Tele2 AB (publ)

Allison Kirkby - President and CEO Lars Nordmark - EVP and CFO Erik Strandin Pers - Head, Investor Relations

San Dhillon - Exane BNP Paribas Lena Osterberg - Carnegie Thomas Heath - Danske Bank Johanna Ahlqvist - SEB Maurice Patrick - Barclays Ulrich Rathe - Jefferies Nick Lyall - Société Générale Henrik Herbst - Credit Suisse Irina Idrissova - RBC Capital Markets Peter-Kurt Nielsen - ABG Sunil Patel - Bank of America Robert Slorach - Handelsbanken Usman Ghazi - Berenberg Stefan Gauffin - Nordea Bank Max Hallam - New Street Research

Thank you, operator. Welcome everyone to Tele2's second quarter 2017 results call.

I have with me here, Lars Nordmark, our CFO; and Allison Kirkby, our CEO. As usual we'll do a management presentation followed by Q&A.

And if you haven't got the presentation already, it's available at tele2.com. I'd start by handing over the word to Allison.

Allison, please go ahead.

Good morning everyone and welcome to our second quarter report. So let's get straight into the financials.

Monetization of connectivity remains our key priority, and you saw, we saw strong growth in the second quarter. On a reported basis, mobile end user service revenue was up 18%, on a like-for-like basis, we were up 12%, which is the highest mobile end user service revenue growth we have had in many years; and is driven by strong growth across the footprint, with particularly double digit growth in Netherlands, the Baltics, and Kazakhstan.

Net sales amounted to about SEK8 billion, which is about 3%, as mobile end user service revenue growth is offset by lower fixed revenues and lower equipment sales in certain markets. The EBITDA on a reported basis was up 60% and 39% on a like-for-like basis, with all of our key markets contributing.

As a result of this momentum that you saw in the first quarter and again in our second quarter, we are pleased to announce that we will upgrade our guidance, our EBITDA guidance for this year and Lars will discuss that in a bit more detail towards the end of the presentation. So just as a reminder, our results are always underpinned by our strategy and our purpose, with enthusiasm for connectivity at the heart of everything we do, to ensure we deliver on our short, our medium and our long term value creating ambition.

With that in mind, in the quarter, we saw the following highlights. First, on our Baltic Sea Challenger businesses, we continue to grow and deliver strong results, with mobile end user service revenue up 3% in Sweden, and in the Baltics, up 18% or 13% in local currency.

We also delivered double digit EBITDA growth in both Sweden and the Baltics, and even more importantly, considering the importance of this region to our group, we saw a 20% increase in operating cash flow in the last 12 months, as our Mobility First strategy continues to serve us well with outstanding cash conversion. In our investment markets, we saw an acceleration of mobile end user service revenue.

In the Netherlands, we grew 51% or 45% in local currency, helped by the launch of our new propositions and our new brand campaign on May 17, and we now have 91% of data usage and 50% of voice usage on our own network. In Kazakhstan, we almost [ph] delivered another strong increase in mobile end user service revenue, up 21% on a like-for-like basis, with just under 240,000 net adds in the quarter and continued positive ASPU development.

These strong results were fueled by a strengthening of almost all of our brands, having launched new commercial propositions in all our key markets in the quarter. In Sweden, the Power 2 campaign is surpassing our expectations for cut through for brand recognition, and in driving unlimited uptick.

And in the Netherlands, we are seeing very promising early results from our new commercial offerings, including net intake of 51,000 for the quarter, with already 70,000 unlimited customers in only six weeks. Our Challenger cost structure was strengthened in the quarter with continued TDC synergy realization, mainly from having migrated all the MVNO customers to our own network, and the integration of Altel in Kazakhstan also continues to progress well, and driving the EBITDA margin further to over 22% in the quarter.

And we had another strong quarter for the Challenger program, which is well on track for the SEK1 billion annual benefit target in 2018, with a revised estimate level of annual benefits of SEK850 million for this year. So moving on to our markets in a bit more detail, and first, our Baltic Sea Challenger businesses.

In Sweden, we saw revenue slightly increase with mobile end user service revenue growth, offset by lower fixed revenues. The mobile end user service revenue growth, which increased year-on-year by 3% was driven by strong growth in the consumer segment, but partly offset by declines in the business segment.

The growth in consumer is primarily driven by migration from prepaid to postpaid subscriptions and our customers are opting for larger data packets to support increased data growth. This has been a great period of growth for our Swedish business.

But let's not forget, as we move into the summer season, we will no longer have the European roaming revenues that we had in prior years. That being said, our Swedish team have built a highly resilient business, as this quarter yet again proves.

With EBITDA going well ahead of the top line at plus 12%, due to Challenger program and TDC synergy benefits, as well as the higher service revenues. Looking at the Swedish consumer mobile business, trends were again strong in the quarter.

We are seeing positive early indicators that the Tele2 Power 2 campaign is increasing recognition for the Tele2 brand, especially when it comes to uptick of Unlimited. Additionally, we recorded the highest Q2 growth intake of Comviq postpaid in its history, driving growth in mobile end user service revenue up 8% or 5% adjusted for the non-recurring item in Q2 last year.

