Marianne Moe - Head of IR Sigve Brekke - CEO Morten Karlsen Sørby - Acting CFO

Fredrik Thoresen - SEB Håvard Nilsson - Carnegie Dominik Klarmann - HSBC Roman Arbuzov - UBS Jakob Bluestone - Credit Suisse Terence Tsui - Morgan Stanley Peter Nielsen - ABG Maurice Patrick - Barclays Ulrich Rathe - Jefferies Stefan Gauffin - Nordea Bank Thomas Heath - Danske Bank Nick Lyall - SocGen Keval Khiroya - Deutsche Usman Ghazi - Berenberg

Good morning everyone and welcome to the Second Quarter Results Presentation. My name is Marianne Moe, I'm Head of Investor Relations and I have the pleasure of taking you through today's presentation.

The results will be presented by our CEO, Sigve Brekke and Acting CFO, Morten Karlsen Sørby. And as usual after the presentation there will be a Q&A session.

First with the questions from the audience here at Fornebu and then with the conference call participants. And after that, we will also as usual the opportunity for the local media to have a short one-on-one with Sigve and Morten.

So then without much further ado, I will leave the floor to you Sigve for your presentation.

Well, good morning to all of you on a beautiful summer day in Norway. We have a strong second quarter and its following the trends we saw from Q1.

4% of revenue growth on subscription and traffic, it's not bad knowing that we are still facing topline challenges in three of our bigger markets Norway, Thailand, and Malaysia. However that more than compensated by a very good growth in Pakistan, Bangladesh, Myanmar, and also in Sweden.

I'm also satisfied with the quarter where the EBITDA is growing faster than our topline revenues. And as some of you know that has been the ambition for the group the last year to have a cost focus to grow EBITDA more than revenue and we actually grow now EBITDA of 1.5 percent points year-over-year.

And because of this, as Morten will talk about later we are going to update our guiding for the rest of the year. Let me start with Norway, our biggest and most important market.

Mobile revenues declined 2% year-on-year that is due to interconnect and also due to our phone roaming going down. In the quarter, the roaming revenues went down approximately NOK100 million and this of course is because the initiative that Norway took on implementing the roam like home in the EU area.

We did that a year before this is going to be forced upon us from the regulator to take a market position. And despite that I see some very positive underlying trends which I’m now going to comment on.

Norway in relation to implementing the roam like home concept also introduced new packages, new data bundles and plan has then been to upsell existing customers and new customers through higher ARPU level packages with this roaming included. And so far we have up sold 250,000 approximately customers to this new packages.

And what we see now is that most of the customers is coming on - in on the NOK399 packages and above. We also see now that the data consumption is increasing with our customers.

The median data consumption within the consumer segment in Norway now is 740 megabyte per customer, which is an increase of approximately 18%. However, we need to do more than the 250,000 up sold customers to be able to further compensate for the lack of roaming revenues from the European area.

We also see now that the focus on fixed is starting to pay off. We have been focusing on the high-speed broadband customers meaning cable fiber and VDSL.

And in this quarter, we added 16,000 new high-speed customers and most of these customers in coming in on fiber connections. That leaves us now with total of 570,000 high-speed fixed line customers in the consumer market.

And we have been quite successful now with upgrading customers from legacy fixed solutions into high-speed solutions and with that also been able to lift the ARPU. So overall, the rest of the year is also going to be challenging in Norway on topline due to the implementation of the roam like home.

But if you're able to continue with that aggressive upsell logic, we foresee that the second half of the year should compensate somewhat for the loss of mobile [indiscernible] roaming revenues. On the cost side, EBITDA margins flat year-on-year 41%, it's however down 3% if you look at QonQ and again this comes from high margin revenue components like our roaming revenues.

Despite the pressure on gross profit that's partly compensated by an aggressive cost reduction program and the Norway reduced year-over-year 4% of its OpEx. And this is partly personal cost but it's also other OpEx elements.

However there is more to be done on the cost agenda in Norway and I know that Norwegian management continues to focus on that. On CapEx, we have now 4G equipment on 4,000 of our 7,700 base stations and as we have announced before the plan is now to put 4G equipment on all of our 7,700 base stations within next year and we see that going to give us a significant advantage on the 4G network.

And there are focusing on the quality and speed in our network, also trying to tighten all the blind spots and also improve the indoor coverage. Overall, I see the Norwegian market being more competitive than we have seen the last year, however Telenor is able to keep its premium position and using its fighting brand, Talkmore to fight among the price sensitive customers.

Moving to Sweden [Technical Difficulty] development in our Swedish operation. That being on the revenue side 2% traffic and subscription revenues in a fairly competitive market.

But also the turnaround we have seen on the fixed business. We have added 13,000 new high-speed fixed customers most of them also being on fiber that's approximately 10% year-on-year growth.

And we see still high demand for fiber connections in the Swedish market that's why we are ramping up our SDU activities and the plan is to increase the home-passed connections from currently around 1.5 million up to 2.0 million in the years to come. On EBITDA, I'm also pleased with how the Swedish operation is developing.

An 8% growth in local currency on EBITDA and actually up 4 percent point of margin improvement. That's coming from the topline growth of 2% but also very impressive cost focused on OpEx elements.

Moving on to the European markets, Denmark still very challenging. We see some improved headline prices, however below the line the price competition is still very, very [Technical Difficulty] implemented at new business support system in our Danish operation that’s a new IT system which is a radical simplification of the legacy system that they had.

That has been challenging in the implementation phase but we are now almost through that and we hope that this new platform is something we can scale into some of our other European operations and with that take a position on bringing down both IT legacy and IT cost moving forward. I also want to comment on Bulgaria, we entered the Bulgarian market in 2016 as a number two operator and with the main position in prepaid and also with low quote in the network.

