Kazakhstan. Secondly, it was a question on Azerbaijan, because there it was a quite dramatic improvement in sales growth. Just wonder if we are seeing improvement in trends or if it's more that we had an easy comparable quarter from last year.
I think we should see it rather, as we said in quarter four, that the impact of the -10% we had around at that time was both regulatory, but it was also a one-time charge effects on the revenue, and these are gone. Then to say if it's a strong trend from -10 to 0, it's wrong, of course, because you have to restate a little bit to -10, and then you have a slight improvement to this quarter, and it's too early to say it's a strong trend in any way. It's an improvement, and we feel that much better in this quarter than we did in the last quarter. That's my comment.
Okay. Thank you.
Thank you. Your next question comes from John Davies. Please ask your question.
Good morning. I have another question on Spain. Regardless of the shape of the remedies or otherwise, which I understand you don't want to go into any detail on, and quite sensibly. Would you consider allocating further capital to the Spanish market if that became a sensible move for the select operation? Thank you.
Thank you. If you refer to capital as being aggressive in acquisitions, the answer is no. If you refer to investing in the market in various ways, yes, according to the current pace. We have an operation which we need to develop, and we're doing that, and we're investing both in the market and in the network.
Okay. Thank you.
Thank you. Your next question comes from Peter Nielsen. Please ask your question.
Thank you. Just a question related to Sweden as well, on the fiber side. You're talking about strong momentum. Could you elaborate a bit on where this momentum is coming from? Is it from SDUs, people who do not have fiber today and where you have little competition? Are you also seeing momentum in areas in cities, MDUs, where you are in competition with others, please? Secondly, can I just follow up on your comments, Johan, about Turkcell? I don't know how much you can tell us, but are you concerned that the recent developments between Altimo and Cukurova, sort of reentering a new phase of a prolonged court battle here regarding this ownership? Thank you.
Hi, Peter. You know I don't comment on the other parties' discussions in Turkey. I can comment on my discussions with some of the others, but this one is purely between the two of them. On the Swedish fiber, yes, momentum is on SDU a lot. That's where we have a good model now for rolling out. It's not no competition, as you indicated. It's quite strong competition where we're fighting to be first in, because if you're first in, then you get a good position to capture the local neighborhoods, so to say.
Okay. Thank you.
Thank you. Your next question comes from Ulrich Rathe. Please ask your question.
Thanks very much. Two questions, please. The first one is on equipment sales. I mean, equipment sales are very high. What I'm wondering is, in particular in Sweden now, whether it is possible to somehow split the reasons for this growth between a replacement cycle due to attractive new devices that have been launched late last year and the commercial activity, particularly driven by Tele2, I understand. Is there any way to disaggregate that between the bump from the device replacement cycle and just from the commercial activity? The second question is, Christian, it's just an attempt to clarify. When you say equipment is one third of the loss in Sweden, could you just be a bit more specific, what quantities are you talking about there? What is the one third of what that is attributed to equipment?
Is it cost or EBITDA, or I'm not entirely sure what this one third refer to. Thank you.
Okay.
Good question on the equipment side there.
We can come back to that.
Yeah.
Let me start on the general reflection on the device and equipment market. We're seeing that in many of our markets now. The desire to upgrade to better handsets because lifestyle is changing and people are watching. We talked about watching TV on the handset 10 years ago. Today, people are. As you know in this room, but many out there maybe not know how developed the market is becoming in Sweden and some other markets here in the Nordics. It is really a part of everyday life now, and people are desiring to have better handsets, and this is where you see a lot of this drive. I don't think we have the optimal mix today between push and pull. That's something we are tuning for the rest of the year, and that's part of the improvement plan for the year in not least Sweden.
That's where you come into the numbers, the mix on EBITDA, Christian, which you can comment on.
Yes, thank you. What I meant there was that last year compared to this year, we had a drop in the Swedish profitability on EBITDA. Of that drop, a little bit more than one-third is related to the increased equipment sales.
That's very helpful. Can I just follow up on the first question on the disaggregation of commercial activity versus the replacement cycle? Is what we're seeing in Sweden really that in an iPhone crazy country, people want to have iPhones. There's a new iPhone out and therefore there's a big sale. Is it really more that commercial activity, a bit of a hunger for market share that's been kicked off by new tariffs from Tele2 is really the major driver of these device sales? That's really what I'm after.