Our value champion strategy continues to attract higher value customers to larger data buckets, with two-thirds of sales in both Tele2 and Comviq now on buckets of more than 3 gigs. And our increased network coverage and our focus on satisfying our customers, are keeping customer satisfaction for both Comviq and Tele2, stable at very high levels.

Moving into B2B, we have now returned the SME business to growth. But, our large enterprise business was down in the quarter, admittedly, compared to seasonally high Q2 last year.

The large enterprise segment business in Sweden is experiencing somewhat increased price competition, and we also lost appeal for a large contract that we had won in prior quarter, and that was expected to compensate for churning customers. As the nature of this business is long sales cycles with large contract going in and out of the revenue base, it will probably take a few quarters to reverse this trend.

However, we are ahead of expectations on the TDC integration plan, and therefore, ahead of the synergy plan, with an important driver being the now completed migration of around 200,000 TDC mobile customers on to Tele2's network. And we remain excited about the ability of the Tele2 and TDC combined platform, to create value in the large enterprise market over time, and delighted that towards the end of the quarter, we signed several large contracts, including three municipalities in the Skåne region, WSP Sweden and Postnord Sweden.

Moving to the Baltics, commercialization and monetization of our 4G investments just continue to drive quite a stellar top and bottom line development. Net sales growth of 21% was very strong, thanks to an ever increasing demand for data and premium handsets.

Mobile end user service revenue growth was up 18% of 30% in local currency, largely driven by higher data consumption and growth in mobile broadband. And EBITDA increased 23% or 18% in local currency, driven by the healthy revenue growth and benefits from the Challenger program, as we continue to consolidate certain tax [indiscernible] into our shared operation organization.

Looking at the Baltics in a bit more detail, we saw strong ASPU development of 13%, as the transition from prepaid to postpaid subscriptions continued, smartphone penetration increased and customers traded up to larger data bucket, very much encouraged by our new proposition, which we launched to support Roam Like At Home. Additionally, the focus investment into mobile broadband has fueled a revenue increase of more than 50%, albeit from a little base, but is now establishing Tele2 as the liberator of connectivity, both in the home and on-the-go in those parts of the Baltics, where home broadband speeds lack that, of the speed in our excellent 4G networks.

In general, we are very proud of and excited about the continued growth opportunities in our Baltic business units. Which now leads me into our investment markets, and first, our Dutch operation is now aggressively accelerating this growth.

Net sales were up 3%, due to strong mobile momentum, offset by fixed broadband in telephony declines and lower handset sales, following the VFT regulation earlier this year. More importantly, mobile end user service revenue was up 51% or 45% in local currency, as the mobile customer base increased by more than 19% and ASPU grew by more than 20%.

Our mobile network economic continued to improve rapidly, providing a strong foundation for continued price leadership. This and the mobile end user service revenue growth, contributed to EBITDA being slightly positive in the quarter, despite a SEK64 million provision related to a legal dispute regarding historical copper line rental fees, which we plan to challenge and to appeal.

On May 17, we successfully launched our new commercial proposition, taking advantage of our unique 4G-only network, which has now reached at par with its competitors, only 18 months since its commercial launch. We saw increase in net intake growth to 51,000 and have quickly doubled our market share of new SIM-only subscribers; because prior to that launch, we were only taking around 8% of the SIM-only market.

As I mentioned before, we are also delighted to see the quick uptick of the new unlimited proposition, with nearly 70,000 customers taking it in the first six weeks from a combination of new intake and upgrading our existing customers. [indiscernible] has continued to progress on the back of a new campaign, and we won further marketing awards in the quarter, including an AVA Award for media advertiser of the year, and a SPREE [ph] award for one of the most impactful and creative campaigns, and then SpinAward for the best digital concept.

Data onloading reached 91% by the end of the quarter, and we now have almost 500,000 active VoLTE users, resulting in 50% of the voice traffic now on our own network. On the network side, we continue to expand our excellent LTE advanced 4G network, which is now at 99.6% outdoor population coverage, and 91.7% indoor population coverage.

As earlier communicated, we expect the rollout to be completed by the middle of next year. So looking forward, we will continue to invest in growing our subscriber base in the coming quarters, and we do however expect a slightly softer growth, due to the impact of Roam Like At Home in the immediate Q3 quarter.

However, we remain very excited about what we can achieve in the Dutch market, now that data and voice is increasingly on our own network, and with our unique Challenger brand that is obviously resonating well with Dutch consumers. We have a fairly empty network, and the opportunity to now push SIM-only, and an ASPU that is well below the others in the market, but increasingly higher than what we have in our base.

So we continue to believe that our disciplined investment strategy will deliver, as we further establish ourselves as the preeminent challenger in the Dutch market. And then moving on to Kazakhstan, our other investment market; where net sales were up 35% year-on-year, and we continued our strong momentum in mobile end-user service revenue, growing by 39% or 21% in local currency.

This momentum was built, as a result of strong customer growth, reaching 6.7 million customers, and increasingly larger data bucket. EBITDA more than tripled year-on-year, as we reap the benefits of higher ASPU, improved scale and from JV integration synergies.

