Earnings Call: Q4 2012

Jan 31, 2013

Good morning, and welcome to this press conference for our Full Year Results for 2012. There's quite a lot of interest in the room. So if I could ask everybody to be seated before we start because we also have a webcasted conference. I know that there are many questions, and some of them may be related to our investment in Uzbekistan. But as you know, the report on that will be made public tomorrow. So we will devote the time here today to deal with our full year results. With that, I'd like to hand over to Lars Neubei to give some introductory words and then Andreas Ekstrom, our Head of IR will be moderating the Q and A session afterwards. Thank you. Good morning Welcome. I think we had a decent Q4. The whole year turned out also to be pretty good nearly SEK 105,000,000,000 in revenue. We actually grew the revenue 1.2 percent in local currencies. The EBITDA margin pressure is a sign of the industry. We feel the same pressure as everybody else. And therefore, the margin percentage went down at 1% roughly. Still, we have one of the highest EBITDA margins in the industry for a comparable company. We had a fantastic cash flow not only driven by the Megaphone deal. The earnings per share actually is the highest 2nd highest actually since the merger between Telia and Samira. It's driven very much by lower minority share. But we increase in Kazakhstan, of course, we pay less to the other asset owners and that helps our EPS. And also, of course, the lower taxes helped to drive this DKK4.59. This is something we have managed pretty well, I believe, over the years. The relationship between what happens with the revenue goes up, goes down to manage the OpEx in a similar way. So if the revenue growth comes down, then the OpEx has to come down. I'm pretty proud of this. Yes, there is a negative trend in the EBITDA margin. I think it's an industry trend, but it's also driven by the fact that we sell more equipment. We sell more phones and particularly more expensive phones than before. We also have and this is I'll come back to it in a minute. We have lower billed revenues, which is really the core of our business. Cost structure. Again, I think this is that we need to continue to work on our cost structure. Again, I think this is an industry trend not only for Telia Samira. And our ambition is to fundamentally change by simplifying and focusing the product portfolio, how we manage our networks, whether they're the fixed networks or the mobile networks. Our ambition is to say the $2,000,000,000 we talked about in the last quarter. We talked about 2,000 people at that time. We still have a 2,000 people net number ambition. We did manage to reduce our headcount during last year by 300 people. And we have 1800 people planned for the Nordic and the Baltics this year. The net savings will only be €1500,000,000 because we also plan to hire 300 people because we have a competence shift. The whole industry has a competence shift from analog just to digital technology. And we need to have more people with that knowledge. And for Sweden, that means that the gross number we plan for this year is 900 and the net number is 700 because we intend to hire 200 people with a new competence in Sweden. There is significant costs involved. I call them investments to do these changes SEK 1,700,000,000 but it's absolutely necessary. Yes, we did see in the Q4 a bit uptick on the build revenue, which is encouraging. But of course, for the full year, the build revenue has come down. And on the right hand side, you see the challenge of the telecom industry. On the right hand side, you see the summary of the challenge of the industry. Our traditional business, the business we've had for 150 years called voice is coming down by 10% in revenue. You see the volume is actually up 1%, but the price erosion is such that the revenue comes down by 10%. That is by far the biggest business that we have and the same thing with messaging. And then you have data. Gross 21% in revenue, which is good, cannot totally compensate the downturn in voice and messaging, but look also at the traffic volume of 79%. And this is of course the whole issue about the business model. Can we capture more of the 71% 79% than only 21% because the billed revenues when you add it all up is minus 2%. This is the issue for the telecom industry globally. I have said many times that the future of telecommunication is not only the mobile network. I believe and I still believe and now I think most people are convinced that the fixed network will be so important in the future because it's the most efficient way to provide telecommunication services to fixed locations like our homes or our offices, of course, not based on copper, but based on fiber. So when we increase the number of fiber customers and TV customers, we talk about triple play. That's a very good sign for the future of TeliaSonera. Yes, Eurasia remains our growth engine. We had a growth of 16% in the quarter, 14% for the full year. And I'd like to point out that we have since 2007, we have nearly quadrupled the business in Eurasia. And the 3 last markets we entered Uzbekistan, Tajikistan in 2007 and Nepal in 2008 stands now for half of the business in Eurasia. And Eurasia has a very healthy EBITDA margin of north of 50%. The year also included resolution finally of our Russian situation. I think we invested SEK 1,500,000,000 totally in megaphone and we realized the value of something north of SEK 55,000,000,000 That's a fantastic investment. However, we have never seen any cash until last year. I was very happy with the deal we did in the beginning of 2012 where we sorted out the ownership. We have a minority stake in the end and Mr. Usmanov has the majority stake. The deal with Megaphone was really several steps. The first step was that we sold shares. We went down from 43.81%. We sold our shares in TCI, totally illiquid shares, couldn't be sold unless we sold it to Usmanov. We managed to do that and then we did the IPO, which IPO is very good for the governance of Megaphone. To be listed on the London Stock Exchange is good for the governance. And we have still 25 plus percent ownership in Megaphone. In Queso, we went the other way. In k cell, like all other entities, we would like to own more than we did. If you remember, for years, we owned 51% via Fintool. So in actual fact TeliaSonera only owned 37.9%. So we had 100% of the work. So we said earlier, we've done it in our other markets