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Edited Transcript of TELIA.ST earnings conference call or presentation 26-Apr-17 7:30am GMT

Thomson Reuters StreetEvents

Q1 2017 Telia Company AB Earnings Call

Solna Apr 28, 2017 (Thomson StreetEvents) -- Edited Transcript of Telia Company AB earnings conference call or presentation Wednesday, April 26, 2017 at 7:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Andreas Joelsson

Telia Company AB - Head of IR

* Christian Luiga

Telia Company AB - CFO and EVP

* Johan Eric Dennelind

Telia Company AB - CEO and President

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Conference Call Participants

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* Andrew J. Lee

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Lena Osterberg

Carnegie Investment Bank AB, Research Division - Head of Research of Sweden, Head of Technology Hardware and Equipment, and Financial Analyst

* Maurice Patrick

Barclays PLC, Research Division - MD

* Nick Lyall

Societe Generale Cross Asset Research - Equity Analyst

* Peter Kurt Nielsen

* Robert Slorach

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Roman Arbuzov

UBS Investment Bank, Research Division - Director and Equity Research Analyst of Telecoms

* Sanvir Dhillon

Exane BNP Paribas, Research Division - Research Analyst

* Sunil Praful Patel

BofA Merrill Lynch, Research Division - VP

* Thomas Heath

Danske Bank Markets Equity Research - Analyst

* Ulrich Rathe

Jefferies LLC, Research Division - Senior European Telecommunications Analyst

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Presentation

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Andreas Joelsson, Telia Company AB - Head of IR [1]

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Welcome to this presentation of Telia Company's Q1 report for 2017. My name is Andreas Joelsson. I'm head of the IR department at Telia Company. And today we will have 2 presenters, as usual. Our President and CEO, Johan Dennelind, will go through the quarter, the highlights and also some part of the strategy and priorities for 2017; and then our CFO, Christian Luiga, will go to the actual numbers, especially per country.

So Johan, please welcome up and give us thought.

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Johan Eric Dennelind, Telia Company AB - CEO and President [2]

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Thank you, Andreas, and good morning to you all, especially you here in this so-called spring morning in Stockholm. For you -- those of you out there, it's a very cold spring in Stockholm.

Let's take us on the Q1 results. And before the numbers, let's speak a little bit about the highlights or at least the main messages for the quarter. First of all, I'd like to highlight the fact that we are now Telia main brand in all our home core 6 markets. We have rebranded 2 more markets during the quarter, Finland and Lithuania. I'll come back to that a little bit later. The key driver for our revenue growth in the quarter is the mobile side, which is actually growing across the footprint, which we'll also come back to a bit. It's a strong underlying performance. We are in line on our EBITDA for the group with our expectations, and I'm also seeing that's pretty much in line with the external expectation as well, but the mix is somewhat different. We will come back to that. And for those of you who have dived into the numbers already, you see a very, very strong cash flow generation in quarter 1, and we'll also explain that a bit further because there's some one-offs in that number, which will not come through later on.

We have closed the Phonero transaction, which will strengthen us significantly in Norway and in B2B, and produce more synergies as we did with the Tele2 deal. And then last on the continuing operations, a strengthened balance sheet through a hybrid issue in the quarter, with about EUR 1.5 billion.

Those are main messages. Let's look at some other key messages which refer to our Eurasian footprint, the discontinued operation. A couple of operational performance points first. There is a continuing positive trend for the region on the revenue growth and on the EBITDA performance. That is important to mention. The markets are turning around. It's been very difficult, as you know, over the last 2 -- well, actually last 18 months or so. We're coming through, and that's a very timely. And we'll come back to that, I'm sure, on the questions.

We have now today also taken out the fact that we have closed the deal in the Tajikistan. We are no longer present in the market. We have no longer any outstanding liabilities or risk exposures. So it's closed divestment of Tcell in Tajikistan. So 2 out of 5 have been divested.

And finally and not least, the provision that we made in conjunction with Q3 last year. We took a provision of $1.45 billion for the settlement discussions with the authorities around Uzbekistan. It's taking time, we are now at the point where we have reasons to revise that provision down to $1 billion, based on the constructive dialogue that we've had. That has taken time but has also put us in a safe situation where we see a better outcome when we finalize this. And it's just not the number. We will have to settle a full package with the authorities, and we're finalizing that now. And hopefully, we can conclude this in the near term before the fall comes into Stockholm.

So that are really the key things in the report and in the quarter, which I'd like you to pay attention to. And I'm sure we'll come back to this somewhat on the Q&As.

Let's look a bit on the continuing operations and what's happening in the performance. We are in the positive territory for revenue growth, and it's the second quarter, but it's higher in the last quarter, and that's good. We're not guiding you on service revenue, as you know, but we're happy to see that we're in a positive space, and it's driven very, very much, of course, by the mobile performance across. And I'll come back to that shortly.

The EBITDA, however, is not following that growth, and of course, that's not satisfactory. Our ambition, obviously, is to grow at least in pace with the revenue growth on the profitability side. This quarter has some good explanations, which Christian will take you through in more detail. But there are some one-off characteristics on the cost increases in Sweden and Finland. So we are not worried for the year, and we'll come back to the fact that we will normalize costs going forward.

Then on the growth drivers. We are then on the mobile billed service revenue around 2.5% growth for our core Nordic-Baltic footprints. And it varies from small growth to strong growth in our footprints here. Overall, it's around 3.5% across the markets, the total mobile revenue growth, and the billed is 2.5%, as I said.

