Good morning, everyone. Welcome back to TeliaSone ra. I'm at the result presentation for our fourth quarter and the full year of 2011. My name is Andreas Ekström. I'm the Head of Investor Relations. With me, as usual, I have our President and CEO, Mr. Lars Nyberg, and our CFO, Mr. Per-Arne Blomquist. We will start with a presentation from Lars and a review of the financials by Per-Arne, and then we will go for Q&A, as usual. For you in the audience, we have a special topic we will illustrate and demonstrate with the help of Michael here, our 4G services, both when it comes to dongles, tablets, and we will also demonstrate our new handsets that we will launch in the first quarter. With that, welcome, everyone, and I leave the floor to Lars.
Okay. Good morning. Welcome. Looking at the numbers, if you look at the top line, a little bit shy of 3%. We reached 2.6% for the full year. I have to admit that when we went into the fourth quarter, I was a little bit concerned about the macro situation in many markets. I was very relieved to see that the Swedish market, for instance, continues to be extremely strong. We grew more than 9% in our mobile business in Sweden, which is fantastic. Also, in markets where the macroeconomic situation is worse, like Spain, we managed to get more than 20% growth. We had a double-digit growth in Eurasia, maybe somewhat lower than I had hoped for. I'm not unhappy with the growth, although we did miss the 3%. I'll come back on the EBITDA because that's a very positive part.
I would like to say a few words about the earnings per share. The earnings per share on the slide shows that we have lost SEK 0.50. I think it's important to realize how that happened. Because of the EBITDA improvement, which I will talk about in a minute, we actually improved the earnings per share by SEK 0.18, which was totally offset by currency and contributions from our associated companies. You know, we have two associated companies, Turkcell and MegaFon. Turkcell has halved its income contribution to us in last year compared to the year before. If you take away the currency, it's reduced by 40%. The decline is totally the result of strong development of the Swedish krona and weak performance of particularly Turkcell, somewhat of MegaFon. Let's talk about the business we manage every day.
This is a picture we have shown and talked about for the past three years. The fact that we've been able to increase the EBITDA margin again, I think it's the 13th consecutive quarter in the third year that we are improving the margin. This is a result of hard work, a lot of cost savings. You might remember, I think about two years ago, we had finished the big restructuring program, and you were asking me whether we should have a new one. I said, I hope not, but it will be dependent on the management's ability to manage cost on a daily basis, every day, every week. I'm very pleased to conclude that now, two years later, we seem to have a management that is able to control cost.
If you look at the ratio between the growth of the top line and the growth of OpEx, it has been very healthy in 2011. That is, for me, the proof. Do realize that after three years and having reached 35.4% EBITDA margin, TeliaSonera , compared to other European operators, if you exclude the one country kind of operator, if you take operators that are in many countries, we have absolutely one of the highest margins in Europe after three years of hard work. I'd like to talk about some specifics that I think are interesting for you and certainly for TeliaSonera was very early in saying that the data roaming prices are not good. They are not good for our customers because they refuse to use our services, and therefore, it's not good for us. Telecommunication is a volume business. It's all about volume.
We decided, in connection with the rebranding in May, to significantly reduce the data roaming costs in the Nordic and the Baltic. This is the Nordic and the Baltic. You can see that the customer has responded very favorably to this decision. They have increased the traffic, the usage to surf when you are in Finland or in Estonia is now natural compared to before when you heard in the airport, you haven't forgotten to turn off your roaming, right? We would like our customers to be able to use our services wherever they are. You can see that we have dropped some revenue. I am convinced that the revenue will be back on the old levels within maybe 12 or 18 months. After that, I think the revenue will continue to grow. I think we'll make more money out of this because we have significantly higher volumes.
We also did this in October for Europe. In December, we did it for a number of countries where our customers go for vacation, like Thailand and Turkey. I think it's a bit early, but I think those decisions show the same kind of result and will show the same kind of result as this one does. I'm convinced customers are very happy about it, and we will make more money ultimately by doing this. This picture is maybe even more important than the previous one. This picture talks about our ability to monetize on mobile data growth. It has been a question for many analysts and journalists, can you make money when the traffic in the network explodes with 100%? This is going to ruin you.
You're going to have to spend so much more CapEx, and your OpEx is going to go up, and your income is going to go down because you won't get able to monetize it. I think we've been arguing as one of the first operators again saying one of the preconditions is that we don't have a flat fee. You can't have a flat fee in mobile data. You have to pay a little bit more if you use significantly more data. We introduced that about a year and a half, two years ago. Many operators have followed, not everybody. There are people who miss logic sometimes. The picture on the right-hand side from your side shows the relationship between the growth of the traffic and the growth of the revenue. This is only sort of 18 months. We don't have all the statistics.
I feel comfortable if we can have a growth of traffic and half of that growth rate is the growth rate for revenue. What I mean is if the traffic grows by 100%, the revenue grows by 50%. That is a very healthy model. We can certainly live with that model. That is exactly what this picture shows. This is Sweden, obviously a very early country that adopts technology, and therefore, it's a good guidance for other markets for us. Fascinating also in Sweden is that the voice business that's on your left-hand side, the bottom of those bars, is the voice business. It's stable or actually even increasing a little bit. That is not the case in all markets. What we have seen in some of the European markets, the other operators, we don't see that pattern, at least not yet. Even messaging is stable or actually growing somewhat.
As you can see, data is growing significantly. That's exactly what the right-hand picture shows you. This is very encouraging because I've said for a long time that our business, where 80% of the traffic is data and 80% of the revenue is voice services, it has to change. We will have to reduce the portion for voice and increase the portion for data. Otherwise, the business model will not work for the operators. This is, for me, the indication that that is now happening. The expansion of the 4G coverage continues. Yes, we were very early to start the 4G, partly because we wanted to be perceived as a leading, also in technology, leading operator. We are now covering quite a bit of the population in several countries, not only in Sweden. The good news is the pads came in the fourth quarter.
