Tele2 AB (publ)

Erik Strandin Pers - Head of Investor Relations Allison Kirkby - President and Group Chief Executive Officer Lars Nordmark - Executive Vice President and Group Chief Financial Officer

Nick Lyall - Soc Gen Sam Dillon - BNP Paribas Stefan Gauffin - Nordea Bank Roman Arbuzov - UBS Johanna Ahlqvist - SEB Peter Nielsen - ABG Ulrich Rathe - Jefferies Maurice Patrick - Barclays Lena Osterberg - Carnegie Thomas Heath - Danske Bank Sunil Patel - Bank of America Henrik Herbst - Credit Suisse Robert Slorach - Handelsbanken

Thank you, operator. Welcome everyone to Tele2’s first quarter 2017 results call.

My name is Erik Pers, I am the new Head of IR. Here Tele2.

I am with me our CEO, Allison Kirkby; and our CFO, Lars Nordmark. And as usual we’ll start with a management presentation followed by Q&A.

So Allison, please go ahead.

Good morning, everyone from a very sunny Stockholm, and welcome to our first quarter results for 2017. So, starting with the financials and the headlines of those that we released this morning, monetization of connectivity has been and is our key priority and we saw strong growth in the first quarter of this year.

With on a like-for-like basis, Mobile end-user service revenue up 10%, which retreating through its Altel and TDC pro forma and on a constant currency basis. Net sales amounts to just under SEK 8 billion, up 3% driven by strong mobile end-user service revenue across our footprint but with double digit growth in the Netherlands, in the Baltics and also in the Kazakhstan and that was offset by declines in fixed.

And EBITDA like-for-like was up by 28% with a strong contribution from all of our key market. So as you have seen in our annual report, we have refreshed our strategy to reflect where we will prioritize and how we will differentiate in the months and years ahead.

And so with that strategy as a forefront, let me take you through some of the highlights that we saw in the quarter. First our Baltic Sea Challenger businesses continue to grow and deliver strong results with mobile end-user service revenue up 5% in Sweden and 12% in the Baltics.

We also delivered a double-digit EBITDA growth in both Sweden and the Baltics. But even more importantly considering the importance of these regions, our Group, we saw a 16% increase in operating cash flow.

In our investment markets, we saw mobile end-user service revenue grew 40% in the Netherlands and we now have 87% of data usage and 40% of voice usage on our own network as we increasingly become less dependent on the T-Mobile 2G, 3G network. And in Kazakhstan, it was yet another strong quarter delivering mobile end-user service revenue of 40% growth.

On challenger cost structure, the integration of Altel in Kazakhstan continues to progress extremely well with cost and revenue synergies contributing to a strong EBITDA results again this quarter. And we are also net docking TDC synergies materializing here in Sweden, mainly from the early exit from the MVNO deal with Telia and FTE reductions as a combine or two organizations.

And we had another strong quarter for the challenger program which is well on track for the SEK 1 billion target that we set out to achieve by 2018. Finally on people, we physically welcomed 800 new colleagues from TDC Sweden into our headquarters in Kista and other offices around Sweden as we closed down the TDC head offices.

And in the Netherlands as usual earlier in March, Jon James has been appointed the CEO there, having great commercial and operational excellence and experience to both the Dutch leadership team but also to our Group leadership team. So let’s get into the markets and first I am going to touch on our Baltic Sea Challenger business of Sweden and Baltics.

In Sweden, revenue was flat with mobile end-user service revenue growth offset by lower fixed revenues and lower equipment sales and they were mainly in the fixed and enterprise area. The strong mobile end-user service growth which increased year-on-year by 5% was primarily driven by migration from prepaid to postpaid subscriptions, our customers opting for larger data bucket to support increase data growth and continue growth in the large enterprise segment.

And this growth was delivered despite to being a fairly modest quarter for sales and marketing investment. Sales and marketing will however ramp up in Q2 behind our new power to Tele2 proposition which some of you might have seen on Friday when we have also launched Roam Like a Home and them unlimited package for very high value customer.

And obviously in the last week, we’ve also launched the Samsung S8. So back to the quarter, EBITDA grew by a very strong 10%, due to the higher service revenues, lower expansion costs, as well as challenger program and TDC synergy benefit now materializing and flowing through to the bottom line.

In our Swedish consumer business, trends were again strong in the quarter. We posted 12% growth in consumer postpaid on the back of migration towards higher ASPU products, which makes 5% mobile end-user service revenue increase as prepaid and mobile broadband were down in the quarter.

If you recall, prepaid was very strong in Q1 last year. Our dual brand strategy and our value champion strategy continues to retry higher value customers to the large base of buckets.

And Comviq is now also traded customers up from the massive data growth. 69% of sales in both Tele2 and Comviq for a bucket of more than 3 gig.

Our geographic strategy, our increased network coverage and our single minded focus on customer satisfaction is driving our customer satisfactions scores to best-in-class levels with Comviq in particularly seen growth year-on-year and using Tele2 levels which remain at best-in-class levels and will obviously be a key focus for us as we now introduced our new propositions at Roam Like a Home and other opportunities. In Swedish B2B, we saw stable stales in the quarter both in the Tele2 business segment and the former TDC Sweden entity.

