Q2 2013 Earnings Call Transcript
Transcript Call Date 07/17/2013

Jesper Wilgodt - Head of Investor Relations: Okay, welcome everyone to the presentation of TeliaSonera's Second Quarter Results. I'm Jesper Wilgodt, Head of Investor Relations. With me today to present, I have our CEO, Per-Arne Blomquist; and also our CFO, Christian Luiga. After those presentations, we will have a Q&A session. By that, I would like to handover to Per-Arne, please.

Per-Arne Blomquist - Acting President and CEO: Thank you. Well, first of all, I would like to say that I'm satisfied with the quarter; it's a decent quarter. We have a stable underlying top line development. We are taking care of the cost in a good way. We are executing on our cost efficiency program. But perhaps even most important, we have also addressed a couple of issues during this quarter that is important for the industry.

First of all, new pricing models, more pricing, and where we try to monetize on data and also the coverage issue around 4G and also fiber. I think that the high-speed Internet access would become more and more important going forward, and we have tried to deal with that now in the first initial stage in this quarter.

Finally, last but not least, of course, the sustainability issues are important for us, and I will come back to that later on in my presentation.

If I go back a year, I felt a bit uncomfortable with the development of both top line and cost. We have had previously a good spread between the cost development and also the income development and that was narrowed and that was the reason why we started to work with the cost efficiency program that was launched at the end of 2012.

You can now see the effects of this where we have cost coming down and also that our income is moving in the right direction, i.e., upwards. That has also meant that we have changed negative trend that we had during 2012 with four consecutive quarters of decreased margins.

Now, we have the first quarter and the second quarter, where you could see that stable top line and improved cost situation creates a better EBITDA margin. If you look at the 34.8%, that is I would guess among the best margins in Europe when it comes to a multi-market operator. Yes, we have certain domestic operators that might have higher, but this is I think among the best in Europe. It’s a effort and achievement just to keep it at this level and try perhaps increase it slightly, but just to keep it around 35% takes certain effort.

We have talked about our revenue side; and sometime I feel that this industry is a bit too depressed about the outlook. Yes, I agree, we have voice that is going down with 11%, messaging is going down, but what we also can see here is that mobile data continues to grow. It's 60%, more than 60%, then you can ask yourself in what industry do you have volume development on 60%. So I'll claim that for the last couple of quarters, we are actually a part of a growth industry and it is up to us as an industry player to make sure that we can monetize on that growth. That's our ambition and also our task to do.

We have tried to do that in different ways. We have taken the first step as major operator in Europe to look at this from a different way; i.e., we have started with flat fees for voice and messaging, but the end user to customer will then pay for the data usage. We are pricing data in a different way.

We have had so far launches in three countries, Sweden, Denmark and Norway; and I will say that so far so good. I think we have been perhaps even more successful in Norway and Denmark than we have been in Sweden; perhaps a more simplified offering addressed to around the single user. Meanwhile, in Sweden we have a more complicated offering, but which is good. It's what we called, (Dela), where you can own more than one device. You can have up to seven different devices. You can have it as a family subscription if you want. A bit more complicated, but still more than 20% of new sales today are in (Dela).

So we are moving not only the pricing issues, but also the industry towards pricing data and we will like to get away from unlimited offerings. So this is not only a question about pricing, this is the question of changing the usage of data in a industry that has been pretty conservative when it comes to price changes. This has been extremely important for us to start with and we will continue with this in as many countries as we can.

Another part of the industry challenge is the question of coverage. I think that we have learned quite a lot during the last I'll say a year, perhaps years how we're actually using our mobile phones and it is strange when I say that we actually have been a bit surprised of how dependent we are on our devices.

If we go back to 10 years ago, we were satisfied to have a phone and we could talk, a couple of years later on, we also put requirements on the quality and capacity.

When the iPhone came 2008, we were satisfied to be able to download certain things. Now, five, six years later, we would like to be online all the time, always online, which means that coverage start to be important.

It's actually the fact if you take Sweden that people tend to leave Stockholm from time-to-time and they would like to use the device also outside Stockholm. That is what we try to address here where we say that our coverage when it comes from a geographical perspective should be 92% close to whole Sweden.

You should be able to use our devices in the whole part of Sweden. This is not only question for Sweden as such. We have been working with that in other countries as well. In Estonia today, we have the best national 4G coverage in Europe. We have also good coverage in TeliaSonera by our JV that we have there and we have launched 4G networks in all Nordic and Baltic countries.

So, this would be an issue that we continue to work with and we will make sure that we continue to rollout 4G also in Eurasia. We have up 13 today, four out of seven countries with a 4G license, a bit concerned about Kazakhstan where we have not yet got the 4G license, we are working with that right now as we speak, but that would be important for us going forward that also Kazakhstan, we'll get this.

Even Spain, we'll launch 4G, I think it will be this week, I think on Thursday and we were first out to announce 4G in Spain, but then someone else put up an antenna a bit earlier than we, but we will (repeat to allow that way) in Spain as well.