That's a good question, and it remains to be seen, but it's a lot of upgrade to better handsets generally. I think there we need to find our optimal mix. Of course, there are different propositions out there, bundled and unbundled, where I think there's also work to be done to clarify our propositions versus some of our key competitors. I wouldn't say it's a price war or a war for market share based on subsidies on the handsets at this point.
Thank you very much.
Thank you. Your next question comes from Allan Nichols. Please ask your question.
Hi. In Eurasia, you only actually had wireless subscriber growth in Georgia, Moldova, and Nepal. You've talked about Kazakhstan, I would appreciate if you could talk more in general. Is there a slowdown in growth because we're hitting a peak in how many people want to have a cell phone, is this more because of Russian influence on the economy? What's going on there, and what's the outlook for future subscriber growth in that region? Thank you.
Well, thank you. More of a general comment, see if we can go deeper and if we can clarify, we're reaching high penetration levels in many of the markets, if you measure SIM per capita. That's when you also see a shift away from subscribers as the main proxy for the next phase of growth, where I think it's much more on how you develop the existing base, ARPU development, and get the data growth going, which we are seeing in all our markets, actually. That's why we also need to stimulate that with better networks. Also get the right mix from the start when it comes to handsets, because that's really the missing link in many of the markets, to have the right handsets out there for consumers to pick up the internet mania.
Subscriber number, I think also you need to take into consideration the restatement which has happened in some of these markets, where we've gone to 90 days. Yes, overall, it is a slower growth on subscriber.
Thank you. Your next question comes from James Britton. Please ask your question.
Well, thanks very much. It seems Apple pushed up prices in Scandinavia last quarter. Just wondering, do you expect other handset vendors to follow as they sort of look to offset the currency impacts? Do you see any challenges in passing this extra cost through to customers? Then following on from that, what are your latest thoughts on moving more towards a SIM-only model to help defend your product from the price increases attached to these higher handset costs? Thanks.
On the handset, the short answer is yes and no. We expect others to follow, and we do pass it on. On SIM-only, we have had a SIM-only plan for some time. We haven't, I think, made it the anchor product in Sweden. Clearly, there are very well-defined such plans out there now, which are more of the champions and the hero plans. We will have to find our balance there between SIM-only and bundles. As I mentioned, we don't have the optimal mix in Sweden yet. That's, you could argue, seen in the investment level.
Okay, thanks.
Thank you. Your next question comes from Nick Lyall. Please ask your question.
Morning. It's Nick at Societe Generale. Can I ask a couple, please? On Sweden, firstly, back on mobile. Just to clarify, you mentioned SEK 180 million of marketing cost for the quarter, firstly. Is that likely to recur over the next couple of quarters? You've extended your double data promotions, for example, to the end of May. I'm assuming that Q2 stays difficult in terms of marketing costs as well, but could you clarify that? Secondly, on the Norwegian market, I think you mentioned no great changes. I'm assuming you've not seen any churn in the base that you've taken on, firstly. Secondly, could you also give us a little bit of detail? I know you won't give exact details, but a little detail on the wholesale contract with ICE, please.
Could you tell us why you decided to give it at the terms you've given, and why you're relaxed that it doesn't suddenly unleash more competition, maybe in the second half of the year? Thanks.
Thanks, Nick. Norway first. I think as a result of the last quarter and the migration and closing of the deal, have not resulted in any churn in that sense. Since the announcement of the deal back in June, July last year, of course, we have seen a very aggressive incumbent there, which I think has, to be honest, grabbed some share in some of the segments, which we're now fighting to grab back. On the related note on ICE, they have gotten a deal from us as part of the remedy discussions, and we think it's a balanced remedy pack in the end, where we also have secured a good wholesale agreement, NRA, with ICE. I don't think that's anything out of the ordinary. Not worried about that as per se.
Sweden, yes, I mentioned the 180 number, which is a mix of increased marketing investments and increased cost for subsidies and handsets. That includes the FX effect. Back to my point, I don't think we have the optimal mix. We need to tune that. Yes, we do see improvements over the year in the Swedish mix and gross margin.