After three years, we are now number one, we have taken [Technical Difficulty] on being first at launching 4G. We are number one also on profitability and also on net promoter score.

And we have moved our prepaid business into taking a leading position on postpaid. And I'm quite satisfied seeing that we have been able to do that in shorter time than actually three years.

Thailand, still very tough competition. We have seen the competition being quite brutal for the last three years.

It started on postpaid, now we have moved to prepaid. And the main competition now it's handset subsidies on the prepaid segment.

And of course this is without binding any lock in at all, so it’s basically to fuel the market with free prepaid handsets. We are very carefully participating in that, carefully meaningful to trying to reduce as much subsidies and cost as possible at the same time stay competitive.

We have also launched a new prepaid brand in the Thai market. However, I see now that the two years’ focus on changing some of the main elements in the way they compete is starting to pay off.

Firstly, that the 4G and the 3G network is now up to competitive status with our two competitors. Secondly, we have revamped the distribution and especially the service part of this [indiscernible] are important for the postpaid customers.

We see also that several cost initiatives that has been taken starts to pay off. And lastly also the focus they have had on building contextual marketing both in terms of platforms but also building competencies in the team enabling us to go for personalized segmentation and enabling us to go digital products.

That's the reason why I am very satisfied that we are now taking market share on the postpaid segment. Postpaid accounts for around 42% of our overall revenues in Thailand and now we are able to grow that segment.

We added 200,000 new postpaid customers in the second quarter and that's a 10% revenue growth year-on-year. I also see that despite the aggressive competition on prepaid and then fuelling the market with handsets of this we are able to keep the EBITDA margins and that is better than the forecasted when the year started.

In the future, we will find that right balance of continuing to take market share on postpaid and to complete in a prepaid market at the same time make sure that we are protecting profitability. Malaysia, also a very competitive market and it continues.

However in this brutal competition, DiGi is able to both maintain and actually, they took significant market share in the first quarter. The focus areas in Malaysia is one take a leading position on data network, we have 91% population coverage on 3G, we have 76% population coverage on 4G and we are probably a little step ahead of the competitors on this data position.

And we’re also continuing to share network with number two operator Celcom that being fiber and that being shared towers. The second part is that we have repositioned DiGi as a brand, repositioned it from a traditional prepaid brand into a brand now also dressing all the different segments in the markets and that's the main reason why also in Malaysia we have been able to grow the postpaid revenues quite significantly, 10% growth year-on-year in postpaid undertaking market share there the same way as we do in the Thai market.

And thirdly on their focus areas, cost initiatives, the EBITDA margin is flat year-on-year but it's up from the last two quarters and again that's a payoff from some of the cost initiatives that they have working with in the first half of this year. Bangladesh and Pakistan, these two markets are the star markets in this quarter.

10% revenue growth in Bangladesh, 11% revenue growth in Pakistan. And this revenue growth in both these two markets is coming from the data.

In Bangladesh, we added 1.9 million new data customers in second quarter alone and that's a 59% growth in data revenues year by year and close to 40% of our customers, our 57 million customers in the Bangladeshi market are now active data users. We also added 400,000 new data users in the Pakistani market.

So we see now that these two growth markets finally starts to pay off the investments we have done in the data network. Secondly, we are able to keep the cost efficiency in these two markets.

Grameenphone with non-EBITDA margin of 54%, if you look at the absolute it’s only Norway that are generating more EBITDA to the Telenor Group than Grameenphone in Bangladesh. So it's becoming a sizeable operation in our portfolio.

Same with Pakistan, 42% EBITDA margin, 11 percent points growth year by year. That coming from reduced marketing spend but also from removed sim tax that has been an important part of the discussion we have had with the government for the last few months.

The strategy in these two markets going forward is to continue to build a leading position on data networks. 90% trade recoveries now in Bangladesh and we just bought some new 850 spectrum in Pakistan enabling us to use that spectrum to cover rural areas with both 3G and 4G, we paid $395 million for that spectrum quite reasonable price if you compare with some of the other spectrum prices we have seen in other Asian markets.

The other strategic point is to continue to focus on date offerings, not only data access but also offerings like financial services like he have in Pakistan, financial services which we also are now scaling up in Bangladesh, health services but also messaging data applications. And lastly on the distribution, we see now that distribution has always been a strategic advantage for us in this growth market and we see that if we are not able to move a physical distribution into digital distribution can give us an additional advantage moving forward.

In both these two markets now we have implemented biometric verifications that was done in Pakistan last year and we are doing that in Bangladesh this year also the 57 million customers we have bio-verified 53 million customers in Bangladesh and that gives us another advantage in the distribution that we are able to do this transition better and quicker than our competitors. Myanmar, still a start in the portfolio but we see now that the revenue growth is not flattening out but it's not growing as much as we’ve seen in the last few quarters.

However, we continue to add new subs into new territories, we added 1.4 million new subscribers in the second quarter and we believe that our market share - subscriber market share is around 38%, 39% in the market. We rolled out 800 new sites bringing this up to now 5,800 sites and the plan is within this year to take that number up to 7,000 sites.

That will then significantly increase our population and geographical coverage into new areas. We have also launched 4G in the capital, Naypyidaw.

While we do this we are able to keep our low-cost operating model that's why you see that the EBITDA margins continues to be very high 46%. And we continue also to deliver a positive free cash flow.

However, [indiscernible] competition is increasing and we see quite aggressive offers now from both our two competitors on net traffic. We are responding to that and I see that we now have a premium position in the market both with our network presence but also with our brand.

It also seems like the entry of the fourth operator is taking more time than we thought, so some time ago and we don't see that come to the market before the first half of next year. Then in India, data uptick it’s still very low in the mass markets where we operate in India.