So now, you can see that our JV is delivering on what we promised, enabling a stronger and more sustainable platform for growth and value creation to build from in the future. Looking at the Kazakh results in a bit more detail, our customer base grew by 5% year-on-year to reach more than 6.7 million customers, and ASPU was up 60%, as we focus on selling higher ARPU at higher margin propositions, while staying true to our price leadership position in the market.

In April, we launched the Altel brand to strengthen its premium position, and we are happy with the initial response from the Kazakh population to this new, more premium look and feel to the brand. And finally, integration is progressing according to plan, with a little more than 1,400 sites merged over up to 1,700 that we intend to migrate and integrate, and the work to complete the integration will continue throughout the rest of this year, and it will be an enabler to further margin expansion in the months ahead.

And just before I pass on to Lars, a quick update on the Challenger program. We are now moving into the final stretch of the program, and it very much remains on-track and delivering benefits slightly ahead of our own expectations.

In fact, we now expect to have achieved around SEK850 million in annual benefits by the end of this year. One of the key drivers of our strong momentum recently, has been a result of the focus that was put into operational efficiency and productivity over the course of the last two years.

The Challenger program and our Challenger cost position, continue to be a top priority for us, and will continue to be so, even when the challenger program ends in 2018. So on that note, I will now pass over to Lars to take you through the financials in a bit more detail.

Thank you, Allison. So let's take a look at what this sums up to on a Group level.

We start in mobile end-user service revenues, which drives much of our business momentum, where we had exceptionally strong growth at 12% in local currencies. In addition, we had some currency payment this quarter, so as you can see, the growth was 18% in Swedish kroner this quarter, and landed at SEK3.9 billion, an increase of around SEK600 million.

The unique combination of both strong customer growth and strong ASPU growth in the Netherlands made this market the best contributor this quarter. But also Sweden, Kazakhstan and the Baltics made significant contributions.

Moving on to EBITDA, we had a 50% increase in reported currencies, with 11 percentage points coming from FX and M&A and 39% being the underlying growth in local currencies. Sweden was the strongest contributor here and posted an increase of SEK194 million, with a little less than half of that being the acquired EBITDA from TDC.

Sweden was also somewhat helped by non-recurring items in 2016. In addition, the Netherlands, Kazakhstan and the Baltics made significant organic bottom line contribution, driven by solid top line development.

If you look at the CapEx for the quarter and indeed for the first half of the year, we could see that the CapEx investment have been low recently. Sweden increased its CapEx versus last Q2 and is expected to increase spending further in the rest of the year and the same is true for Kazakhstan.

And as you know, we continue the network rollout in the Netherlands until mid-2018. So all-in-all, we expect a clearly elevated CapEx level in the second half of the year.

Please note that the cash CapEx for the first half has been at SEK1.7 billion, whereas the balance sheet CapEx was at SEK1.4 billion. That takes us to free cash flow; we had a good cash flow contribution this quarter, driven largely by higher EBITDA, but also significant improvement from working capital, much thanks to Sweden, which improved its working capital position meaningfully this quarter.

We have a focused effort to reduce our working capital in the Group, and see several opportunities to do so. Keeping in mind however, that last year, we implemented handset financing in Sweden, which had a significant positive effect on working capital, which will not repeat itself this year.

Overall, we would expect working capital changes to be approximately neutral for the full year 2017. To give you a longer term overview of the evolution of the Group's cash flow, we turn to slide 22, showing the operating cash flow, defined as EBITDA less CapEx on a rolling 12 month basis.

The blue bar shows the contribution from mature businesses in Sweden, Baltics, Germany, Austria, as well as [indiscernible] costs. We are pleased to see that the operating cash flow has risen from a level of around SEK3.5 billion to a little more than SEK4.1 billion.

This is driven partly by low CapEx, which will be higher in Q3 and Q4, but also by significantly increasing EBITDA. The grey bar shows operating cash flow in our investment markets, Kazakhstan, the Netherlands and Croatia; and as you can see, the net investments we are doing in terms of cash flow has declined significantly in recent quarters.

This is driven primarily by the gradually improved scale that we are realizing within this growth geographies. While we expect the negative operating cash flow from the investment market to diminish and turn positive over time, we do expect the contribution in both investment markets and our established markets to take a step down in the second half of the year, as we increase our CapEx levels.

Slide 23, shows our net debt position, which as you can see has risen somewhat after the dividend in the second quarter, but remains well under control in relation to our growing EBITDA. I'd like to conclude this section by talking about our financial guidance for the full year; we maintain our guidance for net sales of SEK 31 billion to SEK32 billion, as well as for mid-single digit growth in mobile end-user service revenues for the Group.

While we have been executing above this level in the first half, the effects of Roam Like At Home and tougher comps will slow us down in the second half. When it comes to EBITDA, we can conclude now that we have been delivering ahead of our expectations in the first two quarters of the year, and we are upgrading our full year guidance to SEK6.2 billion to SEK6.5 billion, driven namely by strong performance in Kazakhstan and the Baltics and reflecting the Challenger program being ahead of previous expectations.

