Okay. Welcome everyone to the presentation of Telia's second quarter result. I'm Jesper Vilgothead, Head of Investor Relations. With me today to present, I have our CEO, Per-Arne Blomquist, and also our CFO, Christian Luiga. After those presentations, we will have a Q&A session. By that, I would like to hand over to Per-Arne, please.
Thank you. Well, first of all, I would like to say that I'm satisfied with the quarter. It's a decent quarter. We have a stable underlying top-line development. We are taking care of the cost in a good way. We are executing on our cost efficiency program, but perhaps even most important, we have also addressed a couple of issues during this quarter that is important for the industry. First of all, new pricing models, more pricing, and where we try to monetize some data, and also the coverage issue around 4G and also fiber. I think that the high-speed internet access will become more and more important going forward, and we have tried to deal with that now in the first initial stage in this quarter.
Finally, last but not least, of course, the sustainability issues are important for us, and I will come back to that later on in my presentation. If I go back a year, I felt a bit uncomfortable with the development of both top-line and cost. We have had previously a good spread between the cost development and also the income development, and that was narrowed. That was the reason why we started to work with the cost efficiency program that was launched at the end of 2012. You can now see the effects of this, where we have costs coming down and also that our income is moving in the right direction, i.e., upwards. That has also meant that we have changed that negative trend that we had during 2012 with four consecutive quarters of decreased margins.
Now we have the first quarter and the second quarter, where you could see that a stable top-line and improved cost situation creates a better EBITDA margin. If you look at the 34.8%, that is, I would guess, among the best margins in Europe when it comes to the multi-market operator. Yes, we have certain domestic operators that might have higher, but this is, I think, among the best in Europe. It's a effort and achievement just to keep it at this level and try perhaps to increase it slightly. Just to keep it around 35% takes a certain effort. We have talked about our revenue side, and sometimes I feel that this industry is a bit too depressed about the outlook. Yes, I agree.
We have a voice that is going down with 11%, messaging is going down, but what we also can see here is that mobile data continues to grow. It's 60%, more than 60%, but you can ask yourself, in what industry do you have a volume development on 60%? I claim, I've claimed that for the last couple of quarters, that we are actually part of a growth industry, and it's up to us as an industrial player to make sure that we can monetize on that growth. That's our ambition and also our task to do. We have tried to do that in different ways. We have taken the first step as a major operator in Europe to look at this from a different way, i.e.
We have started with flat fees for voice and messaging, but the end user, the customer, will then pay for the data usage. We are pricing data in a slightly different way. We have had so far launches in three countries, Sweden, Denmark, and Norway. I will say that so far so good. I think we have been perhaps even more successful in Norway and Denmark than we have been in Sweden. Perhaps a more simplified offering addressed to one single user. Meanwhile, in Sweden, we have a more complicated offering, but which is good. It's what we call Dela, where you can add on more than one device. You can have up to seven different devices. You can have it as a family subscription if you want. A bit more complicated, but still, more than 20% of new sales today are in Dela.
We are moving not only the pricing issues, but also, we'll say, the industry towards pricing of data, and we would like to get away from unlimited offerings. This is not only a question about pricing. This is a question of changing the usage of data in a use industry that has been pretty conservative when it comes to price changes. This has been extremely important for us to start with. We will continue with this in as many countries as we can. Another part of the industry change is the question of coverage. I think that we have learned quite a lot during the last, I would say, year, perhaps years, how we're actually using our mobile phones. It's strange when I say that we actually have been a bit surprised of how dependent we are on our devices.
If we go back 10 years ago, we were satisfied to have a phone, and we could talk. A couple of years later on, we also put requirements on the quality and capacity. When the iPhone came 2008, we were satisfied to be able to download certain things. Now, five, six years later on, we would like to be online all the time, always online, which means that coverage start to be important. It's actually a fact, if you take Sweden, that people tend to leave Stockholm from time to time, and they would like to use the device also outside Stockholm. That is what we try to address here, where we say that our coverage, when it comes from a geographical perspective, should be 92%, close to whole Sweden. You should be able to use our devices in the whole part of Sweden.
This is not only a question for Sweden as such. We have been working with that in other countries as well. In Estonia today, we have the best national 4G coverage in Europe. We have also good coverage in Telia Sonera via our JV that we have there. We have launched 4G networks in all Nordic and Baltic countries. This will be an issue that we continue to work with, and we will make sure that we continue to roll out 4G also in Eurasia. We have up to table today, four out of seven countries with a 4G license. A bit concerned about Kazakhstan, where they have not yet got the 4G license. We are working with that right now as we speak. That would be important for us going forward, that also Kazakhstan will get this. In Spain, we'll launch 4G.