In the first quarter, we will have telephones, 4G telephones. That, I think, of course, is the catalyst for getting growth in this business. It's not only important to get growth in 4G for the investment in 4G, but I think it will also ease the pressure on our 3G networks. The really heavy users, I'm sure, are going to go to the 4G because they get a 10x higher speed. As Andreas said, we are demonstrating both the phones and the pads here, and you can try it yourself. If you get 10x higher speed compared to 3G, a lot of users, heavy users like me, will go to the 4G. That will ease the pressure on the 3G, and it will provide a better customer experience for the people who go to 4G. I'm pretty excited about this.
Very important, the declining part of our business is, of course, broadband. Particularly Broadband Sweden is so important because Broadband Sweden is like 75% of the whole broadband business. Over time, the ADSL voice service will decline or continue to decline. We have been explaining many times to you that we think, I think the fixed network is very important from a technology standpoint. If you want 100 Mbps or 1 Gbps , the technology to give you that is fiber. It's not mobile. It might be wireless the last 100 m or the last 10 m, but it will be fiber all the way up to the place where you either live or you work. We are rolling out fiber in several countries, among others in this country.
I'll come back on some remarks about Broadband Sweden, but I'm not happy with the efficiency that we are rolling those fiber out. I don't think we are giving our customers a good experience, which is one of the three priorities that we have in this company. I've been saying maybe the most important one. You remember the quality in the networks, managing the cost. We do that pretty good. Customer experience, world-class customer experience. That is not what our fiber customers in Sweden have experienced in the fall of last year, and that has to be corrected. Nevertheless, we are growing quite substantially, the fiber connections. You know we started with the TV business in 2007, and we have now more than 500,000 TV customers in this country. This is, I think, another extremely exciting opportunity for us. Now, finally, we have 3G in all countries in Eurasia.
Coming back to mobile data, mobile data has proven to be of real interest to our customers in this part of the world. I showed you that we can even monetize on it. Let me tell you, I think mobile data in this part of the world is going to be even hotter. Why? What's the alternative? What's the alternative? If you are, maybe if you are in Almaty, you can have a fixed line connection somewhere. I guarantee you, if you are outside Almaty, there are no fixed line connections. If the people of Kazakhstan want to do Internet, surf on the Internet, how are they going to do that? They're going to do that over mobile and 3G. I believe, I can be wrong, I believe we will see 4G in this place within a year or two. Technology is available.
I think the demand for that kind of speed is also going to be there. 35 million subscribers in our business here. It's not bad. The favorite son, Yoigo. You remember that we had a success in the fourth quarter, not last year, but the year before that, because then we became EBITDA positive. We said we will be EBIT positive by the end of 2011. We reached that. We were EBIT positive in the fourth quarter. We were actually also cash neutral. We have now 3 million subscribers in Spain. I used to say, after the fourth quarter of 2010, I said, these people have done a good job. They should be allowed to play the second half of the game. I think they started the second half pretty good. Board directors decided to increase our ordinary dividend by a small amount, EUR 10.
I think it's a sign of confidence in our business. It's a sign of having a strong balance sheet. I'm pretty happy with it. Looking ahead, we believe that the sales growth will be around 1% or 2%. It's not easy to predict, but it's going to be 1.6% or 2.2% or whatever. We say between 1% and 2%. You know we have different businesses. We have things going down, like broadband. We have things growing, like Mobile Sweden and Spain and Eurasia. That's the best number we can give you. Now we come to the EBITDA margin. I know there were some expectations or discussions that we should further improve it. First of all, I said it before, if you exclude the operator that's sort of an incumbent in one country, you exclude them. You take companies like us who operate in 10 or 15 or 20 countries.
We have already one of the highest EBITDA margins in Europe. Of course, we will continue to try to improve the EBITDA margin by cost cutting, but also looking at cost of goods sold, not only OpEx anymore. The EBITDA margin, when we started here, is always under pressure because prices and interconnection prices and whatever have you, that's normal. I want to have a little bit of flexibility here. That's why I'm saying this. I believe that one of the three priorities, world-class customer experience, we have not been as successful with in the last three years, and certainly not last year as we have been with the other two. I believe that the customer service in Sweden, broadband, last year is way below what is expected. I believe that part of the solution is maybe investing some money in that organization. Not only money, also other things.
We need to hire more people, and that costs money. I think it's a very wise investment than to try to squeeze out another half point out of the EBITDA margin. I believe the customer experience is the unique relationship we have with our customer. That will defend us more than anything else. Maybe quality of network and that relationship is the foundation for us to maintain our customers. There are a lot of people who would like to take over our customers, not only the other telecom operators. There are people like Google and Apple. In the end, I think the quality of the network and the customer experience is absolutely determining whether the customer stays with Telia or they go somewhere else.
I think it's a wise thing to invest money in the customer support organization, even if it means we cannot further improve an already high EBITDA margin. CapEx stays the same. All those worries three, four years ago that the data explosion will drive CapEx like 10%, 20%. It's not true. We will continue on the same sort of level as we have been doing before. Thank you.
Starting with the outlook for 2011, and Lars had touched upon this already, I would like to make some small comments about the outcome. We were slightly below the 3%. It was sort of a long discussion in the last quarter whether around 3% means 2.6%, 2.7%, or 2.8%. What I think is important to say, with a net sales of roughly SEK 105 billion, we are talking about perhaps SEK 100 million, SEK 150 million more or less in this area. I think we came pretty close to our outlook anyway. More important is that we kept the balance between the top line growth and the cost. The second half of 2011 was much better when it comes to the cost side. We actually took down the cost substantially compared to the second half in 2010.
