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Executives

Marianne Moe – Head-Investor Relations

Jon Fredrik Baksaas – Group Chief Executive Officer

Berit Svendsen – Chief Executive Officer

Kjell-Morten Johnsen – Head-Telenor Europe

Jon Eddy Abdullah – Chief Executive Officer

Richard Olav Aa – Group Chief Financial Officer

Analysts

James S. Britton – Nomura International Plc

Andrew J. Lee – Goldman Sachs International

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

Thomas Heath – Svenska Handelsbanken AB

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Dominik Klarmann – HSBC Trinkaus & Burkhardt AG

Stefan Gauffin – Nordea Markets

Terence Tsui – Morgan Stanley & Co. International Plc

Sven Sköld – Swedbank Markets

Ulrich Rathe – Jefferies International

Telenor Asa Ads (OTCPK:TELNY) Capital Markets Day 2013 Conference Call September 17, 2013 6:00 AM ET

Marianne Moe

Good afternoon and welcome to Telenor Group’s Capital Markets Day, 2013. My name is Marianne Moe, I’m Head of Telenor Group’s Investor Relations and I have the pleasure of guiding you through the program here today. The agenda here today is to talk about, give you more insight into how we are going to reach our operating cash flow target of NOK 28 billion to NOK 30 billion in 2015 through a combination of continued revenue growth and improved efficiency.

In addition to the Group presentations on strategic direction and financial priorities, we also had the pleasure of presenting to our two largest operations Telenor Norway and dtac in Thailand as well as an overview of our European operations. And as in previous years, after the presentations herein the auditorium, there will also be more informal breakup sessions with management afterwards and you will then have the opportunity to ask questions to Telenor Norway, dtac and Telenor Europe.

So without much further ado, I now have the pleasure of inviting our Group’s CEO Mr. Jon Fredrik Baksaas to the floor to present the Group’s strategic direction.

Jon Fredrik Baksaas

Thank you, Marianne and good afternoon to all of you, and I wish you very welcome to this room at Fornebu as well as the ones that are following us on the net. And of course it’s due to a very good telecommunications that this is possible to distributing that big fashion as we’re doing. But it’s very nice to have you in the room because that gives the touch through the communication I have. So thank you for that.

And there has been one area since we last were in this room together describing more in detail the strategies and how we are thinking in the Telenor Group. And over that year, there have been a number of events. Events, which had triggered a lot of attention, events that has taken a lot of energy, events that has found their solutions and a lot of hard work in the Group as well.

And we’ve taken the liberty of listing a few of them. At the capital markets side, one year ago, we took a right brave target for ourselves in the timeframe of 2015 to bring forward approach in the Group and to improve the cash flows to the level of NOK 28 billion to NOK 30 billion. And today we are reiterating best targets and our journey in that direction.

During this year there has been other events as well and I think the most among one of them is prominent ones where the licensed conversion process that finally took place in Thailand. And Jon Eddy will come back to that later on in his presentation. However, that is a really a long-term awaited competition.

And the journey to 3G took more or less seven years, if I’m not mistaken to get from the concessions we’re seeing to a more normalized and standard license we’re seeing the way we now have it for 3G. And as a consequence, the Thai market is really up for a lot of possibilities in this space.

We also launched 4G in Norway. So happy to begin with, but this summer 4G is really something that is asked for. And as usual when we started the new generation of technologies, we are not able to cover the whole of the country in one go. However, where we have coverage, people are becoming aware of it and they are constantly then asking for more coverage. So it’s the same arguments in the early phases of a new generation. It takes time to cover the whole of the country and to bring the good capacities into a distributive manner.

I won’t speak that much about the Uninor license process. So I think we spent a lot of time on that during this year and spoke a lot with you as it as well. We secured licenses in six regions, the six circles. We are underway to the break-even target towards the end of the year.

And however, Indian authorities are skill and not in the capacity of having signed the formal papers on that license. And on that note, they have also launched the idea of bringing new auctions on to the table. I think we are probably of the opinion that they should conclude their process with us before new spectrum is being put on the table.

Then on the expansion side, we have of course two important events in this year and that is Global coming in as a Telenor Company addressed a month ago, and we have the process of six months to seven months on that one. It’s a move in a region of Europe, where we have operations from before. Kjell-Morten will talk about how he is going to move that region into a scale operation and a competitive advantage kind of position in also this new country Bulgaria.

More on the awareness side of course the new license in Myanmar that has got a lot more attention by everyone. There are a high number of stakeholders on Myanmar based on democratization, development in the society, institution building and what the leasehold. So how investments can both build and develop the country in the speed that one could wish for.

However, we should be prepared for some probably kind of our setbacks to the extent that no development in liner in its curve and knowing this story line on our operations in Asia, I think we have the capacities and the confidence is to address those kind of challenges when they greatly fund when they come. But one thing is for sure, the Country needs telecommunications. We are ready to embark on that one and I think we’re capable of doing it as well.

Lastly or finally here, data-centric pricing, a very important step in this industry, one of those have really changed agents in the industry that every operator needs to address from its angle. I will come back to that more in my presentation. And finally and just recently, the 3G license that also took a lot of attention over the summer on how the details and the framework for that looks to be done.

And in a way that last item here describes the regulatory uncertainty which is so important in this industry to handle in both presently and in the years to come. So that’s where we are in September 2013 and it gives us this base when it comes to the financials.

We are building the operating cash flow. We’re taking this from bond level to other levels through this strategic period and of course then there are three main contributor to our targets in this sense and that is to bring in the Indian operations into positive terms. It is to take the peak of investments, which we will have in the period up to 2015, when we expand networks, when we do extra things in both Norway and Thailand into more normal settings and it is to focus also on efficiencies across all the operations in the group, in the period.

And it’s here that we have the target then of reaching four with the present setup, the level of NOK 28 billion to NOK 30 billion annual cash flows in the group. And this has also led to a very good development in the shareholder remuneration and payout structure, the way we see it. I think we stand very competitive in the industry in those terms and we have this firm target of building the normal payouts also from this point onwards.

I mentioned the regional footprint of Telenor and there are strong regions in our spending area, Europe, Central Europe and Asia. And it’s to be noted here that in Asia, we are probably, not probably we are the most prominent European operator to the extent that we have five operations waiting for the sixth ones to start and in that sense we have definitely reached regional awareness and visibility in Asia.

All these positions are strong positions in their marketplaces. We have generally speaking number one and number two positions. We are of course also have Malaysia, which is third position, but from the DiGi performance up through these areas. I think we can say it’s a solid operator with solid progress as a track record for many, many – both years and quarters.

And in India, we are of course low on the ranking when it comes to market share. However, the position in Uninor is building and in the circles, circle-by-circle, we are taking them from cash flow negative to cash flow positive and when this is done this year, we will reach the target at the end of the year of being break-even on a cash flow basis for all regions accumulated and head office charters as well.

So we believe this is a strong position to build from here onwards. And the underlying demand is there still. The growth aspects of this industry is still very solid both from the aspect of adding more customers as well as building usage in the space of Internet going forward.

We in our industry, we invest in infrastructure and we develop, we contribute to national development big scale. This has happened in Norway and in Scandinavia, it happens in Europe and it happens in Asia, and the most prominent possibility for Myanmar as a country. Embarking on this route is to get good telecommunications at the base of the development of the country.

So in that sense, we invest, we build capacities; thereby we enable a lot of things to happen in the digital space for the society, and for our customers, and we create possibilities. We create possibilities for people that connects. And I think about it yourself when you got your first mobile phone it was a whole difference from not having it to getting it.

We tend to forget that because that happened basically back then when you got it and in my own case, it was in 1989, which means that we tend to forget the difference of not being connected as all becoming connected and this is exactly what happens in Asia as well, mainly to get connected to get on board and to get a flavor, to get a taste of the possibilities what that connectivity can give to you.

So remember the words invest, enable and create. Those are the key words of this industry when it comes through how we contribute to the development of the society. And here comes challenges, but here also comes opportunities. And we could why sink into all the challenges of the world and be a little bit depressed on that.

But if you’re balancing out with the opportunities that comes with this connectivity and the advantages that both Internet access and voice and SMS service carries with them, then this industry is definitely will have opportunities. And this can of course in the Internet space, we leveraged into adjacent services from the operator perspective and again that’s a challenge, yes, but it’s a definite opportunity as well.

Internet for all is a kind of concept that we have taken into the strategy, story telling of Telenor in being 2013. Have we reached voice and SMS for all? Well, not really. But in a way, we are soon there. But in Asia, still customer growth is part of the equation. However, the Internet for all has a much stronger growth curve attached for it, and having mentioned challenges up against opportunities, well, the pricing side of Internet access comes as one of those challenges.

However, Internet access for all is a great enabler for everyone that gets it. Back to and remembering the story on getting connected versus not being connected and this is a very strong composition for everyone that experiences it. In order to achieve that, we need to have passion for our customers. We need to understand the development and the trend development with the market space and we need to take our positions and make our visibility in a competitive set up with others.

And if we can handle that efficiently and grow with the markets so to speak and understand and learning while we are on the streets, I think we have a good story to tell also internally in the group. To get that energy, in order to create this opportunity for our customers, passion for the market, passion for the customers in our own ranks is what it takes.

On the operating side efficiency initiatives needs to be taken on their received corner. The vuvuzelas [ph] in the operator community that do not embark on the potentials of efficiency and innovations will suffer in the long run. And the transition to a data-centric kind of telecommunication environment will require a loss that we really change into the format of being efficiency focused in our decisions.

And traditionally for the telecom operators that basically build verticals per country and we are seeing more and more that we can do things in a more standardized and industrialized way and to capture the scale on certain elements around us. And here also of course, the vendor community and generally vendors are also developing new concepts that we can benefit from in the longer run.

So Internet for all has a phenomenal challenge and opportunity, keep the passion and the energy in the group in such a way that we do the right things when we go-to-market and stay competitive and also make sure that we develop the efficiency side on how we operate.

The great potential in Asia is still quite significant when it comes to growth numbers on customers as such. These are on this panel we are showing our estimate on penetration per country and Pakistan 67, India in our six circle 42, 40 approximately in Bangladesh, and Myanmar eight. And if you compare the Eastern European figures, European countries, which I roughly speaking 100% as such, so there is a lot of potential here.

And if we take a look on the customer side over the last couple of quarters, we have had a significant ramp up of customer acquisition in our countries just recently and it’s in particular Grameenphone that contributed this strongly in second quarter 2013. But all the others also build customer bases in that period.

So the growth that comes from more customers is pretty evident. These countries are going to climb that growth curve as we’ve done in Europe. Then question mark is what is their marginal contribution, because this is really low priced customers at least in the initial phase. But with the improved economic development in countries, we of course reckon that the development of the industry locally is generally speaking positive, because people are going to use communications in the same way as we used in Europe.

And if you then go to the Internet side, the potential is even bigger by numbers. Take a look at this, a very low penetration figures on mobile Internet. This is mobile Internet and from Norway to sort of put into perspective this is an, how we are looking into the market and see how people use Internet over the mobile phone over their smartphone.

And also here then, there is a potential for enhanced growth and the pricing structures that we have try to stimulate the market to do these things. And if we then follow a statistics there, we can again see that Asian countries has a lot of potential to move. But the potential is also materializing.

Take a look at the bottom curve here, where there are more and more visibility of data revenues in the combined revenue streams of dtac and DiGi. And in that sense, we can see a significant growth both by shared numbers of megabytes in the network, but also on the monetizing side of it. And in this sense, we should of course hope that we have been even stronger on monetizing this mega trend of Internet access. But on the other hand, there is growth there and we need to nurture that further on.

Internet for all, how do we enable and stimulate this usage? And that will be pretty top – down on it, but mentioned a few elements. The network side of it is extremely important and we wouldn’t have had this enormous intensity around Facebook and Google et cetera if it hadn’t been for the good level of connectivity, which is hanging around in every marketplace.

So coverage and capacities as well as spectrum to secure spectrum in the long run is part of this equation, it gives network quality and there is a huge difference and the debate for the time being between how United States have arranged for 4G spectrum on a harmonized way in the whole of U.S. continent, whereas Europe has not managed to do the same harmonization.

And as a consequence Brussels is basically scratching their head what can we done on the regulatory side in order to stimulate investments and developments here in Europe. Then at least I would argue that to take a look at end user pricing in the regulatory space is the wrong move to take, but that’s a another debate.

Number two is distribution. Distribution here is primarily physical. People go to a shop, they get their SIM card, the phone is activated and here we go. And digital distribution will gradually takeover. We started the business in infancy here in Scandinavia when we started to do uploads of more airtime through the prepaid concepts and this develops now into more and more digital distribution setups and this has to be balanced between physical distribution, which takes its format of a huge number of outlets. And you’ve all see in it when you circle around in our markets how these outlets are to be found everywhere.

Handsets, it was when the handset side of 2G really hit below 50, below 40 even below $30, but we got this phenomenal increase in utilization usage of mobile, voice and SMS. And we believe that the same thing will happen on the smartphone side.

This week or last week, we had 150 plus developers sitting in here at Fornebu trying to work up the Mozilla operating system platform, which is to say, more open operating system than the two major ones that we know from before and this is our contribution to both learn and to contribute into the process of getting at cheaper handsets that can stimulate Internet for all, the Internet for all ambition that I just described to you. So handset stands up very, very importantly when it comes to stimulating the growth and Internet penetration, and of course the affordability of this is key to it all.