Looking at where it comes from, you see on this slide, strong growth in Norway and Finland. Finland, very much driven by the retail side and the ARPU uplifts and the good pricing initiatives. Norway, strong both in wholesale and in retail, driving growth in the Norwegian market, which is very positive to see. Sweden, hampered somewhat by the B2B drag still, but in the positive territory for mobile. I think there is more to come based on the new pricing and bundles launched recently in Sweden, which we'll speak more about later, I'm sure. And then Denmark is in a good position on the mobile side with growth. So all in all, mobile, driving positive growth.

Then let me just reiterate, reaffirm our strategy, which is there, which we are executing on. It is about enhancing the core, as you know. We are investing in our networks, both in mobile and fiber footprints. And we're working hard to produce and shape our convergence offerings across the footprints where we are able to both bring fixed closer to the homes to -- but also to stimulate that mobile lifestyle.

And then competitive operations is about that efficient operation with the right platform products and systems, which are taking place mainly in Finland and Sweden, in big transformation initiatives, which has a bit of a drag still on our full potential. Then we're investing in opportunities closed to the core, and when I emphasize close to the core, our initiatives here should be clearly boosting our core business as well as taking us into some interesting new verticals where growth is very much higher than in our core business.

The priorities for the year are very clear. We have lined up the guidance for you. At least SEK 7 billion of operational free cash flow. That is our key measures for the year, and we are comfortable on that measure, clearly, especially based on the over performance, to some extent, in Q1. EBITDA, very focused on delivering an EBITDA in line with 2016. And then also shaping that balance sheet to be according to our leverage targets and rating but also creating space to invest further in our core Nordic-Baltic strategy. Those are 3 very clear priorities, which we'll continue to update you on.

Speaking of convergence, when I'm out meeting a lot of you on the road, we end up a lot speaking about our convergence ambition. Let me just spend a couple of minutes on this. It's not a discount game. That's my main message. For us, convergence is not a discount game. Convergence is about creating a better customer experience with more services, seamlessly delivered to you or your home or your family or your company, for that matter. But this is mainly the consumer convergence we talk about here. And our strategy is to value-load more, give more to our customers as well as stand -- step up pricing, as we add other type of services into the bundles and offers that we have. And there are examples of that in the Swedish market for the moment, where we have launched Telia Sense, Telia Zone, that adds to the holistic brand experience of Telia. This is implemented across the footprint. Of course, it is also about bringing more products into one seamless interface: TV, fixed broadband and mobile.

This is done with an ambition of a digital seamless customer service and interface, self-service. And that is not done overnight of course, and that's a lot of focus in that transformation in our core markets to create that superior digital experience, which will create loyalty among our customers and create that loved brand of ours. And of course, convergence is about exploiting -- or exploring, rather, the fixed and mobile technologies to bring fixed as far out as possible to offload capacity, but also to give the full experience of the ever-so-increasing data demand of homes and companies, for that matter, as well.

That takes me into, again, the fact that we have rebranded Telia in all our markets. We are now in a position to leverage the brand across, not just on one product but on many products. And then there are clear examples of that already on the roaming propositions, for instance, in the Nordic-Baltics, which, by the way, now are also taken fully out on EU roaming path for our customers in Sweden and Finland and Estonia and Norway and also Lithuania coming with Denmark.

So the rebranding has been very, very positive, and I have to say, it exceeded our expectations in terms of brand awareness achieved in the Telia main brand on a very short notice. These are 4 markets that we rebranded over the last 18 months, starting with Estonia, Norway, Lithuania and then Finland just recently going from their historic brands into Telia as a main brand and achieving record brand awareness in a very short period of time. So very happy with that and more to be done and seeing results of this.

Another thing I want to mention in this context is our Younite initiative that we launched during the quarter. It is our way to make even more impact to society, linking it to the UN sustainability development goals and to our digital mission that we have on making societies more digital, but also enabling inhabitants and citizens to benefit fully from the digital era. And this ambition is very clear. We want all our employees, 21,000, to spend a day per year doing good in society and creating more impact. And it has started off very, very well with our partners across our markets.

Then let me end on a couple of things. First, the M&A in Norway that we got through after long and hard work, dialogues with the authorities is now closed and full esteem ahead to make sure this becomes as good as the Tele2 integration that was very successful. As you know it created over NOK 1 billion in synergies. We have been clear that this should be NOK 400 million synergies when we have the full run rate and also strengthen us significantly in the enterprise space. So I'm very glad to see that, and we now have -- we have step-up to do in Norway, which you have seen is the star of the quarter in terms of performance. So even more to expect out of an already strong Norway.

Then summarizing Q1. As I said, we are continuing to execute on our strategy. We have good momentum. The priorities are very clear for the year and very much in line with the guidance we have given. But there are more to be done on costs. Very clearly so, in Finland and Sweden. And rest assure that the cost management and focus is high, and we are sending the message that we're comfortable that we are back on normalized levels in Q2, Q3 and Q4 for Finland and Sweden.

So all in all, very comfortable on our guidance given earlier in the year, and I think Christian, will give you even further comfort on that.

So with this, I will invite Christian to take us through the numbers even more in detail.

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Christian Luiga, Telia Company AB - CFO and EVP [3]

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Thank you, Johan. Good morning, everyone. I welcome you as well to this morning. I am -- will reiterate Johan's highlights. We have a stronger revenue growth this quarter than last quarter. It's improving. It's 1.4% compared to 0.4% last quarter. And we are also stepping up on the mobile, and that is the reason. The other thing is cash flow, and the cash flow is coming with the right drivers, the expected drivers that we have talked about already before. We also have a strong balance sheet, I will come back to, and then I will start with going through country by country.