Given that, we actually managed to increase the EBITDA margin with close to 1% unit. We kept also our CapEx to sales ratio, excluding the licenses, at 14%. I will come back to the CapEx later on and also comment upon the margin development during the year. The fourth quarter, I think, definitely was a decent quarter. We had a growth of 2.1% at top line. We managed to take down the cost with close to 5%, which meant that we increased our EBITDA margin once again. You can also see that EPS was slightly down. We have currency effects. We have effects from the associates here. If you also look at the free cash flow, it's substantially down. I will come back to comment more in detail on this. For me, the fourth quarter was a sort of decent quarter anyway.
If you look at the different business areas, I think it's amazing to see how we continue to grow the business in mobility, especially in Sweden and also in Spain. We had in the fourth quarter an increase of more than 9% top line. This is the 20th consecutive quarter of growth in this business area. We continue to see the same trend. Mobile data is growing with 29%. We actually haven't yet seen any hit on the messaging side. We actually increased SMS messaging with 1%. Voice is also going up in Sweden with roughly 1%. Same trends that we have discussed many times. That is supporting the growth. At the same time, we had also in Sweden high sales of equipment in the fourth quarter. Despite that fact, they kept a margin of about 42%, which I think is fantastic.
Spain continues to deliver growth somewhat lower in the fourth quarter, close to 23%. For the whole year, it's close to 32%. They had an EBITDA margin of close to 11% in this quarter. They are sort of moving in the right directions. We still have challenges in countries like Norway and Denmark. We see pressure on the ARPUs in these countries. Meanwhile, the ARPUs are more stable in Sweden, Finland, Lithuania, and also Latvia. Strong development within mobility services in general. Broadband, as Lars mentioned, has also taken some steps forward, very much Sweden. If you look at the underlying business here, we have seen small steps in the positive direction. First of all, if you look at the net sales, it was -3%, which I think is an improvement compared to the previous quarters.
They managed to increase the margins up to 36% compared to 33% in Sweden during the fourth quarter. If we look at the decline on the fixed business, it continues to be at roughly 12%. Meanwhile, we're adding both in VoIP when it comes to TV customers and also broadband customers, something between 10 up to, I would say, 20,000- 25,000 customers in a quarter. It's not big numbers, but it's actually a step, I would say, in the right direction, which I think is encouraging. Eurasia continues to deliver growth, also in this quarter about 50%. You can see that the growth rates are somewhat lower. We have seen a hit on the top line growth in Kazakhstan. We have seen also lower growth in Uzbekistan and also somewhat in Nepal.
When we talk about lower growth in Nepal, we still are at the level of close to 70%. They have a very, very good margin, which is then about 50% on EBITDA level. I think that's a very, very strong sign of that business. I would also repeat what I think Lars said, that we have today close to 35 million customers in Eurasia. I can't remember, Lars, when Telia started, I think they had 3 million, 4 million or something. They have made a fantastic journey now with up to 35 million customers, which means that for our whole company, we are now close to 170 million subscribers. Eurasia is doing very well. On an annual basis, they actually achieved 70% in growth on top line with a margin of about 51%. I mentioned the balance between the revenues and the costs.
We had a concern after the first half year where we didn't get the top line growth as we had anticipated. At the same time, the cost was actually increasing. We have managed now to have a lower cost base in the second half year, which, of course, helps us to improve the margin. This is a combination of taking out personnel, especially in broadband, but also within mobility. We have done that in Sweden, Finland. We have done activities in Denmark. We are trying to attack the structural cost base, not just taking the easy things like decreasing marketing. That is not what is behind this. We have decreased the number of employees during this year by roughly 500 people. That means that we continue to improve the margins.
I think what is a strength here is that this improvement on an annual basis comes from all three business areas. Mobility has grown from slightly about 29% up to close to 31% in EBITDA margin. We have seen an improvement in broadband, not that big, but from 32.7% up to 32.9%. I think it's good to keep that margin given the decline on top line. Eurasia has increased slightly from 50.7% up to 51.1%. All the different business areas are actually contributing to this EBITDA margin development. That is sort of the good part of the story that we are generating results in our majority-led and controlled companies. However, when it comes to the associates, as Lars had mentioned, we have lost out in 2011.
If we take MegaFon, they have dropped from SEK 5 billion down to 4.4%, where over roughly SEK 300 million of that is currency effects. The rest is actually lower sort of operated generated results. The same goes for Turkcell, dropping from 2.6% down to 1.3%, where over SEK 200 million is actually currency effects. The rest is pressure on the whole market. We have write-downs in Belarus and also impairment in Belarus that has sort of hit the result, which means that when you look at the EPS that Lars mentioned, SEK 70 on a whole year basis, it's coming from the FX effects and also associated companies. What I mentioned here is also that our financial net is also somewhat lower due to the fact that we have increased our gross debt. We still have, I would say, a sound interest rate cost, 3.9% for the whole portfolio.
I think it's very, very good. Given the increase of size, we will, of course, have a negative impact on the EPS. We talked about CapEx. We have spent quite a lot of money also this year, SEK 17.2 billion. 2.6% of that has been licenses and frequencies. I expect that amount to be slightly lower during 2012. We spent quite a lot of CapEx on licenses in the fourth quarter, as you see on the cash flow as well. More than SEK 1 billion was paid out for licenses. I think this is one of the most important things we have to pay for. Sometimes it's a higher cost for this, but we need the licenses to be able to operate our business. We will continue to make sure that we have the right licenses and structures in our business.
Overall, we have continued to invest in 4G, as Lars mentioned. We have continued to invest in fiber. For the last quarter, we were close to SEK 6 billion. If you take away the cost for licenses and spectrum, the amount was actually a bit lower in this fourth quarter than it was in the fourth quarter in 2010. Cash flow, underlying, I would say, is still strong. The big difference compared to 2010 was that we didn't receive any dividends, which was sort of one of our own choices from Turkcell. If you take back 1.2%, I think we are well in line with the last year. We are waiting for roughly SEK 1.9 billion to come from Turkcell to TeliaSonera. That will hopefully come during this year, which means that our cash flow will be much stronger in 2012 compared to 2011.