Thank you.
Thank you. Your next question comes from Georgios Ierodiakonou. Please ask your question.
Yes. Hello. I just have a couple of questions. A few of them are follow-ups, actually. Firstly, going back to the margin question. There is an implication of a significant improvement in the rest of the year, and you did comment about finding the right mix of subsidies versus SIM-only perhaps, or other type of plans. Is that the main driver for the EBITDA improvement for the rest of the year, or are there any other underlying, let's say, gross profit kind of drivers that you can also highlight on that? Then secondly, just on Norway. I was just wondering, what was the benefit you had so far in the first quarter from the migration of the roaming from Telenor to your network, and what will be the comparable one in the coming quarters? Do we go to zero roaming payments from the second quarter?
Does it take a bit longer? Thank you.
I will start with the first question on the rest of the year. We believe in an improvement, it will come slightly then starting in quarter two. As you say, we have an improvement on the mix in Sweden and the equipment, that will come through. That is something we believe in. We also believe that the loss we have on fixed will be somewhat slighter. We also continue to drive our cost program both on the COGS side and the OpEx side. We announced this quarter some resignations in Sweden, and we do programs both on resource cost, as we say, consultants and employees. We look at together resources in the rest of Nordics and the Baltics throughout the quarters. The second question please-
On the synergies in Norway.
Yeah.
We have transferred the traffic now into our network, we will see the synergies come through from that in the second quarter. The full synergies that we have talked about in Norway of the SEK 800 million on annual basis will be achieved in 2016.
We should also just say that the Tele2 business was then merging at the middle of February, and it came in with a loss.
Thank you. The next question comes from the line of Stefan Bieniawski]. Please ask your question.
Thank you. My question has been asked already. Thank you.
Thank you. Your next question comes from Barry Zeitoune . Please ask your question.
Hi. Just for Sweden, I'm just interested in why you've decided not to increase the prices on some of the fixed portfolio this year versus increasing them last year. My second question is just when I look at the overall growth in the fixed line business in Sweden, clearly you're doing very well in broadband and the landline loss is relatively constant. TV has seen a notable slowdown, both from an ARPU trend in recent quarters, but also more recently this quarter looking at the ads, which slowed down. I was just wondering whether you're optimistic on being able to see a revenue inflection in Sweden more generally, or whether actually you're looking at a slower TV trend and thinking that's going to be harder to achieve.
Third question, just if you can give us some stats on what proportion of your sales in mobile more generally in Sweden are SIM-only today, and what you believe they should be from a mixed perspective. Final question is just on Spain, on whether you see any kind of medium to long-term margin opportunity from using VoLTE as a means of moving away from your roaming arrangements with Telefónica. Thank you.
All right, Barry, let's walk through the four questions here and help you understand. The fixed side, we haven't, as we mentioned, had a price increase. We've had some campaigns going from Q4 into Q1 and wanted to monitor the results of those campaigns, see what the response have been. I think going now Q2 onwards, I'm sure there are room for some price adjustments in some segments, which we'll of course exploit. Again, it's not just increasing prices. It's a standard formula. You need to understand what the customer needs and what they're prepared to pay for. It will come when it comes.
TV, yes, it's a slowdown, but still a great base to work with in bringing the new TV experience into the market, which of course, a lot of things are happening, moving from traditional to OTT, where we need to have our role clear, and that's work ongoing. The sales mix, I won't really comment on what our wanted position is and how we're going to tune that going forward. You will have to follow that going forward. I don't think we released the mix either.
No, we don't
on the Swedish side, so thank you. Spain, margin opportunity from VoLTE. No, I think it's more how we use our existing proposition there to deliver data. VoLTE, of course, will help that experience when it comes. Not now seen as a margin booster per se. It's more of strengthening the current position and the momentum that we have on data plans.
Okay. If I could just ask one follow-up. When you mentioned finding your place with OTT, in TV in particular, and seeing good potential, can you expand on that in any way? How do you see your position in the TV market?