I think it will be this week. I think it was Thursday. We were first out to announce 4G in Spain, but then someone else put up an antenna a bit earlier than we. We're pretty early out anyway in Spain as well. 4G is a part of the high-speed internet access that we work with. Another part here is the fiber. I could see right now a big difference compared to just a couple of years ago, where we had a lot of discussions, why do we need the fiber if we have 4G? Today it's completely different. We have more demand than we can supply, which I think is one side good, one side bad. What is bad is that I would like to supply as much as I can quickly. We are working with that.
What is good with it is that the end user has understood that this is not a competition between fiber and 4G. It's a complement. You need both. One of the reasons for this is that we start to use our different devices and watch films, TV, et cetera, and you need the best possible capacity at every time. As an end user, I think that you are looking at a wireless solution. That's what you would like to have. Whether the carrier is a mobile network or a fixed network, you don't really care about. You would like to have the best possible quality around this. That's why we also continue to invest in this.
You can see here that we have been pretty successful when it comes to the TV offering in Sweden, more or less coming from zero in 2006, 2007, and now today we have more than 600,000 TV customers. This is just the beginning. We need to continue to invest in 4G, fiber, and also in different TV offerings. When we talk about the mobile data, this is not just a question for the Nordics and the Baltics. This is also important for Eurasia. Today, we have more than one-third of the growth is connected to data. We have a penetration of smartphones of 13%, and perhaps even more important, we have a usage-based pricing. I think that, or I'm convinced that the smartphone penetration will increase. Very much a question of how we could find cheap phones in certain countries, but that will come.
That, I'm convinced that will increase. We need to keep up the discipline on the usage-based pricing, that will help us to also continuously create growth in Eurasia. I see a good potential going forward also in Eurasia when it comes to growth, but not only from voice and increased penetration, but also from the data usage side. I will not talk so much about the efficiency measures. Christian Luiga will do that more in detail later on. I just would like to pinpoint here is that the program we have is pretty aggressive. We're talking about a net cost reduction of SEK 2 billion, which means that if we exclude Spain, we take down the cost at 7%. That includes the Nordic business, the Baltics, and Eurasia.
It is a pretty aggressive program, I'm proud of that we have delivered so far upon this. We will say, of course, that we will continue to deliver upon this program going forward. We need it because we need to protect our profitability. We have talked very much about sustainability, we continue to talk about this, but perhaps more important, we are working with these issues on a regular basis. This is not a quick fix, we can say, "Okay, now we have done the sustainability part." It doesn't work like that. This is a question of working with organization, training, education, and learn how things are working. We work with different areas like freedom of expression, privacy, anti-corruption, and also our supply chain management.
I think is most important right now is that we have launched our e-learning tool, where we talk about code of ethics and conduct. We are now starting with four countries, that will be rolled out in the whole group. As I said, this is not a quick fix. This is something that we have to work with all the time. We have now started with this, we are working now in a very structured way. To summarize the quarter, the cost savings and the stable top line had great improved margins. We are reshaping the market with our new pricing models, we continue to make investments in our high-speed internet access, which is necessary for the future. Given the financial result, we have also decided to keep the outlook for 2013 unchanged. Christian Luiga.
Thank you. I will continue to go into the numbers more in detail. Good morning, everyone. Christian Luiga, CFO. I will start with repeating what Per-Arne Blomquist said. This is a decent quarter with a slight increase in revenue. The EBITDA margin is up close to 1%, I think it's also good to look at the EBITDA in absolute numbers. If you look at the local organic growth, it goes up 3.3%. We increase also the underlying value for the shareholders, we end up at SEK 8.9 billion in the quarter. The earnings per share is down since last year. There's two obvious effects. One is the non-recurring restructuring program that we're running this year, the other part is the lower income from MegaFon, as we actually decreased our share. Free cash flow is good, up SEK 1.4 billion.
I will start in the same way I did last quarter with looking at the currency effects. They are significant, with about 4% on both revenue and the earnings. If we look at the main currencies, euro, Tenge, and Norwegian kroner, and look at how they have developed over the last year, going into the next quarter, assuming they stay the same as they are today, this effect will be much smaller in the second half. Net sales were down in the first quarter, now it's up. This comes from all the business areas. We have improvement both in Eurasia and broadband and in mobility. If we start then looking at mobility, not only for us, but for many operators in Europe right now, a theme is the interconnect rates that are going down. These have significant impact on the revenue side.