You might have seen that we have now closed the deal with Kcell. We have bought 49%, the remaining 49% of Kcell, for an amount of roughly $1.5 billion. We have initiated the IPO process. We'll work with that during the spring. That means that our leverage will increase, I would say, closer to 2% for a while before we go for the IPO. You would expect us to, I would say, deleverage off this during the coming 12- 18 months. One of the reasons for this is that if you look at the debt maturity schedule, we have in 2013, 2014, and 2015, roughly SEK 24 billion to refund, which is not a big amount for a company our size. If you look at the last quarter, we continue to have good growth in Eurasia, Spain, and mobility Sweden. Yoigo was EBIT positive, and cash flow broke even.
We saw Ncell take the lead in Nepal. We had a trade deal license award in Azerbaijan. As I just mentioned, we have increased our ownership in Kcell. I will not comment more on the outlook for 2012. Lars did that very thoroughly. Thank you.
Thank you. I will invite Lars back to the podium. We will open up for questions both from the floor and from the telephone conference. We start with a few questions from the floor. Maybe we can have the first from Andreas on the second row. Please introduce yourself with your name and your company.
Good morning. Andreas Joelsson, SEB Enskilda. A few questions. First on Spain. You played the second half, but now you reached the cash flow positive. What's the next step for Spain?
More profits. More profits and positive cash flow.
In Sweden, you have a quite high subscriber intake. What kind of subscribers are these? If you can divide the growth of close to 10% on mobile data and handsets.
The intake we have had is actually postpaid customers. That's been sort of the major intake. We're gaining there. The one kind of on a more detailed base, I don't really know. I don't know whether you know that. It's the postpaid customer that is actually increasing.
The growth distribution handsets versus mobile data.
I would say that out of the, I would say, 52% is mobile data and 44% is equipment.
Out of the reported growth in Swedish Mobile on 9%, 9.2%, I think it was to be correct. The service revenue growth was 5.7%, I think. The delta there is the equipment sales. Of the 5.7%, almost all of it is data growth.
You're increasing with 29% on the data in Sweden.
OK. We take the next question from Stefan Gauffin.
Hello. Stefan Gauffin, Nordea. I would like to focus a little bit on Kazakhstan. This quarter, you had a very, very solid subscriber intake, best since Q3 2007. Looking on a sequential basis, minutes of use is up 30%. ARPU is down 9% in local currency year- over- year. This signals that you've been pretty aggressive in terms of campaigning, offering a lot of free minutes of use. Should we expect a return to a more normal situation going forward? Have you been more aggressive to meet competition from Tele2?
We have had a market with two operators, and we have now three. We know Tele2 fairly well. They are a very aggressive, competent operator. They want to get into the market, which is natural. We have a leading market position for many years in Kazakhstan. We have a very healthy EBITDA margin. I think we have to be aggressive. I think the real opportunity in Kazakhstan for us is actually the mobile data. If you want to have a lot of mobile data customers in a country, you need a very capable network. We have a very capable network. I think that's sort of one of the priorities that we have. As I said before, I think even if we just got the 3G license half a year ago, I'm going to start arguing with the authorities that we need a 4G license.
As I said, I believe internet access, high speed, is going to be key in these countries because they don't have an alternative. Yes, we are not going to sit there and just wait, and we're going to fight back. We certainly have the margins to do that. We have the management to do that. We have the brand name to do it. We'll see what happens.
Have the campaigns continued into Q1?
I don't know. I don't run the campaigns, Stefan. I do talk to the management in Kazakhstan, saying we are number one. We defend our positions, move to mobile data, develop this market. Of course, it costs some money sometimes, so be it. It costs some money. If you're going to improve the customer service in broadband, it's going to cost some money. It's strategically the right thing to do, so we'll do it.
Another question relates to Broadband Sweden. I had actually expected the Q3 numbers on the top line to improve somewhat. We saw a better growth situation in Q4. It's the broadband and IP-based services that take a jump in terms of growth. Can you comment on that? What should we expect from this going forward?
As I said, I mean, we have seen sort of the normal decline of 12% on the fixed line. We have had something between 10,000- 25,000 increase in customers. It's small steps for the VoIP business, for the TV business, and for the broadband business. It's actually increasing. Hopefully, what we could see here is a combination of the new VDSL program that has been rolled out and also the fiber rollout that started to yield. I would say that it's still a very, very small change. At least it's a positive change that we started here right now. If you look.
If I may just add a few things on Broadband Sweden. Actually, let's talk about business to business for once. We always talk about broadband in terms of consumers. We are working very hard now since 12, 15, maybe even 18 months back on what is the product offering going to be business to business. Telia in Sweden, broadband should have a product portfolio second to none. I wouldn't say we have that yet. We intend to have that. I think that's going to be a positive thing for broadband top line and bottom line going forward. It'll take a couple of years, but we'll get there, and we'll get there partly this year already. Now, moving to consumers, you either believe that the fixed network is strategically important, or you don't.
We happen to believe it's very important, but only if you can provide speeds at least at 100 megabits per second, preferably more, which means fiber. The rollout of fiber in this past year, in practice, has not been as successful as I wanted. Our customers have been waiting. They didn't get an answer when they could get it. Finally, it worked. That's not the way Telia should operate and be perceived in the marketplace. That has to now improve. Finally, the customer operations, we have had too long waiting times, not enough clear answers. I'm convinced that we can fix this. We will fix it now. All of this will cost some money. I'm saying, so be it then. Because by the end of the day, it is the value the customer perceives of Telia. We have not delivered on what we promised.
Another anecdote, I must say, in the fourth quarter, we had a positive subscriber intake in the consumer business for the first time in a long time. The customers that we lose on the PSDM side, we compensate by adding VoIP subscribers, broadband subscribers, and TV subscribers. A positive customer intake in the broadband consumer business in Sweden. Next question before we go to the conference call, Lena.