In large enterprise, we saw 3% growth which was driven by a strong underlying development in mobile end-user service revenue where we grew 8% which was partly offset by lower fixed telephony and equipment sales. We signed several new contracts in the quarter including Katrineholm and Järfälla municipalities as well as contract with HCL Technologies.

And we also managed for long our contract with Postnord. As the TDC integration, we saw the first synergies fixing through so far contributing SEK 90 million which was driven to a large extend by an early migration of what was the TDC MVNO traffic on Telia Network.

This migration will be finalized during the second quarter and as well ahead of our original integration plan. So let’s move across the what I know [ph] to the Baltics where commercialization and monetizing of our 4G investment continue to drive really excellent top and bottom line growth.

Net sales growth of 12% was very strong signs on ever increasing demand for data services and premium handsets. And mobile end-user service revenue growth was also 12% with Lithuania leading the pack at up 15% largely driven by higher data consumption, pre to postpaid migration and growth in mobile broadband.

Last year, Estonia growth was also strong at 10% and 7% growth respectively. EBITDA increased 16%, driven by the healthy revenue growth and benefits from the challenger program as we continue to consolidate their tasks and scales into our shared operations organization.

So clearly data monetization is continuing in the both fix and we saw strong ASPU development of 9% in the quarter as the transitions to postpaid continue and smartphone penetration increased. But as you can see here, the market remains underpenetrated from our smartphone perspective and our user data analytics and excellent customer base management is helping us to consistently up sell successfully.

The prior quarter investment into our mobile broadband business where our market share is lagging that what we have in handset has fueled our revenue increase in that segment of more than 50% all be it from a low base. But it’s establishing Tele2 as the liberty to connectivity both in the home and on the go in those of the Baltics where home broadband speeds lag back of the speed of our 4G network.

So let’s now get into our investment markets and first the Netherlands. Net sales were up 9%, it’s a strong mobile momentum, partly offset by fixed broadband and fixed telephony decline.

Most importantly, mobile end-user service revenue was up 40% as the mobile customer base increased by more than 20% year-on-year and ASPU grew by more than 10% year-on-year. EBITDA was positive in the quarter due to a number of timing impact but also benefit that will recur from higher revenues, lower NRA costs, lower investment to fixed and challenger program benefit.

However, the one timers were significant in the quarter and hence why we are calling this quarter a transitionary quarter. First, expansion cost were lower than expected as the VFT Regulation subdued handset sales and subscriber activation and some of our competitors introduced more aggressive propositions.

Secondly, EBITDA was positively impacted by non-recurring item totaling SEK 95 million, mainly coming from a revaluation of our handset receivable balance, but year-on-year, we did have a significant non-recurring item in Q1 last year as well around SEK 73 million. So despite the increase competition in the market, we have managed to sustain the momentum we finished with last year with our state of new postpaid subscriptions at around 17% in February and March looking stronger than February although we don’t have the market data yet.

The VFT and competition did have an impact on net intake in the quarter. Underline intake of 40,000 customers were shy with 50,000 to 60,000 quarter intake that we were seeing last year, and then a one-time cleanup of 24,000 reduced our reported net intake to 16,000.

On the network side, we continue to expand our LTE Advanced 4G network, which is now at 99.5% outdoor population coverage and 91% indoor population coverage. As early, communicated we expect our roll outs to be completed by the middle of 2018.

As I said earlier, data on loading reached 87% by the end of Q1 and following both the activation on the iPhone 6 in January, we now have just over 400,000 active VoLTE customer resulting in 40% of voice traffic on our own network in March. And according to the newly released PC report, our wonderful 4G network is now within one point of KPN and Vodafone, so hardly consumer notable and one of only two operators increasing their total score year-on-year.

So, as we could have transitionally quarter behind us, we remain excited about what we can achieve in the Dutch market now that data and voice is increasingly on our own network and of then unique challenger brands that keeps winning awards that is resonating very well with Dutch consumers. And yet another quarter of growth gives us the belief that with our continued disciplined investment strategy, we will further establish ourselves as the preeminent challenger in the Dutch market.

So let’s now further to Kazakhstan where it was again another strong quarter with net sales up 14% and strong momentum and mobile end-user service revenue continued with an increasing customer base and higher ASPU. EBTIDA was significantly higher year-on-year and is now a real material contributor to the Group as we meet the benefits of improved scale and from JV integration synergies.

As I've said before, this JV is now enabling a most stronger and a more sustainable platform for growth and value creation in the future. And looking at the results in a bit more detail, you can see that our customer base grew by 3% year-on-year and ASPU was up 9% year-on-year as we really focus on selling higher ARPU and higher margin propositions while staying true to our price leadership position in the market.

The JV integration is progressing according to plan as both organizations are fully integrated and the remaining where this year is very much in the network side. So far we have about 630 sites merged of total demands of around 1600 and that work will continue throughout 2017.

And finally as we move into the final stretch the challenger program, it very much from inbound track and we're delivering benefits slightly ahead of expectations. One of the key drivers of our strong Q1 has been a result of the focus was to into operational efficiency and productivity over the course of the last two years.