And the reason for that is that the smart phone penetration is very low, 4G smartphone penetration is 7%, 8% in the mass market. And even the smartphones that you see there are supporting 2G not 3G.

That's why you see that we’re continuing to be quite successful in adding both subscribers and also revenues in this mass market segments where we are competing. 13% subscriber increase and also about the same increase year-on-year on revenue.

And this is also the third quarter where we have stayed positive on EBITDA with a 9% EBITDA margin. However, as we have communicated several times, we need more spectrum in India to stay competitive long term.

We have then decided not to participate in the upcoming auction that’s an auction that is planned to happen in September, it has been delayed from July to August or August to September but we assume it will happen in September. And the reason why we are not participating it’s the price levels that we see that the regulator has proposed.

Those are price levels that we cannot see that we can create any profitability out of going forward. And as we have told our investors several times we are going to be rational and value creative in the Indian market.

So in the meantime, we will continue to fight for market share and to take our fair share of the market growth and then we will continue to evaluate our options and see to find a long-term solution. Let me end with a slide talking about our main priorities, first one is to continue the cost focus, the efficiency focus.

We are scrutinizing all costs in all the business units as we speak and that's why we are coming out better now on EBITDA than we what we talked in the beginning of the year and this in addition to taking the lower low-hanging fruits. We have also initiated several structural initiatives like digitalizing the core customer journeys and I already talked about digitalizing distribution and I can also add digitizing the service part of the customer's journeys.

They’re also continuing with several network initiatives to cooperate and select assets better in the different market that we operate and also introduce more standardization. The second part is to continue the data growth and as you know can see from especially Thailand and Malaysia, we are quite successful in migrating prepaid customer into postpaid bundled data packages.

When that happens we are able to increase ARPU, so our customer goes from pre-to-post ARPU increase and then it increases further when they go from a feature phone into the smartphone and even a little bit more than that when you get your first 4G phone. So this is a focus we have in all the Asian markets and that definitely a focus we also have in the Scandinavian markets and that exactly what the Norwegian management is doing right now, trying to migrate customers into the more high-value data packages.

On top of that we are also focusing more and more on contextual marketing, trying to give more personalized offers for the customers also growing the data revenues. And thirdly on the technology, we have several IT initiatives trying to simplify our IT legacy and with that more cloud-based standardized solutions which we hope can yield both at the cost efficiency but also a better speed in go to the market on new products.

So that ends my presentation and Morten can you enter the stage?

Thank you Sigve and good morning to all of you. Before I go into the details on the second quarter financials let me quickly touch of the highlights for the quarter.

Like Sigve said, I believe we have delivered a strong second quarter despite continued competitive pressure in some of our key markets. We delivered 4% growth in mobile subscriptions and traffic revenues and the organic EBITDA growth was 6%.

EBITDA less CapEx amounted to NOK6.3 billion and normalized net income was NOK4 billion. Our balance sheet remains healthy despite dividend payouts this quarter.

The net debt to EBITDA ratio remained at a comfortable level. If we move to the next page looking into the details of the quarter, let's start with revenues.

Reported revenues for the second quarter was NOK32.5 billion, an increase of 3% from the same quarter in 2015. Of the increase of NOK1 billion in reported revenue, currency effects continues to be an important element and explains around NOK0.7 billion of the increase in revenues.

The total organic revenue growth was 0.6%, a key factor in explaining growth is again the lower handset sales impacting revenues. And as you can see from the graph to the right, the mobile subscription traffic revenues are growing at a healthy rate of 4% on organic basis.

This is supported by solid trends in Myanmar, Pakistan, India and Bangladesh. And these revenues are key to drive our gross profit both this quarter and going forward.

The fall in handset revenues explains around 2 percent points of the deviation between mobile subscription and traffic, and the total organic revenues. Moving on to EBITDA, continued growth in our mobile revenues and overall focus on cost and lower device sales contribute to an EBITDA of 36%.

And this is clear improvement from last year. The key reason as I touched upon earlier is our ability to increase gross margin and we saw gross margin improvement of 2 percentage points year over year.

On a reported basis, EBITDA increased 8% compared to second quarter last year. And adjusted for currency the organic EBITDA growth was 6%.

The key contributors to the group’s EBITDA growth were again Myanmar, Pakistan, and Grameenphone. And I’m also pleased to see that Sweden contributed positively this quarter.

On the negative side, we see EBITDA decline in Norway and Malaysia. As Sigve explained, but all in all our portfolio has delivered solid improvement in profitability this quarter.

If we look into the net income to equity, despite an EBITDA growth of NOK853 million, reported net income to equity holders of Telenor decreased by NOK2.3 billion compared to second quarter last year. However, the decline is primarily largely explained by the NOK2.5 billion impairment loss related to VimpelCom, which is due to the account increase of the decline in the VimpelCom’s share price as well as impairment in India of NOK283 million which is a consequence of the current accounting treatment of CapEx in India, where CapEx is immediately impaired.

And if you adjust for these impairments and other items of NOK290 million approximately primarily restructuring costs in Norway, Thailand, and Bangladesh, the normalized income for the quarter is NOK4 billion which implies a normalized EPS NOK2.69. And just for comparison, Q2 ‘15 was a very clean quarter with no big-time effects, so the reported net income was close to identical to normalized net income.

And if we do some calculations, we see that this means that normalized net income increased by around 15% compared to the second quarter last year. Few comments on investments.

CapEx to sales for the group was 16% in the quarter indicating that we are still in a heavy phase of network investments to improve over 3G and 4G coverage and rollout of fixed program services in Norway. CapEx was NOK5.3 billion in Q2 and the CapEx this quarter for was however NOK1.5 billion lower than last year and the key reason for this is the fact that in Q2 last year we booked CapEx of NOK1.4 billion related to the satellite THOR 7 which was launched at that point in time.