4G is a part of the high-speed internet access that we work with. Another part is the fiber and I could see right now a big difference compared to just a couple of years ago where we had a lot of discussion why do we need the fiber. We have 4G. Today it's completely different. We have more demand than we can supply, which I think is one side good, one side bad. What is bad is that I would like to supply as much as I can quick. We are working over that.

What is good with this is that the end user has understood that this is not the competition between fiber and 4G. It's a complement. You need both and one of the reasons for this is that we start to use other different devices and watch films, TV et cetera and you need the best possible capacity at every time and as an end user, I think that you are looking at a wireless solution, that's what you would like to have whether the carrier is a mobile network or a fixed network, you don’t really care about that. You would like to have the best possible quality around this and that's why we have also continued to invest in this and you can see that we have been pretty successful when it comes to the TV offering in Sweden, more or less coming from CRO in 2006-2007 and now today we have more than 600,000 TV customers. This is just the beginning. So we need to continue to invest in 4G, fiber and also in different TV offerings.

When we talk about the mobile data, this is not just a question for the Nordics and the Baltics, this is also important for Eurasia.

Today, we have more than one-third of the growth is connected to data. We're having penetration of smartphones of 13% and perhaps even more important, we have a usage-based pricing. I think that – well I'm convinced that the smartphone penetration will increase very much a question of how we could find cheap phones in certain countries, but that will come. So I'm convinced that that will increase. We need to keep up the discipline on the usage-based pricing and that will help us to also continuously create growth in Eurasia. So I'll see a good potential going forward also in Eurasia when it comes to growth, but not only from voice and increased penetration, but also from the data usage side.

I will not talk so much about the efficiency measures, Christian will do it more in detail later on. What I just would like to pinpoint here is that the program we have is pretty aggressive. We're talking about a net cost reduction of SEK2 billion, which means that if we don't exclude Spain, we take down the cost with 7% and that includes the Nordic business, the Baltics and Eurasia. So it is a pretty aggressive program and I'm proud of what we have delivered so far upon this. Now, we will say of course also that we will continue to deliver upon this program going forward. We needed because we need to protect our profitability.

We have talked very much about sustainability and we continue to talk about this, but perhaps more important we are working with these issues on a regular basis. This is not a quick-fix, because okay, now we have done the sustainability part, it doesn't work like that. This is a question of working with organization, training, education and learn how things are working.

We work with different areas like freedom of expression, privacy, anticorruption and also our supply chain management. What I think is most important right now is that we have launched our eLearning tool, where we're talking about Code of Ethics and Conduct. We are now starting with four countries and that will be rolled out in the whole group, but as I said, this is not a quick-fix, this is something that we have to work with all the time, but we have now started with this and we are working in a very, very structured way.

To summarize the quarter, the cost savings and the stable talk time had great improved margins. We are reshaping the market with our new pricing models and we continue to make investments in our high-speed Internet access, which is necessary for the future. Given the financial result, we have also decided to keep the outlook for 2013 unchanged.


Christian Luiga - CFO: Thank you. I will then continue to go into the numbers more in detail. Good morning everyone, Christian Luiga, CFO.

I will start with repeating what Per-Arne said. This is a decent quarter with a slight increase in revenue. The EBITDA margin is up close to 1%, but I think it's also good to look at EBITDA in absolute numbers and if you look at the local organic growth, it goes up 3.3%. So we increased also the underlying value for the shareholders and we end up at SEK8.9 billion in the quarter.

The earnings per share is down since last year. There's two obvious effects. One is the non-recurring restructuring program that we're running this year and the other part is the lower income from MegaFon as we actually decreased our share. Free cash flow is good, up SEK1.4 billion.

I will start in the same way I did last quarter with looking at the currency effects, they are significant with about 4% on both revenue and the earnings. If we look at the main currencies, euro, pengo, and Norwegian krona and look at how they have developed over the last year. Going into the next quarter, assuming they stay the same as they are today, this effect will be much, much smaller in the second half.

Net sales were down in the first quarter, now it's up, and this comes from all – stems from all the business areas. We have improvement both in Eurasia in Broadband and in Mobility. If we start down looking at Mobility, not only for us, but for many operators in Europe right now, the theme is the interconnect rates started going down. These have significant impact on the revenue side. However, for us at least, it's not so significant on the earnings side. The growth we reported in Mobility is 1.8% minus, and 3.4 percentage is coming from the interconnect decreases.

If we look at – I think this is very important to look at, if you look at Denmark and Estonia for example, you have a reported numbers extreme declines, but if you look at the underlying business, it's much better. I think I would like to point out Denmark especially, in Denmark we've had a gradual increase over the recent quarters and that this quarter we actually report a positive billed revenue growth. Then the main effects, I think, we have the main job that (indiscernible) have done down there is to work with new offering like Per-Arne have talked about, but also value-added services such as Spotify and HBO and everything else that we actually sell quite a lot in that market (via) the mobile phone.

