Earnings Call: Q2 2014

Jul 17, 2014

All right. Welcome all to the presentation of Hillasneura's Second Quarter Results. I'm Jesper Bilgoth, Head of Investor Relations. And with me to present today, I have our CEO, Johan Delonen and our CFO, Christian Lougee. And we take some questions after that. And intention is to close this event within an hour or so. By that, please go ahead, Johan. Thank you, Jesper, and good morning all. Not a full house here in Stockholm. I'll take it we're in the middle of the hectic reporting season rather than the middle of the holiday seasons. I'll take you briefly through the highlights of our Q2 where I'm pleased but not fully happy. It has a few components we would like to explain, but overall a pretty okay quarter. Our group service revenues are flat, but net sales is negatively impacted by Spain and we will go through that in more detail. Underlying EBITA is stable in local currency and the margins are similar to last year, which is positive in spite of the revenue pressure. We have continued growth in the Nordic mobile space, which is positive news backed on the Internet demand that we are seeing across our footprint with our new bucket pricing on data having a good effect. However, the enterprise segments remain challenging both in Finland and Sweden, but we're defending share and that's the good news. Our Eurasian operations is showing strength both sequentially and year on year. We have an almost 7% growth in organic terms and the margins are strengthening to very high levels. We continue to focus on our corporate governance and upgrade our respective frameworks in all our markets and we will cover that in a bit more detail later on. As you know, we outlined our strategy in Q2, which we also showed a proof point on during quarter 2 or after quarter 2 actually when we announced the acquisition of Tele2 in Norway. So let's have a look at some of the numbers. Our local organic is minus 1.2 percent mainly related to Spain and equipment which we'll also cover in a bit more detail. Our EBITA margins as I said are flat 35.3% in the quarter. CapEx to sales, slightly higher than previous quarter last year and mainly backed on good progress on our fiber and 4 gs investments across our footprints actually. Moving to some of the key highlights on the service revenue, which is a core parameter for us and a KPI. We're moving slightly away from the net sales and the equipment and focusing more on the service revenue. So it's positive to see that the trend in service revenue as you can see on the left side is positive. We have that from all our regions, our new regions in the new operating model are showing an improved trend on service revenue and we'll also cover that in a bit more detail. So that's a positive side on the service revenue. Moving to Sweden. New CEO in Sweden, Marlin Frenning and her team, 1st quarter as a combined entity, strong focus on 1 customer, 1 brand I'm very happy to see that the customers are also showing a positive response to this with the highest NPS, Net Promoter Score ever in the Swedish space. So that's a positive news and a good start for the Swedish team. They're also delivering a very solid set of numbers in the first in the Q2 with flat year on year growth organic, slightly up on the reported and that's thanks to the acquisition of Sitios that is included in the later part of the quarter. EBITA margin strengthened somewhat, good cost control, good focus on the efficiencies and as I said a good start for the Swedish team. CapEx to sales, we'll get back into some of the more CapEx details. We are on track on our 4 gs investments covering 99% of the population by the end of this year. And the 4 gs network is really superb. Great feedback from the customers, great speeds and good propositions out there. So good tick for Sweden, I would say. Looking at the somewhat the breakdown on the Swedish side, it is mainly B2C that is helping Sweden. If you remove some one offs and look at the underlying growth for consumer in Sweden, it's 2% over fixed and mobile. And that's the first time the fixed is also helping the numbers on the consumer side stabilizing the negative trend. On B2B, however, we are under pressure. It's a decrease of 4.5%, 5% in the quarter. And it's the heavy price pressure that we see on the larger corporates where we are defending share. There's also very fierce competition in the SME segments where we are shaping up our propositions. But as you can see on the bottom chart, the trend on the fixed side in Sweden is improving. The fiber business is supporting this, good rollout of fiber and also stabilizing trend on the old fixed PS10 and ADSL products. Moving to region Europe then. We see a stable margin. Net sales is, as I mentioned, impacted by Spain both on equipment and build, but it supported actually Spain's decrease on net sales is helping the margin stabilization in the region ironically. Good traction also on the investments in the European space on 4 gs rollout both in Norway, Finland and Denmark. So let's have a look at Spain then, current topic. It is a very challenging market in Spain as you know. We've talked about this many times. It's not getting any easier in Spain. The big 3s are 2 of them are getting converged, I. E. They have fixed and mobile and pushing those propositions out in the market. And we have the competition coming from below from the MVNOs adding to the very, very competitive landscape where we see in Spain. And we are mobile only. We're around 7% market share and we're struggling to see and find a path to sustainable profitable levels. And I think the picture is pretty clear. We have stabilized the profitability on EBITDA. As we said, we would in Q1. We said we would be back on in positive territory, and we are. We are slightly lower than on the this market share gain. Even if we are gaining against the big ones, net portings, we're losing a bit of share to the MVNOs. But Spain is difficult and we're also now having looked at this for a few months struggling to see that we can on our own get to a sustainable profitable situation in Spain. So now we are exploring the alternatives for Spain over the coming months. Quick look at Finland and Denmark in the European region. We have a local organic negative trend that is somewhat stabilizing. Finland is good in the consumer space. The Telefinland brand is very strong. Sunrise is stabilizing I would say and also trying out the new price models in Finland. Not an easy