too, we would like to own more. And we managed to convince the authorities in Kazakhstan to sell their 49% stake in KSL to us with a promise and agreement with them that we would do an IPO and have KSL listed in London. And then of course we sold shares for that IPO. And we now have 60 well 62 percent ownership instead of less than 40% plus that Kcell is now listed in London, which is also good for the governance of Kcell. So I'm very pleased with these transaction. Obviously, they have heavily influenced the cash generation in the company during last year. Still, the Board agreed or decided to maintain the dividend of SEK 2.85. I know there were some expectations maybe you wanted more, not you but the shareholders. I want to remind you that at DKK 2.85 you have a yield of more than 6%. That's pretty high compared to most other companies. And I also like to point out that some operators during last year in Continental Europe particularly have reduced the dividend or even eliminated the dividend. I feel comfortable with this dividend. A couple of words about sustainability. We talked about the Danish Institute and the Human Rights Impact Assessment. We have now finished the collection of data. So now the analysis is being done. And out of the analysis comes the action plan. So I think we are making progress on this one. The Industry Dialogue, the Board approved actually to sign the Industry Dialogue recently. And we expect that the other 10 companies will sign together with us very soon hopefully. And we have been pretty active in defining what these principles are, which I am pleased with. We are also, since the fall of last year, strengthening our anti corruption processes and particularly the supply chain. And Transparency International is an organization we work with on this issue. The outlook, I agree, is a bit cautious. Flat sales, EBITDA margin will go up slightly because of the cost savings and the CapEx to sales of about 14%. I agree it's a bit cautious. I think it's time to be a bit cautious to have a strong balance sheet and a cautious outlook. I feel comfortable with this. Thank you. So let's then look at the Q4 and also parts of our balance sheet that has sort of changed slightly dramatically during the Q4. When I look at the Q4 today, I feel very pleased with the outcome. I was a bit more worried at the beginning of the quarter when I looked at the numbers. But we actually ended up with an increase of our net sales with 1.8%. We have a decent margin on the EBITDA level, €33,200,000,000 We are increasing our earnings per share with 35% and the cash flow is up with close to SEK 3,000,000,000 If we then look at the net sales growth that ended for the whole year at EUR 1,200,000,000, it has been a very sort of uneven distribution during the year. We started the year with a growth of close to 3%. And at that point time, I think that Anders thought we were a bit too pessimistic about our outlook. But I think we're right after the 2nd and third quarter where we had flattish growth. And at the end of the year, we came up with a 1.8%. What has actually happened in the Q4 is that we have seen positive trends in Eurasia and also within Mobility. Eurasia have growth in all 7 entities. When it comes to Mobility, we see a good growth in Spain and Sweden. And we remain more or less at the same negative trends within the broadband that we have seen during the last 2, 3 quarters. If we then take Sweden, which has had, I would say, a tremendous development over the last, I would say, 24 quarters, we had 22 consecutive 3 quarters of growth. We then had a flattish quarter and now we're back in the growth mode again. In this Q4, they actually added on 90,000 customers. They have had a growth in build revenue with 4%. And behind that, you have a decline of voice 4%, messaging up at 5%, data up at 19% and services up at 72%. At the same time, our equipment sales went up with 20%, close to EUR 960,000,000 in the quarter. And what is interesting today is that 15% of the phones sold are 4 gs compatible. So a lot of 4 gs phones are sold right now. We talked about broadband, and you could say that slightly a disappointment when it comes to the top line as we haven't sort of seen improvement. The margin has also declined both in Finland and Sweden, and it is connected to gross margin compression. But also that we have been a bit slow in taking out cost that we should have done during the year. We are now working with this and trying to increase the pace. We have also invested for the future. And as Lars mentioned here, we have close to 650,000 fiber customers in the whole area of broadband. We have close to 600,000 customers in IPTV. And this is the base, I will say, for the future growth that will come, hopefully, during 2014. Eurasia, I mentioned that they were growing in all countries. We have, except, 3 clusters. We have 1 cluster with Molson, Geocel cases and T cell where they are growing with 3% to 4%. We have Acelscel in Azerbaijan with 8% and then N Cell and use growing with 41.4 yen use of close to 77%. If we then look at Kaysil that actually was listed and have been sort of under pressure when it comes to the especially the price side, ARPU is going down with roughly 17% in the quarter. At the same time, they are adding on 777,000 subscribers. So they have today more than 13,000,000 subscribers in Kazakhstan. When we go to OSPECT, we added on quite a lot of subscribers in the Q3, more or less flattish in the Q4. And we can now see sort of the volume that we increased on the subscriber base now yielding also on the turnover side. And we are more than 9,000,000 subscribers also on spec, which is also the case for Ncell where we have 9,000,000 subscribers and EBITDA margin over roughly 63%, 64%. So, so far, I will say that the Nepal investment has been a fantastic investment. Lars mentioned that gross margin is still under pressure, and that's very, very true. We have talked about the product mix shift before, which is still evident when it comes to broadband, higher connection cost in especially Eurasia, equipment sales, but also now that build revenue is going down, which is our high margin business actually impacting the gross margin. And we are working with this now going forward to make sure that we could stabilize the gross margin also to improve the result. Given that we have had a top line under pressure compression on the gross margin, we have worked with our rest of the cost base in a pretty good way