However, for us at least, it's not so significant on the earnings side. The growth we report in mobility is 1.8% minus, 3.4% is coming from the interconnect decreases. I think this is very important to look at this. If you look at Denmark and Estonia, for example, you have reported numbers, extreme declines, but if you look at the underlying business, it's much better. I think I would like to point out Denmark especially. In Denmark, we have had a gradual increase over the recent quarters, and this quarter we actually report a positive billed revenue growth.
The main effects I think we have, the main job that Søren have done down there is to work with new offerings, like Per-Arne have talked about, but also value-added services such as Spotify and HBO, and everything else that we actually sell quite a lot in Denmark via the mobile phone. If you look at broadband, it's better this quarter. It's still down 3.6%. The main impact quarter-over-quarter is both carrier, but also we talked about fiber in quarter one. Fiber has started up. We had a slow start with the cold winter, but we also had some digging stops from the Stockholm City because of all the other problems they have in Stockholm right now. That has been sold, and we are up running, and that has an impact also on the revenue growth.
We still have quite challenging situation in broadband on the B2B side, not the least in Sweden and Finland, and that should be noted. Eurasia, strong growth. You look at the picture and you see that Eurasia is above 90%, or Ucell is above 90%. In Ucell, we had the third operator going out of market last quarter, 3. That means from the next quarter it will have an impact on our growth. Ucell will not have 90% growth next quarter. Still, we have a solid growth within our biggest markets, Kcell, in Moldcell, and also in Azercell. If we clean the Azercell numbers from interconnect, we have a 6.3% growth in that unit as well.
Per-Arne talked about how important the data growth have been in Eurasia and in these markets as well, especially in Azerbaijan and in Kazakhstan, we have the biggest growth in value terms of the data growth. Before I go into the addressable cost base, I think we should take a look at the gross margin. It's always good to make sure we understand all the parameters of the income statement. In 2011, we talked a lot about the declining gross margin in this group. We have worked quite hard to stabilize the situation, and since 2012 we have a stable gross margin position around 63%. This is something we continue to work with and defend. One of our main focus area, the cost program of SEK 2 billion, starting in October 2012.
We aim to reduce the cost base with SEK 1 billion this year and SEK 1 billion next year net. We have so far decreased this year, only SEK 400 million and SEK 200 in quarter four. This program includes all types of costs, not only personnel and not only marketing. It's based very much on the way of working and the processes internally. We really try to base this on projects that we're running with new ways of working. The program includes a reduction of 1,800 people, and 1,060 have been notified so far this year. This means that we are planning for another program in the autumn. The cost so far for this first half year is SEK 700 million, and that has then impacted the net income and the earnings per share as I talked about.
The margin increase of 1% on the group level, comes from mobility in Eurasia mainly, this is part of our cost program. We have tried to rebalance the cost base in all markets and we have done that quite successfully. In mobility Eurasia, we can see a faster decline, and they are easier in handling the cost structure. In broadband, you can still see the effect starting in quarter three, and this quarter, it's encouraging to see that all three business areas are reporting a negative OpEx. We have about 1.2% in Eurasia, and we have 2.3% in broadband. The balance is getting into all business areas right now. The stronger margins coming from mobility in Eurasia is encouraging and they continue. In Eurasia, we have a one-time cost related to court case in Azerbaijan of around SEK 103 million.
In mobility, we have a positive effect in Finland of about SEK 120. The margin still increases in mobility if you take away this effect, and the margin in Eurasia is up to 53.8% if you also clean for this effect. On the group level, these match with all the other non-recurring we have. On group level, we have no impact from one-timers. CapEx to sales ratio. The first thing I want to repeat is that we have been working much more with steering and control. I know you have heard in the past about autopilot in this area, and we get into a position where we are much better in handling the planning of the CapEx. This also has an effect on the first quarter.
When we decided during this half year to shift towards another type of 4G setup, which Per-Arne have talked about, we've actually been able to stop things, replan, and then we will start a rollout according to the new plan. That means that certain things that were supposed to be done have not been done in the rollout. Now when we start quarter three and quarter four, we will have a faster speed and a higher focus on spending the money on the right thing. The same with the broadband side. We have an effect from the fiber and the focus now for the second half, and we still keep our 14% guidance, will be to actually focus on the high-speed internet access-related CapEx. Free cash flow up SEK 1.4 billion. The main parts here is CapEx, which I just talked about, and working capital.