Then comes smart pricing. How can we with the mega trend of as we see it in Norway, 60% more data in the networks in July 2013 compared to July 2012? How can we then monetize that kind of fabulous development? What kind of industry are we when the demand is growing that strongly and we help contribution or benefit from being connected in these growing every ones pocket. At the same time, we should be able to offer the price and to set prices correctly in order to get the equation between investments, capacities, and profitability right in the long run. So pricing is key to this.

And finally, the service side; the service side is in fabulous development. We will see digitalized societies, which we haven’t seen before. These will develop. We might feel that we are at the end of the digital evolution and here in Norway. But make no mistake about that. This development will continue and connectivity will move into all things with electricity, the other day, during the week end I was just driving the new Tesla car and is a computer and it carries one gigabyte of monthly capacity as it comes from the factory on a Telenor SIM card of course.

So connectivity, the demand for connectivity and the demand for connectivity along the roads will only increase. And I have to say it was a new driving experience as well.

So that was the ad for that one, but still there are other elements here and more hard core for us. Financial services, e-commerce and also entertainment here figured out with music et cetera and entertainment in their performance. This is just the beginning. So again connectivity is what enables this longer-term.

Then how do we monetize this into revenue? And there are two examples on this slide. One from dtac, where we play on both time, price and content and of course these variables can then be grouped in a different setup, in such a way that you can address different segments with different needs and also in such a way that couldn’t stimulate customers from that one level to another level. And Jon Eddy will come deeper into this in respect of time and later on.

And another example is Sweden. In Sweden, the packages are now grouped in such a way that the size of the packages also seems reasonably balanced up against on how people are using or consuming their data consumption and it’s a very interesting price structure in Sweden for the time being because it has the potential of stimulating people to move the staircase to go from one step to another.

We have the same setup in Norway. However, it’s a little bit too early to say whether the new setup that we have got in Norway this spring is as good as the Swedish models basically looks like. So this is worth following and not only we are following it, we have to follow it and take our position to it.

And in Norway then to be even more precise, the CapEx in Norway to meet the demands both for capacities and coverage is very, very high. We’ve never been as high up as NOK 4 billion plus on an annual basis. So [indiscernible] is such a strong contributor to national infrastructure development as it stands here NOK 4 billion the problem is that is not that visible, Radio is are not that visible and cables are being dugged into the ground and in a wider visibility of this huge investments is so distributed all over the country.

But take a look at the bottom part of this slide, I mentioned the 60% growth here we have the annuals on average data usage and its growing and there is no reason that, that one will stop. So investments need to cover that growth and then if you take a look on the price development of telecoms, telecoms are becoming cheaper and cheaper relatively to the other cost factors in the society and of course in the long run this need to find its balance between the required profitability levels as we are doing investments also to make money in the long run of course.

And then for the pricing structures in Norway, we are close to on average NOK 10 on sort of on the bigger picture NOK 10 a day for Internet access and through a NOK 10 a day consumption you have access to the whole worldwide web always and that’s quite a product, that’s quite a service and basically customers also requires that it works, and to meet that requirements that it works all the time of course we back to the investment side, the CapEx side of the equation and the rest of the day will be focused very much on how to operate going forward that how are we targeting the NOK 5 billion efficiency targets in the group over three years, which we started in 2012.

How can we develop both the operating models in the group? How can we leverage experience from market-by-market and do things smarter in the market-by-market? And how can we get the continuous improvement conditions to flow naturally as we develop?

We have done nice work on this over the years and we must not stop working at the efficiency side and if you take a look at it with NOK 100 billion plus in turnover roughly 50% of this turns into the OpEx side in the sense that OpEx falls apart of the whole call structure and there is a lot to dig into reach this kind of efficiencies. Myanmar, I mentioned it briefly at the beginning, we are now waiting for the President to sign out the Telecom Law which will be the base for the new licenses and when this one is ready, we will move one step ahead the licenses will be approved during a period of time 45 days to 60 days and anticipating. So there will be a launch mid year, earlier to next year.

The options here with other operators of infrastructure sharing will be a quite dramatically done differently in this Greenfield compared to other Greenfields. When Malaysia Greenfield all of the operators built towers on the same hill side. In Myanmar there will be only one tower probably serving two plus or maybe three operators in the beginning and this will take out a huge kind of efficiency on the CapEx side in general.

So the funding here will not be comparable to previous Greenfields because the tower partner will carry a good bulk of the CapEx side and we will of course get that as an OpEx rental over time instead. Population here around NOK 60 million of course this country deserves modern communications and access to the enabling side, of this industry as other countries, so let’s get started.

We feel ourselves very confident to do it, we know there will be setbacks, obstacles, obstructions or not a line of development on anything but we are prepared to address those kinds of challenges when they appear that leaves us for the rest of the day on the agenda, Internet for All how can we move into this in fact opportunity, how can we develop revenue streams along with big significantly CapEx and to develop the efficiency side of the Group in the same way, in the same period.

Thus targeting you think the financial KPI which is most important for during this day, I guess namely that of the cash flow development from the present NOK 21 billion plus to NOK 28 billion to NOK 30 billion with contributions both from India, from the CapEx level in general as well as from the efficiencies that we will discuss more throughout the day I think.

So thank you for this presentation for listening into this presentation just now and I will leave the floor back to Marianne.

Marianne Moe

Thank you, Fredrik. There will be not a Q&A session directly after this presentation but you will have the opportunity to ask questions to Fredrik later today in a joint Q&A session together with the Group’s CFO.

So let’s then go to the next speaker today, which is Berit Svendsen, Head of Telenor Norway.

Berit Svendsen

Good afternoon, ladies and gentlemen. It’s a pleasure to see you all here again. We met one year ago and there has been a lot of dynamics in the Norwegian market, since last time we met. 4G was introduced in the market in December, also to the mobile phone by Telenor.

In May this year, data-centric pricing were introduced successfully in the market and the customers, they really appreciate the new services. They are using more and more data services. And our customers, they are always on. That’s why we always need to be always on as well. So I do have a very adaptable motivated organization that are facing the dynamics in the market everyday.

And let’s take a look at the solid position. Telenor Norway actually has in the market. We have a solid position across different segments and across the different platforms in Norway. We have a segmented multi-brand strategy. We have different brands out in the market. That the most important brand, we have is the Telenor brand and we want to put more differentiators into the Telenor brand going forward.

If we look at our customers, any other industry can actually dream about the demand that we are facing everyday. The customer they are asking for capacity and coverage everywhere in Norway throughout on the Islands, to up on the higher mountains and the business customers in Norway, they are located nearly everywhere. And the business customers are even asking for indoors coverage and capacity.

So there is a huge demand in Norway, and I think we are in a very, very lucky situation that has customers that really asked for so much bandwidth and capacity. To keep up the position in the Norwegian market, we have ramped up the investment to meet the demand from the customers. We have ramped up investment on the fiber side and on 4G and 3G in the Norwegian market. And because it’s so important for Telenor Norway to keep the position going forward in the Norwegian market. We will continue to invest in 3G, 4G and fiber.

As I already mentioned, Telenor Norway is in a very, very good position in the market. We are experiencing huge volume growth. One of the things we are working with everyday is actually to get even more value out of the investments we are making in the Norwegian markets. And now I will go more into details about how to get even more value out of the huge investments we are making in the Norwegian markets.

Let’s move back to 2011. In 2011, we successfully introduced bundles in the market. But they have where we have certain packages out there, a small package, medium, large, and extra large and depend on the packet, you get different sizes of SMS, voice and data, 62% of all the consumer postpaid customers are on such packages today. So the customers, they really appreciate the packages. It also rode some good things with it we were able to increase the revenue by introducing the packages in a network. We had an ARPU list amongst our customers.

In May, this year another thing happened in the Norwegian markets, data pricing was introduced. And with data pricing, we were very quick out in the market with the new pricing schemes based on data capacity with unlimited usage of voice and SMS. We had a good customer uptake in the second quarter. The customer uptake continues in August and September.

Going forward, we see that we need to put even more differentiators into the Telenor brand. We have the coverage and capacity position in Norway. We want to take the service position and we want to put even more services to differentiate the Telenor brand even more.

During the last two years, we have also migrated 60,000 customers from prepaid over to postpaid. That also gives a better user experience. 62% of our existing customers on the consumer postpaid, they are on bundles. We still has an opportunity to move the rest of the 38% over to the bundles and we know that the bundles give good effect on the ARPU and on the income.

There are already 400,000 4G enabled handsets out in the Norwegian market. It means that the customers really appreciate 4G. They like the capacity, they like the speed, they get HD voice, we think that is an even better opportunity to increase that number going forward to let the customers use even more data and also to stimulate to usage of multi-SIM.

We also see that we can be even sharper on the up selling logic between the packages and you have to meet the customer when the need is there, because the customer needs to get a bigger package, when he actually discover that needs more, and then you have to be there selling.

So we think we can be even sharper on that one and being even better at execution and as I said in the beginning we adapt to changes that customers are causing and the technology in the market. So we have the ambition to increase ARPU going forward for our mobile customers in Norway, by giving them even more exciting services, more capacity and coverage.

There are a lot of dynamics in the Norwegian mobile market, but there are dynamics in the fixed market as well. Let’s take a look at how the fixed market is developing in Norway. We have two main revenue streams on fixed network in Norway; one is fixed that I will go into detail about. One is fixed telephony around three NOK3 billion in revenue that revenue is actually decreasing that’s because the customers many of them are choosing away the service.

Since the top usage of the service in 2003, 2004, 65% to 70% of all the customers have chosen other services than fixed telephony. So that is a very natural industry development. On the other side there is growth in the markets on high-speed Internet and television. And here as an operator you can actually capture that demand.

Let’s first take a look at fixed telephony and NOK3 billion in revenue stream for Telenor in Norway. As I said, the customer base is decreasing. Customers are choosing other services, there are lot of older people that are using the service and many of them they really like the fixed phone. Around hundred thousand every year are disconnecting the service. It means that we have a revenue decline overall NOK400 million each year, we have been able to stabilize that and the decline is not that sharp that it was earlier, but still there is a huge decline.

The good thing here is that we have been able to increase the ARPU, because since there are fewer customers to share the whole or to cover the whole costs base, we have been able to increase the ARPU a little bit. And the impression that we are going to just phase out the fixed telephony without having any good products to offer instead that has spread in a market, I would just say its not going to happen.

We have very good alternatives for customers, we are going to change the production platform, but we still have Voice-Over-IP for our consumer customers, we have very good mobile telephony for those customers that prefer that. So it’s only the production platform of the old fixed telephony that will be changed. So we still see that to be in the fixed telephony business is a good business.

On the fixed internet and television side, we see that customer prefer more-and-more higher bandwidth on the internet. We have NOK5 billion in revenue streams from TV and high-speed – and internet, not only high-speed. We are one of the few incumbents in Europe that are really happy to have Canal Digital a cable TV operation as an integrated part of Telenor Norway. They have 500,000 TV customers in the Norwegian market that’s a very, very good position. They’re also have a very modern Hybrid, Hybrid Coax network. And in addition to Canal Digital we also have a fiber program so we have around 350,000 Internet customers on high-speed in the Norwegian market, a very good position.

Regarding our fiber rollout, it’s a demand driven rollout, CapEx per home is around NOK30, 000, that’s for individual households. For the multi dwelling units, it’s around NOK12, 000. It’s a solid business case for us, it was the right timing because the customers were there asking for the service when we started to rollout. And we have around six year’s payback on that investment. And we will continue to invest in fiber as long as the demand is as it is today.

We have been through the revenue agenda for the fixed and the mobile operation for Telenor in Norway. Going forward, and to provide even better customer experience, to reduce the cost and complexity, we need to have an efficiency agenda. And the first thing we should look into is ambitious 4G network rollout, we have in Norway. Telenor, Norway is in a unique position, because 60% of the population in Norway they think Telenor is the best on coverage and capacity in the Norwegian market.\

Building population coverage has been the main goal for the 3G service and is the main goal for the 4G service. Right now at the end of this year, we have 50% 4G population coverage and over 90% on 3G. The people in Norway are not only happy with having coverage where they live, they are also now traveling a lot on the roads and the railways, out to the summer places, winter places in Norway. So we are also building 3G and 4G the places where a lot of people from Norway are actually spending their spare time.

Geographical coverage will therefore also increase up to over 56% both for 3G and 4G in 2016. Right now as we see to give the best customer experience on the telephony, we have to build out both are 4G and 3G. That is because the fall-back on telephony from 4G to 2G is not working, that’s an industry problem. It takes 10 to 15 seconds, to get from a 4G network down to a 2G, where you can actually get a good telephony connection, that’s why we are building our 3G as well, because the fall-back from 4G to 3G is actually working very well.

When VoLTE is coming into the market that is Voice-over-IP on 4G, we will of course reassess the plans. To keep up the superior network position we have in Norway, we will continue to invest in 3G and 4G. As I said, to increase customer satisfaction, we need to give the customer the best experience where we have the different technologies. Fiber is the preferred solution for customers, people in Norway are very aware of technology, but the Hybrid Fiber Coax network we have is also a very good alternative with Canal Digital’s coverage in the Norwegian market.

We have also an extended copper infrastructure, we want to optimize those technologies depended on geographic, what we see is if we have double infrastructure, if we have both fiber or both HFC and copper, we will phase out the copper overtime. So copper network will be the preferred broadband network in the rural areas and we will also increase the speed to actual customer to get better customer experience on our copper network.

