Earnings Call: Q1 2015

Apr 21, 2015

Good morning all and welcome to this Sunday morning in Stockholm and the presentation of TDNIA's First Quarter Results. I'm Jasp Bilgott, Head of Investor Relations. And with me to present today, I have our CEO, Johan Den Lind and our CFO, Christian Luyga. After the presentations, we will have a Q and A session as usually. And we intend to close this session within 1 hour. By that, I would like to hand over to Johan, please. Thank you, Jesper, and 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 and then Jesper said go through some questions. We were looking for a number to symbolize the Q1. Last quarter, we actually had the number 4. This quarter is number 5. We'll see what the next quarter will be. But 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 5 year problem, resulting in a €5,000,000,000 gross dividend to TeliaSonera from Turkcell. And this year, we are stepping up our fiber ambition even more, 25% higher delivery of 5 bilas per hour, which is still not meeting the full demand, which is exploding in Sweden. Let's go a little bit deeper than that and 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. Perksdale dividend as I mentioned. Then on the more negative side, we have a group margin that is impacted as you have noticed as you have noticed already by higher equipment sales. Almost 1 percentage point of the drop in margin is related to equipment sales on group level, which we'll cover more in detail by Christian. Then we still have our macro challenges in many of our footprints. And I don't think we need to dwell on that, but the Russian ruble and the impact and the uncertainty is still spreading across many of our footprints. And 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. 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 2 thirds of the reported sales net sales growth is related to that. And then we have equipment sales helping up and then some M and A. So 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's improving on a sequential basis. Group EBITDA also down on local organic, which we'll 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. And Q on Q, it's 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. So removing them, you still have an improved growth trend on the consumer side, which we're 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. But as you know, I've said that repeatedly, that's 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 highlights here is, it's a lot related to our increased market investments in Sweden. Both equipment and marketing is a large portion, I think around €180,000,000 of the drop in EBITDA. I also like to remind you that the fixed decline is about is resulting in a SEK80 1,000,000 per month impact on EBITDA, which we don't have to compensate, which we do to large extent with mobile. So this the mix the product mix is impacting us also to some €40,000,000 extent. Moving over to Europe, a little bit brighter picture even if local organic is down. We have a Finnish situation there where basically the it's flat if you remove the MTR effect on service revenue reported or it's down. We have Spain, who is out with a very interesting data proposition with €29 for 20 gig, which is working well so far. And it's 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 1,000,000 customers over to our networks, so improved coverage and the network quality to 1,000,000 customers coming over to NetComm and Teleoceanera. We're around 40% market share now and looking forward to drive the real alternative to Telenor in the Norwegian market with a new CEO on board from June 1. And we will see synergies now coming through in quarter 2 onwards and we're still expecting the €800,000,000 at least €800,000,000 as an effect of the synergies with the full run rate effect in 2016 and onwards. So 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 markets. The big effects on that reentering into growth territory, a couple of things. Nepal is stronger than before. And also Azerbaijan has stopped the decline. The turnaround in Azerbaijan is happening. Also 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. But 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 minus 10% and losing share. I would say the good thing in Kazakhstan and KSL 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. And 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, K Cell launched a new proposition in the market to as part of this regaining the share, where K Cell now includes also off net minutes in the bundle, which we haven't had before. So I think that will help to stabilize the decline. Then 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. And I think we also need to be hopeful that we can do more progress together resolving the 2 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 Megaphone. I think it's about SEK 500,000,000 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 full integrated report one day. And this has been well received. We also had a in conjunction with AGM, a sustainability update with key updates from some of our experts and engagements around important topics to us. That was very well received, and we appreciate all the feedback we have gotten. And this gives us great encouragement to continue the hard work that we're doing in many of these markets to stand up for, for instance, freedom of expression, but also to improve our governance and compliance across the footprint. We issued our 2nd 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. Then we also as the last bullet says here, we continue to upgrade our framework for responsible business. And the last quarter and going forward, we were 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. So all in all, we're pleased with the progress. But as always, when I talk about our sustainability work, it is a long journey. Then 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 2,000,000,000 investment program over 2 years in order to save SEK 2,000,000,000 with full effect from those investments. And it's mainly related to Finland, Sweden and technology when it comes to or group technology when it comes to invest to save. And we are progressing, somewhat slow start. We have only invested EUR 100,000,000 in these programs, but we are confident that these programs are overall on track. We're aiming to improve the customer experience, which we measure with Net Promoter Score. And 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, issues to deal with, more sales and service