So if we start with Sweden, a flattish growth in Sweden. We have a somewhat increased decline in the fixed side this quarter. It is around SEK 175 million negative compared to around SEK 150 million to SEK 160 million in previous quarters, so it's slightly up. That said, we do have an ARPU uplift, and we have a good development in B2C, but the negative trend in B2C comes from the fixed decline. The B2B is continuing to be only 2.9% negative, and we have had numbers around 5% to 6% in the previous year. This is too early to say it's a trend. The B2B mix is that the SoHo/SME is still growing with about close to 1%, meanwhile the large is declining with about 6% in the quarter.

The EBITDA is down 6.5%, and that is OpEx and cost that I will come back to, but it's also the service revenue mix, with the fixed decline increasing and other type of service revenue coming in. COGS is also something we work with. And as we have talked about before, the savings that we see and come through in our operations does not come only on OpEx, it also comes on the COGS side. And that is a pretty much 50-50 split.

If we look at the cost level in Sweden, we have illustrated that on the OpEx side here -- this is not the COGS. This is only the OpEx -- we see that we have a small saving and then we have an elevated cost situation in IT and in customer experience in this quarter. We are definitely not satisfied with this position, and this is not something that we think is sustainable. We see that this cost in IT is mainly projects becoming OpEx instead of CapEx. Some of that is the security and privacy development work done in GDPR, and some relates to the IT journey that we are doing.

On the resource cost, it's both from customer operations but also part of this uplift comes in the technicians that we now sell as consultants. So service revenue is increasing, and resource cost on consultants selling the personal technicians in the, primarily, SoHo/SME segment is also increasing. That said, we will take down cost in the coming three quarters. The -- it will come through in quarter 2 but it will be visible primarily in quarter 3 and quarter 4. The initiatives have started, and it will include the resource costs.

If we then go to Norway, a strong execution and then good execution on ARPU. We know we have customers leaving us to our smaller competitor in Norway. They are leaving at a lower ARPU than our average. That is helping the ARPU uplift. But without that, even taking that out, we have a slight ARPU uplift in Norway from a very good management of upsell in the retail business. That brings us to an above 5% mobile growth.

On top of that, cost management is good. And in addition, we should remember that we had a rebranding cost in quarter 1 last year that was up to SEK 30 million from comparison reasons. Still, strong execution in Norway, and we believe that we will also now gain from -- well, from the integration. We have done it before, so we feel quite comfortable we can handle that in a good way during the year.

Finland is also having a good ARPU development. Finland is having a B2C growth of 1.7% and -- where mobile is compensating for fixed. We have an ARPU uplift there from the migration from fixed to mobile. We also have price increases, and we also have upsell. So a good combination of reasons for uplift in Finland.

The B2B side is flattish, a fixed decline actually compensated by a mobile side, so overall, good revenue development in Finland. This quarter, we had one-offs and primarily, the rebranding. That rebranding will also spill over a little bit into quarter 2, and then that should disappear. And the decrease this year -- this quarter is fully explained by one-offs.

The Danish market continues to be very competitive, especially on the MVNO side. The MNO are more stable on the pricing side since last summer, when we had a price uplift in the MNO side. And then we continue to drive our strategy to focus on the value interesting customer, those who want value and not only price. That means that we have a slight price increase or ARPU uplift, and resulting in a flattish billed revenue. And on top of that, some wholesale and interconnect impact makes the billed -- the service revenue mobile go up in Denmark.

I also want to reiterate what I've said in previous quarters that I think that our Danish management team is doing a good job, considering the circumstances in the Danish market.

Baltics, all 3 countries delivering on both growth on mobile service revenue and the EBITDA. It is a, even in the fixed side, a stable situation on the KPIs that are important. We are growing customer base and in all these 3 markets on the mobile side. These, we usually say, are smaller countries but they are important. They are, together, bringing in quite a lot of cash flow and value to the group and important to also have on the right side of the zero bar. And they are doing very well in that. Estonia, impacted by the restructuring that we did in the second half of 2016, we talked about, and that is coming through now visible in the EBITDA uplift, which is very positive.

EPS development, this has been a number that has fluctuated quite heavily in our books, the last year, and one reason is the, of course, the settlement of Uzbekistan that is coming through. It is SEK 0.95 impact this quarter, positive from the reevaluation we have done on the settlement amount. And discontinued operations is therefore negative. Without that, slightly, that stands completely from the Nepal divestment that is out of the numbers, and it was not in the first quarter last year. Actually, the rest of Eurasia is bringing a positive EPS to the group right now.

The other thing is associates. This is the quarter 4 numbers coming through, and they reported a slight negative impact on our EPS. And then nonrecurring is flattish compared to last year, and operations, slightly down, as we talked about.

Free cash flow rolling 12 month, picking up again. I said in the last presentation that cash flow will improve this quarter and for the year from the lower CapEx, from the working capital initiatives and from the taxes. And that is exactly what we see coming through the numbers. We have an impact on working capital of about SEK 300 million. I need to also say, which I have done also many times before, working capital goes a little bit up and down in the quarters because of seasonality, but we feel that we have the initiatives now in place, and we'll deliver on this metric for the year.