Going forward, and we have actually started with it is to address the fixed legacy cost base. We have fixed legacy cost base of around NOK2.9 billion in OpEx. If you see what we are doing in all the processes in the fixed legacy value chain, they are not modern, if you are going to register it and we do that everyday ADSL order, we use 15 minutes in the customer service just to register an order. We use 50 clicks it’s not modern, it’s very old fashioned, takes a lot of resources, uses a lot of money to actually register one order.

We know we can do it much simpler, we can do it maybe in one minute, we can register an order, the customer can do it by himself. We need to go through all the processes, we need to get into the whole to build more process through the whole value chain, we are seeking a partner, we are altering the market, seeking a partner that can help us to get optimal processes, that can get into a model where we don’t own the IS/IT Systems, but we are actually paying for the volume. We are getting out of the systems. We can pay for number of orders for a number of registrations a totally different business model, because this is an area where we have volume reduction. So we think we can get good business model out of this and I think we are ready to move in the beginning of 2014.

What it is also very important is to have an optimal distribution strategy. How do we meet the customers in different channels? How do we get the best customer experience? It has been a trend for many, many years that the customers are moving away from third-party channels, our Telenor branded channels especially on web and customer service, that trend will continue.

So we will be build everything we do around the web and offerings we have on the web. And then we will rebrand now into Telekiosken around in Norway into Telenor branded kiosks. They have very good locations and in that way it’s much easier for us to look at the customer across the different channels to give even better customer experience, because we have our own IS/IT Systems, our own automatic sales tips into these channels.

Let’s move and this is the last part of my presentation, it’s actually the OpEx efficiency agenda. We have delivered on the agenda in 2012 and we will do it in 2013. This is the same figure as I showed one year ago. The good news is that we have actually delivered. 2012, 2013 in the beginning of this year we established the new model in Telenor Norway where we have larger profit and loss responsibility throughout the organization.

We have put one technology organization into place. We have built Canal Digital into the organization responsible for TV and internet service in Telenor Norway. We have also 15% fewer faults in the network than previous years, because we have higher quality in the network. We are building out more fiber, less faults in the network; we are solving more customer complaints in the first line, avoiding to send installation force out to the customers, giving better customer experience, less money use of money.

Initially [ph] it is going forward is actually to have, to address the fixed legacy cost base, as I mentioned, is to improve the rollout and contractor model. We see if we can move bigger projects to the contractors and not detailing everything we are doing together with them. Then we see that we can get more out of the money and get a much better efficiency model with the contractors.

We are going to have new contract in place in May, June next year. We also are continuing optimizing the copper infrastructure and 1st of September this year we wrote history because it was a community in Norway, we just turned off the old fixed telephone that was the first place we did that. And we will continue of course to meet the customers with the best offerings in our distribution strategy and take advantage on digital distribution.

We have good control of the cost side of the equation. But there is also an income side that we have to talk about this afternoon. We continue to have the ambitious goals of 33% OpEx sales in 2015, but there is one thing we have to mention, we need to success with our top line growth to actually achieve that goal. And we are putting a lot of resources into that everyday to get more out of the value, we are investing.

So we keep up the ambitious goals that we had last year, it was actually the same slide we presented last year. On the CapEx side, we know that we want to keep our position in the Norwegian market, we want to take the position on the fiber, we have already started and we want to keep up the position on the 3G and 4G and have the position of the 60% of population on Norway. They think we have the best network and capacity.

So let’s sum up. We are there to capture the potential for revenue growth, we can be even more sharper in our approaches towards the market, giving the customer even better customer experience, get even more value out of the investments. We continue to invest for superior customer experience on the different technologies in Norway, on fiber, 3G, 4G. And the sum of all this is that we are targeting to have an improved cash flow going forward. That ends my presentation.

Question-and-Answer Session

Marianne Moe

Thank you Berit. Thank you. We now have time for a short Q&A section with Berit. Please wait for the microphone to be passed around. And I also kindly ask you to limit yourself to one question and one follow-up.

James S. Britton – Nomura International Plc

Thank you very much it’s James Britton from Nomura and do you expect to yield some revenue share to TeleTu Norway in the mobile market over the next three years.

Berit Svendsen

The question was revenue share to?

James S. Britton – Nomura International Plc

Do you expect to – are you prepared to loose some revenue share to the third mobile operator over the next three years?

Berit Svendsen

No. we are not prepared to loose market share or revenue shares to anybody, we fight everyday for the very solid position we have in the Norwegian market and we will continue to do that with our differentiators.

James S. Britton – Nomura International Plc

And can I just ask one follow-up, how important is it that you remain a roaming partner for TeleTu Norway over the next few years?

Berit Svendsen

I think you know we are talking to TeleTu about the agreement and as you all know the agreement we have with TeleTu today is actually ended in June 2014, and we have you know – we talked with them about the agreement and I think that of course if you a find a good solution we will continue to be the render, but its not a re-price to put it that way.

Andrew J. Lee – Goldman Sachs International

Thank you, its Andrew Lee from Goldman Sachse. You mentioned that fiber rollout is going to be based on demand, I wondered if you could give us a bit more detail about what you see fiber coverage being in 2015 or 2016 and maybe combing that with fiber and cable coverage or any expertise around that would be great.

Berit Svendsen

We see that the fiber market in Norway is growing around 120,000 every year and we take our fair share of that market and there is already around 400,000, 450,000 fiber connections towards the homes [ph] of the Norway and we see that trend continue in the next years.

Andrew J. Lee – Goldman Sachs International

Can I just ask a follow-up question, just particular on convergence and using your domination or your strength in fixed, why are you pushing convergence more aggressively?

Berit Svendsen

You know convergence, if you are giving customers the offer of having both fixed and mobile broadband, fixed broadband mobile telephone, we think that customer then are expecting a rebate across the different services. In addition to that it creates a lot of complexity in the IS/IT systems in the customer front, if you are going to do this you know very deeply, it depends on how we are doing it.

We see that the convergence is actually in the network, we see it – we have 85% of all the base stations they now have a radio link with high-speed or fiber connect to it. So we use our fixed network to provide the base stations with good capacity that’s where we see the convergence, its more in the network right now.

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

Peter Kurt Nielsen from Cheuvreux. You mentioned the importance of driving top line growth to achieve that target, would you mind if we ask please what are your ambitions or targets for top line growth for Telenor Norway. Thank you.

Berit Svendsen

I cannot given a specific guidance; the only thing I would say is that we have ambitions to increase ARPU and to increase the mobile service revenue going forward.

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

No stated ambitions of returning to fixed line growth or stability overall.

Berit Svendsen

We have ambitions to grow the top line on the mobile, yes.

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

Well you are only talking mobile now again.

Berit Svendsen

On the fixed – we have ambition there too, yes.

Thomas Heath – Svenska Handelsbanken AB

Thomas Heath here with Handelsbanken, and you highlight the gross OpEx reductions that you are targeting from 2013 to 2015 NOK2 billion. And then we have the group targets for NOK5 billion from 2011. How much of the NOK5 billion is your job in Norway if you look at the full 2011 to 2015? Thanks.

Berit Svendsen

NOK2 billion is the job we have in Norway of that NOK5 billion.

Thomas Heath – Svenska Handelsbanken AB

Okay, but that’s from 2013 to 2015 and the other one is from 2011 right?

Berit Svendsen

Well, it is not the accumulated savings its 2015 compared to baseline 2011. So there it is right, it’s NOK2 billion out of the NOK5 billion gross savings.

Thomas Heath – Svenska Handelsbanken AB

Thank you.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Thank you, its Laurie Fitzjohn from Citi. On mobile I mean one of your key advantages in mobile is your stronger network particularly in the rural areas your high number sell sites. What risk do you see there, Tele2 and Telia doing the network JV to increase that coverage in the rural areas. I mean that would in some chance reduce your key advantage and how in that – is that a big risk and in that instance, how would you keep your network advantage in the market. Thanks.

Berit Svendsen

Ii has happened in a lot of the other markets Telenor is operating in that number two and three they started to share network. So it won’t surprise us if it happens. So we are prepared for it if it happens. But we will continue to build out, we will continue to use the right frequencies to give best coverage and pack capacity all over Norway.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

One follow-up, would you then look to increase your sell sites beyond, where would you look towards have a gap in your sell sites?

Berit Svendsen

I think we can do a lot of different things to actually keep up the position we have, and we will continue to fight that position.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Thank you.

Berit Svendsen

Yeah.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Okay. Do you have some comments to the roaming regime in Europe? If you’re NOK2 billion roaming incomes disappear, what do you do to compensate for that?

Berit Svendsen

NOK2 billion no, its not the familiar number for Telenor in Norway. But just to comment on the roaming, the competitors are there, the prices will continue to fall. This is a trend in industry, we have seen it for sometimes and it will continue to happen. I think most of the things should be sold by competition and not so much of the regulatory regime. So I think it will continue to fall, our customers we see, they – many of them are turning off their mobile phones when they are abroad.

This summer we launched a new campaign that was well received amongst the customers. More of them started actually to use their phone with a max price of NOK29 each day. They started to use their phone more widely and this will continue to happen, because if we are not there, the customers will use alternatives.

Marianne Moe

Okay.

Dominik Klarmann – HSBC Trinkaus & Burkhardt AG

Dominik Klarmann HSBC. So I understand you are not prepared to give guidance or an ambition level on the fixed line side, but maybe you can give some color on what makes you so cautious on it. I mean you sounded quite upbeat on the fiber uptake rate and the ARPU uplift there, but what other elements makes you cautious?

Berit Svendsen

Now I think the fixed line is a little bit more stable industry, because when you have a fiber connection towards the customer, you have a first mover advantage and there are not many other players that take the risk of going into the same area. So it’s another type of dynamic stand in the mobile network. So I think as an operator, it’s good to have both the fixed business and the mobile business, and then you combine the networks and take out the synergies across the two.

Dominik Klarmann – HSBC Trinkaus & Burkhardt AG

Sure, I'm just thinking within the revenue mix of fixed line, we have the fiber uptake, you are quite upbeat about that but there are legacy revenue streams that apparently continue to be a drag, and I just was wondering if you can give a bit more color those legacy revenues bit that keep you rather down beat.

Berit Svendsen

No. you know we have the trend on the fixed telephony for many, many years, is around 400 million decline in revenue. That has been going on for a while, we have slowed it a little bit down, people are disconnecting from the service, they are using other type of services that is going on. So the up side now is actually create value, out of the fiber investment the TV and high-speed internet and on top of that we have just launched interactive TV in the market for Canal Digital. So this is way we want to continue to create value in that way.

Dominik Klarmann – HSBC Trinkaus & Burkhardt AG

Thank you.

Marianne Moe

We have time for one more question. No questions? Okay. You also have the opportunities to ask more questions to Berit at the breakout session later today and she will then also be joined by some of her colleagues. Thank you Berit. So lets then proceed to the next presentation here today its Kjell-Morten Johnsen, Head of Telenor’s Europe.

Kjell-Morten Johnsen

Yeah good afternoon ladies and gentlemen and welcome to the Europe presentation. It’s a beautiful continent with beautiful history and a great future. And then you could say wow, what is he talking about, where is the growth in Europe, what is happening here?

And the reality is there is growth everywhere, if you look at our business there is growth everyday. In some countries we grow by people connecting to our networks to speak to use voice services, SMS services, MMS services. In Europe, most people are already connected; the next phase is then a transition into becoming usage of data whether that’s in a 3G network or 4G networks. And our job all the time is to be a part of that growth and to extract value from that, creating value but also getting our fair share of that.

And this is a bit of what Fredrik was alluding to in his earlier comments. Where he says that we think that we have come very far, the digital age and if you look back when I retire you will see wow we didn’t – we hadn’t come very far in 2013. and we have a role to play here, whether that is to provide good connectivity, whether that is to help adjacent services using our networks, whether it is to actually provide some of these service ourselves.

And at the end of the day, the way we do this is by installing a spirit in the organization that we are growing, there are opportunities all the time, but bearing in mind the fact that Europe has been through a challenging period of time. We also have to look at how can we create value when there is limited or no top line growth. And I will get back to that in my presentation by showing you some of the results that we have been able to create throughout these years.

Starting with a little bit of an overview, those who have been with us for events like this for sometime of course see that there is one more country inside the group now. And I will speak more about that later on. We are delivering around NOK4.5 billion of cash flow which is quite significant. And if you look at the development here these numbers are shown in terms of – sorry, I was a little bit ahead of myself. But this is one I wanted to show you.

On the position we have in the different markets in Europe. We have been able to maintain or grow market shares overtime. We have been able to maintain or strengthen our positions, we typically have number one or number two positions. We are happy to see that sometimes we are able to make a number two position into a number one position. And we are happy to see that when people are really trying to grab our number two positions we are able to maintain them and keep the distance to the next players.

Typically we will say that Hungary is an example of protecting a strong number two position. Serbia is an example of growing from two to one. And we will talk a bit more about Sweden today; this is a position that has moved very much in direction of a number two position on many parameters.

Taking the big picture view, we are talking with Bulgaria about around a quarter of the revenues of the group and closer to a quarter of the cash flow. And then of course we have to explain this better to you so that some of the parts thing also comes up to a level that is a bit higher than where we are today despite the growth of our colleagues in Asia and in Norway.

I was ahead of myself, I said I started talking about the operating cash flow, and obviously you have seen the presentation since they were laid out this morning already. The picture here is a little bit different, whether you see in Norwegian Kroner which is reporting currency or if you see it in the local currency. But regardless how you look at it the Swedish development has been very good we see a consistent increase in absolute and relative terms and the EBITDA that we are taking out of Sweden significantly better than before.