Lena Österberg Carnegie. Yes, first question is on Turkcell and what the proceedings that you've taken to maybe get hold of the shares in British Virgin Islands. If you can update us on how far you've got along on that process and also what you expect to happen, disputes in Turkcell next. I understand that you have managed to change the articles of association in Turkcell. What has sort of come out of that? The second question on the fiber side, you say that you had a long waiting time for the rollout. When you hire people, do you intend to have your own rollout organization that digs and puts the fiber into the ground, or will that still be outsourced?
No, I think what we should do with our own people is to manage it. We might use, we will use a subcontractor to actually do the digging. We should control the process and ensure quality from first to the last step. The shortcomings are totally internally here. If some of the subcontractors have not performed, it's our fault. We haven't managed them properly. This is the issue. Turkcell, I think some positive things have occurred, let's say, in the last 10, eight months. Obviously, the fact that Altimo won, second round in DVI, as you are aware of, is now going to the Privy Council in London. We don't know. Towards the end of this year, we think. That's very positive. We got a damage award, which is very positive because it's a good tool in this whole debate.
Another very positive sign is that the authorities in Turkey, who have been insisting actually for several years to have more independent board directors in the major companies, not only in Turkcell, but in the major companies in Turkey, have come out with a decree saying you have to do that before June. Now, there are a few things in that decree that we sort of have question marks around. One is that they insist that all these so-called independent directors have got to be residents in Turkey. It's a little bit difficult if you want to have truly knowledgeable telecom people on a global basis. They all have to be residents in Turkey. Hopefully, they can change that. There's a debate going on on what it should be.
Fundamentally, to have a free float of 38% like Turkcell has, to have them being represented by a number of independent directors, we are very supportive of. We have been supportive of that for a long time. Kalamehmet Cukurova, they don't like that for obvious reasons. I think it's all moving in the right direction. With regard to the legal cases, I feel pretty good that we are winning them because the way the second round was described in the court was very sort of obvious. This is the answer. I would be surprised if the Privy Council will come to another conclusion. You never know. I'm not a legal guy. I feel confident that we are making progress in Turkey. Now, the problem in Turkey is that we have a deadlocked board. We have a company not performing. This is a real issue for me.
We lost half of the profitability contribution from them last year compared to the year before. That's unacceptable. We work our butts off here to improve our TeliaSonera operation. We improve the operations year- on year- on- year. It gets wiped out by currency. I can't blame currency. I can certainly be a bit upset about the performance in Turkcell, which I am.
Just to clarify, you said you expect the decision in the Privy Council to be towards year end? Earlier, you indicated maybe the first quarter beginning or second quarter.
No, I'm guessing it's not our legal discussion. It's a conflict between Altimo and Cukurova. We're not directly involved. I'm just referring to what I have been told. Maybe the Privy Council will take it up in the middle, maybe in the end of the year, but certainly before the end of the year. That's what I think. That's not the only thing. There are a number of other discussions and potential actions earlier than that that could make a difference. You referred to changing the articles of association. That's the internal Turkcell thing. We can't do that until we actually know what we have to change it to, because the decree from the authorities is not firm and finalized totally, I understand. We better wait till we understand what it is, and then we'll change the articles of association. I'm pretty sure we will, actually.
OK. Thank you, Lena. My colleague says there are a number of questions on the conference call. Please operate it. Can we have the first question?
Your first question comes from Peter Kurt Nielsen. Please ask your question.
Yeah, thank you. Peter Kurt Nielsen from Cheuvreux . A couple of questions for Lars and one for Per-Arne, please. Firstly, Lars, on the move to one common network operation center in the Nordic Baltic countries, which was supposed to be completed by year end. Has that been completed? Would you say it's been a successful move? What has been the early sort of experiences from that? Secondly, where are we on the joint venture network sharing joint venture in Denmark? When will this sort of be implemented in earnest? A question for Per-Arne, please. For this year, for 2011, you'll obviously be paying out more in dividends than you've generated in free cash flow. Your comments about deleveraging for the next 12- 18 months would indicate that you do not see a similar scenario for 2012.
Would you say that the license payments and associated dividends are the sort of main swing factors in terms of free cash flow and potentially dividends for 2012? Thank you.
Peter, I have to say I'm not totally sure if we shut down all the other centrals. We have done a lot of work towards the end of the year to centralize that to, what's it now, Suns Holocaust? I can't remember. Anyway, the multi-market operation thing is not only, and certainly much more important things than the supervision center, is about products. We have so many versions of every product. I have said internally that I think 2012, this year, we will have substantial steps forward, concrete steps forward in terms of, for instance, end of life of a lot of product, harmonizing product, having the same product, and maybe slight versions, but very well managed. Otherwise, I think some of the cost ambitions that we have in the plan for 2012 will not be realized.
We have assumed in the plan that some of these multi-market actions will be executed in 2012. Clearly, mobility is leading it. Broadband is doing the same, but they are lagging because broadband has other issues and priorities right now I think that are equally important. I feel pretty good about it. Now, the Danish situation, yes, we are talking and planning and discussing on a technical level. I haven't heard any more details than that. We will have to see because we have to get into the details. How are we going to do this? Who's going to be the suppliers? How are the civil works going to look like? What sites are we going to use? That's the kind of work that has to be done. It has to be done by the technical people.
When it comes to the cash flow, yeah, you're completely right, Peter Kurt. First of all, I will say that even though we are increasing the dividend per share, the amount that we pay out is the same. It's still more than what we're actually generating. What will happen this year is that, first of all, we have the dividends from Turkcell. I would expect to pay out less on frequencies and licenses. We paid out SEK 2.6 billion in 2011. I expect what we know today is sort of in the pipeline will mean less for us.