Headcount reductions in Sweden and the Netherlands in particular are benefiting on this quarter, and so the benefits realized from continued consolidation of our network, IT and customer service operations. The challenger program and our challenge cost position as you can see in our new refreshed strategy continue to be a top priority for us and we believe in 2017, we will achieve 75% of the SEK 1 billion target for annualized run rate by 2018.

So on that note, I’ll now be going to hand over to Lars, who can take you through the numbers in a bit more detail.

Thank you, Allison. Let’s turn to the next page for an overview of the mobile end-user service revenue development.

Reported year-on-year increase came in at 19% and at 10% from a constant currency and pro forma perspective. On the right hand side, looking at the individual operations, we have seen positive trends across all our markets.

Sweden contributed an increase of SEK 164 million versus Q1 last year representing a 9% increase in revenues of which 5% was the like-for-like growth. Baltics contributed SEK 54 million increase representing growth of 12%, while on our constant currency basis, the growth was 10%.

Baltics mobile momentum continues, despite headwind from the new EU roaming regulation that was effective in 2016. The roaming changes had a negative effect on the growth rate in the Baltics of just below three percentage points.

In the Netherlands, we saw healthy increase of SEK 129 million as we continue to grow our mobile customer base and experience rising ASPUs. The biggest movement year-on-year that came from the Kazakh business, which improved by SEK 230 million, a growth of 87% versus Q1 last year.

This was based partly on growth of the customer base and higher ASPUs, but also on adding Alltel which was only consolidated for one month in the corresponding quarter last year. On a like-for-like basis, the growth was 48%.

Moving on to EBITDA, we can see that the strong growth in mobile end-user service revenue flow through to the EBITDA. The reported year-on-year increase was 41%, while from constant currency and pro forma perspective, it was 28%.

Let's look at the individual markets. Sweden contributed growth of SEK 197 million with half of the increase coming from the consolidation of TDC with the other drivers mainly being service revenues, lower expansion cost and challenger benefits.

The SEK 40 million growth contribution from the Baltics was likewise driven largely by service revenue growth and challenger benefits. EBITDA from the Netherlands grew by nearly as much as in Sweden at SEK 182 million.

Here the increase comes predominantly from higher service revenues helped those of our lower national roaming costs and expansion costs. Kazakhstan growth of EBITDA SEK 116 million is to large extent driven by the increase scales of the business.

For CapEx, we saw a decline of 46% versus the same period last year primarily due to lower investment in the Netherlands where we had a high level of mobile investments in Q1 2016 and a more intensive network build out. In the Baltics and in Lithuania, we invested around SEK 130 million in spectrum of Q1 last year.

Sweden also usually low investment activity in the first quarter, and overall, we expected that the ramp up that level of investment during the rest of the year. Turing to free cash flow, we saw year-on-year improvement driven primarily by the higher EBITDA and lower investment, which we talked about that partly offset by negative change of working capital.

Timing differences will continue to have an effect on a quarterly basis on the working capital but also keep in mind that during last year Sweden was positively affected by the introduction of the external handset financing arrangement, which will not repeat itself this year. Looking at cash for generation from a more operations perspective, we should review of the overall development on the next slide where we split the rolling 12 month operating cash flow to find that EBITDA less CapEx into two segments with our investor market shown in grey and the Baltics Sea Challenger plus the other group units shown in blue.

We are pleased to see that the Baltic Sea Challenger and cash generators continue to deliver high end solid cash contributions for the group reflecting a strong EBTIDA development than an efficient investment approach. Meanwhile, the negative operating cash flow in our investment markets, Netherland CapEx declined for the third consecutive quarter on a rolling 12 month basis.

This reflects the increase in scale our Dutch and Kazakh business, which has been achieved on the back of the significant investments we have made in these markets in the past. It is also important to keep in mind we're looking at this that beside the underlying operational trends, the operating cash flow will continue to be impacted by factors such as the timing on network CapEx, spectrum investments and non-recurring items.

Moving on to debt and leverage, our economic debt to EBTIDA decreased slightly compared to last quarter to 1.75. The leverage is based on fully EBITDA excluding the 51% share of Kazakhtelecom and all our abilities guarantees the Kazakhtelecom and it includes TDC pro forma.

Turing to our guidance, Q1 was the strong quarter. We have to keep in mind however, but in the coming quarter, we will see higher levels in investment both in terms of CapEx and in terms of sales and marketing costs.

In the second half of the year, we will also see the impact of Roam Like Home and we will be up against tougher comps. So as the first quarter results put us well on track to deliver on our full year target, we're only three months into the year, and so we reiterate our guidance for the full year at this point, which are communicated to you in January.

And do you know that mobile end-user service revenue is based on constant FX and pro forma. And with that I’d like hand back to Allison.

Thank you, Lars. So in summary, our key priority is very much remain intact and now is to be the customer champion and enthusiastic connectivity deliver a more connected life for our customers.

As a result, we will continue to focus on monetizing data, despite headwinds from Roam Like Home and this focus and our new refresh strategy and customer propositions, we believe we’ll sustain our momentum in our Baltics Sea Challenger business. We also believe that this focus will enable us to leverage our challenger strategy in Netherlands and Kazakhstan to take significant market share to any financially disciplined manner.