market to come in with a new our new pricing model where speed is still the dominant factor for the propositions. We're trying to bring quota and volume into the market. Some traction on that even if the main propositions are still on speed from the competitors. In Denmark, positive things are that we are gaining customers. We've improved the customer base over the last 6 months with 5%. However, there is a price pressure. It's a very fierce competition in Denmark. But we have a strong proposition and our 4 gs network is seen as the best in the country and I'm very glad to see that that is paying off. We are small in Denmark. We have not reached our scale in Denmark. We're hoping to see some of that coming out of the network joint venture with Telenor. But the question is whether it's sustainable long term and that we're also exploring. Moving to Eurasia briefly. As I mentioned, strong growth in Eurasian regions 6.5%, 7%. Strength and margin, they look a little bit higher than they should and Christian will explain why. But 54.5 percent EBITDA margin is superb. You see a strong support from this from several markets stabilizing negative trends in Azerbaijan and Georgia and positive growth still high double digit for Nepal and Uzbekistan. Kazakhstan contributing on net sales with the launch of the iPhone, which is taking off in a nice way, slightly behind on our plans for CapEx, but expecting to pick up to normalized level during the rest of the year. Quick look then at Kazakhstan, which where we have 3.5% approximately organic growth. Obviously that disappears somewhat in the FX conversion to reported. And the margins are strengthened in the K cell business. Nepal, we're reaching 12,000,000 customers in Nepal as we speak and the EBITDA margins are now close to 60%, which is, and I remind you, an unusual situation with a 2 player market where we expect competition to increase over the coming quarters. A couple of words also on our corporate governance upgrade and our sustainability. We have a new management in Eurasia on many levels. We are also new people in many of our companies. We have a new focus and it's leading to an improved control and strengthening of our governance framework. It is also resulting in some of the one offs and the write downs that we are doing in Q2 and Christian will cover them in more detail. Our anti corruption risk assessment is completed in the region Eurasia and is now starting in Europe and international carrier space. And the risk assessment, just to remind you, is where we go through the country risk, the operational risk, the company risks to make sure that we know in all aspects what the risks are. Then we continue to roll out our code of conduct, which is well above 90% participation in all our markets. In Azerbaijan, it's 99%. We've also conducted more than 5,000 face to face trainings on the anti corruption policy. So we're getting to a point now where we at least people know what we expect and how we should operate in our respective markets. We're also implementing our freedom of expression policy in our respective markets. And I take the opportunity when I meet with presidents and prime ministers and ministers across the footprint to express our view on this important dilemma. So I'm happy with the progress there, but also reminding us and you that we have a long way to go. Closing off, I'd like to tie back to the acquisition that we've announced last week of Tele2 in Norway. We have now started the discussions with the local authorities, competition authorities in how this deal from our point of view makes sense and why we think it should be approved. And we expect that process, as we mentioned, to carry on for a few months and most likely getting Now we're very focused Now very focused on getting the process and the approval and also preparing for a new start in Norway with 2 great companies coming together. So that's our focus. Before Christian takes over, let's just look briefly at the outlook, which we said in Q1 that we saw higher risk for the equipment sales. We still believe at the time that we would be able to keep that on the same level as last year. We see now mainly related to Spain that that will not be the case. So we are revising our outlook on net sales mainly related or principally related to the equipment sales and therefore will be slightly below last year. Our EBITDA margin should remain the same as last year and CapEx to sales we don't change as well. So as I said, a pretty okay quarter with some unusual items that Christian will take you through right now. There you go. Thank you. Good morning, everyone. I'd like to first just to make a little bit of advertising for our new quarter report. We got some feedback this morning from some of you, positive feedback. And whatever feedback it is, we like it. And we like it, of course, that you think that the new report looks good. We I thought I would start off a little bit with the first half year. And the first half year is very similar to the quarter. It's a drop in net sales, primarily Spain and equipment sales in Spain. We have a stable EBITDA growing slightly and there is a decrease in cash flow and EPS, which I will come back to more in detail. Otherwise, I'm quite happy about the stable first half year and it give us courage that we have a good balance sheet and a strong position going forward. The net sales change is minus 1.2% in the quarter. Equipment sales included that is the driver. 2.1 percentage points comes from Spain. If we deduct that and also if we deduct a positive change from the equipment sales in Nordics, there we can see it primarily in Sweden, Norway and Denmark, we have a still net positive effect on the core business. And this is something we like and continue to drive hard to reach every quarter and it's important to be able to grow EBITDA over time. The EBITDA margin is stable despite quite heavy FX effects in Eurasia. As you know, Eurasia is a high margin contributor and is growing this quarter. And if FX effects are high, it will also impact the margin. We do have a stabilized situation around the 35% margin. And if we look at the right hand side of this picture, we can see that the FX effects in Kazakhstan primarily where we had a devaluation in quarter 1 is quite severe on the margin. So in local currency, the margin would have increased even a little bit. Otherwise, the main factors that have an impact on the EBITDA margin is our cost work. It's the equipment sales, of