The CapEx is down and should be down, also a little bit impacted by higher OpEx than CapEx, as I talked about before. But it will also be down compared to last year for the year. This quarter, it was SEK 350 million on cash CapEx impact. And then we had, as I also said last quarter, SEK 700 million in refund for overpayment of taxes in 2016 coming through now. We were saying it's going to come through in quarter 1 or quarter 2, it came through in quarter 1 in March. And that is now a fixed number in our balance sheet and cash. We also had an impact from finance debt, but that is -- can fluctuate more over the year, so we should be too careful -- a little bit careful to bank debt in completely before we progress a little bit further in the year.

That said, I feel very comfortable about the cash flow progress, and I feel comfortable about our target for the year, above SEK 7 billion. The free cash flow we also watch here is not impacted by associate's dividend or licenses in quarter 1 this year or last year. So this is pretty much also the SEK 3.8 billion -- SEK 3.9 billion we have in this quarter is pretty much also our operational free cash flow that we are measuring ourselves on towards you.

We ended up at 1.58x in net debt-to-EBITDA, which is in the lower range of our target of 2x. We did a hybrid in the quarter. A hybrid is a mix between equity and bond and normal debt. It is actually booked as debt. It is a debt instrument, but the rating institutes -- allocates 50% of this to equity based on the construction and the security of that debt. And it was well-priced, and it was attractive timing. And therefore, we went out with the SEK 15 billion. It helps to support the strategy of having flexibility to want to do M&As, when we want to do M&As, and have a strong balance sheet to decide when we want to do things and not have to wait for other things to happen first. And this is something we talked about before. We want to have the flexibility and the ownership of our agenda. This helps us very much in that.

We have a strong wish to do M&As in the Nordic-Baltics, ICT and in the fixed side, we have talked about a lot. And we have Phonero, as one very clear example, closed in this quarter.

We also have a strong commitment to our rating. And then after we had concluded this, Standard & Poor's kept their A- rating and took us off negative watch, which is very pleasing and will help us in the funding costs going forward.

To illustrate a little bit the performance situation we have, which is something I usually end up anyway talking to our investors with about, and this is then the 1.58x we ended the quarter with. And we can then see what is the effect of the hybrid bond on our net debt-to-EBITDA leverage, takes us down to 1.3x. We have a dividend paid out in April, takes us up to 1.5x, and with the SEK 8.9 billion that we have in provision that we, one day, is -- are expecting the best estimate we will pay, we will end up at SEK 1.8 billion compared to our target of 2.0 net debt-to-EBITDA.

And this is why we believe we have a strong balance sheet situation, and we have a good cash flow, which leads me into the final slide, which is the outlook for the year where we have 2 guidances. One is the EBITDA. And to be around the same level as 2016, we have started slightly negative. We have said we will be weaker in the first half than the second half, and that is something we reiterate. We will continue the initiatives we have and the strong cash -- cost programs in Sweden that we have started, and they will help us to change also Sweden in the same way compared to the first half and the second half.

Previous year, we talked about that Sweden needs to follow and have the same pattern as the group, and that is also the same situation this year, where we will move into another territory in the second half. The cash flow is -- we started strong. We expected also a strong development, and we feel comfortable that we will meet the above SEK 7 billion free cash flow for the year, operational free cash flow.

That is all from me.

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Andreas Joelsson, Telia Company AB - Head of IR [4]

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Very good. I'll invite Johan back up on stage and open up for Q&A. I think we'll start on the floor, and I will forget Robert, because he is on the wrong side, so you start with Robert.

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Questions and Answers

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Robert Slorach, Handelsbanken Capital Markets AB, Research Division - Research Analyst [1]

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Christian, you talked about the high-cost in Sweden in the first quarter and that they're going to return to a normalized level. Could you maybe discuss, give us a feel for how much was not-too-normal cost in the first quarter? How much we can expect it to go down from there?

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Christian Luiga, Telia Company AB - CFO and EVP [2]

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I don't want to give you a guidance exactly the same way as last year on guidance on the OpEx level. Cost is measured both in COGS and OpEx. Our model is changing over time. So as I said, part of the OpEx is related to service revenue growth, the technicians. That is not a problem, but that is part of the increase that may not disappear. But we will have to do more on resource cost, in general, and that is happening and that is initiated. We will secure that we deliver on our EBITDA targets.

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Andreas Joelsson, Telia Company AB - Head of IR [3]

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Good. Johanna?

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Unidentified Analyst, [4]

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Yes. Two questions if I may. First one, just a follow-up on Sweden. Can you say something sort of what are these costs initiatives example of? Is it those IT projects that you will close down? Or is it a totally new unrelated to what drives cost in this quarter? And yes, I think that's it.

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Christian Luiga, Telia Company AB - CFO and EVP [5]

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If I start with that. We have said before that we are running many several smaller cost initiatives in each country, and that is ongoing right now. And then on top of that, we have said in this quarter, that we will increase that pace and increase the efforts in Sweden to -- because we are thinking, the cost are actually not satisfactory. So we are moving on in the same kind of program, but we are stepping it up in Sweden.

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Unidentified Analyst, [6]

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And the second question, can you comment anything on the investigation from EU yesterday? What you foresee could happen if you were sort of forced to let in another player as an MVNO network? Or what can be the potential end game here?

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Johan Eric Dennelind, Telia Company AB - CEO and President [7]

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Thanks, Johanna. We, obviously, yesterday, all 4 Swedish MNO's were -- visited, and there is an ongoing, well, at least questions ongoing, so we're not going to comment so much on what they're asking, how that goes. But let me just say, in Sweden, the MVNO space is not regulated by the Swedish PTS. It is a competitive market with 4 players, competing for MVNOs. And we have around 10 MVNOs on our network today. Of course, that's a business we want, we fight for. So let's see what this is all about, and let's see what comes out later in the investigation.