during the last year years. But still, it's not enough given the trend to see. And that's why we have initiated a EUR 2,000,000,000 cost reduction program. And the ambition is that if we don't exclude Spain, which has sort of another patent than the other companies, We started off the Q3 with a cost base of SEK 27,300,000,000. We have taken out SEK 200,000,000 now in the Q4 and we will go down until the end of 2014 down to EUR 35,300,000,000. Percent. We do this because as Lars said that we would like to put our margin down. I would just like to remind you that this is not a walk in the park. It's a lot of people that we should take out. We should make sure that we continue to improve our processes. But we need to do this just to protect our margin. We have said that we will probably slightly increase this, but it will be a tough call. So it will take time and a lot of effort to just protect the margins we have today. Turning into the associates. They have had a pretty solid quarter. Now Megaphone has a listed count and has also one quarter delayed reporting. Underlying business in both Turkcell and Megaphone is improving. When you look at the Megaphone numbers, you see it's downward trend. That is depending on lower economic ownership in megaphone, but also that we have some cost for the transactions that we did during 2012, both when it comes to higher funding cost and also FX cost. A number of different nonrecurring items in Q4 but also during the year. We sent out the press release a week ago to remind you about what has happened. And in the Q4, we had the gain from the sales of the Megaport shares of SEK 5,400,000,000. We have done 2 write downs on goodwill, 1 in Nexentel, given that the Dispenet Ozt asset, EUR 1,500,000,000 and in NetComm another SEK 2,900,000,000 for after reviewing the goodwill. So overall, the net in the Q4 was EUR189,000,000 plus. For the whole year, it ended up with a minus of EUR 289,000,000 And the whole gain from the Megaphone deal that also lost its guide was SEK 8,400,000,000. We have with all the write downs in the goodwill written down roughly 10% of the goodwill that we have in the balance sheet. So it has been a very aggressive write down session during 2012. We also had some positive one time effects. The tax, new tax rate in Sweden going down from 26% to 22% meant a SEK 1,200,000,000 gain for us in the 4th quarter. That means that we ended up with a tax rate of SEK 13.6 percent in the quarter actually plus 2%. That will not continue even though I would like to have it like that. But we would expect roughly 20% in tax rate and roughly 85% in paid tax during the coming year and years. We talked about the improved earnings per share, and I thought about the tax here as a contributor to the improved EPS. You can see in the quarter, SEK 34,000,000 was connected to the taxes. And also the minority interest increase was roughly 10%. So an increase of 34%, 35% Q4 9% on the whole year basis. And I would say also given the industry environment at Autonomous Desktop, I think this is a very, very strong result and it's very I think it's very few operators that will actually increase their EPS during this year. CapEx to sales, 14.6%, a bit higher than we have anticipated. When we look at 2013, we will go down to 2014, which means that especially Eurasia will have to sort of decrease the relation of the call CapEx to sales. They are today above 20%, close to 23%. They are expected to go down below 20%. And it also means pure mathematically that we will cut somewhat on the CapEx in 2013 given that we are flattish on our top line. But still, we're talking about investments around SEK 4,500,000,000 during the year, which is a big amount. Cash flow. We have had extremely strong cash flow during the whole year, close to $24,000,000,000 in the last quarter, SEK 3,000,000,000 which was connected to less cash CapEx in the quarter and also a positive change in the working capital. If you look at the whole quarter, we have, of course, gained by the SEK 12,000,000,000 in dividends that we got from Megaphone. But we have not received any dividends from Turkcell. So this is also, I would say, a very, very strong underlying cash flow of SEK 12,000,000,000 that we actually get from our operations. So I would say I'm very, very satisfied and I was broadly satisfied with the cash flow generation during 2012, which has also meant that we have improved our net debt situation has gone down from €65,000,000,000 to below €60,000,000,000 You can see all the details what has happened during the year. And that also meant that our net debt to EBITDA has gone down from SEK 1 $75,000,000 to $165,000,000 The ones that are looking at our numbers during the year knows that we have also peaked close to 2 during the year. Now we are, as I say, in the range, not below, not above, but we are well in the range of our target range, 1.5% to 2%. And that gives us a solid situation as well as if we look at our debt maturity schedule. This is the loans that we have. And the coming year, we need to refinance SEK 6,000,000,000 the coming 3 years, SEK 23,000,000,000 which is not a big amount given the size of our company. And we have also tried to prolong the maturities to actually mirror the investment cycle that we have. We are investing in long term assets, 50% to 10 years plus even 30 years. And we actually made then issuance in September, 15 year euro bond and in December, a 30 year sterling. So summarizing the highlights from 2012. We have defended revenues. We have improved earnings per share, generating a very, very strong cash flow. We made IPOs, I will say, in a pretty difficult market in December within 2 weeks, both from Megafone and KSL. We also sold and divested our Norwegian broadband business, increased the ownership in TIO. A lot of activities when it comes to M and A during 2012. We have launched efficiency programs and I feel that we have a strong and solid financial position to meet a very tough market for the coming year. Thank you, Perona. You heard the outlook from Lars before. I will invite Lars back to the podium. Name is Andreas Ekstrom. Happy to be here one last time as Head of IR to guide you through the Q and A session. Quite a lot of people here today, both on the phone, on the web and here, of course, in Stockholm. We will start with a few questions here in Stockholm and maybe I see a hand from Stefan. Please introduce yourself and your company name please. Yes. Stefan Goldstein, Nordea. A couple