Working capital effects in this quarter is mainly related to equipment. Equipment sales ties less working capital, both in accounts receivable terms, but also in inventory. We have actually decreased our inventory on handsets, and this is something we're working with. This is part of the new and better ways of working. Also we can see a slight increase in the days of purchasing days. We pay our vendors a little bit slower, which is good. The net debt has been increasing, and the main reason is of course the SEK 12.3 billion that we shared with our shareholders in a dividend in April. We also have a effect of currency effects.
Between the end of first quarter and the end of the second quarter, we have a currency impact on the euro, and we have a lot of loans in Europe that impact net debt, but does not affect the income statement. The debt value goes up, and that is around SEK 2.8 billion. If we look at the net debt EBITDA ratio, it's up at 185, and that of course includes this currency effect. It's within the range of 1.5-2.0, in the higher part of that. We have just received SEK 2 billion dividend from MegaFon this week.
We are expecting a repayment of the AF Telecoms loan also within a month, around the same value, SEK 2 billion. Finally, finalizing with the repeating again, a decent quarter with a flat net sales outlook that we reiterate and the increase slightly in EBITDA margin and CapEx focused on high-speed internet, reaching around 14%. Thank you.
Thank you, Christian and Per-Arne. It's time for some questions, I think we will start here with the audience. Please use the mic. Go ahead.
Yes, good morning. Stefan Gauffin, Nordea. I have a question around Spain, where we have seen over the last six to nine months that MVNOs has taken some market share. Looking at regulators' numbers for April and May, Yoigo should have reported slight negative subscriber intake. Now you reported 92,000 net adds for Q2. Does this reflect that there is a difference in the reporting to the regulator, or have you improved performance significantly in June?
Well, I must say, I don't really know whether we have a different reporting to the regulator. I see what the numbers that we are getting, they are reported in the same way as they have done before. We have not changed the reporting.
We have increased the sales in May and June. You remember we talked about the handset sales we kept back in the first quarter, we released actually and started to work better on that in May and June deliberately to manage cash flow and profit. I don't know if it still answers the question actually, because I don't know either if we have differences in the reporting.
Okay.
Okay, next question, please.
Yes, good morning. I have a question, actually not so much about the quarter, but about the outlook for CapEx. When Eurasia now grows, but not at the same rate as we have seen historically, do you expect the CapEx to sales ratio to come down in Eurasia? I mean, looking, say, one or one and a half year ahead from now to lower numbers. Will you spend that money somewhere else in the group so that you will maintain around 14%?
Well, first of all, yes, we will go down in Eurasia because we do not have the same rollout plans as we have had before. They are getting into a more mature market, I would say, circa right now. So they should be below 20%. I think it's after that definable. If we have good investment cases, of course, we are prepared to invest in other areas. Basically, I've said for a long time, we should be somewhere between 10%-15%. If we do not find any new cases of investment, we will take it down, but we'll be in the range, which I know is a very wide range. We talk about 10%-15%. We'll be in between there.
Lena Österberg, Carnegie. You wrote in the report that in Denmark with your network cooperation, there may be some more costs for dismantling networks. Are they already in this quarter because you had high margins, or will they come as additional costs, so you should expect lower margins forward?
Okay, we had some costs already in quarter 2, actually. We have started that dismantling. It takes time. Per-Arne has said, I think, before that we will not see the impact really from this network sharing until a year or two going forward, and this is part of that plan. In the same time, we build a very good network together and less CapEx. It takes some costs to take away the old unusable structure.
Will the cost accelerate, or you will maintain it roughly this level?
It will go up and down in the quarters a little bit. It shouldn't be a significant impact on the business.
What we have said is that we will not see cost reduction on the OpEx side, let's say until a year and a half from now, because we need to dismantle.
Maybe a question on Telecel as well, because you issued a press release now when the London Privy Council ruling came. You said that you hope that they would honor their obligations to repay your SEK 932 million plus interest.
What are your hopes of receiving that money, and what steps are you taking to ensure that you will get the money?
We are working with this on a regular basis, and we have tried to make sure that they can't pledge their shares for funding, so that's what we have done. Otherwise, we will see what happens. We have to wait another, I think, could be close to 60 days to see if they are then prepared to buy the shares. They have got the price of SEK 1.5 billion, and we will see what happens. We will try to take any measures to make sure that we get our money back as well.
Okay, we can take one more question here. Yeah.