If you look at Broadband, it’s better this quarter. It’s still down 3.6% and the main impact quarter-over-quarter is both carrier but also we talked about fiber in quarter one and fiber has started up. We had a slow start with the cold winter, but we also had some (digging) stocks from the Stockholm city because of all the other problems they have in Stockholm right now, but that has been solved and we are up running and that as an impact also on the revenue growth. We still have quite challenging situation in Broadband on the B2B side, not at least in Sweden and Finland, and that should be noted.

Eurasia, strong growth. You look at the picture and you see that Eurasia is above 90% – Ucell is above 90%, and in Ucell we had the third operator going out of market last quarter three. That means from the next quarter, it will have an impact on our growth. Ucell will not have 90% growth next quarter.

Still we have a solid growth in our biggest markets, Kcell, in Ncell and also in Azercell. If we clean the Azercell numbers from interconnect, we have a 6.3% growth in that unit as well. I think that – and Per-Arne talked about how important the data growth have been in Eurasia and in these markets as well, especially in Azerbaijan and in Kazakhstan, we have the biggest growth in value terms of the data growth.

Before I go into the addressable cost base, I think we should take a look at the gross margin. It's always good to make sure we understand all the parameters of the income statement. In 2011, we talked a lot about the declining gross margin in this Group. We have worked quite hard to stabilize the situation. Since 2012, we have a stable gross margin positioned around 63%. Then this is something we continue to work with and defend.

One of our main focus area, the cost program of SEK2 billion, starting in October 2012. We aim to reduce the cost base with SEK1 billion this year and SEK1 billion next year. Net, we have so far decreased this year only SEK400 million and SEK200 million in quarter four. This program includes all type of costs, not only personnel and not only marketing.

It's based very much on the way of working and the processes internally. So, we really try to base this on projects that we are running with new ways of working. The program includes a reduction of 1,800 people and 1,050 have been notified so far this year. This means that we will have – we are planning for another program in the autumn.

The costs so far for this first part – first half year is SEK700 million and that has then impacted the net income and the earnings per share, as I talked about.

The margin increase of 1% on the Group level comes from Mobility in Eurasia mainly, and this is part of our cost program and we have tried to rebalance the cost base in all markets and we have done that quite successfully.

In Mobility, Eurasia, we can see a faster decline and they are easier in handling the cost structure. In Broadband, you can still see the effect starting in quarter three and this quarter it's encouraging to see that all three business areas are reporting a negative OpEx.

We have about 1.2% in Eurasia and we have 2.3% in Broadband. So the balance is getting into all business areas right now. The stronger margins coming from Mobility in Eurasia is encouraging and they continue.

In Eurasia, we have a one-time cost related to court case in Azerbaijan of around SEK103 million; and in Mobility, we have a positive effect in Finland of about SEK120 million. The margin still increases in Mobility if you take away this effect and the margin in Eurasia is up to 53.8% if you also (clean) for this effect.

On the Group level, these match with all the other non-recurring we have. So on Group level, we have no impacts from one-timers.

CapEx to sales ratio, the first thing I want to repeat is that we have been working much more with steering and control. I know you have heard in the past about (autopilot) in this area and we get into a position where we are much better in handling the planning of the CapEx. This also has an effect on the first quarter. So when we decided during this half year to shift towards another type of 4G setup, which Per-Arne have talked about, we actually have been able to stop things, re-plan and then we will start and roll out according to the new plan. That means that certain things that were supposed to be done have not been done in the rollout, but now when we start quarter three and quarter four, we will have a faster speed and a higher focus on spending the money on the right thing. The same with the Broadband side; we have an effect from the fiber and the focus now for the second half and we still keep our 14% guidance will be to actually focus on the high-speed Internet access related CapEx.

Free cash flow, up SEK1.4 billion; the main parts here is CapEx, which I just talked about and working capital. Working capital effects in this quarter is mainly related to equipment. Equipment sales ties less working capital, both in accounts receivable terms, but also in inventory. We have actually decreased our inventory on handsets and this is something we are working with. This is part of the new and better ways of working, and also, we can see a slight increase in the days of purchasing days. So we pay our vendors a little bit slower, which is good.

The net debt has been increasing and the main reason is, of course, the SEK12.3 billion that we shared with our shareholders in the dividend in April. We have also effect of currency effects. So between the end of first quarter and the end of the second quarter, we have a currency impact on the euro and we have a lot of loans in euro that impacts net debt, but does not affect the income statement. So the debt value goes up and that is around SEK2.8 billion.

If we look at the net debt EBITDA ratio, it's up at 1.85 and that of course includes this currency effect. It's within the range of 1.5 to 2.0 in the higher part of that. We have just received SEK2 billion in dividend from MegaFon this week and we are expecting a repayment of the AF Telecom loan also within a month, around the same value, SEK2 billion.