course, and also the strong development in Eurasia. We have margin improvements in all regions. However, they are a little bit different. First of all, I would like to point out Sweden, very strong. You will find some personnel nonrecurring as well in our income statement and it's related to some cost reductions in quarter 2 in Sweden and Finland. And we have a strong focus on both bringing up the sales and we have a 2% underlying B2C consumer sales in Sweden. In the same time, we are reducing cost. And that brings EBITDA change in actual absolute terms, which is positive. Secondly, if we look at Europe, it's a little bit mixed. Spain is dragging down the sales, of course, also the cost. But excluding Spain, OpEx is also going down in Europe, which is important. The main contributors otherwise in from EBITDA point of view in local currency in Europe is Finland, excluding the non recurring, Spain and Latvia. And Latvia, we have found a positive trend finally, and it's the 1st country that makes a little bit of breakthrough in Baltics for us, which is encouraging. Eurasia, very strong positive growth. Even if you would look at the EBITDA in local in reported currency, the growth in would be positive. And the cost is increasing slightly above what we may be expected, but most of it is from Kazakhstan where we have a devaluation that pushed OpEx increases and price increases. In the same time, we have not been able to increase the price to our customers, the revenue side. EPS is impacted by the associated companies. Its currency effects in both Megaphone and in Turkcell and they are partly related to the environment we have with the sanctions, etcetera, that has put high pressure. It's both FX effects in within the income statements of these two companies, but it's also when consolidating these two companies into our books, we have a lower profitability and it's quite high between the quarters over the year. Otherwise also we have a negative slight effect on FX even though the euro and the Danish kroner is stronger, Norwegian kroner is weaker. But in Eurasia we have a fall both in Uzbekistan, Nepal and in Kazakhstan on the currency. CapEx and CapEx to sales. We have a strong focus on expanding our 4 gs coverage and the fiber network. The picture lies a little bit and I just want to tell you that that we have now a group technology, a central unit which is not part of this picture. And in the transition of moving projects between the different entities, it may be that it will be on some part of percent a little bit changes going forward. We have now our common platforms. We try to drive a shared common investment platform for TV and other parts of the organization. And that makes it a little bit complicated in the beginning how to sort that out. But overall, it gives a fair picture and we have a weaker position in Eurasia. It's Nepal, Kazakhstan and that is the biggest changes over year on year. Also a little bit in Uzbekistan. We think that it will normalize over the second half year and for that half year and the main focus will be to build coverage in these countries. In Sweden, it is a very high demand on fiber right now. Fiber is much more expensive than the 4 gs. And I think I said last quarter that 40% of the CapEx was fiber and now it's over 50% of our CapEx in Sweden that goes to fiber. And on that topic, I wanted to give a little bit deep dive into fiber. This is fiber the fiber in Sweden. And we can see that we are increasing and having a quite good growth every quarter, which is very positive. It is not only a positive growth in fibrous total, it's also a growth in our connected services to these fibers. And we have around 1 third of the market and there's still a lot of penetration to work with out there. The broadband services, we have on 52% on the fiber households. And the pace is increasing, and that's the most important thing. The broadband is the most important one as well because that's where we have the highest margin. If you look at where Telia has a service, we have it on 67% on the households. The other thing is that this is divided by multi dwelling units, apartment buildings and villas or single households. And in the single households, there's around 2,000,000 in Sweden and around 25% of them have fiber today. And of them, we have 115,000 and it's growing. Of those 115,000, 90% have Atelier service and you know this is OpenFiber and which is very positive. The final comment I want to make about this is that we have said that when we start to build more and more, it will also have an impact on the revenue. And in this quarter, it had a year on year impact of SEK 90,000,000 and this is when we start to develop and dig more and connect more households, it will have an impact. As long as we see a potential for growth, it will be positive. Free cash flow is more negative is negative compared to last year. There's 2 elements, cash CapEx. As you may know, cash CapEx is just a result of when you pay your CapEx, so it will shift over time. And over time, it should be even with our reported CapEx. So it's a timing question. On the working capital, we have 2 or 3 main elements this quarter. 1 is actually related to interconnect payments in timing of interconnect payments in Eurasia. The one is the other one is actually in Kazakhstan where we're building up an inventory and a distribution now of the iPhone. We have started to sell handsets in Kazakhstan. And now in the first step, when we build that inventory, we have a onetime impact. I believe we have the level of inventory right now that is sufficient for the second half year. In Spain also, we have an opposite effect. In Spain, we have had a distribution set up where we have a positive cash flow from increasing equipment sales, the opposite what you would think about. We have paid our vendors much slower than we have got paid from our customers or from the distributors. And now when the equipment sales is going down, it has a quite negative impact on the cash flow. So that's also something that now comes here and stops as long as the equipment sale doesn't drop even further from this level we have today. In the same time, we also have paid some vendors off a little bit faster than maybe usually in Spain. The next page, dividend payment, explains net debt increase, quite simple picture. We have increased our net debt with SEK 14,000,000,000. We have paid out SEK 13,000,000,000 to our shareholders. And SEK 2,000,000,000 is also FX effects on our debt