I think it’s fair to say that we are spending CapEx according to strategy and 60% of our investments are currently going to the Asian operations. Especially our operations in Myanmar, Bangladesh and Thailand have made significant network investments during the quarter.

In Norway, we invested NOK1.2 billion to maintain our premium market position both in mobile and fixed. And as Sigve said, all in all we are - will invest more than NOK4 billion in Norway this year.

If we take a brief look at the cash flow development, we see the following. The net cash flow from operating activities this quarter is NOK8.9 billion.

The main effect in addition to the reported EBITDA are income taxes paid over NOK1.9 billion and positive changes in the working capital of NOK0.6 billion. The net cash outflow from investing activities this quarter is NOK6.4 billion and consist mainly of paid CapEx of NOK5 billion and the license payment of NOK1.7 billion for the license in Pakistan and it is partly offset from the sale of the major stake of NOK0.2 billion.

In total, this gives us net cash flow from operating and investing activities for the second quarter of NOK2.5 billion, which is up from NOK1.8 billion the second quarter of ‘15. I think there is a reflection worthwhile mentioning that the cash flow development so far this year reflects that we are in a heavy investment phase, as we have already communicated on several occasions and going forward managing CapEx and improving our cost efficiency will be high on the agenda.

Moving on to the development in net debt. Telenor group continues to be in a solid financial position and we continue to stay well below our net debt to EBITDA ceiling of 2.0.

Our net debt excluding license commitments increased by NOK5.4 billion this quarter and net debt to EBITDA increased slightly from 1.2 to 1.3. The increase is explained by the payout of the semi-annual dividend to our shareholders in June.

The rest of the net debt reconciliation which you see on the right side of the slide should be fairly straightforward and is partly - not partly but is mainly covered by the walkthrough I did on the previous slide when it comes to cash flow from operating and investing activities. In addition to the net debt shown on this slide, we have license commitments of NOK5.1 billion.

This is an increase from NOK3.6 billion in the first quarter and the increase is explained by this [indiscernible] in Pakistan where 50% of the price were paid in second quarter and the rest will be paid in five yearly installments. Then moving on to the outlook for 2016.

And based on this performance in the first half of the year and our expectations for the rest of the year, we have decided to adjust the full year guidance somewhat. The organic revenue growth for the first half year is 1% and handset sales has so far been significantly below last year and has diluted the grown rate by 2 percentage points so far this year.

Roaming and interconnect effects are also contributing negatively on the revenue growth. And even if we expect somewhat easier year-on-year comparables in many of our key markets in the second half of this year that includes Thailand, Malaysia and Norway, we find it prudent to adjust the full year growth rate down from the previous guidance 2.4% to 1% to 2%.

When it comes to EBITDA margin outlook, I said a quarter ago that we were likely to end up in the higher end of the 33% to 34% guidance which we gave starting this year. And the target we said was to deliver even better than that.

Based on this the solid 35.5% EBITDA margin so far this year will lift the margin expectations to around 35% for 2016 the entire year. When it comes to the CapEx outlook, we are at the high level and continue to invest heavily both in fixed and mobile networks as we see this as key to maintain our market position and our ability to monetize rapidly on the increasing data demand.

However, the CapEx to sales ratio so far is 16.5% and I think we are seeing results over our efforts to increase CapEx efficiency. We see somewhat lower equipment prices from our ability to leverage on scale and we have been working with the dynamic CapEx allocation model which we have described in earlier quarters.

And this has given effects and lead us to adjust the CapEx to sales ratio for ’16 down to 17% from 17% to 19%. Before we go on to the Q&A, I would like to remind you about our Capital Markets Day which will be held in London on September 22.

At the Capital Market Day, we’ll aim to give an update on the strategic direction and financial ambition as well as an update on some key initiatives within marketing and our technology areas. And in connection with this, we will also aim to give you some flavor on our cost and CapEx profile in the coming years.

And as usual, the local management from several of our operations will attend the event and will be available in the breakout session. More information about the event will be provided later but I will just ask you to reserve the date and look forward to seeing you all in London in September 22.

That concludes the formal presentation, I would like Sigve to come back to participate in the Q&A.

Simply state your name and company, and I kindly ask you to limit yourself to one to two questions each.

Thanks Fredrik Thoresen with SEB. First on -- I'm not going to ask you about long-terms plans and strategy in India.

But if you look at kind of shorter-term CapEx, in Q2 you still had like 16% CapEx to sales. Can you give us some more color on the second half outlook and how you intend to conserve CapEx given your statement with regards to the upcoming spectrum auction?

And then secondly, on Thailand. Last year, we saw some type of saturation in the market with regards to these lower priced, or these very subsidized handsets within the prepaid segment.

Do you expect to see kind of the same seasonality this year, as a kind of -- perhaps would taper off in Q3, Q4? Thank you.

Your first question was also related to India, was it?

Yeah.

Yeah. Now, we are also now going to be trying to keep now on profitability in India, on the EBITDA level, as I said, 9% now and this is the third quarter in a row and most of the investments that we need to do in the network to keep this operation rolling has already been done in the first half.

So, we’re trying to be, as what I call it, as careful as possible with additional CapEx investments in the months to come due to the uncertainty we have with more long-term, sort of, in India. On the second question, it’s a little bit difficult to answer, because in Thailand, things are not normal.

It doesn’t follow the usual seasonal trends and again, this is very much due to the very, very aggressive prepaid handset subsidies out in the market. So I basically don’t know, but sooner or later, I think this handset subsidy was started with the number three operator, trying to take advantage of the number one operator, losing the last auction such that they have 7 million, 8 million customers actually without a spectrum.