Thank you. Thomas Heath with Handelsbanken. A few questions, if I may. Firstly, on Norway, a challenging quarter as it looks. Could you say a little bit maybe about whether this is competitive pressures, so losing business contracts to others, or if it's a general market slowdown that you're seeing? A little bit on Norway, if you could. Secondly, on the second half of this year
Your peer, TDC, talks quite a lot about the impact of the EU data roaming cap, saying gross profit will fall about 150 million DKK-200 million DKK. I'm just wondering if you have any assessment, roughly, on how much this will cost, which starts from the 1st of July, data roaming. That's it. Thanks.
Let's start with the data roaming. I think that we have been very early out. If you remember, I think it was one and a half years ago where we decreased the prices. I think that we have taken the major hit already. I think it's good that we take down the prices, because there's no connection between the service and the price that we had before. As I said, it's interesting to have 90% margin on the business, but if you still have zero business, it's still zero. What we did was to take down the prices between 50%-70%, then increase the volumes instead. Our customers start to use the devices also when they're leaving Sweden. For me, I don't see that this will affect our results in a major way. We have taken the hit already.
It was not a very big hit to take because we didn't have any roaming. The first question was about the-
Norway.
Norway, yeah.
Well, in Norway, we have impact both from Tele2, as you know. We have the wholesale agreement. In Norway, even though we have a successful implementation of the new offerings, we also see that it's hard as a number 2, number 3 player in that market to be in the B2B side. The B2B side is where we also see some challenges in Norway. Otherwise, the big part is the wholesale agreement.
Thank you. Last, the third question, if I may, while I got the mic here. On Kazakhstan, on licensing, do you know what the roadmap is for 4G, or is it a sort of regulatory uncertainty situation that you're facing there?
Yeah, partly it is. I've met the prime minister and also the president and talked about that. We had a council for foreign investors there a couple of months ago where we actually said that we would like to have the 4G license. Far, we haven't got it. Kazakhtelecom, the fixed business, has got the license, and we are fighting for this right now. I'm concerned about this, because we should, as the biggest mobile operator, have a 4G license to be able to develop this in Kazakhstan. It's a work in progress.
Good. I think it's time to open up for some questions from the conference call. Operator, could you please open the conference?
Yes. Question from Peter Nielsen.
Thank you very much. A couple of questions, please. Firstly, Per-Arne, your comments about the success you've achieved from your new mobile pricing plans in the Nordic markets, obviously in contrast to somewhat more downbeat signals and comments you've made over the past 12-18 months, which we heard from yourself and Lars previously. Is it an indication that you believe that you've now come out on the other side of this repricing transition in terms of mobile data pricing, et cetera, and that we now can start to look forward to perhaps positive underlying service revenue growth going forward in these markets? How significant should we interpret your comments on this? Secondly, if I may ask more specifically on Denmark, which you sort of underlie, you're seeing finally some positive developments here now.
Is it your view that it's the whole market in Denmark that is sort of stabilizing as a consequence of the dramatic decreases in pricing we've seen over the past years? How significant is this? Finally, may I just ask, you've seen reported very good success in terms of margins in your mobile business over the past quarters. Obviously in Sweden, I mean. Sweden fixed line margins are going slightly the other way. Is that something you expect and believe can be rectified by the cost reduction program you've elaborated upon here a little earlier? Many thanks.
Okay. Let's start with the last question. Yes, I strongly believe that we will see improved margins in broadband as long as we can keep the control of the top line. The efficiency measurements that we've been working with seem to be able to yield results now in Q3 and Q4 for broadband. We saw the first sign of that now in Q2. That should definitely be an effect going forward, and hopefully then also improved margins. If we start with the first question, if we are a bit more upbeat, yes, I am. It's still so that we are having, as I said, 60% growth on the mobile data side. I think the reason for me and Lars to be a bit depressed a while was that we could see that our ability to capture the growth went down.
We were at a factor of 0.4, 0.5, suddenly it was down to 0.2. We said, "Okay, now we have to do something." I think we have reformed, you could say, the buckets, and also we have implemented a new charging structure, which I think is good. That's why I'm saying that, I can't be depressed because if you have 60% volume increases, it's up to us to make sure that we can charge for this, and we have started to do that. If you take both Norway and Denmark, we have seen that the ones that have changed into the new offerings, they have a higher ARPA than before. The impact might not be that evident in this quarter, but it will come over time.
I think that what we have done here, we are actually changed the structure of this, and we are moving into the right direction. That's why I'm a bit more upbeat today. To talk about Denmark as well.