We've talked about it previously. We have our test version, we could call it. From a more of a strategic perspective, it's a test version. From a consumer perspective, of course, it's a live good product, which is Telia Play+, which is the OTT product. We need to understand how we leverage that in combination with the traditional IPTV offering that we have to 700,000 households in Sweden. That's something that's constantly being monitored and developed. When we have something big and new to talk about, we'll do that.
Perfect. Thank you so much.
Good luck.
Thank you. Your next question comes from Sunil Patel. Please ask your question.
Hello. Thanks for taking the question. I just have one question on fixed line. Your subscriber base in the broadband side increased your ARPU, seems to have stabilized after, I think, the decline of last quarter, and you seem to be indicating that going forward, because of the try and buy campaigns ending, you should see ARPU continue to improve. The revenue decline, though, was still accelerating on a downward basis at -1.6%, as per the mix effect. On a more medium-term view, do you think you can see stabilization [on this day] , and how long do you think that would actually take? Thank you.
Which market we talk about?
Sweden.
Fixed line, Sweden. Yeah. That's why I just wanted to confirm that. In the fixed line, we have price increases last year, and in the broadband side also, and the TV side, and we haven't had that this year yet. We will have to review that, and see when and how we want to do this. We have said before there is possibility to bring up pricing in the broadband side primarily, as this is less price sensitive. If you look at the consumer side, I think it's a promising development on the new products like broadband and the TV, but they will be just compensating the decline. On the fixed side, on the B2B side, we're still having a negative trend, and that will continue. That's spot driven.
Thank you.
I don't know if that answers generally because you were asking about the trend, and I can't really give you a forward-looking statement on the trend.
That's understood. Thank you.
Thank you. Your next question comes from Marius Lorentzen. Please ask your question.
Hi. I have a question about Norway. It looks like your EBITDA is quite a bit lower with the Tele2 acquisition. Can we expect this EBITDA level or this margin going forward, or do you see it as something temporary? Secondly, can you give any numbers on your CapEx in network investments in Norway now going forward?
Thanks. On the Norwegian side, we had an impact of a negative EBITDA from Tele2 base coming in. As I said, we expect that to improve over the year as the synergies kick in, both in terms of network and other cost-related harmonizations in the year. Full run rate of the SEK 800 million EBITDA effect is then expected in 2016 onwards. Yes, it's a low one, but it's improving from here according to plan.
On CapEx, we did announce last year when we did the deal that we would increase CapEx both on capacity to moving over the traffic, but also fast forward our ambition to get to 98%, which is a regulatory requirement in the end, on the 4G rollout. This will impact the CapEx we said in the coming two years, which it is.
Can you give any specific numbers on the CapEx in Norway?
I think we said 350 plus about 300, around SEK 600 million in total for both these two effects.
Perfect. Thank you.
For one more question before we close here.
Of course. Your next and final question comes from the line of Henrik Herbst. Please ask your question.
Yeah, thanks very much. Just going back on Swedish Mobile, you've had your double data promotion for a while now, you recently extended it. Just wondering the effects of it and whether you extending it, if we could read that into actually you're thinking about if this might work, if it does drive an increase in data usage, giving consumers more, what you're seeing. Do you see customers use more data as they get more? Because of that, they might move up at the same rate through your bundles anyway. Thank you.
Yeah. Thank you. Before this double data mania came in, people were getting used to the buckets and also starting to learn to upgrade. We were all starting to see an effect of that as a revenue-generating thing. That, of course, is much more difficult now, the upgrades, the top-ups, but that needs to be compensated with more customers on these plans, which are generous. That we have seen. We've seen people moving over. I think we're now at 65.
Close to 65%.
65% on our data plans, as we call them. I think we're still very early in the pricing era of these propositions. I think we can all be better in finding the optimal pricing, and that means some segments will pay more, some will pay less.
Okay. Have you seen an acceleration? Presumably, you have a lot of customers still on half a gig data bundles, making them step up to four gig instead of two. Have you seen an acceleration of those low-end customers taking a bigger data bundle at all?
Won't go into the split of our various segments there and how they're moving through the bundles. Generally speaking, of course, the doubling of data has attracted a lot of interest, especially in the mid segments, which are already fairly heavy users.
Okay. Thank you.
Okay. I think that closes today.
Thank you.
Thank you.
Thank you very much.