So they try to aggressively go after them and then the number one operator responded. So how long time that will go on, I don’t know, but sooner or later, I hope that both our main competitor share will come down a little bit rational behavior again on the subsidies, because this do usually a bit popular language on it.

It really doesn’t make sense to give away free handsets to prepaid customers in the most markets. So that’s why I was saying that we’re going to be very restrictive on not throwing too much money into those handsets, at the same time, participating, such that we’re keeping our competitive level, but more focusing on the more advanced customers, meaning the postpaid customers and continue then to focus on migrating prepaid customers to postpaid and also trying to then take advantage of the investments here on the network and also in the distribution model.

If I may just add in more general terms, not being specific to Thailand as such, of course, the diverse revenues going forward in the second half is also partly dependent on the success of the anticipated iPhone 7. So and you can address that as well, whether that will be a success or not, but we have seen in earlier quarters that when new handsets are introduced, that stimulates handset sales.

Thank you, Morten. Any further questions here from the audience at Fornebu?

Hi. Håvard Nilsson for Carnegie.

Could you please provide some more color on what kinds of options you see in India for the long term and I’m also curious to why you chose to announce that you’re not participating now ahead of the spectrum auction instead of actually get sold for example?

On the auctions, I don’t have more to say about that than what we had said over the last half year that long term solution needs more spectrum and if that is not possible to get a return on, then we need to look at other options. So, I had no more to say than that.

To your second question, the reason why we’re announcing that now is that, they’re fairly shorten on the reserve price levels, that’s what we see from the regulator and also what we understand that the telecom industry is going to support. So, the only outstanding issue now is the so called SUC, also the license fees, but that is not that important going to this auction.

So based on those prices, reserve prices we see, we’re not able to actually have any business plan, justifying the return on that. And then rather to wait a couple of more months with uncertainties, we decided to take it out, such that it’s clear with you, but also it’s also clear operation in India that they need to further reduce the costs and further keep on competing with what they have.

Thank you, Sigve. More questions here at Fornebu?

No. We’re then ready to open up for questions from the conference call participants.

Yeah. Thank you.

So first question on CapEx, your lower CapEx sales guidance on the lower revenue guidance is a pretty significant cut in absolute CapEx terms, so maybe you can give us a bit more color on what's driving it and whether that's a temporary thing, or whether we can really read it as an indication that the CapEx peak is behind us, or yes, what's the CapEx outlook beyond 2016? And then secondly on your mid-long-term ambition to grow revenues mid-single digits, you’re currently running at the lower end with about 4% and now, if you assume and exit out of India, it's even less.

If we think about Myanmar, which will slow down, it’s even less, so where do you see growth coming from longer term, is it mainly recovery in Thailand and Malaysia. Do you still think Norway can grow again anytime soon, what's the incremental growth driver from here?

Thank you.

I can address the second question and Morten can take the CapEx. Now, the growth moving forward, I assume that we’ve been able to grow in the Norwegian market again.

We don't know which market has been quite healthy in the last few years as you know, and it still is, yes, the competition is tougher, but I still see that there is a relative rationalized competition in Norwegian market and if the Norwegian team now is actually able to compensate for the lack of roaming revenues, with an up scaling or upselling current customers to more valuable packages, I don't see why we shouldn’t be able to continue to grow in the Norwegian markets as we have to see in the Swedish market now. The 2% subs and traffic growth in the Swedish market has been like that now for several quarters.

In addition to that, I also talked about before, that still the median usage, data usage per customer in Norway is relatively low. As I said in my intro, it has increased.

It’s now in the 700 megabyte per customer per month, but it is still way behind Sweden, for example. So we see that there is a potential to grow also the data usage with the right set of packages with our Norwegian customers.

Then, I foresee that we will be able to continue to grow in the emerging markets, also in Pakistan, Thailand, I’m sorry, Pakistan, Bangladesh and Myanmar and that's why I'm quite optimistic today or quite satisfied today that we see that data monetization is starting to happen in these markets. So that’s where the growth should be coming from.

So we maintain the kind of long-term view that we’ve had that we want to have our revenue growth in the range of 4% to 6%.

Yes. Your question was about CapEx outlook after ‘16 and the implications for the rest of this year.

I think I would say we started the year with a guidance of 17% to 19%. We also saw that this is a taste of high investments.

Through the first half of this year, we have been actively managing the demand on CapEx and we have introduced new procedures on the CapEx allocation. That with the achievements on the efficiency and also taking benefit from somewhat lower prices from sourcing activities, utilizing the scale of the group, we see benefits coming forward.

And we have not postponed CapEx in the first half and pushed that into next years to come. We have executed on what we have planned for.

So that is the picture. I think as I said, we are in the high in investment phase, we are rolling out 3G and 4G coverage in many markets, and that is explaining the CapEx level.

When it comes to the outlook for ‘17, ‘18, et cetera, I don't think I will give more specific guidance and I've just said, but we will try to give some more flavor on this at the Capital Markets Day in September.

And moving onto the next question please.

Thank you for taking the question. It's Roman Arbuzov from UBS.

I just wanted to follow up on India. Previously, we were talking about that you have fairly limited time in terms of how long you can keep going with the current spectrum position and that the situation needs to be fixed.

So could you just please update us in terms of how long you think you can keep going with the spectrum that you have and also I’m comparing the situation in India to the situation in Thailand where you’ve also decided not to take part in the auctions, but at least in Thailand, you had relatively good visibility for the medium term, in terms of your spectrum position through the concession regime, but in India, clearly, you don't have this visibility. So can you please provide more color, whether you expect more spectrum options to come for example in the near future beyond the one that is scheduled for September?

Yes. Let me take India first.

I don't want to give any specific timeline on that. And the reason for that is that there are a lot of uncertainties in the Indian market.