We have seen Hungary turning the corner. Hungary has been through a long period of economic stagnation overall in the economy. But the management team in Hungary has been very good at driving efficiency and have a very positive mindset looking at opportunities for the future. So we can see in clear numbers here that we’re able to have an uplift in the operating cash flow margin in the country, despite the circumstances. Likewise in the Serbian operation, we do see an increase in operating cash flow, a little bit helped by that there has been some subscriber growth also in the Serbia market, but clearly coming out generally I think significantly more cash flow than before.

When we look at Denmark, I don’t need to tell you that Denmark is a difficult market. And in all fairness, it’s likely to remain difficult for sometime. That is why we are taking very strong measures there, something that I will explain more to you later on. But let me get back to the mindset thinking here, yes we are thinking as a growing company in terms of opportunity for future, positioning ourselves for the future. The hard facts are that we are in the environment where we have regulatory reductions of termination rates kicking in on the top line and we have had a challenging macro picture.

Despite that fact, we see a 17% increase in EBITDA in Sweden, we see a 21% increase in operating cash flow, and this is a comparison first half 2013 to 2012, so a significant growth. We do see growth in Hungary, not a country that you associate with growth these days, based on the GDP levels and you see a significant increase in operating cash flow. Same picture in Serbia, partly driven by some revenue growth, but also underlying efficiencies kicking in here, strong increase in the EBITDA and in cash flow.

And if you take the overall numbers for Europe, Denmark going down, as we all know, that also includes the positives from the rest. We do a see a flattish to a little bit negative top line, but we see our double-digit growth in EBITDA year-over-year for the last 12 months. So it is possible to grow cash flows in an environment that is challenging. And how do you do that while you focus on your business and you are accurate in your decision making?

And that’s what we have to do, we have to create value through operational excellence, obviously I took the first slide show, first side here in order to give you a reason to believe, because it is a reality, you can create value even when you have a challenging environment around you. We need to work on our customer experience; the customer experience that many mobile companies were built up for in the 90s was based on voice. The IT systems, a lot of the legacy was built on the completely different environment.

Some of this has successfully been upgraded and changed overtime, some of that is still way too old-slide. And that is part of the challenge we are facing. But it is also about the mindset, we need to be very active in trying to identify what is expected from us and how can we deliver on that in a best possible way. We are becoming better at this as an industry and we have become better at this as a company, and we have much more powerful tools than we had some years ago.

We need to monetize data growth and I will get back to that in the presentation. Clearly, we are going in the Scandinavian markets from a position where voice was a key value creation for the customers, now its data. And that hangs together smartphone penetration and many other variables. But as an industry, the way we approached that is going to define the profitability going forward.

We must be completely open-minded about the operating models, the way we ran companies in the 90s were probably not right in 2005, the way we are running it in 2005 is probably not right in 2015. It means that we will use a mix of our continued verticals inside the company, we will outsource, we will use resources in the best possible way, so that we get the required scale while keeping the required competency. That is a bit of the management challenge for running a company like this to make those calls.

Inside the Telenor Group we have worked much more over the years now to industrialize our self. We are reusing competence across markets, across regions in a much more efficient than before and doing that in the future is also going to be a critical success factor. I have talked a bit about this transition from voice-centric to data-centric pricing, and how important it is. And we are using Sweden as an example here. And I could openly say, I think actually that Telia did a good job year.

They came out with a pricing concept that was quite logical. We have a logical pricing concept, ours is of course better for the customers than theirs, but they are built upon logic where you pay for what you use. And if this industry follows a track like that, that is an optimum balance between ability to invest and also a fair payment for usage of other services.

This is the fact that we would like to see in other markets. But markets will approach this in different ways, based on the maturity level and certain factors that I actually wouldn’t go translate into, like for example, smartphone penetration. It is completely natural for Sweden to have data-centric pricing with a smartphone penetration in the 70s or in the 80s. it is natural for Denmark to embark on this now, it is not natural for other markets where you may have 20%, 30% smartphone penetration to jump on this band wagon now and why is that?

Well it’s very simple, because it’s the value that you primarily create for the customers is data voice then that’s where the pricing element is. The value that you primarily create is on data and that where is where the focus should be, and in some markets we see that the usage of data is fairly low, there is a network effect here to more people who have a smartphone start using these services, the more they will also use individually. So there is a volume effect there.

And we believe that some where in the area of 50%, 55%, 60% is a quite natural time when you start shifting over to a data-centric pricing, maybe a little bit different from market-to-market, but the logic is compelling, I mean when you switch over 50% is quite likely a smartphone penetration, its quite likely that the data part is very important for your customers. So following up these kinds of things are super important for us and that is the way we can work on developing our ARPU going forward.

Let me talk a little bit about operational efficiency and deliverables. And I'm starting off with Sweden, Sweden has been through a transformation over several years, [indiscernible] was here last year, speaking to you. This is about a sales transformation where we have a completely network – sorry distribution network, the shops are upgraded, the people work in the shops have a higher knowledge base when they meet the customer. This is not only about handing out a box and fill out some form; it’s also about adding competence in the transfer of the service.

The store concepts are important, they are very important for the customers coming in; that should be efficient, but the competence part of it is also important to bring with us. And then we look at the model for running the Swedish operation, it has added scale through partnerships. And what does that mean? It means that we have been willing to work with competitors on our networks; it means that we have been willing to look at other operating models, for example, within customer care, where we took a very cautious approach. First 50% rented with partners and then later on all the way. And this is the way we want to do it, if you want to do it fact based, step-by-step, but we are open for new solutions.

On the network side, I have no problem stating that we’ve had network challenges some years ago in Sweden and I have no problem stating now that we are the best network in Sweden, and this has been confirmed separately. But the main point here is not to have this classical debate between mobile operators who has got the best network. what we care about this how the customers rate the value, the network that we are operating and where we are today? we are in the position to work with the data-centric pricing and to take our fair share going forward in the Swedish markets.

The picture is consistent by making life easier for our customers and transferring more competence to our customers in the processes we have with them. We are able to attract more customers, and through being more efficient in the way we are run our business we are able to become more operational efficient as evidenced by the OpEx to sales, going down over some years on [indiscernible] called the agenda 2013 driving down OpEx to sales from 42% to 34% in a very well executed process.

Leading to despite the fact that we are still investing quite a lot in our business, an increased operating cash flow margin and where we were last year was as we said we will reach OpEx to sales of less than 33% and an operating cash flow margin of 20% plus in 2015 and we stand behind those numbers.

One of the elements that has been important for us in creating these successes is of course that we’ve been willing to work with others. So we have two primary approaches on the network side one is the [indiscernible] which is a joint venture, in a way separate structure that has delivered very efficient 3G services for us with a minor caveat that there are some home networks, but don’t let yourself be so distracted by that. It just means that there are some networks that are operated individually so to speak. But primarily, this has been a way to get more coverage and more speed for a lower price. Net4Mobility has a little bit different structure. There is a geo split, so that its run basically as two – by the two companies geographically defined, but many of the same effects are there.

Structure is a little bit different, but you take out a lot of efficiency gains from running these models and you see 3Gs we are talking about CapEx savings of 5 billion SEK that’s a huge amount of money. We’re talking about cost savings of SEK 235 million per year. Likewise on Net4Mobility, we’re talking about accumulated CapEx savings of SEK 1.2 billion and cost savings of SEK 135 million per year. This is a part of what’s behind the good development we’ve seen in the numbers.

So what would then be more natural than to look at, can we do something more like this, for example, in Denmark in this very challenging market? And TT Netværket has come as a reply to that question. A JV with Telia and it’s operational, and that has been very helpful to us in terms of both, increasing the quality of the level of the network, the coverage and also in the spectrum auction last year, I am convinced we saved a lot of money from having that set up in place. So apart from saving us a DKK 100 million of CapEx per year and also DKK 60 million of cost savings, it looks beautiful.

Look at this. Before consolidation, lots of spots here and there, now, we have this beautiful, green, blue, red map that shows that most of Libratone and the other areas are now covered if – even if they were not before, and they are covered at a much lower price than we otherwise would have had to pay. So this is complementary synergies in practice.

However, I’m not going to fool you by saying that it’s going to easy in Denmark, because we have changed our approach to the network. There are many other things that we need to do. The approach we take to Denmark is completely starting outside-in customer towards company. We’re not starting with tweaking and turning to small bits and pieces of the legacy systems here. It’s too slow, it’s too late and it’s being done now. So the program that we are putting in place now, it is underway.

We will have done a lot of substantial change in Demark in 400 days from now. We will start seeing these effects, clearly, in 2015. So this – the challenge that we have taken in Denmark is tougher than what most operators are willing to take on their shoulders. We will do that and we will also look into reusing those challenges outside of Denmark in order to be more nimble in our approach to markets and to get out of the legacy that has been with us for a long, long time.

These things are not only – these are not primarily just cost exercises. This is very much about improving the customer experience, for us to be much more flexible in how we deal with customers. In many more well operators, the – a customer care, an operator that sits in a call center has to maneuver two maybe three screens, work with four or five different systems in order to really take care of what the customer wants, and obviously, unless you have an enormous brain and three Ph.D.’s, it’s not that easy. You read enough to know these systems well in order to be efficient. So we have done a lot. We have been able to see significant improvement in how invoicing and other things are now functioning. There’s more to do and we’re going to do it.

We have also said to ourselves that we need to use, and I’m now speaking a bit more about the European part, but many of these things go for the entire group to use competence across the region. We have now launched de facto common organization for Serbia and Montenegro legal entities separate, but joint management team. And as realization that these two are the smallest entities in the group, we need to have a more efficient approach both in terms of cost, but also to have more in-depth competence to run the operations.

We have set up a common operations initiative in Central and Eastern Europe. We have basically taken out the network and IT resources of the three operators and put them into one, with efficiency gains of around 15%, 20%, and mind you, those efficiency gains are taken out from a very low base as evidenced by the 80 Kroner [ph] benchmarks, but also in an environment where the cost base is not that far from an Indian cost base. So there are clear efficiencies that we can take out there.

And we would like to see that some of these services to be offered to other parts of our group and that is an objective that that management has in front of themselves. And then, of course, we would like to – when we work across the borders, we would like to make sure that the competence that is built up is reused. So if you look at the management teams inside this region, many of those who are working at the top level, they have been in other, of course, before, have gained very useful experience, they are bringing it with them to the next operating company.

I told you about Common Operations, we have set this up as a – and you’ve seen this picture three times today. So this is a very popular theme in Telenor. This is our way of checking how good are we really. Are we so good that we can deliver this even better than our external vendors? Time will show. I believe we can, but make no mistake about it.

If we feel that we can find a better model using external vendors, we will do that. This is about how we can do our job in the most efficient and competent way, but we’ve taken down the cost by 15%, 20%. It’s going to be visible, but based on a low cost base, you will not be not super impressed by the numbers, but they are what they are.

We think also going forward that this can support us in Bulgaria, when we start integrating Globul more into Telenor. That kind of leads me to talking a bit about Globul, and I have to share with you, I was in Bulgaria this weekend. On Sunday, we had an event, the first time we were able to bring together the employees. We had around 2,000 people.

The average age of that company is 32 years and one month. There is a lot of energy, lot of enthusiasm, people are greeting a new owner, I guess, in a very positive way, but why is that, because we’re clear about what we want to do, we are ready to invest and we are built around people and they believe in that. That’s the way we’re going to run Globul going forward.

We now have a typical Telenor position, which is either number 1 or number 2, we have 36% market share, and we have no intention of doing very aggressive moves to try to run for the number 1 position in a short-term, but we are going to improve the network, we are going to improve the distribution and we are going to make it very, very hard for Mtel to retain that position overtime. But that’s going to be based on people choosing us based on value and competence, not because we run very aggressive campaigns in the market.

Looking at the top line, you will of course have seen a decline in the revenues, but that is primarily due to termination rate cuts and they are coming to an end. Termination rates are now at a fairly low level in Bulgaria, €0.012 and will come down a little bit more, but most of this is taken out. So our challenge going forward is, of course, to realize the same gains we have seen elsewhere in Europe.

We have been able to increase EBITDA, operating cash flow in an environment with limited potential on the top line. This is the task that we have put in front of ourselves. And if you look at what we have elsewhere in Europe, we see that we are typically delivering cash flow margins in the region of 30 to 30 plus. It depends a little bit on where you are in the cycle and swaps and these things, but typically in that area. And that’s natural ambition to put in front ourselves that we are going to drag Globul in direction of that level overtime.

If we look at the previous – the last acquisition we did in the region in 2006, we bought Serbia and we see that on EBITDA in local currency will increase from RSD 10.5 billion to around RSD 17 billion of EBITDA and the OpEx-to-sales has come down from a 33% in 2007 to around 24%, 25% where we are now. So this is a job that we’ve done before. It’s going to be a little bit different. It is always a little bit different, but we’re going to deliver on this one as well.

First step is network swap to make sure that we have what Telenor always has, which is a good network for our customers. We’re going to go through distribution, and of course, we’re going to bring the common concepts that we as a group have developed and are applying successfully in many other markets. So at the end of the day, the task that we have in front of ourselves, without trying to touch upon, is to benefit from the data explosion that is set to continue. We’re going to continue to execute on our efficiency agenda the way we have done and the way we have now seen clear results of.