Finally, finalizing with the repeating again, a decent quarter with a flat net sales outlook that we reiterate and the increase slightly in EBITDA margin and CapEx focused on high speed Internet reaching 14%, around 14%. Thank you.

Jesper Wilgodt - Head of Investor Relations: Thank you, Christian and Per-Arne. Then it's time for some questions. I think we will start here, with audience and please use the mic. So go ahead.

Transcript Call Date 07/17/2013

Stefan Gauffin - Nordea: It's Stefan Gauffin, Nordea. I have a question around Spain, where we have seen over the last six to nine months that MVNOs has taken some market share. Looking at regulators numbers for April and May, Yoigo should have reported slight negative subscriber intake and now you reported 92,000 net adds for Q2. Does this reflect that there is a difference in the reporting to the regulator or have you improved performance significantly in June?

Per-Arne Blomquist - Acting President and CEO: Well, I'm also – I don't really know whether we have a different reporting at the regulator. I'll see what the numbers that we are getting and they are sort of reported in the same way as we have done before. We have not changed the reporting format.

Christian Luiga - CFO: But we have increased the sales in May and June. You remember we talked about the handset sales we kept back in first quarter and we released actually and started to work better on that in May and June deliberately to manage cash flow and profit. I don't know if it still answers the question actually, because I don't know either if we have differences in the reporting.

Stefan Gauffin - Nordea: I have a question actually not so much about the quarter, but about the outlook for CapEx. When Eurasia now grows, but not at the same rate as we have seen historically, do you expect the CapEx-to-sales ratio to come down in Eurasia? I mean looking, say, 1 or 1.5 year ahead from now to lower numbers and will you spend that money somewhere else in the Group, so that you will maintain around 14%?

Per-Arne Blomquist - Acting President and CEO: Well, first of all, yes, we will go down on in Eurasia, but, of course, we do not have the same rollout plans as we have had before. They are getting into a more mature market, or I would say, surplus as of right now. So they should be below 20%. Then I think (indiscernible) if we have good investment cases, of course we are prepared to invest in other areas, but basically I said for longer-term that we should be somewhere between 10% to 15% and if we do not find any new case of divestment then we will take it down, but we will be in the range, which I know is a very wide range, we are talking 10% to 15%, we will be between there.

Operator: Lena Osterberg, Carnegie.

Lena Osterberg - Carnegie: You wrote in the report that in Denmark, you network operation there may be some more costs for dismantling the networks, are they already in this quarter, because you had high margins, or will they come as additional cost or we should expect lower margins forward?

Christian Luiga - CFO: Okay, there were some – we had some cost already in quarter two actually and we have started that dismantling, I mean, it takes time. We have said – Per-Arne answered, I think before that we will not see the impact really from this network sharing until a year or two going forward and this is part of that plan. In the same time we'll build a very good network together and less CapEx, it takes some costs to take away the old unusable structure.

Lena Osterberg - Carnegie: Will the cost accelerate or you will maintain at roughly this level?

Christian Luiga - CFO: It will go up and down in the quarters a little bit, but it shouldn't be a significant impact on the business.

Per-Arne Blomquist - Acting President and CEO: What I said is, we will not see cost reduction on the OpEx side, say, until a year, a year and half from now, but we will need to dismantle.

Lena Osterberg - Carnegie: Then maybe a question on Turkcell as well, because you issued you a press release now when the London Privy Council ruling came, where you said that you hope that they would on a – their obligations to repay your SEK932 million plus interests. So what are your hopes of receiving that money and what steps are you taking to ensure that you'll get the money?

Per-Arne Blomquist - Acting President and CEO: We are working with this on a regular basis and we have tried to make sure that they can't pledge their shares for funding, so that's what we have done, but otherwise, we will see what happens, I mean we have to wait another, I think, it could be close to six days to see if they are then prepared to buy the shares, they have got price of SEK1.5 billion and we will see what happens. So, what we will try to take any measures to make sure that we get our money back as well.

Thomas Heath - Handelsbanken: Thomas Heath with Handelsbanken. Few questions if I may, firstly on Norway, a challenging quarter as it looks. Could you say a little bit -- maybe about whether this is competitive pressure, so losing business contract to others or if it’s a general market slowdown that you've seen. So, little bit on Norway if you could. Then secondly on the second half of this year, your peer TDC talks quite a lot about the impact of the EU roaming data roaming cap, say in gross profit will fall about DKK150 million to DKK200 million. Just wondering if you have any assessment roughly on how much this will cost which starts then from the 1st of July, data roaming and that’s it.

Per-Arne Blomquist - Acting President and CEO: Let’s start with the data roaming. If you think that we have been very (earl out), if you remember I think it was one, one and a half year ago where we decreased the prices. So, I think we have taken the measure it already and I think it's good that we take down the prices. There is no connection between the service and price that they had before and as I said, it's interesting to have 90% margin on the business, but if you still have zero business, it’s still zero. So, what we did was to take down the prices between 50% to 70%, then increase the volumes of that. Then our customers started to use the devices also when they are leaving Sweden. So For me, I don’t see that this will affect our results. We have taken the hit already and it was not a very big hit to take because we didn’t have in roaming and then the first question was about the…

Jesper Wilgodt - Head of Investor Relations: Norway.