online, etcetera. Those are really, really important parts of this transformation, where we need to have patience. So this we will continue to update you on as part of our commitments. I will end with our outlook. I don't know if it will be smooth sailing as it looks, maybe some rough seas. But we're sticking to our guidance for the year where we have EBITDA around the 2014 level, CapEx around the 2017 and hopefully also a dividend above at least SEK 3,000,000, I should say, at least SEK 3. So 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. So we have now a 3 month activity that is the limit for if we include them or not in the reporting. So we did increase the number of customers, 2,100,000 since last year over a year and 600,000 during this quarter. But you will see that the base has changed, but also the this has been recalculated for all periods. So it shouldn't be difficult to understand the trend. So in Spain, we still have 4,000,000 first quarter, as Johan said, is very much as we expected. We have a slight decline in revenue service revenue growth. And but on total revenue, it increases 1.5%. And it's very much related to equipment, and I'll come back to that. And that is also the reason 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, minus 6%, but it's a lot of swings in it. And I will come back and explain a little bit around that later on. And the cash flow is improving, which is positive, and 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, and I think this picture illustrates this very well. 5.6% on revenue of the 8.8% reported comes from the currency effects. And even though we have countries like Azerbaijan that have made a devaluation, the Swedish krona has been quite weak for the recent year. And therefore, we have a strong impact from currency. So euro is 1 large currency in our portfolio, of course. And with the 5.9% increase towards the Swedish krona, that impacts reported numbers well. But also Nepal, Kazakhstan and Azerbaijan Tengue, even though they have made a devaluation, has an increase towards the Swedish krona. The Russian ruble is down 30%, and that is affecting the reported number of megaphones income in our reporting, of course. So that has deteriorated quite a lot from that. The equipment sales is up. And 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 build and service revenue, we can see that mobile revenue, build revenue is flat. We have countries like Spain and Kazakhstan that is negative. And we have countries like Sweden, Norway and also Lithuania, Latvia that is positive. So they balance each other out. Interconnect is fairly small on a group level. But on if you look at Kazakhstan and Finland, it will have major impact or a significant impact. So we should remember that. On the fixed side, it's primarily in Sweden. It's slower this quarter on comparable notes. And it's both a little bit around the price increases we had in the Q1 last year that we did not have this year yet and also on some of our 3 months for free offerings that we have had in the market on both broadband and TV. And they have ended now in the last in this quarter, so 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. So we have a high equipment sales cost to this. And it makes the offerings around equipment negative. And of the Swedish sales, this is pretty much it's more than 1 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. So that is why this is important to see this. The other thing with this picture is that you can see already in quarter 3, it started to pick up. And 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. So 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 4. 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. So that balance is working out well. So the main reason for the EBITDA decrease is the gross margin. On the gross margin, 1 percentage point comes from equipment. We have some storm costs in Sweden. It's not a big part, but it's SEK 40,000,000. And we also have some changes in the fixed side. With the fixed side, it's going down and that impacts the gross margin. So 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. So 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 a quarter four reporting from MEGAfron and Turkcell. And then we have FX impact on the operations. And then 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. So the impact of the dollar increase have actually given us FX effects on the net financials. Then we did an intercompany transfer of assets in the quarter, and that gave us a positive effect on the tax side of around SEK 500,000,000. CapEx is up, and one reason is the change 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 4 gs. In Region Europe, the increase and the biggest part of the CapEx comes from the 4 gs rollout both in Norway and in Finland, but 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. And it's 3 areas where we have growth, and we want also to have a superior network to be able to be competitive. So that's where we have the CapEx. On the best network in Sweden, we work with 3 elements: WiFi, which we'll keep out a little bit now, but 4 gs and the fiber investments. On 4 gs, we have said that we want to have 92%. We will have 92 percent area coverage and 99% population coverage we already have. Today, we are around 60% on our area coverage, and we are expecting to be around 90% at the end of the year. And this is progressing as expected. The fiber rollout is going very well. We had good weather conditions. We have less problem with the supply on the sub suppliers that we have in this part. We have a 48% sales 1st sales on our penetration on our sales in the first set. And last year, we had 42%. So we have increased the number of hit rate and number hit rate when we have our sales in fiber this year. So that's good. We are today having 2 thirds of the orders closed on the 5 villas per hour that we are going to deliver this year. So it feels good. I think this is all as expected and maybe even a little bit better, and 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. And 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 1 and quarter 2 last year to a off balance sheet model, and that starts to give an impact in the numbers. But 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 1 compared to last year to see 1 year perspective on this. And if we look at the 1 year from last year, we started with about EUR 53,000,000,000 in net debt. We have a free cash flow that has been positive of SEK 13,300,000,000. And then we have made a dividend payment of SEK 13,000,000,000. So they match each other quite nice there. And then we have net M and A activities of SEK 4,200,000,000. And then recently we have announced, if we go a little bit further on the picture to the right, the EUR 4,500,000,000 we got in dividend from Turkcell. So the big or the big, the small shift we have had in quarter 1, 2014, to quarter 1, 2015, is actually the FX effects on our balance sheet and our loans. It's around SEK 2,900,000,000. So it's a quite stable situation compared to last year, And we are at $1,720,000,000 in net debt to EBITDA. Good. Thank you. Okay. Thank you, Christian. And it's time to open up for some questions. And I think as we start with the floor, we have some microphones over there and you can see some hands. 