portfolio. So and that comes from the euro increase. Johan, you want to summarize or should I summarize? Well, please summarize. Well, I will summarize. I think it is an okay quarter. We have a very positive result with stable margin. It's very easy to understand the revenue change and we have a B2C growing and we have customer growth in several markets in the Nordic especially, both Sweden and Denmark and Norway is growing very nicely on the customer side. Eurasia has very high performance and we look forward for seeing you in a quarter. Or actually not in a quarter. Actually, we look forward to see you actually at the Capital Markets Day, which is in September 30. That's when we look forward to see you. Excellent. Then I think we're as usual, we open up for questions. Yes. And Jesper will facilitate. Yeah. So maybe we start here in the audience. And do we have some microphones to Andreas, perhaps? Andreas Jovuls on SEB. Surprise, surprise. Question on Spain. What has changed in Spain since 2 years ago when it was quite apparent that it was for sale? How come you try this once again? What has changed? And why do you think you can be more successful this time? I think a couple of things are changing in Spain. One is the competition dynamics where convergence has really entered the stage in Spain. I think you cannot survive long term on a profitable level without having an offering in this space, which is converged one way or another. We have tried that with a reseller agreement which is not really working out for us and we are still hovering around the 7% market share. And last quarter reminding you that I said we're looking at Spain from either we really need to get to a point where we see we can get above 10% of sustainable levels of profitability or we need to find solutions for Spain because right now we don't have the return on capital that we need to have in Spain. And we don't see that based on our analysis and strategic review right now that there are good viable options to get to sustainable levels on our own. Therefore, we need to take the consequence of that and look at options. What has changed? Well, the convergence has changed and you also have a different climate in Europe now in terms of consolidation opportunities, I would say. All right. Liana Stebay, Nager. To continue on the strategic reviews, you also mentioned Denmark that you think that you're too small. So I'm wondering is a presence in Denmark key for you, so you consider buying rather than exiting the market? And then also you mentioned that you need further cost optimization, need a leaner organization. Where do you see opportunities for more efficiency measures going forward? In Denmark or general? In general. In general. So Denmark first and I mean the yes, it's a small business, but it's doing well under the circumstances and we expect to see further improvements with this network partnership with Telenor, which is already paying off by the way in the 4 gs space where we have the best network perception and gaining share. So I mean operationally we're doing well in Denmark even if we need to improve further. The question we have on Denmark is whether we can get to sustainable levels of profitability also in Denmark on our own. And there remains a question mark, remains to be seen. And Denmark is in the middle of our core Nordic Baltic strategy where we want to be strong, where we want to be sustainable profitability wise over time. So we're keen to look at options in Denmark. On the cost side, generally speaking, I think we can improve our efficiencies across the board. We showed last year that we are able to take out costs and maintain focus. We have to do that in all corners of the shop. We don't have growth and then we need to be more efficient to produce EPS growth obviously. And that's the focus now. And I think we're going through each of these components. The one important aspect of that will be the transformation where we are prepared to invest to save and that is in areas where we need to be more agile. We need to reduce complexity. And that's a program that we are working on and we'll talk more about in the CMD in September. Erik Perst, Danske Bank. A question regarding the Swedish mobile market. You changed your bucket sizes and your prices recently. Can you speak in a bit of detail about what effects that have had on your business? And also you reported, I think, end user service revenues about flat for this quarter. Your main competitor, Tele2, had a bit of growth. Can you what do you read into that? And also, if you can could you split that number, the flat number into consumer and business? We can see the developments in each. Absolutely. On the bucket pricing, still early days. I want to wait a bit before I draw any conclusions financially. I can tell you that the reception from our But I think we need to experiment a bit around data pricing, but I think we need to experiment a bit around data pricing, which is now the driver for our future growth and we need to get it right. So we'll get back on the details of the actual effects in Q3. On the consumer side in Sweden, first of all, the service revenue flatness, as we said, is across the group. And in Sweden, in the consumer space, we're actually on a 2% growth if you normalize it across fixed and mobile. And then I can tell you that the mobile is growing faster than the fixed. So there you get probably into the same territory as some of our competitors that have reported on the consumer side in Sweden. Thanks. One question there in the back. Sven Grunberg from the Wall Street Journal. I was coming back to Spain a bit. I mean given that Spain is now a drag on your overall top line here, I was wondering whether I mean, you're less price sensitive in terms of selling the unit to someone. I mean, that was one of the hurdles 2 years ago when you tried to sell it last. Well, I don't know the exact hurdle the last time. There were many reasons for that, not just France. There was also regulatory aspects in the game. As I said, I think there are less hurdles today in making consolidation in Europe generally, given that some of the deals that we have been waiting for has just gone through, however, with some remedies, but they are through. And it's an acceptance in general terms for consolidation in Europe from 4% to 3% at least. On the price side, I'm not going to comment on any of those things at this moment. What we have said is that we're at this point now need to