Christian Luiga - CFO: Norway, yeah. In Norway, we have impact both from Tele2, as you know, we have the wholesale agreement, but in Norway even though we have a successful actually implementation of the new offerings, we also see that it's hard as a number two, number three player in that market to be in the B2B side. So in the B2B side is where we also see some challenges in Norway. But otherwise, the big part is the wholesale agreement.

Thomas Heath - Handelsbanken: Last, the third question, if I may, well, I'll have got the mic here. On Kazakhstan, on licensing, do you know what the roadmap is for 4G or is it sort of regulatory uncertainty situation that you're facing there?

Per-Arne Blomquist - Acting President and CEO: Partly it is. I'm not the Prime Minister and also the President to talk about that. We had a sort of Council for Foreign Investors there a couple of months ago where we addressed that we would like to have this – the 4G license. So far we haven't got it. Kazakhtelecom, the fixed business has got a license, but we are fighting for this right now, but I am concerned about this, because we should as the biggest mobile operator have a 4G license today (but) to develop this in Kazakhstan, but it's work-in-progress.

Jesper Wilgodt - Head of Investor Relations: Good. Now, I think it's time to open up for some questions from the conference call. Operator, could you please open the conference?

Operator: Peter Kurt Nielsen, CAI Cheuvreux.

Peter Kurt Nielsen - CAI Cheuvreux: A couple of questions please. Firstly, Per-Arne, your comments about the success you have achieved from your new mobile pricing plans in the Scandinavian and the Nordic markets are obviously in contrast to somewhat more downbeat (statements) and comments that you have made over the past sort of 12 to 18 months, which we heard from yourself and Lars previously. Is it an indication you believe that you've now sort of come out on the other side of this repricing to transition in terms of mobile data pricing, et cetera and that we now can start to look forward to perhaps a positive underlying service revenue growth going forward in these markets. I mean how significant should we interpret your comments on this? Second, if I may ask, more specifically on Denmark, which you sort of underlined. You are seeing some positive – finally some positive developments here now. Is it your view that is the whole market in Denmark that is sort of stabilizing as a consequence of (few) dramatic decreases in pricing we've seen over the past years? How significant is this? Finally, may I just ask, you have seen – reported very good success in terms of margins in your mobile business over the past quarters, obviously, in Sweden I mean, Sweden fixed line margins are going slightly the other way. Is that something you expect and believe can be rectified by the cost reduction program you've elaborated upon here a little earlier?

Per-Arne Blomquist - Acting President and CEO: Let’s start with the last question. Yes, I strongly believe that we will see improved margins in the Broadband as long as we can keep sort of a control on the top line. But what's the efficiency measurements that we've been working with will sort of yield result now in Q3 and Q4 for Broadband. We saw the first sign of that now in Q2. So that should definitely be an effect going forward and hopefully, then also improve margins. If we then start with the first question; if we are a bit more upbeat? Yes, I am, because it's still so that we are having, as I said, a 60% growth on the mobile data side. I think the reason for me to and Lars to be a bit depressed to why was it, we could see that our ability to capture growth went down. We were at factor of 0.4, 0.5 and most certainly it was down to 0.2 and then we said, okay now we have to do something. I think we have sort of reform because of the buckets and also we have implemented a new charging structure which I think is good, and that's why I am saying that I can't be depressed, but if you have 60% volume increase, this is up to us to make sort of we can charge with this and we have started to do that. If you take both Norway and Denmark, we have seen that, once that had, so the change into the offerings that have higher ARPU than before. Then the impact might not be that evident in this quarter, but it will come over time and I think that what we have done, we have actually changed sort of the structure of this and we are moving into the right direction. That's why I am a bit more upbeat today. Then you talked about Denmark as well.

Christian Luiga - CFO: In Denmark, actually in the Nordic area in total this quarter as the same as quarter one, being quite stable market position. I don't dare to say if there is the same effect in the other players as we have at this time, but I go back and say what I said. We have worked quite hard and (so) down in Denmark worked quite hard for one year, both with the offering side and also with value-added services as a very important part of the sales and that has given the impact in our numbers. I think that's what we can say right now.

Per-Arne Blomquist - Acting President and CEO: I guess, we are doing a bit better than the others. I might guess, we'll get back on this later on when we report our results, but I think they had a good year by the way in Demark.

Peter Kurt Nielsen - CAI Cheuvreux: No, I fully agree.

Operator: Laurie Fitzjohn-Sykes, Citi.

Laurie Fitzjohn-Sykes - Citi: Two questions if I may. Given the progress on the network JV in Denmark, is it still possible for you to participate in consolidation if the opportunity rose? Then on Turkcell, if Cukurova does gain control as a likely outcome, how would this change? How you view the asset?