And recognizing that our market positions require excellence in financial discipline and operational execution, we will continue to execute on our challenger and synergy programs so that our top line momentum continues to flow down to the bottom line momentum and improved cash generation. So our guidance reflects all of it and some of the headwinds ahead, so obviously the first quarter result give us great confidence that we will deliver.

And it doesn’t just got a confidence on the next quarter or the year but we very much our confidence, our focus on monetization of productivity will deliver long term value for our shareholders, our customers and our employees. So on that note, thank you for listening to us and I’ll hand back to Erik now who will kick off the Q&A session.

Thank you, Allison, and thank you, Lars. Operator, we’re now ready to take your questions.

Morning. It’s Nick at Sock Gen.

Can I ask two please, Allison. Just first on the challenger plan, what was the contribution in the quarter to the Group and could you just clarify it was 75% of the run rate to be reached by the end of this year when you talked about challenger?

And then secondly on the Dutch business, subs looked a bit weak again on the revenue and EBITDA another points are moving but on subs particularly, do you need to kick start to growth there, should we expect to big investment in marketing, could you again you just qualify this 3G subs that are less to get rid of before the sub numbers can start moving? Thanks.

Thanks. Well, we don’t get quarterly challenger program numbers.

That the way I looked at the year-on-year, like-for-like growth so around 380 million, about half of that it from a combination of challenger program, synergy realization and lower NRA cost, so real operational financial benefit. Another quarter is from data monetization across the footprint, ex-Kazakhstan and then another quarter is from Kazakhstan.

And main you’ve got one timers and then more marketing spend in the quarter offsetting to drag from fixed which is worth about 25%. So all in you know a good chunk of the benefits in the quarter are from challenger lower NRA cost and real synergy materialization.

And yet we’re very confident in the run rate being SEK 750 million by the end of this year. In terms of the Netherlands, yeah it was as I said bit of a transitionary quarter.

The VFT Regulation hit up in particular because we’ve been really pushing handset. And in third party channels, you saw a little slowdown of handset sales in the quarter and since we’ve been really prioritizing handset subsidy as opposed to SIM only that did have an impact on us.

So yes indeed it was a lower sales and marketing quarter and hence that and some of the non-recurring benefit gave us a positive EBITDA in the quarter. Now looking forward, investment will ramp-up again in Q2.

We still aim for the Dutch business all-in-all to buyback EBITDA breakeven for the event. And then I think your final question was or 3G subs, I think it’s from low 20% of the total subs.

Yes.

Yeah.

That’s great. Thank you.

Thank you, Nick.

Hey guys, two questions. So on page seven, you highlight the customer satisfaction levels for Tele2 and Comviq, I wonder, do you have the same data for the Netherlands and how that’s trended over the last year to 18 months and show a 4G launch?

And at Group level having delivered 10% like-for-like end-users service revenue growth on what was light maxing which is indeed very impressive. I do wonder what more you need to do maxing and what the incremental benefits would be and could you not just keep them budget has it has been in 1Q?

Okay. Thank you.

In terms of customer satisfaction at the Swedish customer satisfaction metric is very unique to Sweden and it’s based on real following up on calls with customers upcoming into our course online or being through our customer service hotline. So the more common metric that we needed to use across the group is NPS and we will start sharing those NPS metric with you for all of our markets in the future.

They were just - the organization that we get our NPS data from changed during the course of 2016. So we won’t be able to get to a stage where we’ve got like-for-like to share with you and then we will share that with you.

But in handset NPS in the Netherlands there’s been dramatic improvement in NPS since we launched the 4G network and since really we re-launched the brand. There is still room for improvement there.

There is still too much frustration at the call center level and that’s one of the areas that they join in the team are really putting a lot of emphasis again. But I would expect our Capital Markets Day on June 1st that Jon will get into that in a bit more details for you but good progress, there is room for improvements.

In terms of your question on marketing investment and the 10% like-for-like in the quarter, it was really just in Sweden, the Netherlands where we were shy of investments. The Netherlands you know in take was slower in the quarter as a result of that lowered investment and we do feel to sustain the net momentum we need to get the full return from the investor in the Netherlands the sales and marketing does need to ramp-up.

In Sweden, we’re seeing great ARPU development, but it’s a competitive market and Tele2’s brand equity and the intake has been suffering for quite some time, so the investment we’re putting into the Tele2 brand in particular this quarter, we’re hoping will allow was to stabilize and grow in the Tele2 residential customer base and so that we’re not just relying on ARPU development going forward. And since we launched value champion, we really haven’t had a proposition that has emotionally connects the consumers as well as we wanted to and that’s why we’re not investing.

But rest assured that we are very much focused on driving retirement investment mentality across the organization and ensuring that when we do invest, we get a good return over the short medium or long term depend on what our investment is. And so we will increase sales and marketing but don’t worry, it will be in a financially disciplined way.

Okay, cheers guys, thanks.

Thank you.

Yes. Good morning.

Have a couple of questions. First of all, you show that there are some synergies coming through from TDC already and you aim to move the MVNO traffic fully in Q2.

Can you quantify how much you will benefit from this? Secondly, you also talked that the national roaming cost was down in the Netherlands.

Can you quantify how much this was or do you had the around EUR 15 million per quarter. And how is this expected to develop in the remainder of the year?

Thank you.

It’s Lars. Thanks for your questions.