We don't know how fast the 4G penetration is going to be penetrated in the mass market. We are still awaiting for Geo, the new entrant to launch and to understand how that will change the dynamic and in the meantime, we are just focused on taking our fair share and more than that among new customers and also in the voice market.

However, that's of course not a sustainable long-term solution. So, and that's why we have to look at other alternatives.

Then, there is a big difference between the auction in India and the auction in Thailand. In Thailand, we decided not to participate, just because we were of the opinion that the prices were way too high.

However, we participated up to a certain level in both the 1800 and the 900 auction. Our current spectrum portfolio in Thailand, it's very okay and we have 10 megawatts on 850, we have over license on 2.1 and we also have 50 megahertz on 1800.

And the best news that can be said about what the regulatory development in Thailand, the last year, it's one that an auction actually took place. However, it has been that the concessions just keep on being extended.

But now, I think it’s very clear that we will have an auction in 2018 when our 1800 and our 850 concession is there. Secondly, it's good news that we did not see any successful fourth entrant in to the top market.

As you know, the fourth entrant had to give back the spectrum, they were not able to pay for that. So when we come to ‘18, it should be more than spectrum for us also to participate in auction and also remember that the very high price you saw in the last auction was in the 900, not on the 1800.

The 1800 had a reasonable realized price and if that is not going to meet us in 2018, I think we have a pretty fair chance to get back what is needed then to continue to compete.

Can you just follow up quickly on the India one, so the fact that you don't -- that you have a relatively weak spectrum position, do you think this potentially pushes you into weak bargaining position or do you think there will be plenty of demand for your assets, should you decide to exit?

You’re trying from different angles to get me to answer something concrete on this, yeah, but no, we’re going to be successful on that. I don't want to say much more than what I had said.

And we have communicated that we are going to make a rational decision on India. We are in India to make money to our shareholders.

That's why we have decided not to participate in the upcoming auction and that's why we also keep on focused on taking our fair share in the market now. At the same time, we are continuing also to evaluate broad different options and I don't want to go into more speculations than that.

Next question please. Could we have the next question please?

Hi, good morning. I've just got one question on the change in your guidance.

Could you maybe just talk through how much of the change to your revenue and EBITDA guidance, how much of that relates to expectations of lower handset sales and how much of it is more organic, so relating to changes in your expectations for traffic revenues? Thank you.

I think we have already said that we are lower on device sales this year than we have anticipated compared to last year. We are down two percent points and of course that impacts the revenue guiding.

In addition, there are roaming effects and especially in Norway, but we also have interconnect regulations taking down revenues in several of our markets. So I think that's the main driver on the revenue guidance.

And then when we say 1% to 2% for the year as such, of course, we have made some assumptions for the revenue development in the second half, including the fact that we are seeing some easier comparables in our three main markets.

Can I just share one thing, the Roam like at Home tariffs, was that already baked into your previous guidance or is that new because it sounds like some of the changes explained by cuts and termination rates enrolment, which I would have thought was in your original guidance? Thank you.

I would put it this way. We don't go into too much detail, but I think we can say that these packages were developed in the first and second quarter of this year and was not delivered like it did in the original guidance.

That's great. Thank you very much.

Next question please.

Yeah. Good morning everyone.

I've just got one question on Myanmar please. Obviously, the EBITDA margin is strong at 46%, but I noticed that the cash generation was quite a bit lower than in Q1.

Do you expect to be cash flow positive in the foreseeable future, given the continuing network rollout? Thank you.

Yes. The short answer to that is yes.

We plan to get to be cash flow positive going forward, and as I said, I think the low-cost operating model, we deployed in the beginning has no, it’s scalable. We see that the same model can be used even when they allowed more customers and then they get into new territory.

So you can assume that we will stay positive on the cash flow moving forward, even though we have more CapEx investments to be made.

Thank you.

Next question please.

Thank you. Just a couple of questions on your Nordic operations please.

Firstly, in Norway, you’ve seen improved momentum on the fiber rollout and you definitely felt more encouraged about what you’re seeing on high-speed broadband side in Norway than you've done for some time, could you tell us please what is driving this, have you increased your efforts in terms of marketing and selling fiber in Norway, are customers becoming more receptive, have you changed pricing, et cetera? That will be good please.

And secondly on Sweden, well, you continue to perform very well, as you said. We are seeing among your competitors in Sweden, some pressure on the business side, the enterprise side of things of revenues, et cetera, you're not really talking about this, could you talk a bit about what you’re seeing on the business side of your business in Sweden, please?

Thank you.

Yes. On the Sweden first, yes, you're right.

The competition on the business segment is very tough. And we don't really see any change of that.

It’s very price competitive. Our strategy however would be to trying to move from a price competition into more integrated solution with our corporate customers on the business side.

And we hope also that our competition will follow that. But the main growth we have in Sweden now is then coming from the consumer segment, not the business segment.

As you know, Tele2 acquired TDC, and we've been in a strong position, there are also some smaller place in Sweden that may be consolidated smaller players on the business segment that make the consolidated so moving forward, we hope that we can as an industry go back to a more healthy growth of the business segment. On Norway, I would say that this is very much the effort from Telenor Norway to really focus more on taking share on the fixed segment.

I think this is something that both -- I have been talking about, but also Berit, the CEO of Norway has been talking about now for the last year and this is coming from implementing a cluster model. They’re trying to get very close to where the customers are and they are looking at cluster base, combining what we have of mobile position.

What they have on more legacy fixed position and also the opportunities we have then on building fiber and this cluster model, which is also a result of a re-organized effort from the organization is now starting to pay off. And I’m very happy to see now that that also comes out in numbers.