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Andreas Joelsson, Telia Company AB - Head of IR [8]

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Lena?

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Lena Osterberg, Carnegie Investment Bank AB, Research Division - Head of Research of Sweden, Head of Technology Hardware and Equipment, and Financial Analyst [9]

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Question on the Phonero acquisition, on the migration of the traffic there. Am I correct to understand that you will complete the migration already by Q2? And could you also say maybe how much of the NOK 400 million synergies is expected to come from the traffic migration?

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Johan Eric Dennelind, Telia Company AB - CEO and President [10]

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So Phonero transaction just closed, and it is a lead time to, of course, get the full synergies out. The NOK 400 million is a full run rate, and that will not be achieved for the year. The migration, of course, will start as soon as possible, but we're not giving any precise estimate yet on when all traffic is migrated. But the full year run rate is NOK 400 million. Of course, we target to do this as soon as we can, but it is something that is slightly different from migration on the consumer space. The business-to-business migration is somewhat more complex and takes slightly longer time to do in a responsible way, to make sure that customers get what they asked for. So we'll update you along the year on the progress of those NOK 400 million synergies.

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Christian Luiga, Telia Company AB - CFO and EVP [11]

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Similar to Tele2, the majority is, all the synergies comes from the traffic side.

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Andreas Joelsson, Telia Company AB - Head of IR [12]

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I think we try to take 1 or 2 questions from the ones calling in. Operator, may we have the first question please?

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Operator [13]

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Absolutely, your first question comes from Peter Nielsen.

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Peter Kurt Nielsen, [14]

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If I can just, I'm sorry, stay with the OpEx in Sweden in the quarter. You're saying, Christian, that you've had 2 higher OpEx on the customer experience. Why has that been necessary in Q1, please? And given that, you're telling us that the cost situation as of now is unsatisfactory, in light of the fact they're coming towards the end of 3-year, SEK 2 billion cost reduction program, should that make us concerned and maybe have to look at potentially another sort of major size cost reduction program? And then just secondly, any progress on the -- any update on the -- progress on the Eurasian disposal process? Obviously, I'm not asking for specifics. But 3 months ago, you told us that you were very optimistic and confident of completing this process. Are you as optimistic and confident now as you were 3 months ago? And any color you can give us on the momentum of this process?

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Johan Eric Dennelind, Telia Company AB - CEO and President [15]

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Let me take the Eurasia question for you. The -- we closed one more today, as you know, where we announced one more market exits today in Tajikistan. That means that we have 5 more, of which 4 are under the Fintur umbrella. And as you know, last year was very much a year where we tried to divest Fintur to our co-shareholder in Turkcell. They were the buyers, but now they are clear sellers. So on the sell side together with us has been more constructive in finding the new interested parties to take Fintur further. We're making good progress. I think we are as comfortable as we were last time we talked about this that this is possible to complete during the year. And we will definitely keep you posted as soon as things materialize or develop further. But the strong focus and good conditions to continue this, especially on the back of what I mentioned into my opening that the performance has improved also in these markets.

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Christian Luiga, Telia Company AB - CFO and EVP [16]

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On the cost side, Peter, the SEK 2 billion program is coming through, and we shouldn't be worried, in general, but we need to be on top and serious about that our business model is changing. We are getting a service revenue mix that is different from the past. That means that we need to continue to drive costs, and this is not going to stop. The customer experience part is an uplift we have in customer operations for different reasons to drive our sort of link to our B2C customers, primarily in B2B also partly in Sweden, but also the technicians that I talked about. Those are the type. I think that, that is -- it -- I mean, we will just continue to step up and decide and tune and shape this company, the cost structure so it fits the future model as we go. And that is the short answer.

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Andreas Joelsson, Telia Company AB - Head of IR [17]

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Thank you for the question, P.K. Maybe our next question, operator, please?

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Operator [18]

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And you next question comes from San Dhillon.

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Sanvir Dhillon, Exane BNP Paribas, Research Division - Research Analyst [19]

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Two questions if I may. In terms of roaming, can you remind us again what impact your expecting for the full year and what are the early indications you've seen on the elasticity of roaming -- European roaming demand when you've included it in the bundle? And secondly, just on costs. Is there anything more you can do around centralization of costs following the Telia rebranding across the board that can accrete the margins for the group?

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Johan Eric Dennelind, Telia Company AB - CEO and President [20]

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Roaming, my first thing I like to say on roaming is that the customer love it. They really embrace it, and we see a strong uptake and appetite, of course, to now live freely on the EU zone. And this creates a behavior also by using your devices more often, and which will also stimulate other type of usage and growth outside EU. Our impact, if we do nothing, of course, is negative, but of course, we're doing things to mitigate. We have seen that across with the recent launches, both in Sweden and Finland, that it comes with an increase in price that we are not shy to talk about. We give more and we charge more. Of course, our cost situation is be carefully managed and monitored as roaming traffic grows. But our size and our agreements on wholesale helps to put us in a good position with good visibility to manage this within our guidance on keeping EBITDA flat for the year. On the cost side, the reason that we have rebranded to Telia is not mainly cost-driven. It is customer experience-driven and proposition-driven and get the best practices across on leverage, on convergence as we go along. Of course, it creates opportunities for best practice on synergies to some extent, but they will not be material in that space. But having said that, of course, group has other cost initiatives where we see clear and large synergies. For example, running operations in one place for several markets. And that one, we have higher ambitions on creating more cost efficiencies through. And well, I'm sure we'll speak more about that during the year.