1 in the front. Yes. 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? And then if you can give some proxy on how much of EBITDA that's related to the B2B side where you face challenges currently? Thank you. Yes. I'm sorry. We don't go into the B2B or B2C margin here, and we'll not relieve 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 onethree of the comparison for Sweden. The loss between the years is coming from equipment. So the rest is coming from the rest of the business. All right. Any more questions here? And with 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. So how do you balance that on a process basis? How do you look at investment in a country say like say, Kazakhstan? And will we should we expect the similar levels we have today as we move into data also in those regions? Or can we take down CapEx a little bit in coming years, given that revenue growth is on the CapEx for 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. So that's why you see the Q1 coming up better this year. But then also reminding you what we've been talking about in when it comes to some of the networks in these markets, some places we have been underinvested 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. So we and then 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 conference call? Operator, could you please open up? The first question comes from the line of Maurice Patrick. Please ask your question. Yes. Hi there, guys. Maurice here. So a quick question on the Spanish market. You've seen some recent price increases from Telefonica and Vodafone in the marketplace. You obviously talked to 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 would be helpful as well. Thank you very much. Thanks, Maurice. On the last question, I mean, that's not something we really can go into any details about. We're active in providing our views on that merger. Joergal 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. And 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 on maturity or it'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 scope for a period of price increases going forward as you launch fiber? Thank you. 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 in broadband. We're looking to see whether we can adjust some of the prices also this year, but remains to be seen. And 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 is 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. And then secondly, still related Swedish mobile. Just on the consumer side, obviously, the big change was what tell you to increase in the data bucket allowances. I'm 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. 1, obviously, is the increased investment that we have shown, which has a price tag. And the other one is the strengthening of our brand and the network perception again with where we are leading, and we're seeing an effect of that. So 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. And 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 it one way or another when it happens. But now we're working closely internally here to see if we can change the dynamics somehow. So we'll come back to that as we move along. On the B2B side is, 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 SOHA is starting to work, both stronger, clearer messaging and branding and also now introducing better products and some key launches also in Q2 will help. But we have seen a stabilizing trend on the porting side versus key competitors, which is positive. And I'll stop there. Great. Thank you. Thank you. Your next question comes from Stefan Gossen. Please ask your question. Yes, good morning. First of all, I would like to comment that please if you make larger restatements, report, which would help make the correct interpretation. And 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 this is 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? And 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. And 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 challenger. And that's how we need to go to market as well. And you will see more of that in the coming quarters. And as I mentioned yesterday, it was a launch of a new tariff plan aiming at first stabilizing the trends because they are still declining. And then Phase 2 start working on the improvements there in the core areas of Kazakhstan. And 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? And then secondly, it was a question on Azerbaijan, because there it was a quite dramatic improvement in sales growth. And 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 4 that the impact of the minus 10% we had around at that time was both regulatory, but it was also a one time effect on the revenue, and these are gone. And then to say if it's a strong trend from minus 10% to 0%, it's wrong of course because you have to restate a little bit the minus 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, but it's an improvement and we feel that much better in this quarter than we did in the last quarter. So 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 local operation? Thank you. Thank you. I don't 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 are I mean, 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. And your next question comes from Peter Nielsen. Please ask your question. Thank you. Yeah, 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 where you people who do not have fiber today and where you have little competition? Are you also seeing momentum in areas sort of in cities, MDUs where you are in competition with others please? And then secondly, can I just follow-up on your comments Johan about Turks that I don't know how much you can tell us? But are you concerned that the recent developments between Altima and Chugoruba sort of be entering a new phase of a prolonged court battle here regarding this ownership? Thank you. Hi, Peter. 