We’re going to take a radical approach to Denmark in terms of being open to change the legacy approach and that will start from a customer perspective outside-in. It’s not going to start from changing the nuts and bolts what we have. And of course, we have bought Globul now and Germanos, so there are two companies, now we will have to execute and deliver on that agenda, and based on what I have seen up to now, I am very positive. Thank you very much.

Berit Svendsen

Thank you, Kjell-Morten. I guess, the audience has some questions for you as well.

Question-and-Answer Session

Berit Svendsen

Could you please pass the microphone over to left side of the room?

Andrew J. Lee – Goldman Sachs International

Hi. I’m Andrew Lee from Goldman Sachs. Just two questions, firstly, on Sweden and I wondered if you can give us an insight into the competitive environment you are seeing at the moment. You mentioned that you are moving towards the number two position or a stronger number two position, how you’re able to do that? And then secondly, in Denmark, TDC is pushing a fixed on mobile of conversion proposition more aggressively. How do you think you sit now given that you are stepping away from fixed, does that give you any concerns? Thank you.

Kjell-Morten Johnsen

Now, when I say that we are comparable in many ways to a number two position, it is basically because if you look at profitability, you look at the position in the market, it is – it’s ballpark. It’s not like you have a huge gap between the two players. So it will – nothing more than that. As for Denmark, our first and our second and our third priority, is to transform that company into becoming a customer lead efficient operator, and then the other things would be a lower priority.

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

Thank you. Peter Kurt Nielsen, Cheuvreux. Just for me in Denmark, please your comments about radical measures here to be completed by 2015 if I understand correctly. What will happen to your market position in the meantime while this process is undergoing? Thank you.

Kjell-Morten Johnsen

Yes, that is always a challenge. When you’d make a big change, it is to make sure that you don’t take your eyes off the market, and that’s definitely difficult, something that we’ve seen in many other places. The task before the management there, myself and others, is that we maintain our position in the market in a good way throughout this transformation process. That is not easy, but that’s the obstacle.

Berit Svendsen

More questions? Okay, now that in the break-out session later today, you also have the opportunity to ask more detailed questions about Telenor Sweden as we have also Lars-Åke Norling, Head of Telenor Sweden with us then.

Kjell-Morten Johnsen

And we have also one more person, and that who can answer also a bit more questions about Common Operations if you like.

Berit Svendsen

If there are no more questions from the audience, I suggest that we now have a short break. Refreshments will be served upstairs and we can meet here in about 20 minutes to continue with the last two presentations, which are dtac and Telenor Group financial priorities. Thank you, Kjell-Morten.

Kjell-Morten Johnsen

Thank you.

[Break-out Session]

Marianne Moe

Welcome back. I now have the pleasure of introducing the CEO of dtac, Mr. Jon Eddy Abdullah, and Jon will take you through two important topics; the massive increase in demand for data in Thailand as well as the very important transition from concession to license regime.

Jon Eddy Abdullah

Feb up almost, it’s great to see all of you here today. When I was reminiscing about what to talk about and I looked at last year’s presentation, I think this year’s presentation kind of takes off at the last slide and what we told you about risks last year and opportunities now I hope that we can show you actual deliverables. So I would – for those of you that were with us last year, it’s where we took off, and for those of you that are new, it’s a great story. So I hope you enjoy it.

Talking with some of you over the break in at lunch, there’s a lot of interest, so I hope I can bring that passion to you. We’re obviously interested in our business and it’s a growing business and it’s quite exciting right now, and as Marianne said, moving from concession to license is such a joy. It takes us back to more normal business operations. So a very good story to tell you.

Before I jump in, I want to just bring of us – all of us back up to date of a little bit about Thailand and what’s happening right now from a market standpoint and an economic standpoint. Population, pretty much the same, 65 million and you see the split between metro and upcountry.

So we have a fairly good urbanization and that’s happening more and more. We see urbanization happening, so see this migration. GDP, still positive growth, but it has been guided down recently. So we’re seeing some downgrades on GDP growth, we’re seeing downgrades on foreign exports.

We are seeing some harsh realties in agriculture growth, so the economy right now is not putting wind in our sales like the last 12 months, it’s a little bit fluttering right now. So the next couple of quarters ahead, we got to keep our eyes on the economy and hope that that doesn’t cause us any problem.

Mobile penetration now, 135%, primarily made up of dual sims and triple sims. For our telecom services, but we’re also seeing double and triple device coming in to play specifically in the Bangkok and the urban areas.

Fixed-line penetration firm at 10%; this is really a good story other than the opposite of Berit’s story, this is great for us. There is no alternative, but mobile access for the masses and also for those that have fixed connectivity all through the day as their mobile, most of them, they have themselves.

For those of you that don’t know as well, we have a very traditional three-player market; number one, commands a little bit over 50% revenue market share, we’re standing at 32.5% and number three, far behind at around 15% or 16%. That is 99% of the revenue in the mobile market. There is a few small MVNOs and some alternatives, but I’d say, it’s completely immaterial and we don’t see that changing in the strategy period, so a very traditional three-player market.

We are stuck in the middle, firmly ahead of number three. We are gaining market share and I’ll come back and talk a little bit about that. We crossed over 27 million customers and growing. We should come close to 3 billion in revenue this year. If you look at the bottom left, we’re guiding a little bit higher on licensed 3G network coverage, now up to 55% of the population covered by the end of the year on 11,000 base stations, of which 6000 of those are licensed network base stations.

Distribution, very stable; it’s been upgraded. We have 200,000 points of distribution, primarily on E-load and a very good physical distribution network in retailers. So distribution network, very solid. We have refreshed our relationships with our distribution channel and we have new automated system, which gives us a little bit more control in distribution. And today, we are pretty much stable in the market today, but we are worth about $8.6 billion in the capital market, so top 10 company in the country.

Internet is what we’ve talked about today and it’s the story of dtac right now, it is the growth engine. And I will start at the top left and kind of work down and across.

As I mentioned before, 135%, 136% penetration of which 45% of that uses data, now there is going to be some different numbers thrown at you today. So I’ll be just clear on this. 45% using data, but there is double and triple and quadruple sum on devices. So this number is a little bit higher than what we think the actual data user on a subscriber basis really is. That number we believe 20 million customers, 20 million ties access the Internet everyday and 50 million do not, so just to be clear on those two numbers.

You see that the vast revenue growth quarter-on-quarter, year-on-year is growing and you see a little bit degradation on voice. Now, we’re really happy to see that we were actually able to grow voice absolute in Q2 and take one point market share in voice. So voice isn’t dead, but it’s obviously under pressure as people move from voice and SMS to data. So we see a very similar trend, but as of Q2, we are able to maintain and grow that a little bit.

Going over to the right, service revenue was over 10% last year, last 12 months just shy of 10%. We are guiding this year at high single digits and at the trend around that looks to be a safe bet.

And then down below, I’m very, very pleased about the development competitively for dtac. The last time we sat here, we had slightly lost revenue market share and you see from 2012 to Q2 of this year, we’ve taken back 1.4%. So, every quarter right now, we’re doing very well on the back of fighting upcountry and urban on voice and primarily on the data position that we’ve taken, we’re doing extremely well.

Our network upgrade was completed last year. Our investments in 850 3G were done. We have got a great 3G network and we are investing in 2.1. So the network is very, very solid. Our pricing and our byte size and our bundling in our device is really hitting home and putting this altogether for customers and we’re seeing great uptake and you will see that on some following slides and also we did an OE transformation around people, we really went from voice and SMS company to a data company and that really paying dividends for us. So that’s what’s driving the market share increases.

So, if there is one word I can use for Asia and what’s growing data and access, it is social. Asians like to be connected, they like to be connected all day, they like to express what they are doing in the day, they like to take pictures of their food and where they are at and post it in Instagram, it’s an unbelievable phenomenon and it’s going very, very fast.

A few numbers that you should remember; the average age of a Facebook user in Thailand, this is going to surprise you is 41 years old, that’s very high and what we are seeing is, it’s a little bit more of the affluent segment. They have smartphones and what’s great for me that it leaves a lot of opportunity down towards the youth as they get smartphones and get a little bit more money in their pocket. So it’s a little bit inverted above what you’d expect and that bodes well for the future of social uptick in the country.

Bangkok is the largest connected capital in the world by Facebook. We have over 18 million users of which dtac commands 50% market share, well above our subscriber in a revenue market share and we were very specific on taking this several years ago and we’ve hammered away on it and I am very, very proud of what the team was able to do around Facebook in connecting our base. We are going to defend this significantly going forward.

Line users, we don’t have to worry about losing SMS revenue, because it’s very, very small part of our total revenue, single digits total part of revenue. What we have now is line users, using SMS we align and they have to buy data package and if you don’t have that data package or you haven’t bought the content part, you are out of connectivity, which is great, because you don’t see people go zero balance, you don’t see people going in and out of the network. If you are online and you are on social, you can’t go to zero balance, you have to be connected. So this bodes well for again more and more connectivity going forward.

Twitter is a little bit low, but it’s coming up on a percentage basis and we are seeing a lot of activity around this, but I would say focus on the top 2 in Instagram, those are the key drivers right now.

If we go to the far right, we hope to hit 27% penetration of smartphones. Today, it’s about 23%, that’s another number I want you to remember. Less than one-third of our subscribers have smartphones. That means a huge upside as we go through this tradition from feature to smart and pre to post and concession to license and I’m going to come back over and over again on that. So that’s the first data point I want you to remember, less than one-third of a smartphone.

You see the same percentages in usage, Android is growing and it will continue to grow. iOS holds a very premium part of the market, so from an absolute standpoint, Apple will probably not grow material in size, but it has a premium part of the segment.

If I could sum up the dtac strategy in one slide, this is it. This is a 23 page document and several hours in one slide. Our vision is Internet for all. You heard Fredrik use the term repeatedly. We are bold enough to say Internet for all is the dtac vision. Everything that we do over the next three years is to support this.

In this message chaos, I will just take you from the bottom up quickly. We’ve talked about operating models and operational excellence. For us that means how do we go from a traditional company on the verticals with 5,000 people, how do we look more like an Internet company, how do we move quicker, whether that’s managed services or partnerships, or structures or going paperless or online, that’s where all of that activity is and that’s the base of what we are doing.

On top of it, TriNet is our marketing position on our network. It’s the network experience. We have three bands, 1800, 850, and 2.1. We have 50 megahertz of spectrum, the most in the industry. Instead of saying we have more and faster and better, instead of saying, we have 3G and 4G and 2G, we say we have TriNet. And that was a very bold marketing position to take and that’s what we are driving repeatedly. We have TriNet, the others do not.

One digital dtac is converting from a traditional telco and to a digitized telco. How do we digitize what we do internally and go paperless, go online and how do we digitize what the customer needs for the future and there is a significant amount of work right now in converting ourselves and this is a core in our strategy for the next couple of years.

Customer centricity is not a word for us. We currently have opened and closed feedback loops running every week. About 40 or 50 people meet together to go through every single trouble ticket that we have and action plans to close permanently. We started this about a year and half ago. We have cut the complaints, the fault complaints to our call center by 50%.

So I am very, very pleased with what we have done. We measure NPS score not only in retail, it’s a retail experience, but also in the call center. We’ve closed the gap to number one, we’re within five or six points of number one already. So I think we have a real shot if we continue on this journey to take the number one position as measured by NPS towards customer and we think that that’s a sustainable advantage.

Another layer is Business Intelligence and Billing, I am going to come back in a later slide. Business Intelligence is the key here. We believe that we have capability, whether you call it big data or a database or analytics, we have a very powerful engine that I will tell you about in a later slide.

All of this supports our market activity and I will have a slide in each one of those. To the right, we have 50 million potential customers on the Internet. Now the second data point, only one-third or less than one-third have a smartphone and 50 million have never used the Internet and they don’t have an alternative other than mobile.

If you look to the bottom right, you see our increase in ARPU as a percentage basis on Internet and value-added service climbing nicely. I don’t see that this peaks in the near future. If we look only at Internet, take STP out of it, take SMS out of it, we have grown Internet access and the revenue coming from it by 80% QonQ the last six quarters. In this quarter, we don’t see that slowing. So it’s still growing extremely well.

Now, I am going to take you through a deep dive on the key items that were in that message house; the first is TriNet, again that is the marketing position for our network and our services, we cover about 80%, 85% of the population on a concession network 1800 megahertz network. This concession goes back nearly 20 years, the concession runs out in 2018. In 2011, we launched a 3G network on the 850 band under concession and that covers about 50% of the population, currently all of Internet that I’ve been talking about to this point is riding on the 850 network, 10 megahertz there.

We secured a 2.1 GHz license last year in auction, we are rolling out coverage on 2.1 GHz. We currently cover 50% of the population on 2.1 GHz license network, by the end of the year 55% and we will accelerate to finish the regulatory requirement of 80% by 2015, so what I am showing you is a picture, the 2.1 GHz license network will be as large as the concession networks by 2015, so another very big data point, we now have the capability to migrate all of our traffic because we have equal coverage on a license network.

The question now and what you may have read is what’s the 4G opportunity. We have several different ways we could do 4G if we desired; Number 1, we still have 5 megahertz open under the license that I haven’t used yet, we could launch LTE in the licensed band in a very localized way, and I show Bangkok in the picture, we could also launch 4G under the concession, that’s technology neutral and we have made application with the regulator to look into that possibility.

So 4G is an option for us if we think there is enough devices and there is a brand reason to go to 4G, still undecided. In either scenario guidance stays firm, $34 billion over three years, we would just move between 3G and 4G on what we invest in.