of questions. First with you already stated your guidance was a bit conservative. Just looking at the trends at the moment, Eurasia improving growth from 12% to 16% this quarter and much driven by Uzbekistan and we should see that trend continue. We also see Kazakhstan improving the growth trend. So my view is that Eurasia should continue at these growth levels. We also have quite easy comparable quarters in mobility Q2, Q3 this year. And you also stated that you have seen increased intake in fiber. So my view is that this is a truly conservative guidance. Where am I wrong? I don't know. You sound like some of my colleagues, but I feel a bit uncertain about the telecom industry. This whole shift of voice going down 10%. You have to realize voice is our biggest business by far. If that 10 becomes 15, it will have a huge impact on us. And how quickly can we change the business model and capture more of the data? That's sort of the uncertainty. If we would be able now this year, which I hope we will, to establish a new business model that actually flies, I will be a whole lot less concerned and maybe be more brave. But this is the best judgment that And if And if I may add, I think that we see 2013 as a transitional year. I mean, there's a lot of things that happens here with investment in hardware, new business models, etcetera. And that's why we I think we're a bit cautious. But remember, the Q1 last year, we were accused of being too pessimistic and we were right at the end of the year as well. So it's we have to be a bit cautious in this environment. Then a question on Turkcell. There was a ruling yesterday, maybe a bit unclear ruling. But you have earlier blocked dividends from Turkcell. Has your position around dividends in Turkcell changed in any way in Turkcell? Well, I don't think the issue of dividend is the biggest issue. We have a conflict between the owners of Turkcell and that needs to be resolved. We have a deadlock in this case that you talk about between the Russians and Zukorova. And the decision yesterday, I view as one step at least forward in the resolution. Unfortunately, it is not a clear cut decision as you say, but at least it's a step forward. I assume that we will restore dividend as soon as possible and certainly no later than when the deadlock is resolved. Thank you, Stefan. We have one question from Sven here. Good morning. Sven Schall from Swedbank. A question on mobility. You mentioned that voice revenue is down roughly 10%. If you split out Denmark, which is obviously a very weak market, how is it how does it look then? 2nd, it's the 2nd quarter in a row where we actually gained some subscribers in Finland and that has not been the history if you're looking at 12 or 24 month perspective. Has anything changed in your offers in Finland or Yes. I could take that with Finland. We have introduced a new offering that could have been completed with from the other competitors. We can say it's sort of free roaming in the whole Nordic Baltic area and that has put the pan out to be very good. So I think that's one of the things that we have changed in Finland. I can take the first one. I'm a little bit slow on math, but Denmark was down 16 percent and the average was 10%. So I guess that that leaves about 8% excluding Denmark. Okay. We have a question here from the gentleman. If we can get the mic there. Ola Vesterberg, Swedish News Agency. Lars Nippo, could you please clarify what you meant this morning when you said you were not employed, you were not there when the decision was made to invest in Uzbekistan. I mean the deal with Tiglan, the partnership deal was closed in December 2007, new deals were made in 20082010. Sounds like you were employed. What I tried to say was that I'm very happy that tomorrow we will get an external report. It's a very complicated transaction in a very complicated legal environment and a big portion of the transaction was done in a time frame where I don't know the details because I wasn't there physically. So at that what I was trying to say was I'm happy that we tomorrow get an external report from a renowned legal firm who understands the legal aspects of this who have gone through all the details. And we will talk about that report tomorrow. I'm just asking you to clarify I just did. I just did. No, Ed, you didn't. You were implying that you were in 2,008 and 2,000. There will be plenty of opportunities to discuss that topic tomorrow. So I think that we will Sure. It sounds like some preemptive blaming of your previous investor or other people in the organization. No. I just said I realized that interpretation of your comments. Are you talking now? Or am I talking? Go ahead, please. Repeat it again what I said to you. No. Please don't. Please answer the question. You did. You won't get another answer. A big portion of this deal was done before it was employed. And therefore, I don't know the details. So now I have to answer your question. With that, I think that we leave that discussion for tomorrow, and we can hand over the microphone to I see a hand from Thomas there. Thank you. Thomas Heath with Handelsbanken. Two questions, if I may. Firstly, keen to hear a little bit about the Swedish fiber rollout, particularly take up rates. When you started the project, there was some uncertainty about the return on this investment. Maybe if you could comment a bit on the earlier projects. And then secondly on working capital, you discussed earlier this year that you were starting to look into this. It would appear to me that there is some structural headwind there with increasing handset sales and TVs and so forth. So what can you do from a company point of view? And what expectations do you have to deal with working capital? Thanks. Let's start with the working capital and Hore. You take them both. Yes, I can take both. Let's start with the working capital then. Yes, I mean, we have been working with sort of dissecting what actually is included in this and what has driven sort of the consumption of high working capital from the year over the last year is higher prices on the phones and also that we have shifted from prepaid to postpaid. So what we're doing right now is to look into this, how this could be mitigated within sort of the offerings and also just the knowledge that these other effects has helped us to have a much better control. But of course, over time, if prices on hands will go up, that will affect the operating head of the negative from our