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 2 of them. On the Swedish fiber, yes, momentum is on SDU a lot. So and that's where we have a good model now for rolling out, but it's not no competition as you indicated. It's quite strong competition where we're fighting to be 1st in, because if you're 1st in, then you get a good position to capture the local neighborhoods, I'll say. Okay. Thank you. Thank you. Your next question comes from Ulrik Rathe. Please ask your question. Yes. 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. So is there any way to sort of disaggregate that between the bump from a device replacement cycle and just from the commercial activity? The second question is, Christian, it's just a tariff attempt to clarify. When you say equipment is 1 third of the loss in Sweden, could you just be a bit more specific what quantities are you talking about there? So what is the third of what that is attributable to equipment? Is it cost or EBITDA? Or I'm not entirely sure what this one third referred to. Thank you. Okay. Good question on the equipment side there. You can come back to that. Let me start on the general reflection on the device and equipment market because 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. I mean as you know in this room, many out there maybe don't 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. And 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. And that's where you come into the numbers, the mix on EBITDA, Christian, which you can comment on. Yes. Thank you. On the what I meant there was that last year compared to this year, we had a drop in the Swedish profitability on EBITDA. And of that drop, a little bit more than 1 third is related to the increased equipment sales. That's very helpful. Can I just follow-up on the first question on the desegregation of commercial activity versus the replacement cycle? Is there is what we're seeing in Sweden really that in an iPhone crazy country, people want to have iPhones as a new iPhone OS and therefore there's a big sale? Or is it really more that commercial activity, a little bit of a haggle for market share that's been kicked off by new tariffs in Tele2 is really the major driver of device sales? That's really what I'm after. It's a good question and remains to be seen. But it's a lot of upgrade to better handsets generally. And I think that we need to find our optimal mix. Of course, there are different propositions out there bundled and unbundled where I think we're also work to be done to clarify our propositions versus some of our key competitors. But 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. And your next question comes from Alan 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, but 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? Or is this more because of Russian influence on the economy? Or what's going on there? And what's the outlook for future subscriber growth in that region? Thank you. Well, thank you. I mean more of a general comment, see if we can go deeper and if you can clarify. But we're reaching high penetration levels in many of the markets if you measure CIM per capita. And 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 ARPA development and get the data growth going, which we are seeing in all our markets actually. And that's where we also need to stimulate that with better networks and 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. But subscriber number, I think also you need to take into consideration the restatement which has happened in some of these markets, so where we've gone to 90 days. But yes, overall, it is a slower growth in subscriber. Thank you. And your next question comes from James Britton. Please ask your question. Thanks very much. It seems Apple pushed up prices in Scandinavia last quarter. So just wondering do you expect other handset vendors to follow as they sort of look to offset the currency impacts? And do you see any challenges in passing this extra cost through to customers? And then following on from that, what are your latest thoughts on moving more towards the SIM only model to help defend your product from 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 heroes, hero plans. And 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. And that's you could argue seeing in the investment level. Okay. Thanks. Thank you. And your next question comes from Nick Lyall. Please ask your question. Yeah, good morning. It's Nick at SocGen. Can I ask you a couple please? On Sweden, firstly back on mobile. Just to clarify, you mentioned EUR 180,000,000 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. So I'm assuming that Q2 stays difficult in terms of marketing costs as well, but could you clarify that? And then secondly on the Norwegian market, I think you mentioned no great changes. So I'm assuming you've not seen any churn in the base that you've taken on firstly. And 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 the terms you've given and why you 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. But since the announcement of the deal back in June, July last year, 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. And 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 in And So not worried about that per se. And Sweden, yes, I mentioned the EUR 180,000,000 number, which is a mix of increased marketing investments and increased cost for subsidies and handsets. And that includes the FX effect. So back to my point, I don't think we have the optimal mix. We need to tune that. And 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 Ierodiaconou. Please ask your question. 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 or a significant improvement in the rest of the year. And you did comment about finding the right mix of subsidies versus SIMONLI perhaps or other type of plant. 