Please note, that in regards to Roam Like at Home, we have included an impact of SEK200 million to SEK300 million in our guidance. Also, we will expect expansion costs in Sweden and the Netherlands to be elevated in the second half, when you compare it to the first half of this year.

CapEx will [Indiscernible] most likely increase in the second half, but due to timing effects, should be somewhat lower than we expected at the beginning of the year, which is why we updated the guidance to SEK3.6 billion to SEK3.9 billion for the full year. And with those words, I'd like to hand back the word to Allison to summarize the quarter.

Thank you, Lars. So in summary, the quarter is very much still on the priorities that we had for quite some time now, and there to be the customer champion and enthusiast of connectivity, liberating our customer to live a more connected life.

As a result, we will continue to monetize data, despite the headwinds ahead from Roam Like at Home, and we believe that this strategy and focus will enable us to sustain our unique Baltic Sea Challenger status and strength, and we do expect a significant growth opportunity in the Baltics to continue. We will also continue to leverage our Challenger strategy in the Netherlands and Kazakhstan, as we accelerate towards cash flow breakeven in those markets, and take significant market share in a financially disciplined manner.

Recognizing that our market positions require excellence in financial discipline and operational execution, we will continue to execute on our Challenger program and our synergy programs, so that our top line momentum continues to flow down to bottom line momentum and improved cash generation. Our updated guidance reflects all of this, but most importantly, the confidence we have, that our focus on monetization of connectivity will deliver long term value for our shareholder, our customers and our employees.

So that brings us to the end of the presentation, and Lars and Erik and I will be very happy to take your questions.

Thank you, Allison and Lars. Operator, we are now ready for the questions.

Hi guys. So my first question is on Swedish B2B, and specifically your commentary on large enterprise.

Who is being incrementally more aggressive in this segment, and do you expect B2B to remain in negative growth territory for the year, for the remainder of the year? Secondly, on roaming; I think you had previously guided to a drag of around SEK200 million for the year, so it appears you have increased by up to SEK100 million.

Does that suggest your early experience of Roam Like at Home has been, that you have seen a higher roaming demand from your customers than previously thought? And finally, on the Netherlands, you have done about SEK230 million of positive EBITDA, adjusting for this quarter's one-off.

Do you still believe you will be EBITDA breakeven for the year? Thank you.

Thank you, Sam. So taking each of those in turn; Swedish B2B, yes it was low.

We did have a very strong Q2 last year [indiscernible]. But that being said, we are seeing more price pressure in the market, as the market leader in particular has tried to retain some of its large contract, but at a lower price.

And so, with that and some contracts -- unfortunately, we lost the appeal, we are expecting trends to be fairly muted in the second half of the year, because as you know, this business has longer sales cycle, and that is built into our guidance for the year. So slightly softer than we would have wanted, but we are very confident that as the two organizations have now come together, and we will have a combined product portfolio later in the year, that we will build the business opportunity that we expect, as a result of merging the TDC.

And as I mentioned, we have already won some great new customers, just towards the end of the quarter. Moving on to roaming, as we said, the great momentum we had in the first half of the year, and look forward into the second half of the year.

It's early days on roaming. Certainly, consumption and the cost of our consumption is coming in line with our previous forecast and expectations.

But as we were taking the guidance up, we decided to give ourselves a bit more room in that guidance for roaming to be even higher than the original SEK200 million. So in our guidance, we have allowed for up to SEK300 million, just in case, consumers consume even more than what we are seeing today.

But what we are seeing at the moment is very much in line with our original forecasted expectations. And then in the Netherlands, we had a strong start to the year.

Some of it has been driven by one-off. Don't forget we had a SEK95 million positive one-off in the first quarter and some of it has been fairly much lower investment in handset sales, and some of it we are just getting much improved network economics.

In our guidance, we are still assuming breakeven for the Netherlands for the year, because we want to hold back the potential to continue to invest behind the great momentum that we now have, and it's still a very competitive marketplace. So in our guidance, we are still assuming Netherlands will revert to round about breakeven for the year.

Okay. Thank you very much.

Yes, good morning. Some questions on TDC, first of all in Sweden; you say that you had an accumulated effect of SEK72 million by the end of the quarter.

So I was wondering in Q1, you provided what the actual impact was in the quarter? Could you say how much benefit you had for the full quarter in Q2, so you can see how much sort of -- if there is a spillover effect into Q3?

And then also, if you could please elaborate a little bit, I know you said it's still early days, but so we understand what has the consumer behavior been for Roam at Home, did you have a sort of uptick, do you think some of the extra uptick you saw this quarter, was ahead of Roam at Home that you may have some benefit now already on revenues, but maybe not the costs? Just to understand, how consumers have acted in Q1 and what we see early in Q3?

Okay. So on the first question, yes Lena, you're right, it was SEK19 million in Q1, and the incremental amount in Q2 was SEK53 million.

So that will be more likely a standard run rate going forward will be the SEK53 million per quarter, which is the vast majority were transitions during Q2. On roaming, we have only had 15 days in the quarter, and obviously, we are looking at the early behavioral patterns, these first couple of weeks of July.