OK, thank you.
Thank you.
Thank you, PK. Operator, the next question, please.
Thank you. Next question is from Laurie Fitz-John. Please ask your question.
Thank you. Good morning. I have three questions, if I may. Firstly, in any of your markets, are you seeing any significant falls in SMS volumes, mainly driven by the new iPhone operating system? Is this putting any pressure on revenues in these markets? Secondly, in Q4, other EBITDA was significantly lower. I just wanted to check what was the reason for this because it seems quite a break in the trend. Lastly, just a more general question on MegaFon. In general, would you be happy to be, in the future, a co-shareholder alongside the Russian government? Would that just be not an option? Thank you.
You're asking me if I want to be a shareholder along with the Russian government? Is that what the question was?
Would you consider that, or is that something you wouldn't put on the table?
I think there are 53 different possibilities. I'm not going to speculate on any of them. We have a partner together with Altimo. I would like to see a resolution together with Mr. Uspanov and Alicia Uspanov, where we could join somehow. We have also said we want to focus on Turkey first. I think we are making real progress in Turkey together with Altimo. When we are sort of done there, at least made significant progress, we will focus on Russia. What was the first question? I forgot that.
The SMS trend.
Yeah, at least in Sweden, we haven't seen it. Actually, SMS in Sweden, and I use Sweden again because they're such an early adopter, we haven't seen it going down. Actually, it went up a little bit. The most important thing is that the data revenue tracks the data volume in traffic. That's the most important thing. I showed that, I shared that with you. I'm very encouraged that that's being the fact.
We don't see any big trend shift in any other markets either, Laurie. When it comes to other, you know that tends to be quite volatile, that line. In this quarter, you see that we have some higher costs for IT this quarter. You also have lower contribution from holding, for example, [Vakon Corner], which is the Dixon chain, the electronic chain. Those are two components that take that year-to-year decline.
Great. Thank you.
Thank you, Laurie. Another question, please.
Thank you. Next question comes from Ulrich Rathe. Please ask your question.
Yeah, thanks very much. I was wondering about Swedish Mobile and Swedish Fixed with some more detail. I mean, Swedish Mobile in particular, in the fourth quarter, I think you highlighted already, you had very, very strong device sales, sort of contributing to the revenue strength. Now, on the other hand, of course, you surprised us all with very good margins in Sweden overall. I'm just wondering what this should mean into 2012. I would assume that maybe the device sales, which tend to be margin dilutive, are not going to be quite as high, which ultimately means that you would then see margin expansion in Sweden quite materially. I'm just wondering whether that's sort of the right sort of thinking. I know you don't guide on a divisional level. That's the right sort of thinking.
Where does the margin dilution come from when you guide for flat margin at the group level? Thank you.
If we start with the growth thread, as I said before, roughly 40%- 44% of the growth is connected to equipment sales. That, of course, hits the margin in a negative way. What has actually offset this is the sort of good cost control. The OpEx went down pretty much in the fourth quarter. I don't see that. I mean, we've taken certain actions. We take the sort of working with the construction cost space. To think about expanding the margin further in Mobile Swedish, I think that's unrealistic, given that, I mean, we have equipment sales. We might have sort of some kind of price pressure. Just to remain at this level that they are today, I think they are on an annual basis 44% would be an achievement as such. That requires quite a lot of work with the cost side and lots of things.
Thank you. Thank you so much.
Thank you. We have a lot of questions on the conference call. Could I please ask you to maybe ask one or two questions? We can take the other questions afterwards. In the meantime, please operate the next question.
Thank you. Next question is from Andrew Lee. Please ask your question.
Thank you. A question on Eurasia, firstly. You've seen slightly higher competition in many of the markets. If this remains the case, do you think that that can be offset by 3G-driven data growth to allay revenue pressure? If not, do you have enough cost flexibility to offset that revenue pressure going forward and maintain a 50% margin overall in Eurasia over the next year to 18 months? Secondly, Spain, you've met your profitability expectations successfully there. Do you see an opportunity to go after subscriber share more aggressively in 2012? Thirdly, sorry for the third question, but in last year's guidance, you said it was in line with internal management targets. Is that the same this year with guidance? Are there some differences between guidance and your internal targets? Thank you.
That's a good question. What do you think? Do you think we have exactly the same targets as we tell the market? Of course, basically, they are. There is a buffer here and there. Talking about Spain, I think we should continue to be as aggressive as we have been. I don't think we should become more aggressive. Yoigo has an extremely good brand name. The proposition seems to work. I mean, when you grow more than 20% and you have 3 million subscribers after a number of years, I think you have done a pretty darn good job. Why change a winning concept? I just think they should be allowed to play the rest of the second half. Eurasia, I think, is a very interesting question you are asking. First of all, I think you made a little bit too heavy a statement.
We don't see an increase in competition in Eurasia. Yes, we do recognize that Tele2 is coming to Kazakhstan, which is one of the markets. If you take Nepal, for instance, we've become the number one in Nepal. We have 7 million subscribers in Nepal. We have a very high EBITDA margin. I think that's typical for an emerging market. When the market matures, the margin normally goes down. Tero Kivisar, who runs Eurasia, has stood here and on Capital Markets Day saying, over time, as the market matures, the margin will have to come down. We have a discussion currently about should we try to speed up the mobile data. You were into the 3G. Can that compensate? Yes, absolutely. I think it's a great opportunity. Even 4G will be an opportunity. Now, there's a question of behavior. These people, these markets normally don't buy that many smartphones.
They buy normal feature phones. Should we push smartphones a little bit more? It's a discussion that we have. I don't know yet the answer on it. Clearly, we will benefit from, I think, the explosion of mobile data in Eurasia in the coming, let's say, five years.
Thank you.
You're welcome.
Thank you, Andrew. Operator, we take the next question.
Thank you. Next question is from Maurice Patrick. Please ask your question.