On the synergies in TDC, we had about 19 million coming through in Q1, that’s driven by two things, one is on the SG&A side, we have done some efficiency measures and that is also the MVNO contract coming through whereas we cancelled that contracts. So other 200,000 customers we already have quite a large time coming through.

But they come through also during the quarter and also towards the end of the quarter. Now, when it comes to how much the MVNO contract will deliver out of that 300 million synergies, we haven’t given that number.

What we can say is that it would come earlier as we had expected which is very positive for us. On the MVNO traffic, on the national roaming cost in Holland, in the Netherlands, we last year as you remember we were around EUR 15 million a quarter, this quarter on the normalize level we’re on 10 million and going forward obviously different measures impact that metric and it’s a combination of the customer gain and uses but all of us rolling up in network as Allison mentioned, we’re at 87%.

That’s on loading already and a 40% of the VoLTE of the customer base. So I think generally speaking, we should see national roaming cost coming down, if we already see the order benefits in Q1.

Can I follow-up on the synergies in Sweden, can you say the run rate end of the quarter if you just continue as it is?

Look is that the majority will come through in the first couple of years. I think it is a little bit too early to say what the run rate is going to be expected to be at the end of the year, Stefan.

Okay.

I think it’s a chance. What we are seeing on the MVNO transition is that - that it will steam ahead, so that would come in earlier, but I would like to wait at least for another quarter until I give you that number.

Okay, thank you.

Thanks.

Thank you very much for taking the questions. My first one is on Sweden mobile, so it sounds like things are going very well in the consumer segment and also the large enterprise.

What about the SME markets, do you see any positive signs of pricing going in the right direction towards the TDC acquisition and any signs of market repair or improved competitive dynamics in the market? And then secondly, I just wanted to follow-up on the questions Stefan was just asking around the TDC synergies, so is there a number that you can give us for what you hope to achieve in terms of synergies for this year or not, just an aggregate in terms of what we know what is the synergy this year?

So as Lars said on the TDC synergies Roman, we thought we have another quarter before giving you a number there, but you know it’s SEK 19 million already in this quarter and they’re not very positive. So on Sweden mobile, SME has stabilized and the good news is that we’re seeing an intake growing again.

TDC has no impact there. We didn't have an SME business.

So the real competitive pressure in the SME segment is much more from Telenor and from three in the little 50 employee market. So it still tough, so we’re seeing some stabilization, we're seeing an intake starting to grow again and there will be a halo effect of the new commercial propositions on Tele2 consumer into the Tele2 SME and business segment in the coming months.

Okay, thank you very much.

Yes, can you hear me?

Yes, how are you Johanna?

Yes, good. Hi.

Thank you. Congratulations to a strong report.

Thank you.

Just a few question from my side if I may. First of all, ARPU in the Netherlands, and can you say something what you expect on the development in absolute terms ahead given, I mean the competitive situation that you have and are you sort of considering changing your own offer to meet the quite aggressive one from T-Mobile?

And secondly you’re guided for the roaming impact of SEK 200 million, just sort of if you can give some more flavor on that how much is related to loss of rolling revenues and sort of what do you expect, what they sort of included in terms of data usage abroad in that, is this sort of average usage per month also abroad or can you say something all sort of the sensitivity on that number? And then thirdly, Sweden, can you say something about the churn in the quarter, how it has to develop the quarter-over-quarter or year-over-year?

Thank you.

Thank you, Johanna. So Dutch ARPU, our expectations well you know yes, it’s become very competitive there, but the rest of the competition are still trying to protect EUR 22 ARPU upwards and we're still in that you know kind of EUR 15 ARPU level.

So despite of being competitive, so definitely room for us to improve our ARPU and still be lower than the others. But as you know, our current propositions in the market are still very much skewed towards handsets subsidy and we have not yet done anything major on a SIM-only proposition, but that's something that we are reviewing at the moment.

In terms like a home guidance, it’s still too early to tell, we're sticking very much to guidance that we gave at the beginning of the year Johanna, we’re expecting around a SEK 200 million hicks to revenue in EBITDA and not based on impacts across our footprint and based on the information we had, based on the consumer behavior on roaming pattern last summer. We're still sticking to that guidance at the moment, and it's another reason why we are not yet notching our guidance overall for the Group, because we like a few more months under our bell before we could change our Group guidance.

So the Roam Like a Home, it’s still around the 200 million. And then Swedish churn in the quarter, pretty much kind of stable in postpaid, nothing much to report there.

We had negative net intake in prepaid, but then we had a prepaid through towards the end of 2015 and early 2016. And is that to decline again.

But no, churn is nothing to report really in quarter. It was a fairly - from a sales and marketing point of view, there was nothing really major that happened in the quarter.

Great, thank you.

Thank you.

Thank you. Just a question related to the Swedish business please, for the past couple of quarters, your told as particularly in the Q4 that you had initiated to the two reposition campaign in Sweden, it sounds now like, which would imply higher marketing spend that hasn't really materialize and has been have push back with a little bit.

Could you elaborate a little bit on this in terms of the efforts? Thank you.

Yeah, we just launched on Friday last week. So it didn't impact the quarter.