In Denmark, actually in the Nordic area in total this quarter, the same as quarter one, it's been quite stable market position. I don't dare to say if there is the same effect in the other players as we have at this time. I go back and say what I said. We have worked quite hard, and Søren down in Denmark worked quite hard for one year, both with the offering side and also with value-added services as a very important part of the sales. That has given impact on our numbers, I think that's what we can say right now.
I guess we are doing a bit better than the others.
Yeah
I guess get back on this later on when they report the results. I think they have done a good job, by the way, in Denmark.
No, I fully agree.
Thank you.
Thank you. Your next question from Laurie Fitzjohn-Sykes.
Thank you. Two questions, if I may. Given the progress on the network JV in Denmark, is it still possible for you to participate in consolidation if the opportunity arose? On Turkcell, if Turkcell does gain control as a likely outcome, how would this change how you view the asset? Thank you.
Well, to start with the consolidation issue, I do not think that is connected to the JVA as such. It's more a regulatory issue. So far I have unfortunately not seen a tendency that the regulator has been open for in market consolidation. Something has to change in that sense. I know that Neelie Kroes has been very positive to investment, et cetera, when it comes to high-speed internet, but Joaquín Almunia has been more restrictive when it comes to the regulatory side, and I think they need to open up. As I said, if you take the Nordic area, we have, I think, what could it be? 13, 14 networks for 27 million people. It doesn't really make sense.
Which means that smaller countries like Sweden, Denmark, Norway, and Finland, where we have between 5 to 9 million people living there, we can't live with four networks. That won't work over time.
The second question was on Turkcell.
Turkcell, yeah.
Yeah.
What I think is positive with this is finally that we will hopefully get a clearance on who's owing the shares, and that means that we can start to discuss with the counterparties there. I think that will help. What it mean in practice, that remains to be seen, but at least this blockage that we have had has done everything more or less impossible to move in Turkey. Now when this is cleared, I'm a bit more positive that we could move forward in Turkey. Let's see in six to eight.
Great. Thank you.
Right. Next question, please.
Thank you. Next question, Nick Lyall.
Yeah, morning. It's Nick Lyall from UBS. Could I ask on the Swedish ARPU, the Swedish ARPU trends have improved this quarter, but could you discuss the effect of the new packages on the ARPU number? Have you seen some dilution within that number and actually the ARPUs are better than they might seem from the headline numbers? Then secondly, back on Turkcell as well. Could you just mention as well what actions you're taking against the CMB, if any, about them maybe putting 2 more members onto the board? Could you discuss the sort of practical things that you're doing to maybe stop that happening and what that might mean for the outlook for Turkcell again, please?
Well, I think that this has become a political issue, and I think we are trying to work on the political arena as well to convince the Turks that they should not install new members on board level. Whether we will be successful in short-term perspective remains to be seen. I can't get into the details, but we're working pretty actively with that right now. Back. We had the ARPU in Sweden.
On the ARPU side, I wouldn't say that it's not too much to relate to the new offerings, but we see some of this pressure on the voice side and messaging side actually, and also higher data growth. It's not really only related to the new offerings.
I think that that's far too early to say.
Yeah
It will not have that big impact yet. It will take time.
Okay. Thanks very much.
Thank you. Next question, Ulrich Rathe.
Thank you very much. I have two questions, please. The first one regards your new CEO, your incoming CEO. I think the message was that he is available, quote, to the company. Was just wondering, what does this mean in practice? Is he sort of sitting in on meetings, or is he actively debating it at this point already with you, Per, or is he sort of just scurrying around for information and trying to get his head around the operation? Just interested what this actually means and whether he is already influencing decisions. The second question is on Uzbekistan and its sort of role to the group at large. If I understand this correctly, without Uzbekistan, the group revenues would be fairly firmly in organic revenue decline at this point. How do you view this?
Would you be sort of okay with the overall group revenues declining, or do you feel this would then be a sort of a line that cannot be crossed and would require incremental investments to get the growth restarted again? As you mentioned yourself, Uzbekistan might start to sort of annualize the effects from the third quarter onwards. Specifically in Uzbekistan, I was wondering whether you have any signs of the authorities trying to reestablish a third operator in the market. Thank you.
To start with the last question, no, we don't know anything about a new third operator. Back to the second question, yes, I think what I'm trying to say is that whether we are satisfied with the underlying growth or tendencies in the company, what's important for us is to see that the billed revenue increases. That's where we have the biggest margins, and that is actually happening in quite a lot of markets. Once again, remember that we have been severely hit by the interconnect. What we are trying to do is then really to work with the underlying business as such, and hopefully that could then compensate if we are coming a bit short on growth in Uzbekistan. I think the most important thing for us is to work with underlying business, and that's why we talk so much about the billed revenue.