If there is anything that we’re doing that really excites me and gives us capability versus the competitors in the future, it’s our BI capability. Now most times you have a data base, it gives you some insight, you then go into a manual process of pushing offers, you get an uptake of single-digits normally and everyone’s happy. But what we’ve done is we bolted a contextual marketing front end on to this, and what does that allow us to do? It allows us to predict on a segment of one what a customer is going to do, and then we do something before that or after he does something we offer him something to support it. This gets smarter and smarter and smarter, the more we use it, and we are able to tailor these offers in very unique ways, example from left to right; we fight in a very localized way, on the street, much like we do in Uninor.

We have people that look at network capacity and quality, how we are doing in sales and our positions on the ground in very small areas. They get the data from BI. We then say well, what does the customer need in that area, should he be a data user, does he need more voice, does he need more SMS, is he high ARPU, should he go from feature to smartphone, should we give him an offer on a device, so the BI unit would again go to pricing and bundling, and pick what’s appropriate and push it to him.

How do we get it to that person or that customer, do we use physical channel or do we use online and again, we can stimulate which channel is appropriate for that customer at the lowest cost. As the customer gets more and more advanced and he moves from just Facebook and Instagram and Line we start to put more advanced features in the offer, music, financial services, content, video, we can bundle anything that we want on a segment of one and push it out there.

Again this is all BTL, we’re not spraying at the whole country, we’re not wasting advertising dollars in press, and in print, right to that customer and this just goes around and around and around, we’re very excited about this we launched it a couple of weeks ago and we’re starting to migrate all of our customers on to this database now.

Device is extremely important going forward, fourth data point; if we don’t get our customers migrated to a 2.1 GHz device we don’t get the 30% uplift from feature phone to smartphone, and we don’t get the 60% ARPU uplift prepaid to postpaid and more importantly, we don’t get out of concessionary fees of 30% of revenue down to a license of 5%. So the device is very, very important on multiple fronts, and because they are so much there, it gives us a lot of opportunity to play with how do we migrate that customer, where do we give the benefit, do we do it in a device package, do we do it on a service bundle that’s trailing, do we do it on specific offers, the device is the key.

Now we have a lot of devices, but the most important is the OEMs that we’re launching right now, at prices that are below what’s available on the open market. We have basic phones at $40, medium phones at $80 and the Cheetah phone which is a very, very good phone by spec for $142. Now this is at a price point in getting people into the Internet at a price they can afford, and then we put a service bundle on the back of it, if you look at the service bundle on the back of it, the device is free. They could not get that offer if they just bought the offer and not that device, so very good way to make this conversion and we’re seeing a very high uptake on it.

What we will do on the devices going forward is about every quarter or two we will refresh our OEM offers, and we are coming out with four new phones next month. Price point is going to be in this range, this is our top seller, so we’re going to differentiate a little bit on the high-end and only a few on the low-end.

Fredrik alluded to some pricing advantages that we have, and I am just going to give a specific example, in Fredrik’s slide you saw volume-based pricing, you saw time-based pricing, you saw some mix and match, and you saw some content pricing, we have all of that, but I want to give a specific example of how you build people enter the Internet and how do you expose them in such a way that you actually take them to where they want to go, where they feel the value.

Byte size is very important in a prepaid market specifically in Asia. People have a 100 byte in their pocket, but they only want to spend nine of it that day in case they need the other 90 for something else, so they buy sachet, they buy what they need, when they need it, so we have a variety of bundles that are very, very small byte size.

Every SIM pack that you buy from us now comes with free Facebook and free Internet to allow you to test it a little bit, so if you want to try it, and see if you like it you can start for free, when you get through the free part for 9 byte, you can try it for an hour or two. For 20 byte you can take it for a whole day, for a 100 byte a whole week and for 200 or 300 byte a whole month, and what we have is a path for people to grow up through data access without fear of being overcharged, and this I think we perfected and you can see just the uptake on Facebook alone how we have stimulated that specific case.

On postpaid a little similar, we have a lot of device offers in bundles for smartphones to get people over that hurdle, the initial shock of paying a lot of money for a phone, and then do I really need it. So we have unlimited data on postpaid small byte size, if you use too much I throttle you down, so we don’t have to worry with abuse, and that’s fairly consistent in our market, so we have a fair usage policy. We then went from instead of one size fits all choice, we call it choice, if you are heavy data user you use data packages in 500, 1 meg, 2 meg, 3 meg bundles, if you want to mix and match voice and data you can and we make it very easy and since we’ve launched this we’ve had very good uptake on postpaid, 200,000 just in the last couple of months.

This is a picture of our new shop, the physical shop, we have 300 of these shops nationwide, a 150 of them have been upgraded like this now, this is a conversion from service only to 50% sales and service, and what you see now our customer enters through the sales area, he is able to walk around and try stuff out, he then can go to the next counter which teaches him how to use the device, how to set it up and some training and at the back of the store, service if he needs it.

We’ll complete all of the shops in early to mid 2014 each time we convert a shop we see a significant uptake on our sales capability, so it’s a very, very good business case. It’s not just physical, we want to also move online. We have an excellent online store, I would encourage you if you can to go in and just play around in the store, we believe that it’s as innovative as what you see in the more developed countries, what we want to do is offer things first online, meaning we don’t offer it in the shop first, we want to push that exclusivity to online, so example, we may launch iPhone in the future online first or the ability to pre-book online.

So people get used to using an online experience, and then we deliver right to your door. We’ve seen our online sales grow nicely, double Q-on-Q, but this is from a very small base and we’re also seeing our visits to our website grow nicely.

At the top of all of this is obviously the service layer and we have a new STP, it was built primarily we believe in partnerships, we don’t want to do things ourselves, we can’t compete with the Internet, we can’t compete with local content, we can’t compete with international local developers. So Deezer is an example, we have a very good relationship with Deezer on music. We have an excellent relationship with Facebook because we have such a large market share in our country, and we were the first to launch Facebook messenger in Asia, the second in the world just given that relationship.

We had 2,000 developers that applied to our developer forum, the end goal was to be sent to Silicon Valley if you are the winner, we whittle that down to 200 and then down to 10 and there is a company now from Thailand sitting in Silicon Valley learning how to be a world class developer, and we’ll continue to stimulate local content.

We have over 29 entertainment channels online for video content and also a Google store shop where we can put that locally developed content out there to make money. The numbers on the right, I think the partnership model is right for dtac and we have a lot of opportunity going forward here to go even faster.

I want to move just to the last couple of slides now on financial services, those of you in the room that know me, you’ve heard me talk passionately of our financial services for years, I feel the same way about it in Thailand and there is two different derivatives here. The first is banking the unbanked; 40% of the population still does not have a savings account and doesn't use traditional banking services, so we’ll have a lot of effort of how do we bring the unbanked into the banking world using our distribution capability.

But what’s really interesting about Thailand is this online and our position in Internet, and if we can put financial services and a conduit of transaction in Facebook, in social, on the way that they buy games, in the way that they buy commerce online. You have to believe that’s a position that we must be in and it might take a year or two or three we’re not sure, but we want to make sure that when you think about mobile financial services there is only one game in town and that’s dtac, so we’re going to invest in this and we’re going to launch it in Q1 most likely.

What are we building? It’s a conduit of transaction. At the core of it you can strip away savings accounts and insurance and device loans, it’s a conduit of transaction, 24x7x365 and that doesn't exist in most developing countries. And then you say, it’s layering up more advanced products as time goes by.

On the regulatory front a little bit of a busy slide, but we’ll start on the right side going from concession to license. What are we actually doing? Primarily getting out of concession fees which for us are 30% of revenue, going to a license fee of 5.25%, that’s the monetary issue. On top of that and probably more importantly is from a very challenging legal frame work where we challenge each other because the concessions never contemplated all of the challenge we would have to a more normal, easy, fair and transparent framework.

On the left side the way I want you to read the chart is from left to right, and the 900 megahertz band AIS has 17.5 megahertz that comes out of concession in 2015, on the 1800 band both AIS and true come out of concession this year. They have an extension until next year and we expect a license next year. There’s talk of coupling those 12.5 with the 17.5 from AIS for an auction in September of next year. What we hope to do is take 25 megahertz that we currently have under the concession that we can’t use because we cannot show need of use, this goes back many, many years, to put in there. The scenario is quite clear, 15 megahertz of 1800 along with 17 megahertz of 900. That makes – we’re very attractive auction and we will try to make that happen over time.

What does this mean overall? How do we get the regulatory savings? First of all we have to port customers. This year we will have 10 million customers on the license network. 6 million will come from the existing base, 4 million will come from new SIM sales. What does this mean overall? Over time we go from a blended regulatory cost of 32% down to 15% reduction. And what happens in this process? Many, many things and why you don’t see it going to 5.25% is what I want to walk you through. First of all you have to have a network. We only have 50% population coverage today. We’ll take it to 80% over two or three more years. So there’s not enough network to cover everyone. That’s one hurdle.

Second hurdle, you have to have a 2.1 device, so all of your calls and data access is on a device that can access the license network. Third, your calling pattern. If you call or you are on a concessionary network, obviously we don’t get the savings and I have to take all of those port requests through a traditional porting channel meaning MNP and that takes time. So it is going to some time before we can fully realize all of the regulatory savings.

In summary, Internet for All is our vision and we believe if we do things right we can become the most preferred Internet company and since there is no other access point other than mobile I think this is an achievable vision.

The revenue potential, I won’t say the word is not enormous and it’s infinite, but let’s go back to the data points. Less than one-third have a smartphone. We only cover 50% of the country with 3G today. We still have a lot of room from pre to post. There is so many things that are happening now. Only 20 million of the 65 million access the Internet on a daily and monthly basis. So there is a lot of room for growth.

Cost savings is around the migration from the concession to the license. We have a very good plan. It’s just going to take some time. And where does this end up, in a better position. I would hope that we could land near some of the operating companies in our neighborhood with a more standard licensed regime. I would use a reference probably of Malaysia. That’s a very achievable target if we execute in a good way going forward. Thank you very much.

Marianne Moe

Thank you, Jon. Let’s see if the audience has questions for you.

Question-and-Answer Session

Unidentified Analyst

Of the concession savings, how much of that you expect to retain versus – or do you expect the operators to retain versus being given back to consumers in the form of lower prices?

Jon Eddy Abdullah

What you’ve read in the market right now, with the license came some expectations from the regulator. One was a 15% reduction in overall tariffs. Now what we’ve been able to do is through normal bundling and normal competition we’re already at that amount. So what you’re seeing right now there will be no substantial change other than market forces on the pricing side.

The device side, I can see a little bit of activity because there’s so much upside to get that migration going. So you probably see us using a little bit of that just to push the migration forward. Do I have a number in my head? No, but I don’t think you get it all. You’re not going to get it all. Somewhere in the middle we are going to find a good equilibrium and hopefully it’s not hypercompetitive in the transition, but I don’t have a specific number to give you.

Marianne Moe

Next one please.

Stefan Gauffin – Nordea Markets

Yes, Stefan from Nordea. Just looking at the regulatory costs, which you planned to take from 32% to 15%, longer term is it relevant to look at the 5.25% or are there other costs that add up to another number?

Jon Eddy Abdullah

Yes, there are some other costs USP fund and there’s some small things in there. I think it’s a long-term target. You start to tail closer and closer to it. What we need to keep our eye on is there something else that may happen. An example; and we’ve heard this a little bit. I think it’s not a near-term thing, but it’s possible. In the framework there isn’t a telecom exercise tax in there. It’s currently set at zero. Now we haven’t heard a lot of effort on raising that, but I think we just need to keep our eye on that. That’s a risk that I could see would be – it’s possible, but not expected in the near-term. That’s the only one that frightens me a little bit. Other than that I think you eventually get there over time.

James S. Britton – Nomura International Plc

Thanks. James Britton from Nomura. Can you just clarify what infrastructures you might consider leasing back from state-owned enterprises and when will those terms and conditions be finalized?

Jon Eddy Abdullah

Thanks, James. The question was there is a few different things we are taking about. Number one, you’ve read a lot about infrastructure funds and potentially towers specifically. Right now those towers are in dispute in the industry. If those towers somehow could find their way into a fund and we could open that up and monetize it, that’s one way, but I think it’s very complex until we get out of concession. So in our case that’s 2018, but we are looking at ways to potentially monetize those assets.

The 2G kit, once you get to the end of the concession what would we do with that? Do we buy it back, do we lease it? We have open access on that kit right now. So we know what the cost structure would be. That’s already posted. So many different models on the kit itself, transmission very similar. So I think there is different ways on how we could monetize the asset, how we get access to it and the cost structures and we know many of that right now because the prices are posted.

James S. Britton – Nomura International Plc

And can you just clarify what the SOEs will do at least on revenues with huge numbers of employees to deal with?

Jon Eddy Abdullah

Well, it’s a tough James. I think what we are trying to do is find mutual business together right now. Our concession partner is CAT. What can we do together mutually which is beneficial? So can we start a new business? Can they use something that we have? Can we use something that they have? But it’s quite difficult to make up for that 30% that over time is going away. It’s a tough discussion. No easy answer right now.

Marianne Moe

Next question please. No more questions?

Ulrich Rathe – Jefferies International

Thanks very much. Ulrich Rathe, Jefferies. The transition to licenses was leveling the playing field you are saying. Are there any reminisce of the way you would say dtac gets less advantageous rules or rulings or anything of that sort compared to AIS or true simply because it is maybe still viewed as a company with more foreign influence, are there any sort of remnant areas even in the new world?