So the new additions we’ve had in this quarter and also the revenue growth received from this new addition and not at least also, our ability to not migrate legacy fixed customers into more high speed packages gives me a good hope that in the coming few quarters, we will see now that these areas are growing and that we're also taking back some of the lost market share that we've seen over the last couple of years. We are probably now stabilizing that market share a lot we’ve seen, but the aim is definitely to take some of that back also.

If I may just add on the Swedish business market, I think there are two different answers in your question. That is of course in the large corporate, we see a case-by-case pricing and offer and that is dependent on customers and the situation, but we have seen some very aggressive offers from our competitors in that respect.

When it comes to the small and medium-sized segment, I think we have been quite successful due to the fact that we have been able to increase our efforts and also utilize third-party distribution to a larger extent than we did a year ago. So I think analyzing the Swedish business market, you have to divide between the two segments.

We still have a lot of analysts in line for asking questions. So will most likely continue for another 10 to 15 [Technical Difficulty]

Thank you. Good morning, everybody.

Just one question from me on VimpelCom. There's been no real mention of that in your presentation.

You started an exit process, I think, in October of last year. Can you just update us on what's your latest thinking around the stake that you hold?

And what's the timeframe for any exit? Thank you.

There is no change in our intention. We have communicated as we said, October last year that we want to exit, that is still the case, and we are still preparing and finding the right time window for doing that.

And I don't want to be more specific on the timing, but we're still looking to execute on that intention.

Okay, next question please.

Hi, guys. Sorry to ask another question on India, but in the scenario where you were to sell your spectrum, could we understand -- help us understand how much it would cost to actually exit India?

I think from your annual report you have about NOK6 billion of commitment towards tower vendors. And I think there's an outstanding NOK2 billion or so of spectrum payments.

But presumably there are other costs as well. So perhaps if you could help us understand how much it would cost you to exit India, that would be very helpful.

Thank you.

Well, I think this is a hypothetical question. But to try to give you some flavor, if you look into this from an accounting point of view, we have already disclosed that we apply a fair value, less cost of disposal approach related to the recording of the value in India.

And this led to an impairment loss of NOK2.3 billion in the first quarter and the recoverable amount of the intangible assets, which are still on the books is NOK4.4 billion. This is, of course, as I said, anticipated fair value, less disposal costs, which is the direct costs.

So when you look into this, and I’m not able to give you a specific guidance, you should look into what you think is the spectrum price and the contractual obligation related to the business as such. For example, tower obligations are not included in the impairment exercise, just the directly related costs.

Thank you for the clarification, Morten. Next question please.

Thanks very much. This is actually a follow-up, two follow-ups to earlier questions.

In Norwegian mobile, you now have minus 3.5% end-user mobile service revenue decline, which is obviously quite a deterioration compared to last quarter, and it excludes mobile termination. I assume this is mostly from the roaming.

Now, you explained that there are certain sort of upselling activities going on, but in the net-net is there a possibility that Norway gets worse before it gets better on mobile end-user service revenues? And the second question I have is on the CapEx guidance again.

Is it fair to say that you -- that all of the cut has essentially increased efficiencies or are there actually areas, where you have decided to spend less than you originally planned at the beginning of the year? Sorry, this is not the right way of saying it.

You're obviously spending less, but that you're doing less in terms of the actual assets that you are looking to put into the ground? Thank you.

On Norway, now, you are right, the main reason for the revenue decline, it's the introduction of the Roam Like Home packages for the EU area. On a full-year basis, that's about NOK500 million, that's the revenues we get from roaming in the EU area and this is what we hope to compensate and we then moving customers up to higher value packages, where this is included and remember that it's not included for in your current packages, you need to change package to be eligible for this Roam Like Home concept.

However, this is a very strong value proposition. So it’s relatively easy then to convince customers to go into another package.

And as I said, most of the customers we see now coming in on these new packages come in on the packages 399 and above and that is now becoming the most popular price point. Whereby, in the past, the price points have been lower.

So you can then estimate that when we move people in to these packages, you also get an after effect after that. And we hope that the momentum, we now have them upselling, will continue and as I said, the overall aim here is then to compensate for that NOK500 million loss with, yeah, on the roaming side.

So it's a little bit early to say, because it's now when Norwegians out on vacation and then we see [indiscernible] roam more or increase the data volume, so we will have a better answer on that in some few months’ time. But I hope that is not getting worse, before it’s getting better, and that's again putting hope into the upselling logic.

Your second question was on CapEx, no, there is nothing we have stopped doing prioritization, we are continuing to invest according to the structure as Morten said. And the reason why we are doing a little bit better than when the year started, it's basically better prices using our scale, and it’s also being very, very focused on pertaining the model, where we see that we can give a return.

Next question please.

Yes. Hello.

Looking at the EBITDA margin in Myanmar, you have previously warned a little bit for the margin impact from entering rural areas. Despite this, you have continued to see margin expansion.

Can you say a little bit of what you expect going forward in Myanmar, given rural expansion and the competition level?

Yes. I am more worried about the competition level than I am actually about the rural rollout.

We are now quite deep into some of the villages and into some of the areas and we see that the marginal customer is also coming in on a fairly satisfying ARPU level. Little bit lower, of course, than what we are doing in the cities, but there is still absolutely mobile demand and we also see that the data demand, the market continues to increase.

So the volume now I think is more on the competitive level and as I’ve said in my intro, the competitors are now out quite aggressive on the offers. That, of course, trying to build up market share without trying to connect fees.

If that develops also into much more competitive tariffs on off net, then there is of course a risk that will take down the entire market growth. However, it's a little bit too early to say on how this is going to develop.

But that is, if I’ve been a little bit cautious in the previous quarter, that’s the cautious point I wanted to leave here also that we may see that there will be some pressure on top line and with that, also EBITDA margins going forward.