Per-Arne Blomquist - Acting President and CEO: Well, to start with the consolidation issue, do not think that is connected JV as such, it's more a regulatory issue. So far I have not – unfortunately, not seen a tendency that a regulator has been open for (end) market consolidation, something has to change in that sense. I know that (Neelie Kroes) has been very positive to investment, et cetera, or accounts the highest speed Internet, but (Joaquin Almunia) (indiscernible) has been more restrictive on account of the regulatory side and I think they need to open up, because as I said, I mean if you take the Nordic area, we have, I think, what could it be, 13, 14 networks for 27 million people. I mean, it doesn't really make sense, which means that smaller countries like Sweden, Denmark, Norway and Finland where we have between 5 million to 9 million people living there. We can't live with four networks, that won't work over time.

Jesper Wilgodt - Head of Investor Relations: And the second question was on Cukurova.

Per-Arne Blomquist - Acting President and CEO: Cukurova, yeah. What I think is positive and this is finally that we will hopefully get a clearance on who is owning the shares and that means that we can start to discuss with the counterparties there. So I think that will help. What it mean in practice, that's remain to be seen, but at least this blockage that we have had has done everything more or less impossible to move in Turkey, but now when this is cleared, I'm a bit more positive to that we're going to move forward in the Turkey, but let see in 60 days.

Operator: Nick Lyall, UBS.

Nick Lyall - UBS: It's Nick Lyall from UBS. Could I ask you on the Swedish ARPU, it's obviously – the Swedish ARPU trends have improved this quarter, but could you discuss the effect of the new packages on the ARPU number? Have you seen some dilution within that number and actually ARPUs are better than they might seem from the headline numbers? Then secondly back on Turkcell as well, could you just mention as well what actions you're taking against the CMB, if any, above them, maybe putting two more members onto the Board. Could you discuss the sort of practical things that you're doing to maybe stop that happening? What that might mean for the outlook for Turkcell again, please?

Per-Arne Blomquist - Acting President and CEO: Well, I think that this has become a political issue, and I think we are trying to work on the political arena as well to convince the Turks that they should not install new members on Board level. But we will be successful in short term perspective remains to be seen, but I can't get into the details, but we're working pretty actively with that right now. Then we had...

Christian Luiga - CFO: On the other side, it's – I wouldn't say that it's not too much related to the new offerings but we see some of this pressure on the voice side and messaging side actually and also higher data growth. But it's not really only related to the new offerings.

Per-Arne Blomquist - Acting President and CEO: I think that's far too early to say because it will not have that big impact yet. It will take time.

Operator: Ulrich Rathe, Jefferies.

Ulrich Rathe - Jefferies: I have two questions please. First on regard to your new CEO, your incoming CEO, I think the message was that he is available 'to the Company'. I was just wondering what does this mean in practice. Is he sort of sitting in on meetings or is he actively debating it with – at this point (indiscernible)? Or is he sort of just scurrying around for information and trying to get his head around the operation? I'm just interested what this actually means and whether he is already influencing decisions? The second question is Uzbekistan and it's sort of role to the Group at large. If I understand this correctly, without Uzbekistan, the Group revenues would be fairly firmly in organic revenue decline at this point. So how do you view this? Would you be sort of okay with the overall Group revenues declining or do you feel this would then be a sort of a line that cannot be crossed and would require incremental investments to get the growth restarted again, because as you mentioned yourself, Uzbekistan might start to sort of annualize the effect from the third quarter onwards. Then specifically, in Uzbekistan, I was wondering whether you have any signs of the authorities trying to reestablish a third operator in the market.

Per-Arne Blomquist - Acting President and CEO: We'll start with the last question. No, we don't know anything about the new third operator. Back to the second question, yes, I think what I'm trying to say is that, (indiscernible) satisfied with the underlying growth (indiscernible) in the company because it's – what's important for us is to see that the build revenue increases, that's why we have the biggest margins and that is actually happening in quite a lot of markets. Once again, remember that we have been severely hit by the interconnect. So what we're trying to do is then really to work with the underlying business as such and hopefully that could then compensate if we are coming a bit short in on growth in Uzbekistan, but I think the most important thing for us is to work with the underlying business and that's why we talk so much about the build revenue. Then you talked about Johan, yes, he is here from time-to-time and we meet and we are discussing issues going forward. Remember, he has been here now for 14 days. We try to help him to is understand what is going on in our business and he will start to work full steam the 1st of September, but of course I mean we have a dialog about different things. There is nothing strange with that and I'm very happy to have him here actually.

Operator: Barry Zeitoune, Berenberg.