perspective. But I think we have increased awareness of how we deal with these issues. When it comes to the fiber rollout, we have been working with us pretty intensively now during 2012 to improve the rollout processes. And I've been very deeply in Zolanda. And what we could see is that we had a very low ambition when it comes to the uptake from the very beginning. We talked about 25%, 30% and perhaps going up to 50%. In certain areas where we have done a good job, we come up to 60%, 70%, 80% of take. So that's why we are a bit optimistic. If we do this in the right way, the demand for fiber is, I would not say, unlimited, but it's very easy to sell with the right pricing and with the right distribution and selling process. Thank you, Thomas. We have a number of questions on the conference call. We will come back to the floor here in just a minute. But operator, could we please have the first question from the conference call? Yes. The first question comes from the line of Pernod Ricardan. Please go ahead. Thank you, gentlemen. First question on your growth profile and just looking at it without Joico, it would look significantly weaker. And I'm wondering how you would address that. Would you become more acquisitive? And if so, would you look for acquisitions outside your footprint consolidation or a rather small bolt on stuff like the recent acquisition in Sweden? Any change in direction there? Any new thinking? And then maybe on rooming elasticity, where you in the last couple of quarters explain that you're quite encouraged by the trend seeing. How is that evolving? And is that actually maybe a driver of the better trends in mobility also this quarter? This is Dor. I think actually running our own business, our current business is the answer to compensate for growth that was generated by Joico. And I think the real opportunity is both in the broadband, the fixed network, the fiber, IP and of course the mobile data, which is related to the exchange of the business model. I think that's a bigger answer to the question than acquisitions. Yes, of course, we are always looking at acquisitions and nothing has really fundamentally changed. We haven't done that many acquisitions. We also done some divestitures. I really think that the answer for growth lies in our own current business. Okay. Thank you. And maybe just a follow-up there. And did I get that right that you were actually hoping to see drop and or fixed line in Sweden at least returning to revenue growth next year. Is that the Yes. I wouldn't say next year, but I am convinced we will see revenue growth in broadband. The question is, it's an equation where the traditional voice goes down and the triple play goes up. And at a certain point in time, I am convinced that the growth in triple play fiber will be bigger than the decline in the copper base. So yes, there will be growth whether it's going to be next year or the year after or the year after, I'm not totally sure. I'm very encouraged like P. A. Said, I'm very encouraged about the uptake and our more professional rollout of the fiber investments that we have done particularly in Sweden. So, Amol, I had a question about roaming initiatives that we took was it last year? How that has been developing? Continues to be a very good decision. This is a volume business. Operator, can we please have the next question? Yes. The next question comes from the line of Drorie Fitzjohn. Please go ahead. Thank you. Three questions if I may. On Sweden mobile, we saw quite an encouraging improvement. Is there anything particular area driving this consumer or business? Secondly, are you able to quantify the benefit to EBITDA in Spain from the switch to handset installment plans, perhaps a year on year benefit to EBITDA? And then thirdly, if you could just remind us how easily do you repatriate cash across your Eurasian market? Thanks. I think the mobile business in Sweden, I think the positive signs are driven both by consumer, but also on business to business. And then as P. A. Said, when we entered the Q4, particularly the business to business, it was something we were a little bit concerned about. It seemed that the customers big customers were delaying their decisions, but it turned out that they didn't. So the activity level was pretty high actually in the end of Q4. So I would write the reasons on both consumer side and the business to business in mobile suite. Question on Spain on handset. You know that figure Ron. I can't quantify that. I can't quantify either. Let's get back on that one, Laurie. The last one was on repatriating cash from Eurasia. Yes. I mean we could repatriate cash in all countries, I would say, except Uzbek where we have limited sort of possibility to convert into dollars. Otherwise, it's not a problem at all. Great. Thank you. Problem as before. Operator, can we have one more question, please? Next question comes from the line of Farooq Dizon. Please go ahead. Hi, good morning. I've got a few questions. The first one is looking at data volume and data revenue growth. It seems that the conversion rate is still about 25%, 30% in terms of revenue cent growth to data volume growth. And my question is, do you think that you can improve that from where we are today? And also taking into account spectrum costs, does that mean that data is a NPV positive opportunity for you? My second question is, if I look at the growth in smartphone penetration and the growth in postpaid data package uptake, it seems pretty consistent in terms of around about 70% of new smartphone customers roughly are taking a data package within mobility services. Is this being driven? Is this consistency being driven by falling smartphone prices? Or is it being driven by falling data prices? And then my third question is on Turkcell and really whether the political backdrop in Turkey seems to support Turkish ownership. So does this limit your long term strategic capability in terms of where you can go with your ownership in Turkcell? I'll leave it at that for now. I think Thank you. Thank you, Baram. We can stand our hats now. Do you want to start with Turkcell? I can start with Turkcell, yes. No. We own something like 37% of Turkcell. And we're pretty happy with that ownership. I think we are good owners. I think Turkcell is an interesting company and an interesting market. We need to get a resolution on the deadlock between the owners. If and when that happen, I think we can go different ways. I clearly would like to stay in