get some alternatives on the table when it comes to Spain as a whole. I mean we have looked at it from investment and going up in Spain. Now we need to understand if there are viable options in leaving Spain or not. Okay. Should we open up for some questions from the conference call? Operator, please? Thank you. Comes from the line of Peter Nielsen. Please ask your question. Thank you. Yes, just returning to Christian's very interesting comments and short presentation on Swedish fiber. I mean, obviously, the improvement in service revenue trends in the consumer side is quite remarkable on the fixed side. Are you hopeful now that with the demand you're seeing the uptick the rollout you're seeing that you can envisage the fixed business returning to sort of flat stable revenues in Sweden on the back of this? And secondly, can I ask you Johan, I know you're not directly involved in the current proceedings between Tugger Rover and Altimo of course, but in your sort of once the ownership situation in Turkcell once the ownership situation in Turkcell becomes sorted? And thirdly, if I can just return to the SEK 2,000,000,000 cost reduction program last year and this, are we to take it that this is almost completed now and the targets have been reached in terms of the cost savings? Thank you. Thanks, Peter. On the fixed side, there is still a higher demand than we can supply and that's a good thing. So we need to make sure that we address all the people that need and want our Internet services on fiber. Whether that will return into flat sustainable situation on fixed or not remains to be seen. We're very glad to see this quarter holding up, I would call it, rather than growing on the fixed side, but it's positive. On the Turkcell situation, well, we're obviously very close to the situation. We have good dialogue with the partners and we're keen to see the outcome of the And then we'll talk about what that means for us going forward. And then we'll talk about what that means for us going forward. But every day we're getting closer. On the cost program, I'd just like to say that last year in the beginning of and actually end of 20 13, we no, 12 actually, we initiated the cost program. And it's been running and we are on track, but we have a new organization, new set. We foresee that we need to do continuous cost measures all the time. And we are operating model 1st April, and we still have a change in this quarter, and we will continue to do that. So we're on track, but it's not sort of we're going to end this internally. We're just going to continue to work with programs, local programs all the time. So it's a little bit maybe blurry answer, but the real answer is we are on track, but we are not stopping. We are continuing. Okay. Very good. Thank you. All right. Next question please. Your next question comes from the line of Barry Zeitung. Please ask your question. Hi, good morning. It's from Berenberg. I've got a few questions. The first is more of a general one. And I was just hoping to get your general view rather than thinking about it in terms of your specific participation, but your general view on consolidation in Denmark and Sweden after the German and Irish remedies and whether you think those remedies would be a threat to the potential of consolidation in the Scandi market or whether indeed it opens up more consolidation potential? My second question is on fiber. Com Hem in their marketing were highlighting that they have a speed advantage versus were highlighting that they have a speed advantage versus fiber over most of their footprint. Do you think cable speed advantage versus fiber over most of the cable footprint is sustainable? Or do you think you can catch them up or even overtake them? And then my final question is on Norway. You've mentioned that you've started discussions with the competition authorities. I was just wondering whether you've started any discussions with ICE on the potential sale of Tele2's network or any other spectrum assets as well? Thank you. Thanks, Barry. Consolidation generally, I mean, you get 100 answers if you ask 100 people. So not sure Maj will add much to your full picture there. Let's focus on our concrete example of Norway. We think we have good reasons and good arguments for this consolidation in Norway. There will still be 3 networks. There will still be plenty of brands. There will be good competition and that's our argumentation that we now are using. And I think on a general terms, it's good to get clarity what the attempts have been in Europe that the attempts that are out there have now clarity on what the remedies would be. And then you have to make up your mind whether you think that's good for the merging entities and the remaining entities. And I think that's the big debate now in Europe, whether they are acceptable to the remaining entities rather than just the emerging entities. So that's a good I think it's a good step that we know what is expected from the authorities when you go for consolidation. So in that sense, one less hurdle. And I commented on Norway. I'm not going to comment anything else than we're focusing on getting this deal through. And then we'll see what that means for the rest of the market and the rest of the players. On the fiber and Com Hem, I'm not going to really comment on their claims. I can just say that our proposition, our product, our fiber rollout, it's excellent speed, excellent quality once you get it. But again, it's a high supply high demand and we're struggling to supply through the value chain and that we're working on. There was one on I said you didn't comment. Yes, so we are finished. We didn't comment that. So next question please. No further questions. Your next question comes from the line of Andrew Lee. Please ask your question. Thank you. Good morning, everyone. Just a few more a couple more questions on M and A. You stated that you'd be keen to take a proactive role in in country consolidation, particularly in the Nordics. But now that you've always done, do you actually see other opportunities presenting themselves in the next 12 months? And do you actually feel you have the financial and managerial capacity to do this in the near term? And then secondly, on Denmark, you mentioned you're exploring options here. Do you feel you could fulfill your Nordic strategy overall by having just a wholesale arrangement in Denmark? Or do you need to own assets there? Thank you. Thanks, Andrew. I think on the first question