Barry Zeitoune - Berenberg: I just got two questions please. The first is just a bit more detail on your Swedish Broadband margins, because we've seen pretty good Broadband ARPU growth this quarter versus recent quarters. We've seen strong fiber uptake, we have seen good TV growth and at the same time, we've seen quite step down in margins in this Swedish Broadband business from about 37% to 35%. So, I was hoping just to get a bit more detail of what is really driving that margin pressure and really what your long-term view is on margins for the Swedish Broadband business. Do you expect them to stay flattish at the 35% level or continue declining? I know you are going to get some benefit from cost cuts, but if you can give more color on that that would be helpful? My second question is regarding Turkcell and the situation with CMB and with potentially greater government influence. I mean you said that you're against that. Why are you against the government having more influence in the running of Turkcell and do you see the possibility that the government may even look to take an active stake in Turkcell. So, is it possible for took her over to potentially sell it rights to buy the stake -- in Turkcell to the government and could we even see Altimo potentially as a seller to the government. If you could give us your opinions on that, that would be helpful.

Per-Arne Blomquist - Acting President and CEO: If I'll start with Turk, well, I think the problem is that we are owing 38% of the Company and we have yes, one Board seat and it doesn't reflect the ownership that we have. That's my problem and I would like to see that changed and I don't think is good for a government to have their Board members on our Board and trying to steer a business without having (indiscernible) only about the business, that's number one. What will happen with the shares which you grow, yes I mean it's up to anyone to buy them. There is nothing that we can steer and we will be happy with (any owners) who we could corporate with going forward, but that will remains to be seen, but the most important thing is that, we would like to have a Board seat that reflects our ownership in the Company which we doesn’t do right now.

Barry Zeitoune - Berenberg: Can I just follow-up on that? If you are unable to get a Board structure that reflected your ownership and if it was pretty clear that that wasn't going to change, would you consider your ownership in the Company?

Per-Arne Blomquist - Acting President and CEO: I'm working off the hypothesis that we will like to – that we will change this in a positive way. I could even think of increasing the ownership in the Turkcell, given that.

Jesper Wilgodt - Head of Investor Relations: Then we had a question on the Broadband from audience, I don't know if you…

Christian Luiga - CFO: Well, if you – I agree, we have some positive signs in the Broadband Sweden business. However, if you a decline in revenue, that is the same or higher than the decline right now in addressable cost base, you will have a decrease in margins. That's the main reason overall. Of course, we are working and that's where you see the signals to both increase the revenue, but also to continue to work on the cost base.

Per-Arne Blomquist - Acting President and CEO: It's also very clear that we have lower margins from the new services right now than we have on the older, more mature product. So that’s, of course, will hit and that's why it's so important for us to improve the cost structure also in Broadband going forward.

Christian Luiga - CFO: We don’t give any guidance on margins.

Operator: Terence Tsui, Morgan Stanley.

Terence Tsui - Morgan Stanley: I have got one question on Sweden mobile, please. Obviously, the family plan is going very well. I just wondered at the low end, have you seen any impacts from the launch of (Raspberry) brand for SIM-only. For instance, the deal take of your (haboob) brand changed much during the quarter. Just a bit more color on that would be much appreciated.

Jesper Wilgodt - Head of Investor Relations: I think you need to come back on the (haboob) number. I don't have that on top of my head. I will come back to you on that, Terrance.

Operator: Jakob Bluestone, Credit Suisse.

Jakob Bluestone - Credit Suisse: Three questions, please. Firstly, on the improvement in Denmark, I mean, how much of the improvement in growth? You also mentioned returning to positive build revenue growth. How much of that improvement is easy comps and how much is an actual improvement in the sort of underlying performance of the business? Secondly, in Finland, you were previously quite aggressive on pricing, say, from October last year onwards and you seem to become a bit less aggressive with lower level of promotions this quarter, but at the same time also very strong contract net adds. Can you maybe talk a little bit about how you see that market? Is there general an attempt to be less aggressive and to drive a little bit of market (repair)? Also, can you maybe explain a little bit why you had such strong contract net adds? Then finally, on working capital; historically, you've hedged negative working capital movements about SEK1.5 billion each year as obviously you've had very strong working capital this quarter. Is that sustainable? Or is that something that will reverse out in the next couple of quarters?

Per-Arne Blomquist - Acting President and CEO: If I start with Denmark and you can take the other two questions, Finland I'm sorry. I think that if you look at Finland, we introduced a new offering called (Zorpia) at – it was in August-September last year, which was good in the sense that we were the only one who actually could offer roaming for both the Nordics and the Baltics, and that gave this offer a sort of an extra kick up. So I think the problem we had was the pricing as such. It was perhaps a bit too aggressively priced and we have now adjusted that. So that's why you see less of aggressive pricing, but still I think that (Zorpia) offering as such is very attractive for the market. I hope also that Finland which has been very, very tough market from a competition perspective on price, will come down or we will try to contribute from our perspective (on that sales). I think what we can do is then to create offerings, like (Zorpia) where we are offering something else than just price issue that we could offer something that the others can't compete with.