So on Friday last week, we launched the Power 2 campaign, so if you go on to your chip, you'll be able to see the tailor to school of power, and some of the great characters that we're now fueling with collectivists with the new propositions that include Roam Like a Home and for the higher value customers and unlimited offer at SEK 500.

So was it deliberately postponed the quarter one?

No, we always - it was always going to be in the spring, because that’s the best time to launch. And we try to link it close to the Samsung S8 launch.

So one point we might have thought of doing it in March, but you know if anything it's just a few weeks, because we try to combine it with Samsung S8.

Okay, thank you.

Thank you.

Thank you very much. I have two questions please.

The first one is, as you mentioned several times the sort of somewhat lower market investment in both Sweden and the Netherlands I believe, would you be able to sort of separately just for that commercial investment in the markets, give us a sense of what the scale of that has been of that reduction in Sweden and the Netherlands. I think you sort of given a couple of indications, but they were aggregated with other items?

And so related to that, I think it's pretty clear why you have done that, in Sweden, it's not entirely clear to me why you would have reduced market investment in Netherlands in the first quarter, could you sort of just describe the rationale for doing that, this is simply related to the management change or the other reasons, tactical reasons or other market reasons for that? The second question is very simple one, what is the reason for the 24,000 clean up in the Netherlands, is this sort of reflection of something that happened there in the past or is it sort of just usual stuff, I don’t think you have very much pretty bid in Netherlands, so I'm just wondering what the 24,000 actually is?

Thank you.

Okay, thank you. I’ll take the first question then Lars can mention the cleanout.

In terms of the marketing investing in the quarter, it was about 40 million lower in Sweden year-on-year and probably about 50 million in Netherlands year-on-year. And in Sweden as you said, just expanded.

Netherlands it wasn’t intentional just the handset market shrunk in the quarter, and as you know, our propositions are very attractive from a handset point of view. You know the whole VFT Regulation is your basic when you sell a handset now seen there’s a consumer credit, and lot of the third party retailers in particular and all of other operators are under new very regulated information on how we sell those handsets.

And it all affected me first, but people started to prepare for that already in the first quarter. And so you know the whole communication around selling a handset now is like about selling a mortgage.

And the consumer has reacted to that and the handset market definitely shrunk in the quarter, and we probably suffered more than our peers. Our peers reacted more on SIM-only and we have not yet reacted to that as we are you know getting our brand commercial propositions ready for our Q2 refreshment, which Jon is now getting ready to launch into the market.

And as far as the 24,000 customers, I will start of a review on the systems that we went through and we notice that these are contract customers, postpaid customers that have been on the suspense account for quite some time and we then disconnected them.

So, just a regular thing up.

Understood. Okay, thank you very much for both.

Thank you.

Thank you.

Hey, morning guys. Question on the outlook for Netherlands, so you talk about the slowdown that had some slowdown of third party handsets sales as well, do you think the churn pool in the Netherlands is actually shrinking as some of the other operators push conversion tax aggressively to the own base.

And what have you - could you give us some the mobile data stands gigabyte per use please would be very helpful, you’ve given in previous quarters? Thank you.

Yes, so obviously the churn tool has been shrinking for quite some time as a result of FMC and it shrunk further in the quarter as a result of the VFT Regulation. So we think it will start growing again and actually we just commission some research that say that there is increasing demand for consumers to reconsider mobile only and get out of the bundle, because the fixed operators are really pushing up the price of the fixed broadband in TV bundle, so those definitely still a churn fill and mobile only customer base that we can go after.

And Jon is very much working on at the moment who is the right mix of handset subsidy and several mix pricing for the market now that’s been quite some change from T-Mobile and mobile to phone. In terms of gigabyte per user it’s just over for us is now 1.5 gig.

In Sweden date, how that push here?

Sweden, 4.7.

Thank you so much.

Yes, hello.

Hi Lena.

Some more questions on the Netherlands. Just I was happy to say that you already has 40% of the traffic migrated on the voice as well.

I assume that's related to the iPhone migration. How do you think that will proceed over the rest of the year, because now you had one big challenge with the iPhone, how will that work with the other handset that you have, sort of what target should we assume in migration for the year end?

And also as you now launched unlimited in Sweden, is that the way to respond to T-Mobile in the Netherlands to go unlimited as well? I’m just sort of wondering how you see the fight that you’ve dependent on handset subsidies now you can’t really subsidized to the same extent to such as you've had before, so how do you view that, how do you respond to T-Mobile?

And then also one final question on Kazakhstan, how far have you come in the OpEx synergy extraction if I understand that you have now done most of the integration between the two now, is it more CapEx now if you move to network integration or is it still OpEx also in the network?

Okay, so thank you, Lena. In terms of Dutch voice traffic, yeah, you're right we're going to big step up now the iPhone 6 and so progress from now and throughout the end of the year will be a combination of network rule outs and new handsets and remaining customers moving on to either both the handsets or upgrading the software.

We haven’t given a target for the end of the year. I don’t think it will jump up as much as did in this quarter in the coming quarters, but it will progressively increase during the course of the year.

And as you saw as Lars mentioned are in already around historic lower than they were last year already in Q1. In terms of you know we’ve launched unlimited in Sweden, because we have - we felt that was the next stage in our data bucket journey for the Swedish consumer.