We have seen significant uptick, I think. Our Swedish team are seeing, five times increase and that is pretty much in line with what we were forecasting.

In the quarter, there is a little bit of impact from that, where it's not material to pull out, but there is a small impact. And so at this stage, it's very much in line with our forecast, but as I said on the previous answer, as a result of the strong momentum in the first half of the year, we have accommodated for a little bit more roaming impact now in the second half, in the guidance that we have given, just in case.

Thank you.

Thank you, Lena.

Thank you. A few questions if I may?

Firstly, on unlimited in Sweden, you mentioned brand recognition, is there any actual intake, and in that case, is the new customers or customers uptrading, and sort of how it is performing compared to what you expected? Then secondly, I believe there was a tax case issue, your press release earlier this summer.

I believe it's already taking a provision on the P&L, just wonder if there is any cash impact on that, unless you win in an appeal? Thank you.

Thank you, Thomas. So on unlimited in Sweden, as I said, it's SEK500, it's a big bucket and the early indicators are that it is both selling and -- to both new intake and upsell within our existing base is ahead of plan.

So very happy with the early indicators, and how the whole unlimited positioning is really reestablishing our sales again, as the challenger in the market being the first one to launch that, and is really helping drive the messaging of Power 2 and the Tele2 brand in general. In terms of the tax case, I am going to pass that over to Lars.

Yes, hi Thomas. So you're right, we have provided for it, and not just a period that is indicated at [indiscernible], to the point of report.

We plan to appeal the case in the next instance. If we would lose, it would have a cash impact.

It's too hard to say when that would be, but we would expect the appeal to take at least a year.

That's helpful. Thank you.

Thank you, Thomas.

Yes. First of all, you mentioned that the expansion cost will increase in Sweden in second half, and I am just wondering, [indiscernible] give any flavor of the magnitude of that increase?

And then Kazakhstan, I know this was a very-very strong quarter, and you see no reason to sort of expect these strong trends to continue, and what you -- are you more confident knowing that you will have an equity value in the end from Kazakhstan? And maybe thirdly as well, just on Dutch intake, around 50,000 subscribers this quarter, so do you expect this intake to be sort of the run-rate going forward, or are you more optimistic given what you see now with attraction from the unlimited offer?

Thank you.

Thanks Johanna. I will take the last first, and the Lars can finish off with the expansion costs.

So with Netherlands intake, so the new propositions were just launched on the 17th of May, so we have only got about five-six weeks of the impact of that in the quarter, but helped accelerate us back about 50,000 in the quarter. I think, our aim is to be consistently taking around 20% of the available market, which is around 50,000 to 60,000 net intake per quarter, and that is what we are continuing to aim for in the balance of the year.

So we are not revising that estimate at this point in time. In terms of Kazakhstan, yes it has been -- it was an even stronger second quarter, really happy with what the Kazakh team are doing down there in terms of integration and the commercial funds, as we really drive the dual brand strategy.

And as I have said before, we want to build towards the 30% market share business and a 30% EBITDA margin business around about the time that we would have the opportunity to serve ARPU [ph] option, and that would of course, enable further growth in the equity value, and in fact, you will have seen in the quarter, we have again reserved an increase in the [indiscernible] due to our partner, because we are recognizing that the equity value has again increased on the back of the great trends in the quarter. And Lars, on Swedish expansion costs?

Yes. So Johanna, on the Swedish expansion costs, we expect it to be elevated in the second half versus the first half of this year, as you know, Q1 was slightly down compared also to Q1 in 2016.

So just to give you a little bit of indication, going forward and also coming back to, in relation to the guidance, we are not going to give you an exact number there, but we will expect a slight increase in order to continue to achieve the very good momentum we got on the Power 2 campaign.

And remember Q3 last year, Sweden was fairly low from an expansion cost point of view, and then it spiked up in Q4. So think about that, if you are doing your quarterly estimate.

Perfect. Thanks a lot.

Thank you, Johanna.

Good morning guys. Maurice here.

Couple of quick ones for me, first one, Netherland NPS stats, I think you gave some numbers for the first quarter showing your NPS versus KPN and just wonder where that's tracking in the second quarter? Second question, can you share with us please, the mobile data usage in Netherlands and Sweden, as you often do?

Thank you for that. And then just a third question, I see your share of SIM-only in the Netherlands is now 15%, it was 10% a year ago.

Do you think you can grow beyond 15%, is that realistic? Thank you.

Thank you, Maurice. I don't have the latest on NPS in the Netherlands, but that is something that I am looking at Erik, if he has it.

If he doesn't, then we will get it over to you after the call, Maurice. Of course, we updated that early June, so we might not even had an update yet.

But we will get back to you. Mobile data usage in Sweden, Tele2 brand is now on average 5.4 gig per month, up from 4 in the same period last year.

Netherlands is now 2.1 gig per month, up from just under one in the same period last year, so still very low, but increasingly showing that with the right pricing and great accessibility to great networks, we can start to drive Dutch consumers away from Wi-Fi and on to 4G networks that we can monetize. And then similarly in the Netherlands, we have seen great momentum to 15%, that 15% was the average for the month of May, and so only reflects two weeks of the new proposition.