Turkcell. I think that's a good investment. But exactly how and under what conditions, I'm not sure. It depends very much on the other owners and the regulators and the authorities. So our focus has been to try just like we did in Russia. In Russia, we did actually resolve the long deadlock and we hope that we can during this year also resolve the deadlock in Turkcell. That is at least my ambition. When it comes to the question of how they are sort of picking a data package, I don't think it's the question of either price on the services or the house. I think it's the question of we are used to use to have a handset today. I mean we need them and everyone has their phone And we need to be connected to Internet all the time. And I think that's what's actually driving this increase, not so much surprises. The other one I'd like to comment on the ratio of revenue growth versus traffic growth. It's about 25%, 30%, which is not too bad. Can we improve it was the question? Yes, I think we can improve it. But also very important is when we move to new technology to 4 gs technology, the cost of producing a megabyte is significantly lower than producing the same megabyte in 3 gs. So it's not an issue only of how much can we catch all the traffic growth in terms of revenue growth. It's also in what system are we generating the service. Is it 3 gs or 4 gs? Which means that it's extremely important to have a good control of the production cost in different systems going forward That will help the margin development. Can I just ask a quick follow-up? In terms of 4 gs then, are you seeing a better volume to revenue trade off with 4 gs than you are with traditional data? That's not what I said. I said the cost of producing a megabyte is lower. And therefore, if you have a lower cost, you can of course accept a lower ratio. Yes. And that's my whole logic. And so would you be willing to accept a lower ratio than where you are today? Would that still be profitable for 4 gs? I wouldn't. I'd like to have a higher ratio, but and that's it's all about this business model. But I just wanted to add the information. I'm not sure you all understand Yes. No, no. It's fair. Producing a megabyte is much lower in one technology compared to the other one and that is not unimportant for the profitability of our company. Sure. Absolutely. Thank you very much. Thank you. And you said, Barry, that 70% takes a data package. I think that's quite conservative actually. I think in Sweden at least it's 90%. And Beran indicated in his presentation, 15% of the phones that we sell today are 4 gs enabled. And obviously, if you buy a 4 gs phone, you take a data package. With that, I think that we go back to the floor for a few questions. We have before Erik, we have the lady here on the 2nd row. Alimao from the 5th business, Erik Alconesti. Two questions here. You mentioned that you have gained more customers in Finland because of this free roaming in the Nordic countries. How about the in Telia in Sweden, the same possibility? And the other question is, you're right here as our ambition is to fundamentally change our business and so on and so forth. But you haven't been doing this or so what is new? Yes. That's very correct. We have been doing a lot of cultural changes in the last 5, 5.5 years. But we haven't spent that much time on the product portfolio and how we generate our services. So our technical networks, the fixed and the mobile, we've been focusing on other areas. And with the technology shift now from analog to digital, it's time to really look into that those areas. And that's what I'm referring to because we should have TeliaSonera should have a fair portfolio second to none in the marketplace. We don't have that in my opinion. We also don't have the tradition of proning the product portfolio. That means putting end of life to certain products. That's not in our DNA. We tend to keep products till the last customer abandoned the product. And then somebody even orders, you still keep it, maybe somebody comes back. And we can't afford that. We have to prune the products, we release money to develop new products. And that has fundamentally changed the way we operate our product portfolio management as well as our network management. The first question Prahran was I think if we had one market share on the roaming initiatives in Sweden. Yes. I mean we have not perhaps exactly the same offering, but we did, as Lars mentioned before here, introduce sort of a limited roaming cost. You could tap room across the different countries, where you're roaming in our own networks, but also other ones. So I think we have a wider offer in Sweden, but slightly different to what we have in Finland. Okay. You can leave the floor to Erik sitting just behind you. Erik Parash, Danske Markets. I have a question regarding the relation between again data revenues and traffic growth. It seems to me that in at least the 3 after the 4 Nordic markets, the standard data packages allows for far more data includes far more data than people actually use. And once everybody has the data package then, which is soon the case, then it becomes very hard to grow your revenues in data, it seems. Do you agree this is a strategic question? And how do you see that can be resolved? Absolutely, we agree that's a strategic question. And that is part of the discussion how to change the business model. That is part of how to change the business model. What price plans should we have? It's very interesting. I mean in the U. S, Verizon and AT and T, they have flat fee per voice. I think the industry is going that way, at least for domestic voice. And then of course they have another model for data with smaller buckets. So you feel that you do have to pay a little bit more if you use twice as much capacity as you did the year before. That's the business model that they are using. And we're going that way. We're all going in that direction I think in the industry. You think it's possible to cut the amount of data included in the standard packaging? No, I don't think that's the solution. But I won't tell you what I think the solution we are working on it. Did I see a hand there? Thomas Litton, Perea Toeima. Could you just remind us or update us on the situation in Uzbekistan in terms of the situation with MTS, whether it's you and Infocom or MTS or anyone else with the pre launch and how we should think about Telia's market share and the penetration in the country going forward? Thank