Jon Eddy Abdullah

I think moving to license is a real material change and the more customers that request to port and the more we port and the more traffic that moves and the more license spectrum that’s released that has a natural stabilizing effect and that’s what we see right now. Can things happen? Yes. Do I see anything that fundamentally could change? Not really. We seem to be on a license track right now and there seems to be a lot of internal momentum in the country to keep going down that. We just have to hope that we stay on the course.

Marianne Moe

Okay. If there are no more questions from the audience I would say thank you, Jon. And please note that you can also ask more questions to Jon later on today in the break-up session, but he has to leave at 4.15. So make sure that you visit Jon’s session before that.

We have now reached the last presentation here today, which is the group’s financial priorities and ambitions. And I have the pleasure of introducing Richard Olav, the group CFO.

Richard Olav Aa

Yes. Thank you, Marianne Moe and I’m honored to speak at the end of this, I think it’s been informative day and I hope you enjoyed Mr. Eddy’s presentation as much as I did. It’s a great story. So I’ll try to round this off and I’ll go through three main teams in my presentation. First, I’ll take a little recap of the financial performance of the group, the last 12 months since we met last year. Then I will try to substantiate to you how we’re able to grow the cash flow from around NOK 21 billion now up to NOK 28 billion to NOK 30 billion. And finally I’ll go through the capital allocation priorities.

So let’s start with the recap, and these are the financial highlights since we had this gathering one year ago. We have continued to outperform the other telecom stocks in the sectors, also provide a good return, 25% return, dividends and share growth combined the last one year. We have since Telenor also IPO measured ourselves both against Oslo Stock Exchange and also against European Telco Index. And of course like Kjell-Morten says European has maybe not been the best place to be for some of our European competitors due to the macro environment and also overleveraged balance sheet.

She also decided we had to put out the benchmark against listed Asian telecom entities like [indiscernible] groups and so on and we see we also have a strong outperformance against our Asian peers. So I think the mix of a strong emerging market portfolio with strong cash flows from Europe and a good cooperate governance and a solid shareholder policy on dividends and buyback has proven to be a quite effective recipe for shareholder value the last 12 months.

I think we also during the last 12 months have taken some very important positions that have cost money, but very strategically important for successful spectrum auctions. Total cost around NOK 8 billion spread out over time, but very vital to the Internet for All strategy and also become an effective operator.

Two M&A transactions. Bulgaria is paid for around €700 million. Myanmar, we have not disclosed the figures yet because we are in discussion on the final license conditions with the government and have to come back to that.

Then also from VimpelCom we have received very good dividends the last 12 months, NOK 6.5 million. If you remember back we had the dividends stalled after we bought shares from Naguib Sawiris. That was freed up after Altimo bought these shares and also Altimo did conversion of shares that resulted in extra dividend and in addition to the normal dividends we have received a substantial all-time high dividend from VimpelCom the last 12 months.

The cost efficiency agenda, we are progressing well on the NOK 5 billion that we laid out last year. I’ll come back to that in more detail. So I mean these first bullet points, they are very good story the last 12 months, but there are of course challenges. This is a balanced picture. I think the biggest risk we have as an operator is really on the regulatory side and we have seen quite a lot of increased regulatory cost, especially in Asia and Eastern Europe as the industry is very tempting target for government that needs to balance budgets.

Also listed are data monetization as a challenge. You heard Jon today talking about opportunities in Thailand. You heard Berit about the opportunities in Norway. So this is both a huge opportunity and a challenge and we look at it as an opportunity, but we also have examples like the Danish market where really the transition to data has been done in a way, which actually has driven down the ARPU.

So important to do this Kjell-Morten said, to executive this in a very precise and good way to get the benefits from the data growth. Then looking at the cash flow, last year to the right there you see last 12 months we have generated NOK 21 billion in cash flow, that's the level we’re today and where we need to, that’s the base to grow to NOK 28 billion to NOK 30 billion.

And as you see we have a substantial improvement from reducing losses in India, but also strong underlying improvement in the main business of NOK 1.4 billion on EBITDA. And we’re investing more in Norway, in Thailand, and other parts to grow cash flow further, NOK 2.7 billion increase the cash flow over the last 12 months.

So compared to 2011 this is up around NOK 2 billion and if you look at a longer term perspective back we were at around NOK 15 billion in 2009. So we have been able to grow around NOK 6 billion. And now we have to step it up with another NOK 7 billion and that's what I am trying to at least NOK 7 billion and that's what I am trying to substantiate in the next part of the presentation.

So last year we laid out the cash flow target of NOK 28 billion to NOK 30 billion and you may see that there is a huge step up from where we were in 2012 or NOK 20.5 billion up to NOK 28 billion to NOK 30 billion. But it’s really important that you understand the five bullet points to the left there and I will go into detail on each of one of them in the remaining of the presentation.

Starting with India, India has had a significant drain on our operating cash flow and in 2012 it was NOK 2.1 billion negative although NOK 20.5 billion. So just neutralizing the negative cash flow in India from where we are today it would be close to NOK 23 billion. Then of course we expect to continue the growth in the revenues. We have a huge and tough subscriber growth that Fredrik showed in his slides, mainly over Asian markets and we have a huge growth opportunity in data and data come with a lower cost of goods sold than voice and SMS, so the gross profit on data is higher.

So we see both subscriber growth and growth on data in itself will drive a very good gross profit development. The big question mark is really what Jon and Kjell-Morten, and Berit and Fredrik have touched upon, how good are we to monetize and drive ARPU growth on customers moving into the Internet. I will come back to that. And then on the CapEx side we are investing more than the normal level both this year and next year and that will come down in 2015. I will come back to details on that.

So all these four bullet points in my opinion executed well, we should be able to achieve the target of NOK 28 billion to NOK 30 billion. Then since last year we’ve got two new operations into the picture, Bulgaria will come in with a positive cash flow in 2015 after we’ve stopped the network and improved distribution and so on, while Myanmar will clearly be in the negative.

We have not said anything that these balance each other out exactly, but these investments in the bigger Telenor pictures, we think they could be well achievable to do both of them within the NOK 28 billion to NOK 30 billion target. I’ll also come back to that.

But let’s start with India. Since we passed the kind of dramatic events last year on the spectrum side, I think we have operated India quite well. We’re on the track now to achieve operating cash flow breakeven by the end of this year and remember the six circles we’re in is only 40% real subscriber penetration. So it’s a lot of growth left in these circles. And we have a good position. We are clearly perceived now as the low cost brand providing best value to the customers.

So India now is in a way divided market, where you have the three big players like, Idea, Vodafone, and Bharti, premium services offering full fledged data, good coverage. Then you have the midsized players which are really struggling with a weaker position and then you have Uninor coming from the bottom with really the best on basic services and low price and best value for customers.

So what we see now is that the big ones are grabbing customers and we’re grabbing customers. What we also see is the pricing in the market is improving as after the auction there has been a lot of natural consolidation in the market. So typical what was eight, nine, ten players in each circle is now down to may be five or six that are really active.

And I think we should have the mindset also in Uninor that we all had in Malaysia, where we’ve really taken the best value proposition with the best prices and really that message put details also gradually overtime, more or less eliminatory discount, but still being perceived as the best value in the market.

Today Uninor has a huge price discount to the top brands, but we can see as we build the brand position and get that accepted, we can take that discount down overtime and in connection with that the market will be more rational and consolidated there could be a very good race in the ARPU going forward in Uninor, but it depends on a lot of factors.

But any how we’re now last 12 months NOK 1.2 billion negative in India. We expect to end this year at the run rate of cash flow positive and then in 2015 when we measure ourselves against the NOK 28 billion to NOK 30 billion, we certainly hope to have some positive contribution from India. But that will depend a lot on the top line development in India and no doubt that we’ve been able to take subscribers, but will depend a lot on the general price level in the market and how we will reduce the discount overtime. That was India.

Then remaining business; revenue growth, subscriber growth will continue. If you just look at the real penetration numbers in Asia there is a lot of room to go. And like I see now in Thailand some of that growth will come directly on data. Many of the users that Jon talked about had their first experience on Facebook. You put the hand in the phone and it’s really they start to use Facebook before they use voice.

And now with the prices of smartphones coming down dramatically, I think we will also be surprised at Telenor to see that more of that subscriber growth will come directly on data. And then it’s a matter I think that’s given, but then as a matter, how good we’re at monetizing and we have some very good stories, like the transition from feature phones to smartphones in Norway into the bundle packages lifted ARPU. We had 6% to 7% ARPU growth quarter-on-quarter for many quarters in Norway.

Now we’re seeing it’s stagnating in Norway because we have not been able to up sell to bigger packages as the consumption growth that's the next challenge which Berit talked about. We see the early moves some in Sweden and Kjell-Morten alluded to the more structured package and up selling [indiscernible] in those packages and we think that we have another path in Sweden, where we can see ARPU upside when the customer start to consume more data.

And the dtac story is just in the beginning. But again we have other stories as well like the story in Denmark. This is really the key value driver in my opinion, if we’re able to do this well there is even more upside to the plans that we have seen here and if you’re executing well enough and this industry in general is executing [indiscernible] of course more downside.

But with the data, it comes with gross profit. Most of the data revenues come with close to 100% gross profit because they don’t carry and they interconnect. And we see then Asia really being a big driver for the Group in this going forward. So this is really the key slide depicting kind of how easy, how hard it will be to over achieve or achieve, or under achieve on the NOK 28 billion to NOK 30 billion. I think on India and the CapEx and the efficiency programs we’ve very good control, but here we’re really depending on industry development.

Then on the cost efficiency again though, I have three slides on this. This is recapping what we said in 2010 and we set the cost efficiency target. Then I have the investments which are crucial for being able to hit the NOK 5 billion program in 2015, and then finally what the 2015 program contains.

Three years ago, at the capital markets we laid out a program saying that we really need to improve productivity in the group. We did not want to put out the nominal target and OpEx at that time because we felt it was really important to look at productivity combination of sales and OpEx. And if you see the right there top shot we have been able to take down OpEx to save from 39% now to 36%. We have taken it down by 3 percentage points. The target is to get to 35% at the end of this year. So we have a 75% completion of target so far.

And how have we done this so far? We have some, in my view quite impressive productivity numbers in this period. We have maintained stable operation and maintenance cost, despite 25% growth in number of sites.

We have swapped basically all the networks. We have done a lot of managed services working with partners and network sharing, which Kjell-Morten alluded to and also general productivity improvement.

We have been able to keep salary costs flat despite average inflation in the Group is around 4% to 5%. So you can say, now you don’t add the 9% work force reduction that doesn’t add up, but guess what, we have cut more costs in high cost countries and then we added labor in low cost countries, so the mix all the labor force even if it’s a 9% work force reduction is less than accumulated inflation has made salary cost to remain flat.

Then on the sales and marketing costs, we have been able to scale on the distribution networks and we have flat sales in the marketing costs despite 47% growth in our customer base.

So I think these three years we have good progress, but we make no doubt about it, it’s a struggle to close the last percentage points. The last 25% of the efficiency program from 36% to 35%. We still really aimed to get there and we think we’ll definitely show good improvement towards the end of the year, but we have really been hit by regulatory costs, and that’s what I said, that’s one of the key risks of the Group, and this has hit us in Bangladesh in various shapes and form. It hit us in Hungary in various shapes and forms, in Malaysia, higher costs. We also saw higher cost in dtac on the revenue share before we now come off concession. So this is a cost driver that goes completely the other direction.

So I’d say the target of 35% is still feasible, but it depends on the strong top line development in the second half because we will not do short-term cost measures, kind of stopping advertising as on just to hit the target, which will hurt ourselves long-term. We are long-term player, and that’s the way we operate. But I would say that, it’s now we’ll end this program towards 35% this year, and then focusing forward on the NOK 5 billion OpEx savings program.

And before I go into that, we will to realize the NOK 5 billion in 2015, we will not do any big impairments or massive restructuring cost or anything like that. There is a lot to do of about intelligent investments. And you’ve heard John today about the rollout of the 2.1 GHz network in Thailand and the TriNet, there is a massive regulatory cost savings coming out of that things [ph] in Thailand. And then you’ve heard Berit about the fibre investments in Norway that not only enables growth on the fixed network, but also lower the cost of the backhaul, and also can take out all infrastructure. Those are the two biggest single CapEx items the next years.

In addition, we are three network swaps in the middle of finalizing in Malaysia, Pakistan will be finalized later this year, and then Bulgaria comes next year. Then Malaysia, backhaul fibre significant cost item if you look at DiGi extremely cost efficient operator, but they have won [indiscernible] and that’s the fibre. We are doing joint fibre rollout now with Celcom in Malaysia and that cost more.

Then we have more in the growth side, the Myanmar and the Thor 7 satellite that comes in next year. Beware that will come CapEx next year about NOK 1.5 billion.

We said in 2010 that when we swapped the networks and done all the productivity improvements, the mobile operations should have a CapEx to sales of around 10%. We’ve seen Norway network sharing and so on that is actually running below 10%. But we see also that the fixed network in Norway require more CapEx as fibre growth and also to do the transitions Berit talked about.

But if you look at the bottom slide here, the four bars there, you have the 2.1 GHz, you have the fibre-to-the-home, you have the network swaps and the Thor 7, they add up to around NOK 10 billion, NOK 11 billion of extra CapEx in 2013 and 2014. Will we be able to curb all of that in 2015? No. But I will say a significant portion of it. So that in itself, plus India would be a natural increase from the NOK 21 billion and upwards, just on the CapEx side. But then this CapEx also then should result in significant OpEx savings.