So it is our ambition to get to around 20% of the intake of both SIM-only and handset, although we are still well ahead of 20% on handsets at the moment. So we think we can build it furthermore.

Thank you.

Maurice, you can add [ph] perhaps that on your first question regarding NPS, we have had some positive results on consideration, following the -- after the end of the quarter. So the consideration level you are seeing at 52% in Q2, a direction to the higher 50s in the last few weeks.

So that's a positive trend there [indiscernible].

That's great. Thank you.

That will drive NPS up. We will start to try and report NPS more regularly.

Yeah, very helpful. Thank you.

Thank you. Actually a follow-up on some questions that have been asked earlier on.

On Roam Like Home, first of all, Telenor commented yesterday on a slightly slower growth, that's a very material growth in usage similar to what you are talking about in Sweden, but they actually said their costs were essentially flat on the basis of significantly lower negotiated wholesale rates. I was just wondering, whether you would be able to comment on the unit costs, and whether that has come down and whether that could come down further for Tele2 as well.

Second question is, Swedish B2B, you have sort of indicated the future for the large enterprise pressure, but obviously, the another big news here is that you have now turned this new whole segment into growth, just wondering, whether you are willing to comment on sustainability of that area now remaining in growth from here? And my last question is, coming back to the Netherlands, you did say that you want to retain the target of sort of roughly 20% of the [indiscernible] market per quarter.

Could you just sort of outline again what the reasons are, why you wouldn't push this a bit harder now, given that you have this fairly empty network, the network seems to be very good according to third party network surveys. So what's the reason not to push this slightly harder at this point?

Thank you.

Okay, thanks Ulrich. So first on Roam Like at Home, I guess, Telenor did launch Roam Like at Home last year, so they are already comping a period, where they had taken an early adopter approach to it.

So I guess they are -- we did not, we just launched Roam Like at Home, so it's a different comparable period. In terms of the unit cost trends, my roaming team continued to do a fabulous job of negotiating the costs down and continue to do so.

In fact, so much so, that we actually provide outsourced MVNO services to MVNOs in countries around the world, Sky in the U.K. for example, we do all of their MVNO traffic for them.

So we keep working on the costs to manage it down, but Telenor already launched early last year, so it's not going to have the same impact on them, as it's having on us. In terms of Sweden B2B, yes I commented large enterprise pressure, SME is back to growth.

We want to sustain that growth. It's a highly competitive market, but a lot of things are starting to come together, and we just launched the Power 2 campaign now into the B2B segment, and that's really pushing the messaging on both to the SME segment and the large enterprise segment.

So I'd like to see that segment get back to sustainable growth again, and that's our ambition. And in terms of the Netherlands, why not push harder.

I will be happy if we get more than 20% in any one quarter. As you see, we are well ahead of that in the handset market, and -- but I think for now, we are just saying 20% is a good target, but I always hope that my team will slightly overdeliver on that.

Thanks. Can I follow-up?

And just on that Roam Like Home thing, I mean, Telenor had an almost four-fold increase in volumes, and it's true that they started earlier, but still they had a year-on-year fourfold increase in volumes, and again, the costs they say were essentially flat, so they are applying a four, sort of significant drop on a year-on-year basis to their wholesale rates, which isn't really related to them starting earlier. Are you seeing the same type of cost reductions by sort of a factor of four, or is that something that Tele2, maybe because of scale differences or other reasons is not achieving?

Thank you.

I don't have those numbers at my fingertips, and we will not guide on that any way. But we have seen a five times increase in volumes in Sweden, so very similar trend.

Thank you.

Yeah, morning. This is Nick at SocGen.

Could I ask two on the Netherlands please, Allison? The first one, on the mobile business and on the current run rate of EBITDA, which is quite a bit below where we were last year.

I was quite surprised, your on-net voice was up by about 10 percentage points from last quarter, particularly given the SIM-only. Could you may be comment on that for us?

And then, with the NRAs being down, is there any sign of a move back to handsets at all, post the VFT legislation, and was this a full market in the quarter. So should this be the run rate for EBITDA in the mobile side from here, if this is sort of where we are going to stick up for the next few quarters.

And the final one was one on fixed business; the ARPU is still quite substantially down about 7%, a little bit surprised about now -- given the VULA in corporations. So could you just mention really what you are doing on pricing, are you slashing pricing on broadband as well, because subs are still falling?

Thank you.

Okay. So on the mobile business, the network economics are improving all the time, as our network expands outdoor and indoor, and so that is one of the positive factors that you are seeing in the quarter.

What's happening to handsets post VST is, what you are starting to see now, is the use of handset in promotion, which is allowable within the regulation, that you can the odd promotional campaign, and I think all operators are taking advantage of that, including ourselves. Is this therefore, a good reflection of a run rate going forward, no.

We are still within our guidance, assuming that for the full year, we will have the EBITDA around breakeven for the year. So we have got room in our guidance to increase expansion costs and investments behind huge quality customer acquisition in the balance of the year, to keep up our momentum.

In terms of the fixed business, was that the Dutch fixed business you are talking about?