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Andreas Joelsson, Telia Company AB - Head of IR [21]

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Thank you, San. Do you have a follow-up?

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Sanvir Dhillon, Exane BNP Paribas, Research Division - Research Analyst [22]

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No, no.

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Andreas Joelsson, Telia Company AB - Head of IR [23]

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Operator, could we have the next question, please?

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Operator [24]

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It is from Roman Arbuzov.

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Roman Arbuzov, UBS Investment Bank, Research Division - Director and Equity Research Analyst of Telecoms [25]

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I have 2, please. So the first one is about Sweden and the B2B segment. So you're talking about some stabilization in the large enterprise. Could you please just talk about what's driving that in a little bit more detail? Is it the end of repricing cycle, for example? Was there a particular initiative that is driving that? And then secondly, just in Denmark, we are seeing some modest improvements. I mean, they are modest, but we saw flat to maybe even marginally positive mobile service revenue growth in the quarter. Are your views on Denmark evolving at all to the positive side and do you think an organic solution, Denmark is actually becoming more feasible now? Or do you still think that that's not really an option?

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Johan Eric Dennelind, Telia Company AB - CEO and President [26]

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Sweden, B2B. I wish I could say it is we're out of this negative trend and territory and we see only positive going forward, but we're not there yet. But we do have to say there is a stabilization, as Christian mentioned. I mean, 2 quarters in a row, we're significantly better, bad numbers. The reason is, of course, hard work and good sales and management of customers, good negotiations, but also keeping and gaining customers from others. So it's a result from hard work, but it's also some cyclical affects. And therefore, we are not ready to say that this is a clear trend shift yet in the B2B large. Having said that, I'll also like to mention the SoHo/SME is and still on a good pace. And when we said it was a trend shift, it was a trend shift. So let's keep an eye on the large as we go further, but it feels slightly better. Denmark, even if we see some kind of stabilization in the pricing environment from the MNOs, there is still crazy price fights going on across market from MVNOs, which puts pressure on pricing actually across the board. And we haven't changed our view in terms of the prospects of creating enough value just being smart and efficient and great organically. That will not cut it to create value for shareholders over time. So therefore, we're still very focused on finding structural solutions for our Danish situation. And let me repeat what I said last time, we haven't ruled out anything in terms of structural deals, but when it comes to TDC, as I said before, the valuation on the risk, it was not attractive and it's still not attractive, so we're focusing on other options.

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Andreas Joelsson, Telia Company AB - Head of IR [27]

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Could we have -- we have plenty of questions from the phone conference. So we'll take another one, operator.

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Operator [28]

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Your next question comes from Maurice Patrick.

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Maurice Patrick, Barclays PLC, Research Division - MD [29]

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So a question on the cash flow, please. You guided to greater than SEK 7 billion of free cash flow for this year on your definition, very strong, so the SEK 4 billion in Q1 already you had, and some of that is one-off in nature. But you have talked about an intention to grow cash flow in the future. So thoughts in terms of how much of the 1Q beat will unwind possibly during the rest of the year, and any changes in your view around the intention to grow cash flow sustainably over the coming years.

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Christian Luiga, Telia Company AB - CFO and EVP [30]

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Clearly, I mean, you're spot on in your analysis, but the cash flow growth over time needs to come from CapEx, working capital and our profitability, and that is the fundamental base for cash flow growth, not tax and financial net. We can work with that as well, and that will have an impact, but that is not our core what we're driving. So that's what you should foresee over time.

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Andreas Joelsson, Telia Company AB - Head of IR [31]

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Thank you, Maurice. Could we take one more from the floor? I know that Thomas Heath is eager to ask a question.

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Thomas Heath, Danske Bank Markets Equity Research - Analyst [32]

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Two questions if I may. Firstly, in Sweden, you have competitors launching unlimited mobile data offers or be it at quite high price levels, and we already have unlimited offers from competitors at least in Finland. So just curious to hear your thoughts on this development, perhaps in a longer-term thinking on how you view these type of offers? And then secondly, on Latvia, which you moved to other operations, how should we think about Latvia again in the longer term?

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Johan Eric Dennelind, Telia Company AB - CEO and President [33]

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Well, unlimited or not, I think the main point and the main focus is to give our customers what they need and want. And right now, we're doing that. We have generous buckets, if you call it that, which are well and competitively priced. That's the feedback we're getting, and that's the numbers we're showing. Of course, there are more to do, but we're still reluctant to go unlimited because we don't see the reason for it, in fact. Of course, perception-wise, we need to create a value that works for our customers and that you need to then be very close to the market and see what happens. In Finland, we have tuned it to be very competitive. In Sweden, we're still competitive, but I'm sure we can do more. We saw some competitors coming out with very strong numbers, and we're looking at that, of course, and see if we can change anything and just tune our propositions. But right now, I think we're in a good to spot with the Telia brand in Sweden giving a lot more, charging a bit more. On Latvia, thanks for bringing that up. That was the missing piece in our seven markets in the Nordic-Baltics. We still have 2 companies there, associate and subsidiary. We have a clear ambition and the desire to bring them together to create the full potential of the 2 companies coming together, like we have done in Estonia, like we have done in Lithuania and Finland, by the way, and Sweden also, bringing fixed and mobile together. And we see the clear proposition for that, but we need other shareholders to agree with that and mainly, of course, the Latvian State. And we have good, constructive dialogues, which we hope to progress during the near future.