You talked about Johan. Yes, he's here from time to time, and we meet, and we're discussing issues going forward. Remember, he has been here now for 14 days, and we try to help him to understand what is going on in our business. He will start to work full steam the 1st of September. Of course, we have a dialogue about different things. There's nothing strange with that. I'm very happy to have him here, actually. Thank you very much. All right. Please go on with the next question.
Thank you. Your next question is Barry Zeitoune.
Hi. I've just got two questions, please. The first is just a bit more detail on your Swedish broadband margins. We've seen pretty good broadband ARPU growth this quarter, versus recent quarters. We've seen strong fiber uptake, we've seen good TV growth, and at the same time, we've seen quite a step down in margins in the Swedish broadband business from about 37% to 35%. I was hoping just to get a bit more detail of what is really driving that margin pressure. Really what your long-term view is on margins for the Swedish broadband business. Do you expect them to stay flattish at the 35% level or continue declining? I know you're going to get some benefit from cost cuts, if you can give more color on that would be helpful.
My second question is regarding Turkcell, and the situation with CMB and with potentially greater government influence. You've said that you're against that. Why are you against the government having more influence in the running of Turkcell? Do you see the possibility that the government may even look to take an active stake in Turkcell? Is it possible for Çukurova to potentially sell its right to buy the stake in Turkcell to the government? Could you even see Altimo potentially as a seller to the government? If you could give us your opinions on that would be helpful. Thank you.
If I start with Turkey, well, I think the problem is that we are owing 38% of the company, and we have just one board seat, and it doesn't reflect the ownership that we have. That's my problem. I would like to see that changed. I don't think it's good for a government to have their board members onto our board and trying to steer a business without having the knowledge about the business. That's number one. What will happen with the shares of Çukurova? It's up to anyone to buy them from us. That's nothing that we can steer. We were happy with any owner who we could cooperate with going forward. That will remain to be seen.
The most important thing is that we would like to have a board seat that reflects our ownership in the company, which it doesn't do right now.
Sorry, can I just follow up on that? If you were unable to get a board structure that reflected your ownership, and if it was pretty clear that that wasn't going to change, would you consider your ownership in the company?
I'm working off the hypothesis that we will change this in a positive way, and I could even think of increasing the ownership in Turkcell, given that.
Okay. Thank you.
We had a question on the broadband margin. I don't know who. Well, I agree, we have some positive signs in the broadband Sweden business. However, if you have a decline in revenue that is the same or higher than the decline right now in addressable cost base, you will have a decrease in margins, and that's the main reason overall. We are working, and that's where you see the signals to both increase the revenue, but also to continue to work on the cost base. It's also very clear that we have lower margins on the new services right now than we have on the older, more mature products. That of course will hit, and that's why it's so important for us to improve the cost structure also in broadband going forward. We don't give any guidance on margins. No. All right.
Should we take the next one?
On the telephone, you have Terence Tsui.
Morning, everyone. Thanks for taking my question. I've got one question on Sweden Mobile, please. Obviously, the family plan is going very well. I just wondered at the low end, have you seen any impact from the launch of 3's Hallon brand for SIM-only? For instance, did the intake of your Halebop brand change much during the quarter? Just a bit more color on that would be much appreciated. Thank you.
Yeah. I think I need to come back on the Halebop number. I don't have that on top of my head. I will come back to you on that one, Terence.
Thanks.
Thank you. Next question, Jacob of Bluestem.
Hi there. Three questions, please. Firstly, on the improvement in Denmark, how much of the improvement in growth, you also mentioned returning to positive billed revenue growth. How much of that improvement is easy comps, then how much is an actual improvement in the sort of underlying performance of the business? Secondly, in Finland, you were previously quite aggressive on pricing, so from October last year onwards, you seem to become a bit less aggressive with a lower level of promotions this quarter. At the same time, also very strong contract net adds. Can you maybe talk a little bit about how you see that market? Is there generally an attempt to be less aggressive and to drive a little bit of market repair? Also, can you maybe explain a little bit why you had such strong contract net adds?
Finally, on working capital. Historically, you've had negative working capital movements, about SEK 1.5 billion each year. It looks like you've had very strong working capital this quarter. Is that sustainable or is that something that will reverse out in the next couple of quarters? Thanks.