It’s very consistent with our brand proposition and we see great customer satisfaction benefits for those customers who want to spend in EUR 50 per month. And we take our pricing decisions very much on a market by market basis, and Jon and his team are obviously reviewing what is now the right move for the Netherlands.

Now that we are increasingly less dependent on the T-Mobile NRA cost, it’s obviously to allowing is to reassess what’s the right mix of handset subsidy and SIM-only pricing and that's something that we're reviewing at the moment. Kazakhstan, we’ve always said that by the time our two options is due in March 2019, would like to be closer 30% market share and a 30% EBITDA margin.

And so there are - so we're still to get the two year OpEx synergy benefit that the headcount reductions really only start fitting late spring, early summer last year, customer service consolidation only happened in Q3 last year, so you will see margin expansion from OpEx synergy during the course of this year, so obviously the CapEx synergy really start to kick in once we do network sharing, I don’t know Lars, you want add anything to that?

Yeah, I mean as you know we are merging side, so we have merger on 360 and there is about 1000 more to go. At the same time, we're also rolling out more size in Kazakhstan as part of the network program.

So when you look at Kazakhstan, did you see an increase in CapEx going forward and that’s also what we had talked about before.

Okay, thank you.

Thanks Lena.

Thank you, Thomas here. Just a follow-up on the Kazakhstan, if you can remind us a little bit, there’s a debt portion, but the valuation of the equity part in Kazakhstan just on sort of what basis is that value if you choose to exit Netherlands and you use that put option?

And then recognize that it might be way too early, but do you have any initial sort of response on limited plan? Sorry it’s just too early to say.

Thanks.

On unlimited it was just launched on Friday, so a little bit too early to say anything there. And remember it’s SEK 500, so you know the major step up from our average Tele2 offer.

It will be targeted at a very specific customer base. Kazakhstan with a shareholder loan outstanding at the moment is worth around SEK 3.1 billion that when we step the two options would be just be repeat churn.

In terms of valuations, the equity product you know our partner will go to three independent valuations at the time of the exit, so it’s not based on any multiple, will be based on what the business is work at that point in time. They offer us a price then we don’t agree with that and we get an independent valued and will be a third independent valuation will come in.

As the business keeps improving and you will see that we did a crew further for the value of air night that will be due to our previous partner as a result of the latest great progress. So there - we do believe there is equity value in that business already today based on our future projected cash flows.

That’s very helpful. Thank you.

Thanks Thomas.

Yes, thank you. I just have two questions.

One is what can be done to fix the declines in Sweden fixed? And the second question is you provided a breakdown, I’ve seen you slide B2B, I hadn’t seen that previously.

But what I'm interested in is the 1% B2B net sales growth, do you think that can grow with the same rate as your consumer business? Thank you.

So Sweden fixed consumer is old like I say on a little bit broadband here and there, so that business will continue to decline. Sweden B2B fixed however obviously a group opportunity for us as a result of the integration with TDC.

And then you’re right, when I’m putting out B2B in that net sales number, you see the ability of some of the other segments, so you see equipment sales and you see solutions then you see projects, so it’s not just a simple as mobile and fixed. In terms of getting - our ambitions is that the B2B business should be able to grow the 2% to 3% range as well as our consumer business.

But the consumer pieces mobile end-user the service revenue and the B2B pieces including everything, including equipment and solutions, and the whole range of services that we offer to enterprise. I think in the quarter, another very strong mobile end-user service revenue growth in large enterprise up 8%.

Thanks. Just to clarify, what I meant Sweden fixed, I just meant that the telephony piece, when I look at this six telephony line that your record…

Yeah.

I appreciate that it’s an average smaller part of your number, but I mean the declines are quite steep and something like 79%, is that just something that we should assume will continue to decline at that rate going forward or is there is a way you think or is there point we’re reaching now with declines we just become less because people have substituted if they want to and et cetera, et cetera?

So, I think you it’s safer to assume that it will continue those kinds of declining rates. Those businesses are unfortunately having a natural churn because it tends to be the older population.

That of the only one using fixed telephony. So as they leave us we are not able to replace them because the younger generations are not bothering to get fixed telephony anymore.

And we’re actually proactively trying to migrate them away from fixed telephony and move them into mobile, because it’s just it economically more attractive for us.

Thank you.

Thank you, Sunil.

Yeah. Thanks very much.

I’m just trying to understand the OpEx trends in Netherlands a little bit, but as you have less voice and some roaming costs and then also less sales and marketing. And I mean as we ramp-ups sales and marketing again, because I presume you’ll continue to push handsets, but your national roaming cost will continue to fall and also the expansion costs I presumed.

I mean as first assumed that you can keep your OpEx space broadly flat from here? And then the second question is on Sweden.

I am just wondering if you can give a bit of color in terms of the distribution of your existing customers on the consumer and 69% of new customers or new sales taking a bundle with more than 3 gigabits, in terms of your existing base, how the start number compare? Thanks so much.

Okay. So I’ll take the Swedish question, let me give Lars to help you on the OpEx trends in Netherlands.

You know this is the first time that would combined both Tele2 and Comviq bundle. I think previous we’ve all been talking about Tele2 postpaid sales above half a gig.