We have time for 3 to 4 more questions before we close the session. Next question please?

Thank you. Thomas Heath with Danske Bank.

A question on strategy and perhaps tying into India, nonetheless. You've previously preferred full ownership and control of all subsidiaries, really, both in India where you bought out minorities, but also elsewhere with a lot of governance troubles in any assets where you've owned less than 50%.

So just wondering on a general basis, you're thinking about control in subsidiaries and JVs, and applying this to India. Of course, if you're unwilling to pay the reserve price for spectrum and trading arguably shouldn't give any lower price, then it's either an exit or a merger with someone else, which would be the only options left.

And hence, any thoughts on JVs from a structural strategy point of view, very appreciated. Thanks.

Yes. I can answer in a general way to your question, but I don't want to be specific on India and the general answer to your question is that we still maintain the overall strategy that we want to be in majority control of our assets.

And the reason for that is that partly that we want to do things our way, but of course also operationally, but also that we need to be in control of compliance issues and more non-financial issues in this very challenging markets. So don't expect us to change the learnings we have had from our minority positioning in India or our strategy for quite some time now on staying in majority moving forward.

Next question please.

Good morning. It’s Nicholas, SocGen.

Could I ask firstly on the CapEx again? Could you just give us a bit more detail on which markets in particular there are cuts in?

It seems a little bit odd with the dtac guidance, which seems to be 20 billion, not just this year, but ongoing and also DiGi raising their guidance slightly. So whereabouts does that come in?

Is it maybe just purely Myanmar cuts versus consensus? And then secondly, just on your comments on Thailand earlier.

You mentioned a lot about 1,800, but is your expectation that you get access to 850 megahertz in the 2018 auction? Or is it just 1,800 that you think you'll get access to in the auction process?

Thank you.

Yeah. I can take Thailand first.

On the 850, I don't know, and for two reasons. One, it's not 100% sure that they’re going to put [indiscernible] and there are discussions in the government if they want to reserve at least part of 850 band to railway.

That is building a railway from China through Thailand. However, if it comes to an auction, of course the pricing for that 850 is going to be similar with what we’ve seen on the 900.

So that's going to be extremely costly. So the bets we are making as of now is the 50 megahertz we are having on the 1800 and that should be more than enough for also our competitors, if they wanted to pick up some additional 1800.

However, if 850 comes available and it comes available at a reasonable price, of course, that also will be of interest.

When it comes to the CapEx, you asked for more details on the different BUs and I don't think I will give you that, but in general, the way it’s constructed is that when you start a roll-off program, you just find that as a program, and you try them to run that as efficient within a period of time, and I think it’s the combination of how that is working. You will see that GP, for example, have concluded a major upgrade first half of this year.

You will also see that there are some seasonal issues due to the monsoon seasons, et cetera in Asia. And just wanted to highlight that I think we said earlier, I think the reason why we’re able to bring down the guiding to 17% is a combination of efficiency and smarter thinking and we are not postponing the CapEx into projects into next years to come.

We have been doing what we have been planning to do and that is also what we are doing for the second half.

Okay. Two more questions.

Thanks. I've got two questions, both on Malaysia please.

Firstly, when will we learn how much you need to pay for the spectrum in Malaysia? And secondly, how concerned are you around the competitive environment?

In Malaysia, it does seem like Telekom Malaysia and also, Yes, are being a little bit more active and I would presume that U Mobile could be a little bit stronger once they get the spectrum allocation as well. Thank you.

Yes. On your first question, we had hope that we will have some clarity on that, the payment, the reformed spectrum that we got a couple of months ago.

This seems to be dragging out, so we don't really know when and how much. However, we hope that the Malaysian government is going to follow the policy they’ve had for several years and then to be reasonable on spectrum prices.

So that's our assumption. But we don't really know, and hopefully this is something we will have much more clarity in the coming couple of months.

On the last question, that’s a worry you are right, the market is already very competitive with U Mobile taking a leading price competition, position and now with Telekom Malaysia and also YTL, under the name, Yes, is coming to the market. However, Telekom Malaysia is also owned by Khazanah, their sovereign fund, which also have the same owner as Telekom.

So it's a little bit hard to see that the same owner with a low Telekom Malaysia to be very disruptive to its telecom assets and the YTL go to market strategy is very unclear for us. So I would be much more worried about what Nexus is going to do, because they have also been very aggressive on the prepaid segment and if they go back and start focusing a little bit more on profitability, I think that can send some signal, at least for a market rationalization on the more high-end in the market to postpaid customers.

And then we just like to have that wait-and-see, what’s the long term strategy of U Mobile. So I’m more worried about the current players than I am about to newcomers.

Last question please.

Hello, thank you for taking the question. I just wanted to ask about Sweden.

I mean, could you update us on where the plans are for the SDU expansion? There are some of your competitors have indicated that there's just not enough subcontracting capacity in the market to be building a greenfield fiber infrastructure there.

Thank you.

Yes. The question was about SDU development in Sweden.

I think you’re correct, there is a lot of players, including Telia, ourself and Com Hem, which has given statements on addition in that segment. I think the pilots which we have been running have been fairly successful and so far, we have been able to work through the issues with capacity, with the installation force, et cetera, et cetera.

So we see there is a tight market, but so far, we have not been constrained by the capacity to build out when we have been able to sign up customers in an area for development.

Thank you, Sigve and Morten. And that concludes the session here today.

Thank you all for participating. I wish you all a nice and well-deserved summer vacation and I'm hoping to see you in London in September at our Capital Markets Day.

And as usual, for media present here today, there will, as usual, be the opportunity to have quick one-on-one interviews with Sigve and Morten and those requests will be coordinated by [indiscernible] from the communications team. Thank you.