Yeah. So just the ARPU is still --

Is the ARPU affected by some of the one-offs or is there -- no, there is no one-off effect. I am looking at my team here, and I am not really -- Lars?

Yeah. It could be a mix effect here, so we have some business customers in there as well, so the consumer pricing is obviously different than we are having in the -- some of the smaller business segments there.

So there is probably something going on there. And then, we obviously have different price points for single package, dual package, triple package, so there maybe some movements there as well.

So that's one of the reasons for that.

That's great. Thank you.

Thank you.

Yeah, thanks very much. I had a few questions as well; firstly on, in terms of the uptick of the larger than 3 gigabyte bundles, so it's up a bit year-over-year, but it does seem like it's down from -- I think it was 69% in Q1, 66% in Q2.

So if you could just explain that a little bit, it seems like a odd move. Also if you could maybe talk a bit, which of your bundles or which data bundle is the most popular on the Tele2 brand?

Then, I just also wanted to follow-up on Roam Like at Home, so as I understand, it was just a very small impact from Roam Like at Home on -- and user service revenues in Q2. So if you could just confirm that?

And then, last question on CapEx in Sweden, which you are saying is picking up there a bit. Can you maybe talk a little bit about what you are investing in, or are you starting to see congestion in some areas of your network or are you still building out coverage?

Thanks very much.

First question on -- you are right, the average went down from Q1, and that's because we were particularly driving some kids [ph] products in the quarter, and data 1 gig. So there was quite a good intake of that, particularly kids focused package.

In terms of which bucket sells the most, it's somewhere between the 5 gig and the 15 gig in Sweden, have driven the most intake in the quarter. And then, Roam Like at Home, confirming very small impact at quarter.

There were some positive benefits in Croatia. Looks like Sweden and Baltic people like to go to Croatia, and partly Bulgaria on holiday.

But that was offset by some negative impacts on Baltics and Sweden, but overall, it was a small impact in the quarter. And on CapEx, Lars?

Yes, it's mainly related to capacity, Henrik. So we obviously see an increase in our users which is positive, because they can monetize on it.

When you look at the CapEx increase, mainly capacity, and also some in IT. We talked about that before, that they are pushing the digital initiatives within the company, there's old folks on investments going into that area.

Thanks very much. Can I actually just follow-up in terms of the usage as well, is the average or the growth in average usage per sub, is that accelerating the growth rate, or is it --?

It's up to 5.4 gig in the Swedish Tele2 brand in the quarter, from 4.7 last quarter.

But year-over-year, is the growth rate accelerating?

Oh yes, yes it is. It is everywhere.

Great. Thanks very much.

Thank you.

Hi, good morning. Just a couple for me please; first on the Challenger program, could you please quantify for us, the contribution from the program this quarter?

And also on the CapEx guidance reduction, could you give us some more granularity on the items that drove the change in guidance? And are there any timing effects that we should be considering, or in other words, is there a chance that some of the CapEx will be pushed back into 2018?

Yeah. So on the contribution in the program, [indiscernible] other 250, when you look at the annual benefits; so the annual benefits was 600 in 2016, and now we are running towards 850.

So I would say it's about -- we are on track to deliver half of those benefits, so about 125 for the first half of the year, when you compare it to last year. Could you repeat the second question Irene, on CapEx guidance?

Yeah, just some granularity around the items that drove the change in the guidance, and are there any timing effects that we should be looking for? Is there a chance that some of it will be pushed back to 2018?

No. I think what we have indicated, is that we would see elevated levels in Sweden and also in Kazakhstan, and I think from the timing and pushing over into 2018 within the guidance of 3.6 to 3.9, that's not foreseen to push in a large portion into next year.

Basically, we build more capacity into our CapEx planning for the year in most of our markets, and we haven't needed as much as what we were planning. And some of our digital and IT transformation projects are not costing as much as we expected either.

Great. Thank you.

Thank you. Yeah a couple of questions please, first one if I can return to the [indiscernible].

Peter, you're breaking up.

Peter, we can't hear you.

It's very poor connection, I am sorry.

You're fine now.

Okay. Thank you.

The first question on Dutch mobile, as you said earlier Allison, you are running at a significantly better run rate on EBITDA than previously guided, and I guess that the new regulation has lower acquisition costs, and you have better network economics. Why would this go up materially in the second half, if you expect slightly softer [indiscernible].

Just secondly --

Peter, we are losing you again. Okay.

Do you want me to take that first question then? So Dutch mobile, why would it go up in the second half of the year?

Well, we only launched the new proposition half way through the second quarter, and we are seeing -- in the early part of the year, people were really avoiding pushing handsets. We should expect that there will be some promotional campaigns in handsets, particularly around the October-November periods, and so we are allowing for that.

We are also in the process of completing our network rollout over the next 12 months. So our own internal network costs will go up as a result of that.

So we are just allowing for continued investment in a disciplined way in the second half of the year, within the guidance.

Okay. Thank you.

Thank you, Peter.

Yes, thank you. Just two questions for myself please; firstly, on the Netherlands, when you look at your net adds, can you talk about a little bit, about which operators those come from, and has that changed through this year, especially with your recent launch of unlimited?