And what we’re just trying to show to you is that above 3 gig and above it’s nowvery strong growth for both Comviq and Tele2. Tele2 have been really promoting the 20 gig bucket for quite some time.

So in the last few months, we’ve been getting a good half of our intake coming in in 20 gig. And then the Comviq brand, we’ve been pushing much more at the 7 gig buckets.

And for those really heavy data users, we have been offering the Comviq customer also a 20 gig bucket, but at the same price as the Tele2 consumer. So we get exactly same gross margin whether they are Comviq or Tele2 on a 20 gig bucket.

So we’re going a great job at trading consumers up. I think our big bucket strategy has really helped us up sale and trade up and the new propositions that we launched on Friday is giving as another opportunity for trading customers up around SEK 50 on a time.

And on the OpEx, I mean if you look at the national roaming costs, we were expected to be at approximately that level given the fact they were taking on new customers and the usage is increasing, but then we are also rolling out our network. On the other OpEx elements, please remind that we rolled out about 1000 lines last year; we’re also rolling out quite this year and up until Q3 next year.

So we look at the network OpEx that will actually figure out somewhat. And on the expansion growth, Allison mentioned before we were about 40 million to 50 million lower in expansion growth Q1 and Q1.

And this is the activity we got coming our way, we would expect that to go up. And then offsetting there obviously have a challenge of benefits coming through in the Netherlands as well on the different initiatives that we got, But net-net adding about together compared to Q1, they would probably see a slight uptick in the OpEx.

Yeah. I think for now - for now Henrik, we’re still sticking to our EBITDA being roughly flat for a breakeven for the truthful business so for Dutch business in this year and obviously the effect that one to go another quarter and that’s the move we set as well.

Okay. Thanks very much.

Can I just follow-up on the first question, so of your existing base, how many customers are on bundles have 3 gig or smaller?

That we’ve never disclosed that but quite a big chunk are still. You know if you think, if you look our Q levels, Comviq the low SEK 200.

Tele2 is about SEK 200, so there’s still lots of room for ARPU development on existing customer based.

Okay. Thanks so much.

Thank you.

Hi. Thanks for taking my question.

Just a couple, so first a follow-up on the EU roaming question, of course the new offer in Sweden now includes EU roaming and have seen operators in other geographies say they plan to do things like domestic only packages or perhaps there is not too regulatory mechanisms. Can you just talk about what tools are perhaps the most realistic for you to use across your footprint to contain the roaming impact to 200 million that that you have factored in?

And then just a quick one on Netherlands fixed line, could you just give us more color on the progress in addressing their cost base there and are you where you want to be now and how meaningful could this be in terms of EBITDA contribution for this year?

So yes, you’re right, there are some markets where there are domestic only tariffs being created and you’ve seen that in some of the Baltic markets already. We are monitoring the situation every day at the moment to see what are the price plans are going into each of our market.

Some markets look domestic only, others pretty clear that that would not what happen in Sweden because Telenor already launched Roam Like a Home last year within their existing tariff. So that will not happen in Sweden.

What tools we have, we obviously there have the fair, the fair of usage policy to help us manage that. And then what we are trying to do is encourage people, our customers to take on bigger buckets.

So that they feel comfortable to roam freely likely with home when they are abroad and that giving us trade up opportunity to higher price plans. In terms of Netherlands, progress and addressing the cost base, well at Lars just said, we’re still rolling out the networks.

So great progress on becoming less dependent on T-Mobile and getting the NRA costs down and obviously that ambition for that to becomes zero by summer 2018 when our networks, it’s really rolled out. But we still need to build up on our own network at the same time, so that we totally flew towards the bottom line.

We continue to look our fixed business and as was seen in the quarter, we’ve done a really good job at focusing on the cash generation of that business and we are continuing to look at how to be drive those cost and to put business as well. And I think the new legislation on handsets actually is a fantastic opportunity for us.

Once our network is getting closer to being totally ruled out, because there is much rather invest in very transparent subscription pricing than into handset subsidies, so that’s not something we can do yet as we're still really pushing VoLTE handsets in the market.

Operator, we're about run out the time, so can we have just one more question please.

Thank you very much. Just couple of, are there in Sweden looks bit remarkable, I thought it would step up lot more revenues in EBITDA quarter-to-quarter, it will be one more month of the TDC business?

And then also if you could give us any sense for the usage on the 20 gig buckets that will be interesting to know? Well, thank you very much?

Okay. Usage in all our buckets is usually about 50% to 60%, that’s the average that we always see.

What was your question on Sweden, I didn’t quite get that Robert, I am sorry.

On other operations in Sweden that only stepped up about 40 million quarter-on-quarter, it looks pretty low compared to what one could have expected since I guess the TDC business would be in then and it will be in other months of it?

Yes, I think that’s probably a business area called project the TDC has where you know that could be quiet - you know that varies quite a bit quarter-by-quarter because it depends on whether they're doing big integration projects or not. So that that's one that has quite a high amount of variability and if I recall was big area was a big contributor to TDC in Q1 last year.

All right, thank you very much.

Thank you everyone.

Thank you. That concludes the call.

Thanks everyone for listening in. And you're always welcome to contact IR if you have any further questions.

We will talk again on the 19th of July when we really start second quarter results. So thank you and goodbye.