on the deal and the execution capabilities, I think that is not the main problem, the execution capabilities. I think we still have a strong balance sheet to be part of consolidation in different ways in our home Nordic Baltic markets, but also in the Eurasian space that's also part of our core home markets or our core markets rather. So we'll see what availability there is and the viability of those opportunities we'll speak about when we have them at the table. On Denmark, I think that's obviously an Denmark that we're using and actually growing. But to take it to the full potential next level, we're looking at various options. Your next question comes from the line of Georgios Erotter. Hello. It's Georgios Eriagoulou from Citi. A couple of questions from my side. The first one, a follow-up on your answers around Spain. I think a lot of the debate is around mobile consolidation, but that is perhaps less up to you. I was wondering whether if there is a convergence option for you to merge perhaps with a listed broadband provider and have a stake there, whether that will be an acceptable solution or whether an exit from Spain is primarily the objective here? And secondly, around the fixed performance in Sweden, you mentioned you increased prices on the access fee in particular at the start of the year. It's quite encouraging, but I'm quite surprised by the fact that we haven't seen line losses increase on the telephony side. So I was wondering if you could give us an idea as to why that is happening and whether that means you could push more price increases in the future? Thank you. Thank you. On Spain, I don't have much more to say than I said. Let me repeat that. We are looking at our various options in Spain. We have looked at ways to get up in Spain and both organically and non organically. We don't see that as a very viable option at the moment. We're focusing on delivering on our current business. TIM is doing really well in very difficult markets. But now we also need to look at the other options for Spain, which will include a range of alternatives that we have to assess. And that's why I say that is now the main focus to assess what options actually we have. And then we'll have to make up our minds then in the end what is best for our shareholders. And the second one, you want to take that question? I think it's fine. Well, as you say, we have positive increases in the pricing and still there is not a higher rate of losses in the fixed lines. We are positively surprised a little bit as well. And I think that shows that the behavior is more important than the pricing in this area. So the shift from traditional to new, that kind of behavior change is a bigger driver than the pricing maybe. But it's too early to say and let's wait and see. And as long as it works this way, it's good for us. Your next question comes from the line of Dominik Plummer. Please ask your question. Yes. Thank you. I'll spare you another consolidation question and ask you about the regulatory reform package. I'm just wondering if you are supporting the connected continent package at this stage or do you rather still see too many negatives in there? And connected to then going forward, what's your expectation from Jean Claude Jonker? Are there any further reform issues you would want to see picked up by the new commission? And then maybe on Sweden and you increasing the data allowances. I'm just wondering if it's not a very dangerous thing in terms of educating customers that more service costs more when you now raise your data allowances again? And what's the rationale behind that? And then maybe you can update on the competitive situation in Uzbekistan. Yes, that's all. Thank you. Let me go from the bottom to the top. Uzbekistan, no news really, but more speculations about the timing of the new entrant. We're still saying that it will happen. But now we probably can safely say that the full impact of the 3rd entrance will not come this year. It will come into next year. And on data pricing, in Sweden, if you look at Sweden versus the other Nordic countries, we have the lowest data per user and that's one of the reasons we're also trying to give more to our Swedish customers and has been very positively received as I said. Obviously, we need to find a way of monetizing this over time. We need to experiment. We need to also to add to the simple pricing of just data. We need add things to that, which we'll do as we go along. But it's a very important area, high focus, and we expect this to be an important growth driver obviously going forward. And the last one on EU. Well, let's see what we have from the new commission. There is a handover agenda from Nielle Kruse into someone and we are monitoring this closely. We're working as an industry. The CEOs in the large telcos in Europe are talking and together with GSMA, together with regulators to see what we can do to drive the investment climate in Europe to the next level. And we're keen to get clarity on a number of topics, including spectrum, including net neutrality and also roaming. So we are driving this very hard. We're taking steps already leading the way. And I think there's never been as good dialogue as it is right now. Great. Thank you. Your next question comes from the line of Kevil Quiroya. Please ask your question. Good morning, Ivan. I've got two questions, if I may. First on Nepal, can you comment what's the state of the progress for the rollout of the new entrants? And when do you expect them to have a more meaningful impact on the market? And then secondly, on Norway, if I look at the build service revenues, they were down 5% in the quarter and local currency, they're down 1% in the prior quarter. So can you just comment a little bit more about what explains that trend as well please? Thank you. So Christian will cover Norway. Let me talk about Nepal. We have said earlier in these calls that we expect a new entrant to come in this year. I think also in Nepal now we need to say that it probably won't have a big impact this year. We're probably moving into next year when the 3rd engine will have the full impact. Having said that, I think I'd like to take the opportunity to say that the competitor in Nepal has been become very, very much more aggressive on the competing with our Ncell. And that is it's good. We're getting good competition there now and we're doing well, rolling out the network even broader and deeper in Nepal. And we're seeing the effect now. We're