Yeah, hi. It's Maurice from Barclays. On the data volume growth and revenue growth chart that you show, Lars, in the past, you've talked about the unlimited demand for bandwidth. Of course, you're managing that via the tiered pricing. Can you give us a bit of a sense of how much of that growth in traffic is driven by smartphones and how much is more by the USB modem? We get a sense of which bits are growing the fastest and how you're managing them. Thank you very much.
OK. I don't know exactly the numbers. It's mostly handsets or phones. That's good news for us because the phone consumes less traffic volumes than a dongle on a PC. Do you have the numbers?
I think it's 80/20 in the favor of smartphones.
Right.
OK. Just as a quick follow-up, people talk about this idea of sort of rural LTE as a substitute for fixed-line alternatives. You've obviously stripped the need for fiber, which presumably is more urban than rural. What's your take on the idea of mobile taking away fixed-line alternatives in rural areas?
The mobile can certainly take away the voice. I mean, we've seen that for many years. The mobile, if you have 4G, can theoretically give you about 100 Mbps . If you have a big house with many people in it and they all want to use it, I don't think in practice you're going to get 100 Mbps . You won't get 5 Mbps, but you'll get something in between. If the appetite for bandwidth is unlimited, if you really want to watch TV in HD format, 5 Mbps or 10 Mbps or 20 Mbps won't be enough. I think a lot of people are going to demand that. Therefore, I believe the fixed network is going to be important if you have a fixed network. We have no intention to go build a fixed network in Kazakhstan.
In Sweden, we have the ducts, although we found they were a little bit old when we tried to blow fibers through them. We had some problems with that. We have ducts, and we have copper. Of course, we're not going to have fiber to every home in Sweden like we did once a long time ago on copper. We're going to do it in urban areas like Stockholm and Göteborg and Malmö, and we'll do it in the medium-sized cities, et cetera. In the end, I think the customers won't really care how they get their service. I'm not sure we're going to care that much either. I think we have to manage both a mobile network and a fixed network. I think which network we use to serve you will be determined on what demand you have.
If you don't want anything more than voice, I'm sure it's going to be mobile. If you want TV HD, I know I only have one chance to do it, and it's over fiber. Then you better live in a place where I can draw fiber to lots of people. Otherwise, it won't work.
Very clear.
Thank you.
Thank you.
Thank you. I see no questions here from the floor. Maybe we have. Thomas.
Thank you. Thomas Heath with Handelsbanken. Two questions, if I may. On data growth in Sweden and the Nordics in general, I presume quite a lot of that is people trading up to smartphones. Do you have any sense of where sort of smartphone penetration is and what the rate of change is there in the Nordic space?
Basically, every phone we sell is a smartphone. I'm accelerating a little bit. It's a question of a couple of years, and we will have a base out there based on the smartphones, all of it. I'm making a bit black and white. I'm sure Andreas can make it more gray.
You also said that 8,000- 9,000 phones are smartphones. The stolen stock could be 35%?
It is. It is.
Sweden is leading the others a little bit in your networks.
I'm not sure. I think Norway is pretty good.
Norway, we have about 40% in Sweden in our base, and a little bit higher in Norway, actually.
Exactly.
My second question on Denmark. You say that you have some actions taken there. More concretely, what's in your hands? What can you do with profitability there?
I think we did the very obvious one during the fall, Håkan Doström who runs mobility, and Sören who runs mobility in Denmark. They took the cost down. I don't think that's enough. I think we have to think a little bit about what our position is in that market, what's the profile. It's difficult for us because we're not used to being number three. We think like we are number one in every market. In Denmark, we are number three. We better realize it. What does it mean? I think this cooperation on network together with Illinois is a good step in the right direction. I hope it's going to work out. I don't think that even that is going to be enough. I think there are other things. That's a debate we are having. That is an internal debate.
When we come to some conclusion that we are willing to communicate, we will do that. Having an 8% EBITDA margin in the fourth quarter, it's just unacceptable. Something has to break.
We have a follow-up question here from Stefan.
Yes, Stefan Gauffin again from Nordea. Maybe a little bit of a theoretical question. I know that for Sweden, you still manage to hold up voice and SMS. Maybe it's not the same situation in the other Nordic countries. You don't have the same problems as some other European operators. I noticed that AT&T, they have actually raised prices on data plans with between 10% and 30% now in January. I wonder, is that something that you are considering for your market? Do you believe it would even be possible to accomplish a price increase on data?
I think the big accomplishment we have done on pricing for data is really, Stefan, the fact that everybody, or nearly everybody, understands that you can't have flat fees. I think that's way more important than the actual price level. This is a highly competitive market. I think there will be price competition on data as well. I'm not so, of course, I'm worried about it. As long as everybody understands that there's got to be a relationship between how much you consume in a network and what you pay, then I think we'll be fine. I think we have a track record of being smart in bucketing services, tiered pricing. In the end, it's the perceived value of the customer who decides what they're going to pay. I come back to my two priorities. What's the quality of the network?
We've had some challenges, all of us, in the 3G network in the last year. I think customers don't like dropped calls. I don't think customers like when it's slow to get onto one of the internet sites, whatever they are. We need to fix the calls in the network or further improve it. Ultimately, it is the customer relationship and the customer experience. I think those things are more important, actually, than being SEK 5 cheaper or SEK 5 more expensive. We will always try to be careful about prices. We are the leader in this market. The leader has a special responsibility, I think. I think we have a value proposition better than our competition that justifies a somewhat higher price.
If I may, I can just underline that it's not so much about a price increase as having the right buckets. Because, I mean, if we should keep this factor of 0.5, you really have to make sure that you have the right offering for the customers. May I just go back to your question also about the voice business growing in Sweden? We should be aware that we have a slightly different situation in Sweden than we have in Finland. We have a transition on voice from fixed to mobile, which helps us. Today, I would guess 65% of all traffic is now in the mobile network. Meanwhile, we have in Finland 80%. As long as that goes on, we will see a growth on the.