Christian Luiga - CFO: On Denmark, just to try to give you an answer. We have a 3% increase in billed revenue in Denmark and we had a negative 3% decrease in quarter one. Then the rest is mainly handsets. So the difference you saw from the chart I showed earlier, you should be able to calculate from that. I am not really sure of what you were asking actually on Denmark other than that. You asked how much was underlying business contributing to the growth, but billed revenues is the main underlying business, so that's my answer. On working…

Jakob Bluestone - Credit Suisse: Maybe just to clarify a question on Denmark. I mean, you obviously had a series of price decreases in previous years. My question is, is the improvement that you've had, so going from minus 3 to plus 3, is that just driven by annualizing previous year's price cuts, or is it actually being driven by an actual improvement in the business.

Per-Arne Blomquist - Acting President and CEO: I mean, we see – it's probably a little bit of easier comparisons perhaps for last year, but we definitely see an (online) improvement as well if you look at (multiple speakers) if you look at ARPU trend in the business.

Jakob Bluestone - Credit Suisse: If you look at the ARPU trend sequentially, I think that has stabilized during the last two, three quarters.

Christian Luiga - CFO: They have stabilized and we have seen a gradual improvement. So that should give the right signal. The working capital, of course, we are working hard on that matter. Quarter two is typically a positive quarter for TeliaSonera. So we should remember that, but this is even better than it usually be. We are trying to actually stop that SEK1 billion a year negative effect, but I don't want to give a guidance right now on how successful would be this year, but we are doing our best of course as a Company to manage that.

Operator: Dominik Klarmann, HSBC.

Dominik Klarmann - HSBC: Two questions, if I may. One on fiber pricing, can you just remind me if at all you have any usage tiers in place and fixed similar to mobile? If not, do you have any plans to introduce them? Then and more broadly an update on when you think that uptake on fiber can compensate for the decline in the more traditional business lines? Then a follow-up on consolidation in Denmark. Do I understand you correctly that you think U.S. as an industry can overcome the (president's) dilemma and things might unwinding the joint venture if and when regulation would make consolidation easier? So do you think the upside for the industry is too big to ignore if it becomes available?

Per-Arne Blomquist - Acting President and CEO: Well, I think that will – might be (indiscernible) need to discuss plus the most important question is to make the end market consolidation to happen. Let's start with that and we are not there yet. So I think let solve that problem first and I will see what it means for there the different countries. Now what was the first?

Dominik Klarmann - HSBC: The first question was about usage…

Jesper Wilgodt - Head of Investor Relations: Volume-based pricing …

Per-Arne Blomquist - Acting President and CEO: What we have today is that we have (a firm fee for installing it) when we talk about the single value units and then you pay for the access for fiber and also the different services that you have. We might change this going forward, but we couldn't look at volumes that way and also different other services, but that's I would say is work-in-progress right now.

Jesper Wilgodt - Head of Investor Relations: Then we had one question on when the uptake in fiber and Broadband could compensate for the decline in traditional fix.

Per-Arne Blomquist - Acting President and CEO: Well, let see. We had discussed it, but I think it will take a while. It's more (Indiscernible), was it year ago, year and a half, (indiscernible) happen during the end of 2014 and let's see if she was right or not. Let's see in a year's time

Operator: Sasu Ristimaki, Merrill Lynch.

Sasu Ristimaki - Bank of America Merrill Lynch: I was just curious as to why do you think the decline in voice and messaging revenue seems to be getting a little bit less severe. We're down single digits in messaging. Secondly, of the 22% growth you're seeing in mobile data revenues, how would you break that down into penetration growth of data users and same user revenue growth?

Per-Arne Blomquist - Acting President and CEO: I think that the decline in both voice and messaging is very similar to the previous quarter. So it's – we're talking about 6% to sort of 7% and then also was it 5% or sort of 6%, it's more or less the same. That has not really changed. When it comes to how we break up, what is penetration and what is usage, I don't have that number actually.

Jesper Wilgodt - Head of Investor Relations: But what we see is when you shift from 3G to 4G, that obviously a kind of bigger increase in volumes in general, but we don't have the split right now.

Sasu Ristimaki - Bank of America Merrill Lynch: You said big increase in volumes, but is there a big increase in revenues when you shift from 3G to 4G?

Jesper Wilgodt - Head of Investor Relations: It depends how you price it.

Per-Arne Blomquist - Acting President and CEO: Exactly. I think that – I think we made a mistake with the pricing before. We tried to take a higher price for 4G. However, I think we have more sort of a similar price to 3G. So I don't think that the price will sort of shift the revenue. It will be the usage, much more than pricing.

Christian Luiga - CFO: Users and usage.

Jesper Wilgodt - Head of Investor Relations: Okay, thank you. Do we have any more – any further questions?

Operator: There's no further question on the telephone.

Jesper Wilgodt - Head of Investor Relations: No further questions. Any more – any further questions.

Operator: No further questions on the telephone.

Jesper Wilgodt - Head of Investor Relations: No further question? Anymore questions here from the floor? Seems rather quiet, okay and we thank you all for joining this call.

Per-Arne Blomquist - Acting President and CEO: Thank you very much.