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? And then secondly, just on Norway, I was just wondering what was the benefit you had so far in the Q1 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 0 roaming payments from the 2nd quarter? Does it take a bit longer? Thank you. I'll start with the first question on the rest of the year. We believe in an improvement It will come slightly then starting in quarter 2. As you say, we have an improvement on the mix in Sweden and the equipment, and that will come through. That's something we believe in. We also believe that the loss we have on fixed will be somewhat slighter. And we also continue to drive our cost program, both on the COGS side and the OpEx side. And 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. And I mean, we have transferred the traffic now into our network and we will see the synergies come through from that in the second quarter than the full synergies that we have talked about in Norway of €800,000,000 on an annual basis will be achieved in 2016. The and we should also just say that the Tele2 business was then merged in at the middle of February and it came in with a loss. Thank you. And the next question comes from the line of Stefan Biaglian. Please ask your question. Thank you. My question has been asked already. Thank you. Thank you. Your next question comes from Barry Zekunay. 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? And then 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. But 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. So 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? Then 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 mix perspective? And then 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 Telefonica? Thank you. All right, Perio. Let's walk through the 4 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 and 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. But 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. So 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. And the sales mix, I won't really comment on our wanted position is and how we're going to tune that going forward. You will have to follow that going forward. And I don't think we release the mix either on the Swedish side. So thank you. And Spain, margin opportunity from Volta, now I think it's more how we use our existing proposition there to deliver data. And Voalte, of course, will help that experience when it comes. But not now seen as a margin booster per se, it's more as 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, what can you expand on that in any way? Like what do you how do you see your position in the TV market? We've talked about it previously and we have our test version, we could call it, from a more of a strategic perspective, it's in test version. From a consumer perspective, of course, it's a live good product, which is Telia Play Plus, which is an OTT product. And we need to understand how we leverage that in combination with the traditional IPTV offering that we have to 700,000 households in Sweden. But that's something that's constantly being monitored and developed. So when we have something big and new to talk about, we'll do that. Perfect. Thank you so much. Thank you. And 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. I mean, 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 try and buy campaigns ending, you should see ARPU continue to improve. I mean the revenue decline there was still accelerate even on a downward basis at minus 1.6% as per the mix effect. I mean on a sort of more medium term view, do you think we're in a where you can see stabilization in STI? And how long do you think that would actually take? Thank you. Which part would you talk about? Sweden. Sweden, yes. That's why I just wanted to confirm that. In the fixed line, we have price increase this last year. And in the broadband side also, we and the TV side, and we haven't had that this year yet. And we will have to review that and see when and how we want to do this. We have said before there is a 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. And then on the fixed side on the B2B side, we're still having a negative trend and that will continue. And that's what's driven. Thank you. I don't know if the answer is really because you were asking about the trend. And I can't really give you a forward looking statement on the trend. Yes, that's understood. Thank you. Thank you. And your next question comes from Marius Lorentzen. Please ask your question. Yes. 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? And secondly, can you give any numbers on your CapEx in network investments in Norway now going forward? Yes. Thanks. On the Norwegian side, we had an impact of a negative EBITDA from Tele2 base coming in. And 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. And then full run rate of the €800,000,000 EBITDA effect is And on CapEx, we did announce last year when we did the deal that we would increase CapEx growth on capacity to move on over the traffic, but also fast forward our ambition to get to 98% of the which is a regulatory requirement in the end on the 4 gs rollout. So this will impact the CapEx we said in the coming 2 years, which it is. Can you give any specific numbers on the CapEx enrollment? I think we said the €350,000,000 plus about €300,000,000 around €600,000,000 in total for both these two effects. Perfect. Thank you. One more question before we close in. 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 and you've had your double data promotion for a while now and you recently extended it. Just wondering the effects of it and whether you're extending it. If we could read that into actually your thinking about if this might work, if it does drive an increase in data usage, giving consumers more and what you're kind of seeing? Do you see customers use more data as they get more? And because of that, they might move up at the same rate through your bundles anyway? Thank you. Yes. Thank you. We before this double data mania came in, there were people were getting used to the buckets and also starting to learn to upgrade. And 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 plants, which are generous. And that we have seen. I mean, we have seen people moving over. I think we're now at 65% Close to 65%. 65% on our data plans as we call them. But I think we're still very early in the pricing era of these propositions. So 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. But have you seen an acceleration? I mean, presumably you have a lot of customers still on kind of half a gig data bundles giving making the step up to 4 gig instead of 2. Have you seen an acceleration of those low end customers taking a bigger data bundle at all? I won't go into the split of our various segments there and how they're moving through the bundles. But generally speaking, of course, the doubling of data has attracted a lot of interest in some 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.