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Andreas Joelsson, Telia Company AB - Head of IR [34]

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Thank you for the question, Thomas. We return to the conference. And operator, could we have the next question please?

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Operator [35]

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Absolutely, the next question is from Sunil Patel.

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Sunil Praful Patel, BofA Merrill Lynch, Research Division - VP [36]

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Just 2 questions from myself. On Sweden EBITDA, you grew the EBITDA very slightly but you grew it last year. Do you believe that Sweden EBITDA can grow in 2017? And my second question is, Johan mentioned convergence, I think, earlier in the slide deck, can you give us basis, statistics and sort of how many of your customer base take 3 or even 4 products from yourself and really what your ambitions are in terms of these KPIs?

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Johan Eric Dennelind, Telia Company AB - CEO and President [37]

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Let me be clear on Sweden, and Christian has said this several times, it will improve over the year, especially from stronger focus on the costs, getting that in line with our expectations. So that's a very clear message and a very clear focus. We don't guide on country-per-country EBITDA, but as Christian said, the shape of Sweden EBITDA is that it improves, second half. And I think you should take comfort in that. In terms of convergence, there are many measures you can have, and we have introduced a new definition, for instance, of ARPA in Finland, which we follow very closely. Average revenue per account, that's one measure. And we see strong improvements when people take up, of course, more services. The key measure that we look at also here is the churn, and that reduces significantly as you take 1 or 2 more products and services. And that's the whole point of my triangle that I showed you on my slide. We're starting from the top. We're starting from offering the segment of want more from Telia brands, more services, more products, and they're prepared to pay for it. That creates stickiness and loyalty, and then you can trickle down later. So we don't start with discount, and we're keeping an eye on loyalty and churn as key measures.

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Sunil Praful Patel, BofA Merrill Lynch, Research Division - VP [38]

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Just as a follow-up there, like how much of your base -- how many -- what percentage of your base are within such a bundle? And I appreciate, it's not discounted, but actually it takes such a converged platform.

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Johan Eric Dennelind, Telia Company AB - CEO and President [39]

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I don't think we have disclosed that specific number on how many products we have in our various segments. I think when time is right, we will come out and show you how it looks in the respective countries. We're not mature enough on our convergence across the footprint yet, so that's why I bring it up to show you our focus of that. It's more important to take step-by-step than rush in to a wide launch of convergence, which will, for sure, drive discount and price order, and that's not our focus.

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Andreas Joelsson, Telia Company AB - Head of IR [40]

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Thank you, Sunil. May we have the next question please.

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Operator [41]

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Your next question comes from Nick Lyall.

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Nick Lyall, Societe Generale Cross Asset Research - Equity Analyst [42]

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Just a couple of questions, and one on Sweden, please. In the B2C business, on fixed, some of the average looked pretty weak this quarter. So is there a rising competition in the fixed business that you're seeing? And secondly, on the -- on Turkcell, any progress at all on talks with the other parties or on the prospect of a dividend from your standpoint please?

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Johan Eric Dennelind, Telia Company AB - CEO and President [43]

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Let me take my favorite subject, and Christian, you can take the Swedish one. Turkcell, we care that there are a lot of things going on in Turkey, as you are aware and also quite active Turkcell agenda. There was an AGM ambition for Q1. I think that is now scheduled for later in Q2. Of course, we have a clear ambition to agree among shareholders for a dividend. There is nothing we have counted or put in our plans or forecast, so if a dividend should happen, that's an upside.

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Christian Luiga, Telia Company AB - CFO and EVP [44]

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And on the fixed side, as I said before, we had a slightly increased to SEK 170 million drop in Sweden compared to SEK 150 million and SEK 160 million in previous quarters. We don't see an increased competition. And it's too early to say in this legacy segment if there is any changes, so we have to wait and see. But we will keep an eye on it, but nothing alarming at this point.

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Andreas Joelsson, Telia Company AB - Head of IR [45]

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Thank you, Nick. May we have the next question please, operator?

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Operator [46]

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And your next question comes from Andrew Lee.

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Andrew J. Lee, Goldman Sachs Group Inc., Research Division - Equity Analyst [47]

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I just had a question on M&A incomes and another question on Swedish mobile. So on the content side, I wonder if you just talk through how can earning content improve your customer proposition in domestic fixed? And are there any organic or inorganic opportunities to deliver that? And then secondly, allegations (inaudible) that the operator confidence in Swedish mobile growth seems weaker, and most of you seemed to expect relatively low growth, at least, say, the next year or 2. Wondering if you could just talk about what has changed structurally do you think? I mean, Swedish mobile no longer offers growth or top line growth in European peers?

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Johan Eric Dennelind, Telia Company AB - CEO and President [48]

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On a broken line there, I think we picked up your questions. Let me address the content question, it becomes a bit generic, but still, of course, great content is a prerequisite to have a TV offering. And then the question is how do you deliver that content, and we do that today as a distributor or a smart distributor or an even a better distributor. And we, I think, have shown a good track record across our markets to do that. Then the question is, how do you get the right content on that distribution, and today, we do it in a classic way. We buy content from the content houses and then we deliver it to our customers. The question we have, how sustainable is that over time? What do we need to do to get -- secure our content for our customers to make sure that they stay with us and not just on one product, but back to my convergence discussion, on more products, which will be, as we all know, a great business case? So the strategic question is, how do we secure content? And that we can do in many ways. I think we need to do more than we do today, to just buy content, we can partner up, and we're looking at that as we go along. And we haven't done anything yet, and that means that we haven't found any attractive value-creative way of doing it. And that's always a prerequisite when we do these things that we look at it strictly from a value creation point of view. And if we do anything, we will come out and give you very clear views on how to create value on that type of investments. Christian?