almost up to 12,000,000 customers in Nepal. On Norway, we have both the B2B and B2C has been tough for us in this quarter. And it looks good on the surface when you look at the number of customers in Norway, and it is positive in the end, but we started actually the quarter in April May with a decrease in number of subscribers. So only in June, we went above the previous quarter. So therefore, the average for the quarter is actually, you could say, a fewer customers. Then we have successfully with both price and packaging moved a little bit positive than in June. It is still been tough from our competitors and we continue to try to do the best there. And in the B2B, it's been similar. That's great. And could I just follow-up? When you mentioned your subscriber trends for April and May were weaker, do you think you're losing out to Telenor or Tele2 in Norway in those 2 months? Javier, we have seen the most aggressive offers in the market has been from the alternative player in the quarter, if you put it that way. Sure. Okay. Thank you. Your next question comes from the line of Alan Nichols. Please ask your question. Hi. Alan Nichols from Morningstar. I was wondering if you could give us an update on international data roaming and how your decision to cut rates in 2012 is affecting usage and revenues? Thank you. I want to take the data roaming. I don't know. We need to come back from that. I mean, we know that we have had a positive impact on usage the 1st year and into this year. We are continuing to work with the roaming agreements externally with all the countries as well, primarily where we have high usage from our countries. But not sure Yes. We'll go into specific details on the data side. Maybe we can take that afterwards. Yes. Your next question comes from the line of Thomas Heath. Please ask your question. Thank you. Two questions, if I may. Firstly, back to cost cuttings. You put quite a lot of nonrecurring items in EBITDA this quarter. Is part of this due to the reorganization into country structure? Or is part of this more traditional cost cuts? And basically, should we assume that there is a sequential drop in cost in the operations where we're seeing the non recurring charges. My second question on bucket plans in Sweden, if you could say roughly how much of your subscriber base is on bucket plans now? Thank you. Yes. We have if you take the Nordic picture on the data pricing, it's varying from 5% to 85% of the customer base being into the new buckets. And I would say Sweden is somewhere in the middle there. And €5,000,000 being Finland and €85,000,000 being Norway. On the cost recurring costs non recurring costs rather, we have this quarter a couple of items there. Some are related to the new operating model and related to Sweden. Some are more related to the new focus and governance and control that we have in Eurasia. I don't know if you want to add anything, Christian, to that. No, I can just say around SEK 300,000,000 this year is around the reorganization costs that we will continue also to try to find future measures on. And as long as we do that, we will have cost on non recurring personnel reductions. And the rest comes from Eurasia noncash items. And last year, it was actually primarily 100% on personnel related. Thank you. That's very clear. A quick follow-up, if I may. As a change in head office, will this have a material impact? Thank you. Change in head office costs? No, no. I was just thinking the big rental, you're having some longer term projects that move in site. Yes. When we move in, in a couple of years, we will decrease cost on the group from this. Okay. Thank you. Your next question comes from the line of Jack de Groelin. Please ask your question. I have three questions. The first one, could you comment why the division of others has a negative EBITDA this quarter? Second question regarding consolidation, what is the book value of your Spanish subsidiary in your books? And third question, could you give us a flavor of what could be the impact in terms of EBITDA of having normal roaming in Europe 2015? Thank you. Let me just take the first question then on the other operations where we have Seragul and Telefinance and also a head office and functions. We have quite large cost on the reorganization, both consulting and communication, etcetera, that we have taken in this quarter. And that is the major impact. You should not expect to have the same pace going forward. The other question was It was difficult to pick up your other questions. Could you please repeat that? Sorry. And the second question relates to the book value of your Spanish subsidiary. And third question relates to the impact of the EU roaming regulation on a full year basis? Thank you. I think on the EU regulation, I'm making reference to the expected Connect regulation. We don't comment on the book value of Spain, but the last question was around the roaming EU regulation, which we'll come back to. There was a similar question before on the roaming impact. We'll cover that later. Jesper, we'll get back to you. Your next question comes from the line of Ulrich Ratzl. Please ask your question. Thanks very much. I have maybe three questions. The first one is you talked about investing to save and you will tell us more at the Capital Markets Day and that sort of is looking forward to that. But I was wondering whether there is an element also maybe of incremental need for commercial investments in some of your assets. So if you look at your asset portfolio, do you feel there are assets where you really have in the past maybe underinvested on commercial investments and you feel that you would benefit in a return accretive way from really ramping up investments in a material way? That would be my first question. Second question is more clarification. You talked about some distortions in the divisional versus sort of central allocation of CapEx, I believe it was. I was wondering whether there's anything similar going on with regards to EBITDA in the quarter, I. E. Whether there are sort of costs in the overhead and the allocations that maybe would usually more logical belong into the countries or vice versa? And my last question is with regard to the margin guidance. I mean you essentially cut the revenue guidance and give the reason that it's lower handset sales, which obviously are very low margin, but you're maintaining the EBITDA margin guidance. I'm just wondering implicitly you're sort of cutting the margin