It helps our mobility business.
We are losing on the broadband.
Yes.
Thank you.
We continue with a couple of questions on the conference call. I see already now that we will have a challenge to have time for all of them. We do our best. Operator, please, next question.
The next question is from Dominik Klarmann. Please ask your question.
Yes, thank you. Two questions, one on fixed, one on mobile. On the fixed side, I think the trends are quite encouraging. Just wondering how the pricing environment is developing. Any signs of price inflection as we move from copper to fiber yet? On the demand for fiber on the wholesale side, does any of your competitors use your fiber to the home or fiber to the building wholesale product yet? On the mobile side, follow-up on Sweden versus Denmark and Norway, just on a more conceptual level. Any new thoughts on why the trends are so different from maybe from a game theory point of view? Why do players behave so differently in what actually structurally are fairly similar markets? Any new thoughts there?
The last one is a difficult one because we can't really talk to anybody except we can talk to you about it. We can't talk to the other players. I don't know the answer. I'm also a bit surprised over how some players act. We have to accept that as a fact and act accordingly. I don't think I can add anything more than that.
When it comes to the fiber, yes, we have what we call an open fiber. It's open for other operations in the wholesale business. How much that is today, I can't really answer. That's an open fiber. We are also the only one that's actually regulated in the market and that actually has an open fiber. I can't really say that we have seen any kind of price pressure so far. It's a very early stage. People are actually paying us for installing the fiber to the houses, and I think that's good. Generally speaking, I don't see that we have this sort of big price we're at now on the service provider side. I don't know what you say, Andreas.
No, absolutely not.
I'm not sure you picked it up with what Per-Arne said. In Sweden, when a customer actually wants fiber, he has to do a significant upfront payment to get the fiber. That is pretty unusual, I think, for the continental Europeans.
We are paying something between EUR 1,500 for an installation.
I pay SEK 17,000. You know.
I would say no.
This sounds for being a CEO in this company. We will have time. Was that OK, Dominic?
Yes, thanks. Very helpful.
OK, we take three more questions, and then we unfortunately have to break it here. Operator, next question, please.
Next question. Do you have to go in? Please ask your question.
I'd like to follow up on mobile in Sweden. Could you update us on the trend in mobile voice pricing in Sweden, which has been very, very comfortable for the last quarters? Thank you.
I can take that. Overall, I would say it's very stable on the voice side. Of course, there is a migration going on to a lower price plan. If you want to talk about price erosion, I would say that it is about 6%- 8% in the Swedish market.
Very short. Good, Jack. Next question, please.
Next question is from James Britton. Please ask your question.
Thank you very much. Firstly, can I ask around costs? You managed to reduce your addressable costs by more than 4% in Q4, which is a big step forward from the previous quarters. Can you just clarify why margins didn't expand a bit more in the fourth quarter? Is it simply because of the commercial costs of selling smartphones? Do you expect to be able to keep reducing your addressable costs in 2012? Secondly, on Spain, can I just ask where you think margins can get to at Yoigo once the final whistle is approaching?
If I understand for the cost in Sweden or the cost overall, I think that the gross margin went down due to the fact that we had quite a lot of equipment sales. That sort of hits the margin. When it comes to look at the addressable cost base, yes, we will continue to do that going forward. One of the reasons why we actually took away the outlook for the addressable cost base is that we are now working with all the costs. We are working with the cost of goods sold, and we are working with what we call the OpEx. That, for us, is a complete sum, and that will be something that we continuously work with. As Lars had pinpointed, we will not avoid making the right investments for quality reasons.
That is why we're now sort of working with the whole cost base and try to just keep up the margin at this level.
The question of Spain. I don't want to give you any forecast. I think you are all experienced to know that it's got to be beyond 10. The question is, how much beyond 10? Two digits between 10 and 99, right? It's a good number.
OK, thank you.
Guidance 97.
Say that.
Last question, please, operator.
Next question is for Keval Khiroya. Keval, please ask your question.
Hello, Keval.
Disappeared.
We can't end it this way. We take another question then, operator.
Next question is from Jakob Bluestone. Please ask your question.
Lucky me there. Just a quick question on deleveraging. I just want to make sure I understand the math correctly. For 2011, you had SEK 10 billion in free cash flow, and your dividend payment is about SEK 12 billion. For 2012, you get an extra SEK 2 billion of Turkcell dividends, hopefully. You expect to pay less than the sort of SEK 2.5 billion in spectrum fees that you paid last year. Plus, you have a bit of organic growth. That doesn't leave you a huge amount of free cash flow for deleveraging organically. My question is, do you think you might need to make some disposals of non-core assets to speed up the deleveraging process? Do you think I'm sort of underestimating the amount of organic free cash flow that you can generate?
I think what I also take into account is the IPO in Kcell. That will also help us to deleverage. It's not only a question about free cash flow, but also the disposal of that.
Do you think you need anything beyond that, or is that more kind of case by case?
Pardon?
Do you think you might need any further disposals beyond that, or is that there's not sort of anything that you feel is necessary?
That's more case by case. If we think that it's not a part of our core business, then we'll look at it and then dispose of it at some point in time. The major thing here is the Kcell deal.
Thank you.
Maybe I missed one thing, Jakob, as well. I mean, we have the SEK 1.9 billion in dividend from Turkcell for this fiscal year. In addition, that comes hopefully to the ordinary dividend for next fiscal year.
We will have a double dividend, hopefully, from Turkcell in 2012. We will see.
We will see.
I look forward to that. Thank you.
Thank you. Sorry for not having time with all your questions. Please call me afterwards, and we'll deal with that. In the meantime, for all you here, I urge you to visit Michael here to demonstrate our 4G services. I wish you back in the Q1 in April. Thank you very much.