you. Well, I mean it's a nightmare for an operator to lose its license and MTS did lose its license. And I understand they've also filed for bankruptcy with a local company in Uzbekistan. I think we should assume that this will not stay a market with 2 players. I cannot believe that in the medium term at least. And whether this MTS who comes back or somebody else, I don't know. I don't know more than you do. But our assumptions is so our assumptions are that there will be a market in U. S. Based on the 3 players. Thank you, Thomas. One question here, gentlemen. Taneli Menek from Finnish News Agency. You mentioned Sweden share of this 18 100 employees. How about Finland share? And then you also mentioned you need to recruit new competitors. Any numbers on that one? Well, we are not we cannot comment for legal reasons and union negotiations reasons to numbers in Finland. We can do that in Sweden, so we did it in Sweden. So I but the trend is the same in Finland. We have to reduce and we have to add exactly the number I can't comment on. Sorry. We take one more question from the floor before leaving back to the conference call. Johan, if we can get the mic to her. Thank you. Johan Alkistron, SVB Enfrylde. Two questions. First of all, the broadband business we saw you mentioned also that there was quite one off effects in the quarter related to the poor margins. But how should we view in general broadband margins going forward in 2013 given the cost cutting program? How much was one off effect and how much can be done? And secondly, Norway, you divested the broadband business and also took, I think, 2 goodwill write downs this autumn related to the mobility side. What is your strategic view on Norway going forward? Well, I can start with Norway. I think Norway is a very important market for us. We are number 2 obviously behind the incumbent Telenor. I think it was a right analysis and the right decision to divest the broadband business because I believe in broadband, but only if you have your own network. We didn't have our own network. If you want to be a fixed network provider of triple play, you better have your own infrastructure, especially if your name is TeliaSonera. So I think that was a natural divestiture. In mobility, Natcom is doing a good job. And I think we absolutely have a place in Norway. I don't think we ever going to be number 1, but healthy number 2 is okay for me. When it comes to the margin, I think that the ambition is in the first phase, actually to stabilize it. I mean, we have lost close to 2% units during 2012,000 more than. And but if you look at the phasing of the cost cuts, I will say that for normal, they're a bit more back end loaded during 2013. You would so you I don't think that you would expect to see this improvement in the Q1. It will take a bit more time than for example for mobility. Thank you, Johanna. We go back to the conference call operator. Thank you. The next question comes from the line of Andy Parnes. Please go ahead. Yeah. Hi, guys. Thanks for taking my questions. Two questions. The first one was on the gross margin stabilization. I want to given a lot of the pressure is sort of outside of your control regarding higher interconnect and equipment costs. I was wondering what measures do you think you can actually take to stabilize the gross margin? And then the second question was on your leverage. Excuse me. It's going to come down towards the very low end of your net debt to EBITDA range, so by the middle of the year. Would you consider a sort of special dividend or buyback, I guess, in the second half of the year once the Uzbekistan investigation has concluded? Thanks. Well, if I start with the gross margin stabilization. Quite a bit of the $2,000,000,000 savings program is actually not on OpEx, but on COGS, cost of goods sold, which would help stabilizing the margin. And I think what you have is sort of the effect from interconnect and that's of course if that stabilizes, we will automatically have a stabilization. But we're also looking at sort of how to sort of look at the hardware pricing itself. So it's a lot of different issues that we are working with right now. And I don't think that we should expect the stabilization to term next quarter. This is a world that will take time. So that's why we are a bit as I said before that it's not a walk in the park. It's a pretty tough in front of us right now when it comes to the cost side. Do you want to comment on the leverage question as well? What was the question about the liquidity? We will do an extraordinary dividend in in the fall when it comes down to NOK 1,500,000. No. Okay. I think that was a clear answer to you, Andy. We take the next question from the operator please. Thank you. The next question comes from Peter Nielsen. Please go ahead. Thank you. Two questions please. First one, Lars your comments a few minutes ago about Norway, Next Gen Tel and the lack of a sufficient infrastructure. Situation. May I ask you, how do you view your current fixed line infrastructure in Denmark? And secondly, if I may and I'm sorry, I don't mean to ignore Per Arne, but I guess for you as well Lars, the 2,009 agreement with Altimo related to Megaphone and Turkcell, is that still valid at least as regards to Turkcell? Or if not, has it been replaced by another agreement sort of between yourself and ALTIMO? And any update on the status on this would be appreciated. Thank you. Yes. Let me start with the last one. I mean the agreement that we made with ALTIMO has actually expired. Okay. And the whole structure that we agreed upon has been turned out to be very different than reality because we were going to resolve Megaphone and Turkcell and put them into a holding company. Now we decided at the beginning of last year that Ultimo sold its shares its ownership in Megaphone. So they're out of Megaphone. We are now partnering with Usmanov in Megaphone. We are still I feel we still have a partnership with Tridman when it comes to Turkcell, but we don't have a written formal agreement. And no, but I don't think any side feels the necessity of making that. We are jointly on the board and we do communicate and we do talk to each other. And we will see how the resolution comes out. I think we have a good relationship with them. On the first question after we sold Stofa, we have very little left on the fixed line side. I think it's 1% of our business. But Perona, do you want to comment on fixed line strategy in Denmark? I think we should