expectations with this, right? And I was just wondering what would drive incremental margin pressure in the year that has caused this implicit cut? Thank you. Can I start with 2 questions, Johan Orr? Yes. Let me just answer the EBITDA question and head office and allocations. We have allocated the group technology and group commercial units in the right way, so that will not have a change over time. And the guidance questions, I just give a flavor that in the first half year, we have, as we said, an EBITDA margin that increased in local currency, but we have currency impact on that. And therefore, we have a stable margin for the first half year. Ulrik, I'm getting back to your first question on this investment topic. There are a couple of things we're doing. We're investing and I spoke about investors save, both short term obviously, but more importantly to transform some of our operations into a more agile lean operations, we need to take a longer term view and that's the invest to save. And we'll be more detailed on that. But we're also investing obviously to grow. And in some of the markets, you're right, there have been some underinvestments and we're making that right. We're upgrading a lot of our 4 gs and fiber investments across the footprint where we have it. But we're also more clear on our prioritization of growth, which comes under umbrella back to winning in some of our key markets. So you will see both and we will explain more in detail in the CMD. Great. That's very clear. Thank you. Right. Any further questions? Your next question comes from the line of Manish Beria. Please ask your question. Yeah. Hi, there. I have a question on basically if you can give a breakup more explicit breakup between B2B and B2C revenue just on the mobile side in Sweden and Finland. And can you comment, I mean, the B2B decline is more kind of a structural decline rather than just a cyclical one? And any update if you have seen any competition going up due to Alltel launch in JAKIS Pharm? Sorry, what was the last one? Competition in? Yes, competition in Kazakhstan because of Alltel launch of commercial services there. Right. So Kazakhstan, we have it's normal competition, I would say. What you have also from the 4th player there with 4 gs license is that they're going a little bit more nationwide ambition. So we'll see if they get any traction. We're working hard with the stakeholders in Kazakhstan to make sure we get 4 gs into all of the players actually. And I think it would be good for not just our customers, but also for Kazakhstan as a whole. On the structural question on B2B and Christian you can cover the details on the split. The structural reasons we have talked about and let me remind you there is a couple of things going on. First, you have a macro aspect in some of these markets where we have our enterprise very exposed to the economic environment. Secondly, you have a transition from old technologies into newer IP based technologies where we are taking our customers into the future platforms and it comes with a one off downgrading revenue so to say. And then you also have fierce competition in some of our core segments where we're choosing to defend share in the larger corporates, but also that comes normally with quite heavy price pressure. And then we're a bit under pressure in the SME segments where we are strengthening our propositions in Sweden and Finland mainly. And I can take a question on the B2B and B2C. On the total service revenues, is it rather fifty-fifty split between B2B and B2C? And within mobile, it's a little bit overweight on the B2C side, you can say, in both countries. And can you just give a split of revenue growth this quarter just on the mobile side in Sweden and Finland between B2B and B2C? On the mobile side. On the mobile side, yes. I mean, in Sweden, on the mobile side, we saw 3.5% approximately on the B2C side and -4% approximately on the B2B side. Your next question comes from the line of Maurice Patrick. Please ask your question. Hi, it's Maurice from Barclays. I know you'll talk more about the investment plan at the Capital Markets Day. But I remember sort of comments from previous management teams talking about some of the simplicity projects that have taken place or were due to take place inside Telusenera specifically around the Swedish markets and so the IT and billing systems. So can I have some sort of comments in terms of if you do see this as a very much a Nordic plan in terms of spending to save or it was a wider Telia Snera issue and opportunity? Thank you. Hi, Maurice. Yes, it's a wider issue than just Sweden. Actually we have legacy and complexity that we want to get rid of in many of our markets. And we need a bit of patience to get the full effect of that. So we'll break that down for you in more details as I said, in the CMD. Is it a multiyear investment of Ambridge sort of short sharp? And do you think? Yes. There are no easy quick wins when you are transforming legacy operations. We need a bit of patience to get the full effects, but we have urgency of getting them started. But we'll break it down for you, Maurice, when I see you in September. Great. Thank you so much indeed. All right. I think we have time for one final question. There are no further questions on the telephone lines. Please continue. Okay. Any questions on the floor? One over here in the front. I have some questions about Eurasia. The write downs there of €412,000,000 in the quarter. Do you see any more write downs going forward as an effect of your valuation of assets there? And also can you give us some more details about the write downs related to the fiber agreement in Uzbekistan? You want to take that, Christian? Yes. We have a focus on operational assets as we work both for better control and we also work with a new strategy. We have then a SEK 400,000,000 write down in this quarter. I think there's risks that we will see more, absolutely. And that's what we're also saying in our report. And it's not going to be any cash items, but it's going to be historical investments that need to be reviewed. Just to give you also a perspective, we have this generally in this industry when you have infrastructure. So typically, you would find it in the infrastructure of broadband in Sweden, etcetera, copper networks taken down that maybe not always have been written down to the full extent. But now we have a bigger and higher focus in Eurasia and therefore it will be bigger impact in the short term.