If I start with Denmark, you can take the other two questions. Finland, sorry. I think that if you look at Finland, we introduced a new offering called Sopiva. It was in August or September last year, which was good in the sense that we were the only ones that actually could offer roaming for both the Nordics and the Baltics. That gave this offer a sort of an extra kick-up. I think the problem we had was the pricing as such. It was perhaps a bit too aggressively priced, and we have now adjusted that. That's why you see less of aggressive pricing. Still, I think that the Sopiva offering as such is very attractive for the market.
I hope also that Finland, which has been a very tough market from a competition perspective on price, will calm down, and we will try to contribute from our perspective in that sense. I think what we can do is then to create offerings like Sopiva, where we're offering something else than just a price issue, that we could offer something that the others can't compete with.
On Denmark, just to try to give you an answer. We have a 3% increase in billed revenue in Denmark, and we had a negative 3% decrease in quarter one. The rest is mainly handsets. The difference you saw from the chart I showed earlier, you should be able to calculate from that. I'm not really sure what you were asking actually on Denmark, other than that. You asked how much was underlying business contributing to the growth, but billed revenue is the main underlying business. That's my answer.
Maybe just to clarify my question on Denmark. You've obviously had a series of price decreases in previous years, and my question is the improvement that you've had, going from minus 3 to plus 3, is that just driven by annualizing previous years' price cuts, or is it actually being driven by an actual improvement in the business?
We see, probably a little bit of easier comparisons perhaps for last year, but we definitely see an improvement as well, if you look at the ARPU trend in the business.
If you look at the ARPU trends sequentially, I think they have stabilized now during the last two big quarters.
They have stabilized. We have seen a gradual improvement. That should give you the right signal. The working capital, of course, we are working hard on that matter. Quarter two is typically a positive quarter for TeliaSonera. We should remember that, but this is even better than it usually is. We are trying to actually stop that SEK 1 billion a year negative effect. I don't want to give a guidance right now on how successful we'll be this year. We are doing our best, of course, as a company to manage that.
That's very helpful. Thank you.
Next question, Dominick Karmann.
Oh, yeah. Thank you. Two questions, if I may. One on fiber pricing. Can you just remind me if at all you have any usage tiers in place in fixed similar to mobile? If not, do you have any plans to introduce them? More broadly, an update on when you think that uptake on fiber can compensate for the decline in the more traditional business lines. A follow-up on consolidation in Denmark. Do I understand you correctly that you think you as an industry can overcome the prisoner's dilemma in things like unwinding the joint venture if and when regulation would make consolidation easier? Do you think the upside for the industry is just too big to ignore if it becomes available? Thank you.
Well, I think that might be a consequence we need to discuss, the most important question is to make the market consolidation to happen. Let's start with that, we are not there yet. I think let's solve that problem first, then we'll see what it means for the different countries. What was the first?
The first question was about usage.
Volume-based pricing on the fiber side.
What we have today is that we have a front fee for installing it, when we talk about the single building units, and then you pay for the access for fiber and also the different services that you have. We might change this going forward, but we could look at volumes and also different other services. That I would say is work in progress right now.
We had one question on when the uptake in fiber and broadband could compensate for the decline in traditional fixed.
Well, let's see. We had discussed that, but I think it will take a while. Malin Frenning, when we had the Capital Markets Day, was it a year ago, a year and a half, she said that it will happen during the end of 2014, and let's see if she was right or not. Let's see in a year's time.
Thank you. Very helpful.
All right.
Thank you.
Do we have any more questions on the conference call?
On the call, you have Seshu Ramachary.
Hey, good morning. I was just curious as to why do you think the decline in voice and messaging revenue seems to be getting a little bit less severe, where we're down single digits in messaging. Secondly, of the 22% growth you're seeing in mobile data revenues, how would you break that down into penetration growth of data users and same user revenue growth? Thank you.
Well, I think that the decline in both voice and messaging is very similar to the previous quarter. We're talking about 6% instead of seven, also was it five instead of six. It's more or less the same. That has not really changed. When it comes to how we break up what is penetration and what is usage, I don't have that numbers actually.
No. What we see is when you shift from 3G to 4G, there is a big increase in volumes in general.
Yeah.
We don't have that split right now.
You said big increase in volumes, but is there a big increase in revenues when you shift from 3G to 4G?
Depends how you price it.
Exactly. I think we made a mistake with the pricing before. We tried to take a higher price for 4G. Now I think we have more sort of a similar price to 3G. I don't think that the price will sort of shift the revenue. It will be the usage much more than pricing.
Users and usage.
Okay. Thank you.
Okay. Thank you. Do we have any more?
No further questions on the telephone.