I mean we are a very small player, and I don't think that we could expand very much in that. And it's I think that's the part of the annual review that we do on different markets. And for us, it's important to be able to combine perhaps fixed with mobility, especially when it comes to the corporate clients. But he was referring to the cost savings in the technology side. The cost savings in the technology side is mainly in Sweden and then Finland and then the Baltic. Denmark is very, very small compared to these markets. Thank you. Thanks, P. K. Next question operator. The next question comes from the line of Maurice Patrick. Please go ahead. Good morning, guys. A couple of quick ones. On the SEK 2 cost saving plan, Piranha referred to it as not a walk in the park. I was just clear to see the extent to which is an ambition or if you actually have a clear plan with 10, 15 items lined up to which you're going to get towards that $2,000,000,000 number? And the second question, it looks like the marketing expenses actually went down in the Q4 despite it being a big handset quarter. So just curious as to what's going on there. Thanks. Yes. When it comes to the plan, of course, we have plans because you can't announce SEK 2,000,000,000 just by coincidence. So I mean, of course, we're working with that. But it's still, I mean, taking down SEK 2,000,000,000 cost net given that you have underlying inflation is not the walk in the park for any company. But of course, we have detailed plans to how to reach there. Question on marketing, that went down despite being a strong handset quarter. Well, it's good that they're a bit careful with the money. We advertise all the time everywhere. I think we should be more careful. Yes, thanks. We have about 5 minutes left and we have a number of questions still on the conference call. Co, please, operator, let's take the next one. Thank you. The next question comes from the line of Andrew Lee. Please go ahead. Yes, thanks very much and good morning everyone. A couple of questions, kind of pushing for a little bit more color on questions that have already been asked. Firstly, a question maybe for you, Andreas, given your new role, Has a question on M and A policy earlier. I wonder if you could give us a bit more of an update on what your M and A policy specifically is at the moment. Is there anything on the horizon or you now just be putting your feet up? And then on Turkcell, it seems like the visibility on the outcome and the timing of any resolutions here is almost more uncertain than it's ever been. I wonder if you'd agree on that. And on how we can go from here, would you ever consider merging that asset with other assets owned by your co owners? Thank you. I'm not going to answer the first one. You can do that. I think actually the decision in the private council was maybe a bit less clear than I had hoped. That's obvious, but I think it was a step in a direction of coming to a resolution. I have experienced now 5.5 years of discussing Turkcell and different kinds of aspects of it. So I'm pretty used to that it's going to take 2 steps forward and then we take a step backward. I think this was a small step forward. And I don't know why you mentioned merging. I don't even think about merging anything in Turkcell. Turkcell is a great company and we need to resolve the deadlock in the Board among the owners because I think it's hurting Turkcell that we have a deadlock now for years in the Board. And if I may then comment on the M and A side, it's the same strategy as we had before that we are as the remainder within our footprint that we may have today. And we have tried to increase ownership in the entities where we have sort of the majority holding there. So that's it's not changed. And we do not look at India. Thank you. Can I just have one just quick follow-up question? Lars, apologies if this is an in person question. But could you just clarify your expected tenure in the firm? Will you definitely not be extending your contract pass this year? Well, a lot of people are thinking about that. I have a contract. I'm already overdue. That's date that's passed. By the end of this year, I'm supposed to retire. I think whether I retire 31st December or another date will be dependent on the board's ability to find my successor. Okay. Thank you very much. Thank you. We have more questions than we have time for. Take the final question and then you can call me or my team at TIMAS Relation afterwards. So please operator, can we have the latter question please? Thank you. The last question comes from the line of Jacob Bluestar. Please go ahead. Hi. Just actually following on from an earlier question from Andy. Just could you maybe just given you kept the dividend flat this year, could you just talk a little bit about your priorities for use of cash flow going forward? Is it still mostly deleverage string? Well, I can start. We decided that when we had the peak at 2.0 or 2.1 or whatever it was, and we knew that we had the ability and the big possibility to deleverage. We clearly agreed with the Board that we should deleverage. We are now at 165 and we can also calculate. And at one time, we will be by 1.5 and even below 1.5. At that point in time, the Board will have to have a discussion. And we have they have we have a track record, very strong track record of surplus cash being returned to the shareholders either as an extraordinary dividend, raising the dividend or even buying stock back. But it's too early to talk about it now. Let's get to the 1.5 or the 1.4 whatever the number should be when that discussion will have to take place. And it will have to take place then. And I think there's also some other factors. I think you are too stuck here with the range as such. I mean, we have to look at other things like how much underlying free cash flow do we have. It's €12,000,000,000 So it won't even cover sort of the €12,300,000,000 that we will pay out. So that's one issue. So we have to work with them. I personally think also that their yield of 6% is very high. And in this sort of environment as we are today also where we are taking out 2,000 people, I think a political sort of provocative actually to increase dividend and also actually go for extraordinary dividends. With that, thank you for coming here. A lot of media. Obviously, we I will ask you to take contact us with either Salomon here or Cecilia for individual interviews and Irian as well. Thank you all for coming. Thank you.