And I am interested [indiscernible] KPN, Vodafone, T-Mobile, and which are the splits there. My second question is, you have increased the Challenger savings, will we see a return of the mid-30s margin target in Sweden anytime soon?

Thank you.

Okay. So the first one on Dutch net adds, they are coming from all operators, slightly relatively more from T-Mobile than the others, but we'd be taking good intake from Vodafone recently as well, and yes, it's -- so I think KPN is always lower obviously, but there is good broad base coming from kind of everybody, but slightly more T-Mobile and slightly more Vodafone than KPN.

And on Challenger, Lars, do you want to take that question?

Yeah, on the Challenger benefits and Sweden, I mean, we obviously see the benefits coming through [indiscernible] Sweden is the largest country, around 40%, 45% is coming through in Sweden. And then, when we look at the Challenger program, we also talk about the Challenger cost structure internally, so going above and beyond the Challenger program, we will obviously continue to focus on making sure that we have a very efficient operation and operate at the lowest cost possible, because we believe that's part of our DNA, of heading to Challenger.

And that will drive us to higher EBITDA margins across our footprint.

Thanks.

Thank you. Couple of questions from costs in Netherlands in wireless there, could you say something about the percentage of gross adds to take a handset now, and the difference maybe between Q1 and Q2, and also maybe I missed it, but the roaming costs to T-Mobile in Q2, if you could give us any number on that will be great?

Thank you very much.

Okay. It's about 50-50 handset and SIM-only intake in the quarter.

And obviously, that will accelerate a bit more towards the end of the quarter, but it was 50-50 in the quarter. In terms of the cost, T-Mobile, it's in line with our forecasts, and we are going to stop disclosing that now.

It's commercially sensitive.

Robert, the trend we showed at the capital markets in Amsterdam flat to flattish to slightly falling overall network costs, including our own network costs and the international roaming, and a falling network cost on a per subscriber base, that continues.

Okay. Thank you.

Hello everyone, thank you for taking my question. Two questions please, firstly, in Sweden, are we to expect that the end user mobile service revenue growth, because of the pressure from B2B and the Roam Like At Home is going to go to flat to slightly negative in the second half?

That's what seems to be implied in your guidance? And then the second question which is on the Netherlands again, breakeven for the entire segment for 2017 implies mobile business doing a loss of around SEK600 million in the second half versus a positive SEK140 million in the first half.

I mean, that implies quite a huge increase in marketing costs in the second half, is that the right way to think about this, or if you could give any comments on that, that would be great. Thank you.

I am not sure about that second question, how I am going to look at Erik and Christopher to maybe get back, because those numbers don't sound right, Usman. But certainly, we don't see that significant change, and mobile has not been profitable in the first half.

We have made losses in Mobile in the first half. In terms of Sweden mobile end user service revenue, yes you're right, it will go flat to negative, as a result of Roam Like at Home in Q3, in particular.

That's what -- we have been exciting all along, because we had significant moving revenues in our headline numbers in Q3 last year in Sweden.

Okay. Just on the Netherlands I mean, again -- your guidance for breakeven applies to the entire Dutch business, is that correct?

That's correct.

Okay. So I guess the question is --

For mobile in the first quarter, it was around SEK50 million loss, and the second quarter was around about a SEK90 million to SEK100 million loss, roughly.

Yeah, exactly. So in the first half, you have done around SEK140 million loss, I mean, that needs to go up by three to four times for you to hit a kind of overall breakeven number for all of Netherlands for 2017.

So that's quite a big --

It goes up, but maybe not to the extent that you are talking about. But we can take that offline and discuss it there.

Okay. Thank you very much.

Thank.

Yes. Well I was mainly looking into the same type of calculation on the Netherlands as the previous speaker.

But I could follow-up on the Challenger program; so there is impact for the Challenger program this year. Is this only that you are ahead of plan, or is this an indication that the plan can be exceeded?

So Stefan, that is an indication that we are ahead of plan, and we are still shooting for the SEK1 billion. But they are moving a little bit faster.

Okay, thank you.

Thanks Stefan.

Hi there. Mine is similar to the last question actually.

I was just wondering, with the good progress, is there any scope for a new program over and above the existing Challenger program? And whether you could maybe quantify some of those cost savings after this program ends?

And also, with the progress made on synergies to-date, whether there is any room for further synergy benefits to be coming through? Thank you.

Obviously, within our new guidance, we have reflected the higher Challenger program benefits this year and the great progress on synergy benefits, particularly in TDC and Altel. Looking forward, we have cost consciousness, that's one of our values in the Tele2 way, and cost consciousness is a key part of our DNA.

So I would like to end the program when it ends, but we will always keep pursuing to have the best lowest Challenger cost structure in the markets that we are pretty going on with, and that is very much a key part of our strategy beyond a Challenger program. And I don't want to start talking about synergy expectations outside of 2017, but those Challenger and integration is very much benefitting us this year, and we hope to build from that in future years.

Operator, we are approaching the end of the calling time. Let's take one more question please.

Perfect. Well thank you all.

I wish you all a great summer.

Thank you very much. That's the end of the call.