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Christian Luiga, Telia Company AB - CFO and EVP [49]

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You want me to talk about the top line growth of mobile in Sweden?

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Johan Eric Dennelind, Telia Company AB - CEO and President [50]

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Yes, that's your favorite topic.

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Christian Luiga, Telia Company AB - CFO and EVP [51]

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That's my favorite topic. Well, on the lower growth in Sweden compared to the Europe market, I -- and your expectation that it should be higher in the future compared to the European peers. I think -- I don't think we have a situation today where we believe we don't have a potential for growth in mobile going forward. And then the question is, what the rate will be? And we will see. We will do our best to increase both pricing and the value creation for our customers. That's a combination, of course. And then that's it. I -- it's difficult to answer, actually, your question of if we will be lower than Europe in the future.

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Andrew J. Lee, Goldman Sachs Group Inc., Research Division - Equity Analyst [52]

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It was more just what -- you've consistently delivered higher growth. It doesn't appear to be the case at least over the next -- at the moment, and it doesn't appear to be your kind of (inaudible) for the year. What are the obstacles? What's stopping you to kind of delivering the above-average European growth that you have been delivering in the past? Is there something new that's holding you back?

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Johan Eric Dennelind, Telia Company AB - CEO and President [53]

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Let me have a go as well, then I'll -- at the important question, but let's zoom in. This is -- all is relative, and it's all also domestic. You can't really compare us to Greece or the Sweden to Portugal because they're on different stages of the growth. So the relevant comparison is in country, and that's a very important measure, how we do against our peers? And some quarters we win, in some quarters we lose. And our ambition is always to win on revenue market share. And I think there is more growth in Swedish mobile. There is still -- we're still in growth territory. We see some competitors delivering great numbers. So of course, it's possible. And that is encouraging. We're not let down by just being behind one quarter. We're encouraged that there is growth out there if we get the propositions right. So I'm sure that Sweden will continue to have growth if we do things right on a good level.

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Andreas Joelsson, Telia Company AB - Head of IR [54]

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Thank you, Andrew. I think we have time for a couple of more questions. So operator, please, the next one.

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Operator [55]

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And your next question comes from Ulrich Rathe.

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Ulrich Rathe, Jefferies LLC, Research Division - Senior European Telecommunications Analyst [56]

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My first question is on fiber in Sweden. Always in Q1, it's always a bit slow. And I think this one was a bit slow. I was just wondering how is it on the end customer side in the first quarter? And do you see signs of increased competition based on all these sort of statements from some competitors about a push in this area? The second question is, again, coming back to Swedish costs. The overall commentary you are putting forward today sounds a bit as if something has sort of gone slightly off-pace there, and that it wasn't entirely as planned. Could you just -- I mean, well, obviously, there are elements of that, that were planned because you sort of guided for a back-end load here. And I was just wondering, when you talk about sort of the incremental measures you're now taking to alleviate these sort of possibly slightly unexpected developments. Could you just sort of single out what exactly happened that was maybe slightly unexpected compared to the more sort of planned elements of all this? That would be very interesting. And my last question if I may, it's sort of going back to Andrew's earlier question. I'm not sure, I might have missed it, but I don't think you have, in fact, disaggregated the Swedish mobile growth this quarter between B2C and B2B. That would be interesting to get an update how that went for the 2 segments, separately.

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Johan Eric Dennelind, Telia Company AB - CEO and President [57]

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So let me start, and then, Christian, you'll take the 2 last ones. So on fiber, yes, there is an increased competition, which is no surprise, which is good. And I think in retail, you have to divide it first into 2 areas. On the retail side, I think we're still doing well taking our share. We're delivering in line with last year on the OTCs. But we also have -- and the fact that when we lose in retail, we can get some of that back on wholesale, which then should compensate for some of -- on the loss in retail. But the reason we really, really want to have the retail interface, of course, is to be able to offer our converged proposition with a full range of portfolio. And that we lose if we lose in retail. So with all respect for wholesale, that's not -- we're not happy just getting wholesale.

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Christian Luiga, Telia Company AB - CFO and EVP [58]

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On the -- I'll start from the end and the -- on the revenue side, sorry for not mentioning that, we had around 3% on the B2C mobile growth and a negative 1% approximately on the B2B. And then there, we did grow on the SoHo/SME and then -- and went down on the large. And on the cost side, well, as you say, we have guided for a heavier first half, and this is in line with that. But we're still not satisfied with the level, and the drivers are the elevated customer operations and the cost that goes to OpEx rather than CapEx that has been sort of the ones impacted most from an expectation point of view.

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Andreas Joelsson, Telia Company AB - Head of IR [59]

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Thank you, Ulrich. Unfortunately, time flies. So I think we have to end this presentation here. And for those of you that didn't manage to get your questions asked, please reach out to me or my colleagues, and we will provide answers to you. Thank you, boys, and see you back in July, at the latest, for the Q2 presentation.

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Christian Luiga, Telia Company AB - CFO and EVP [60]

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Thank you,.

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Johan Eric Dennelind, Telia Company AB - CEO and President [61]

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Thank you.