And here it’s the breakout and somebody asked earlier about the gross OpEx savings, Norway share all the gross OpEx saving, and it’s about NOK 2 billion or the NOK 5 billion, so it’s about 40% that lies on Berit’s shoulders.

So network strategy and new operating models in Norway are crucial, that’s where we have the biggest cost potential in the Group on the normal OpEx side. Then the transition to a new network in Thailand is very important. There are increased regulatory costs in Thailand as well, but to get the license cost substituting the concession revenue share is extremely important to reach the cost again.

Kjell-Morten talked about the radical simplification in Denmark, it’s a not a huge part of the pie, but I think the program is extremely important because it’s a new approach, how you run a teleco in a data centric age.

Then the backbone in Malaysia, we have already touched about. And then one situation that we have not discussed so much externally, but the power situation in Pakistan have really made Pakistan missed their targets on OpEx to sales. We are now around 13 to 14 hours per day in Pakistan on load shedding meaning that we have to run on diesel.

Also, what are we doing with that? We’re swapping the network to energy efficient network. We are installing better batteries. We are improving the relationship with the managed service partners. They can reduce pilferage and theft and so on diesel, and in connection with, but the government in Pakistan will have to do on the power situation because that is really bringing the country into difficult position. We have really hopes to reduce power cost in Pakistan.

And then, what John and Berit have talked about earlier today be more efficient in sales and marketing combined digital and physical both in the retail and the customer care. We see good cost potential there, but also better customer experience. Is NOK 5 billion enough? That’s the target we have now, but we’ll definitely look for more in the planning period.

So those were the main four bullet points. But then we also have got two new operation that comes into the picture when we should measure our cash flow. We have Bulgaria and they have the cash flow around €90 million in 2012, NOK 700 million approximately. We need to do a network swap, we need to refurbish the distribution in Bulgaria over the next year or so, and then we target to have a better cash flow going into 2015 and long-term we see no reason why Globul should not be on the level with other Eastern European operations. And by that, we should get a pretty good return on also our investment in Globul.

Then we have Myanmar and we have still not got the license, so we cannot be very explicit on the financials and the targets from Myanmar, because we are on the confidentiality. But what is public is that we target the launch operations eight months after we get the license. So let’s hope we get the license on time this year, and we’ll be well into 2014 before we launch operation. That means 2015 will be the first full year operation.

Now in India, we should be able to be cash flow breakeven after four years. In Pakistan, we were cash flow breakeven after five years, we should definitely try to do it quicker in Myanmar, but definitely 2015, will be a year of negative cash flow in Myanmar. But what we’ve said Globul and Myanmar they will not net each other all in cash flow because what the cash flow will be in Myanmar in 2015 will depend a lot on when you launch and how we will launch. So we have to come back to that. But in the big scheme of Telenor, we have said these two operations taking them into the equation should not alter the cash flow target of NOK 28 million to NOK 30 million.

I’d also like to stress that we expect lower peak funding in Myanmar than we have seen in India and Pakistan. First and foremost Myanmar is one-third of the population in Pakistan and expect to have telecom companies in Myanmar to take care of the investments in steel and concrete i.e. towers, which will come back as OpEx over time, but you’d avoid the kind of upfront peak funding.

Secondly, we expect to share with competitors in Myanmar. And thirdly, we have seen over time equipment prices coming down with introduction of Chinese vendor, but bear in mind that Myanmar is a country without infrastructure. It’s also expensive to install sites in Myanmar. But also very importantly we are learning from India. We are using the Indian concept of a cluster base model with a very efficient network roll up and short time to breakeven and really drilled that down in distribution.

So to recap before I move into the final part of the presentation which is the capital allocation. How to get to NOK 28 billion to NOK 30 billion, India cash flow continued Internet for all really monetizing on Internet for all by growth in revenues and gross profit, execute on OpEx saving program, and reduce CapEx for allowing the significant investment we’re doing these two years, and then the conclusion on Bulgaria and Myanmar.

So last part of the presentation, capital allocation. These three items have been carved in stone now for the last three plus years; maintain a solid balance sheet, competitive shareholder remuneration, and disciplined and selective M&A. No revolutionary things today on that, but I will take you through one by one.

So let’s start with the balance sheet, we have been running now net debt to EBITDA around 1, meaning that the debt has more less approximate there are EBITDA, right now in the second quarter is 0.95. Globul will add 0.15 to that so then up to 1.10. So we are comfortably below the maximum ceiling we have set of 2 times net debt to EBITDA. So we are very strong position but we have no ambitions, and I remember three years back we have found that hard to believe that we have no ambition to grow this to 2.0, but we are very comfortable at one, and I think we have proven now over several quarters that we are there. So then we’d have to be for the very right opportunity if we elected to go up towards 2.

Also on the refinancing risks we have done two bonds in the second quarter this year, and really eliminated all the refinancing risk. If you see that there, it’s very low compared to our cash flow.

Then on the M&A side. When you read in the media about Telenor, you can think it’s all about VimpelCom Indian M&A, but I promise you, I mean most of the time we spend in the group and the 30,000 plus employees is really how to do Internet for All and execute on the cost efficiency agenda. That are what we spend most of the time on.

But I would like to elaborate a little bit more about how we work on more M&A and the structured things and of course the in-market opportunities also take a lot of time. I mentioned four spectrum auctions. I think we have succeeded in all of them. We are working very systematically on spectrum in the group and that is a high priority to create the value from those acquisitions.

Consolidation. Yes, we would welcome consolidation. We suggest that the EU regulation should support more consolidation. If it happens, I think the German case is a test case in our markets, I mean India and Denmark stands out. They’re crying for consolidation, but regulation and also the various players’ approach to consolidation has not made it happen, but there are several other markets also that would benefit from future consolidation.

And then network and spectrum sharing. Very open to that and engage with other players when those opportunities come. So I’d say that we spend a lot of time on those three bullet points. But of course when there are attractive assets coming in and being explored by other players and being explored by us, like global and like Myanmar opening up, of course we take a look at that, of course we spend time and see if we can create value around those assets and that will continue. But I think it’s important for also you to understand that it’s not an M&N again that drives Telenor, no. These are opportunity driven and there be can great value. And of course we are looking at the assets that are not strictly related to the core. However, we can maybe find better orders for them all-time.

Then on the shareholder remuneration. Given the strong cash flow development of the group, we also have a strong earnings per share development. It now last 12 months stands at a normalized basis around NOK 9.20 per share and also a good development in return on capital employed. It’s around now 17% of the tax in the last 12 months.

And these parameters also then yield a very good dividend per share as the dividend policy is tied to the EPS. And the dividend has now grown from NOK 2.50 per share in 2009 to NOK 6 per share in 2012 as an annualized dividend growth of 34%. Is it possible to grow the dividend with 34% going forward? No, I don’t think so, but we definitely will grow the dividend going forward given the growth in our cash flow.

We have spent significant funds on capital repatriation to shareholders during the last four years. Both from the dividend you see it in billion NOK there, NOK 9.4 billion last year, but we also top that up with share buybacks. So we have spent now close to NOK 15 billion in share buybacks over last three years. I may have another 1% buyback program that is about to be completed in these days. So the combination of these have proven to be a very strong shareholder remuneration policy.

I think going forward 10% buyback of shares. We will pay less emphasis on buybacks and more emphasis on dividends going forward as we expect a very good growth in the earnings per share.

So wrapping up, targeting operating cash flow, I hope I could have substantiate the due how we get there. Target is there. It’s very clear to them Thai [ph] Telenor organization. Do we have the plans to get there? Absolutely. Are there risks on those plans? Absolutely, else it would be very easy to get to this target. It’s an ambitious target, but we think we can get there. And by getting there we should be able to offer a very good and competitive shareholder remuneration.

And then on the M&A side, more opportunity-driven, where it’s really the priorities and which are wrapping this up is Internet for All and do that in a very efficient way to make us for the success as we have been in the past. Thank you.

Marianne Moe

Thank you, Richard. I will now invite Fredrik to join Richard for a short Q&A session.

Question-and-Answer Session

Terence Tsui – Morgan Stanley & Co. International Plc

Thanks Marianne, it’s Terence from Morgan Stanley. I just have a question on VimpelCom please. I was wondering if you can just remind us on where you are standing on the potential conversion of your preferred shares of VimpelCom now that the conversion window is approaching and you’ve shown that you definitely have the balance sheet to support such a conversion. And maybe just remind us longer term where you stand on your shareholding at VimpelCom given that it’s unlikely that you’ll be the controlling shareholder in that little time? Thank you.

Jon Fredrik Baksaas

The position in VimpelCom is so that the preferred shares become convertible now this October and they will stay in the conversion period for 2.5 years. We have no immediate plans of addressing that kind of question. We have ample time to do that within that timeframe and things may happen. That is also pretty clear that the way the shareholdings position soon the company stands then we are much clear of a financial player in VimpelCom given that the Altimo is having a 48% voting position and that we including the preferred shares would have 42%.

So from that perspective you don’t make that much of a governance change if you should think conversion. However, in 2.5-year timeframe things might change and thoughts might vary. We are of the believe that VimpelCom is having a tough journey on improving operating positions and we’re supporting the group in that and the efforts in doing so is very solidly embedded where we see it in the group full-time be.

Marianne Moe

I believe the next one was Peter Kurt over there and after that it’s Sven Skold.

Peter Kurt Nielsen – Crédit Agricole Cheuvreux International Ltd.

Thank you. Just a question related to the capital allocation. Obviously you’re in the process of entering two new markets, one in Asia and the other in Eastern Europe and as you’ve boasted today, both carry a higher regulatory risk and uncertainty than most of the other markets and obviously going forward there will presumably be some consolidation opportunities. And as you move into these markets, I guess the risk profile at Telenor is also sort of increasing.

How will you manage that process and say three, five-year horizon? I mean from an investor perspective, should we expect that the overall group risk profile will increase as you attempt sort of to capture marginal growth or will you allocate more capital on new capital to mature existing, say, Western Europe markets to balance that out. What should investors expect? Thank you.

Jon Fredrik Baksaas

Does the question imply that there is no regulatory risk in Europe? Given recommendation package that just came out, I saw quite a significant risk also in that package. So really where is the risk increasing, where is the risk lower than higher? I think we have proven that. Basically we can handle a Greenfield like Myanmar in the way we have done before. In other countries, yes there will be risks involved.

However, the energy that a new country like Myanmar gives to the Telenor business culture that Telenor way are working is a very strong ignition to energy in the group. And the dynamics that any new extended footprint that comes with Myanmar and Bulgaria to the operations in Europe, I look very positively on that energy coming in. So yes, there are risks, but there are also good confidences in the group and I think we are capable of handling and running processes along with other industry players also in the regulatory space.

Sven Sköld – Swedbank Markets

Yes, hello. Sven Sköld here from Swedbank. There seems to be a global trend of the integrating fixed and mobile networks and I also heard your CEO being very positive about the integration or synergies within market. How do you look upon that in your other markets, are there opportunities or threats that you maybe have to go for the fixed line side as well?

Jon Fredrik Baksaas

This topic is basically driven by a bit of the statements that Vodafone has been associated with after their Verizon deal. I’m not really sure whether this is as strong as argument for all players involved. In Scandinavia where we are in Norway and Sweden, both positioned on the fixed and mobile, we have the ample opportunity to play those cards if it becomes relevant to play them.

However, the bundling side as such hasn’t been that strongly evidenced in several markets and ambitions have been higher than what has been realistically demonstrated behind it. So I am a little bit twisted on that. That doesn’t mean that we in Norway wouldn’t say that to have both cards is a stronger hand than not having it, but that is more or less kind of historic development of the group and the historic position of the group. Whereas if you say in Hungary, would we need access to fixed line or would we not or is it so that 4G frequencies will solve this sufficiently down the road, I think all these questions are of for further evaluations and the conclusions aren’t necessarily carving stone at this stage.

But Vodafone has always had a kind of approach to being vulnerable up against the other continental players, because they have emerged into the position that they had primarily on the mobile side, whereas the other national players have come from the fixed side moving to mobile. So I can understand that kind of situation in the continental countries as such.

Marianne Moe

First one is Laurie from Citi.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Hi, thanks. This is Laurie Fitzjohn from Citi. Slightly related to the last one, with the shift to 4G, some operators are saying that, now is the time to accelerate investments. So if larger operators did gain a network quality advantage over the smaller operators, would you agree with this as an opportunity for Telenor? And then related to that, does the 28 billion to 30 billion target leave yourselves enough flexibility to pursue that in certain markets if the opportunity rose?

Jon Fredrik Baksaas

What was the end of the question?

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

The second one is, does the 28 billion to 30 billion target leave yourselves enough flexibility, if that was an opportunity?

Jon Fredrik Baksaas

Well, of course that depends what you have in insight when you ask the question. But given the footprint that we’re in, I think we’re comfortably okay. But if you ask for M&A and line it up with what Richard said on how we’re looking at M&A’s, then of course you can get, both yes and no to that kind of question. But given the disciplinary approach that he runs in this group, I think we’re okay.

Laurie Fitzjohn-Sykes – Citigroup Global Markets Ltd.

Thanks.

Marianne Moe

And I believe the next one was Ulrich from Jefferies.

Ulrich Rathe – Jefferies International

Thanks very much. I would like to come back to this concept of underlying CapEx and this 10%, let’s say, isn’t the reality nevertheless I don’t know from 13 years to 15 years that whenever they’re sort of the outlook for CapEx reductions, there is the next technological innovation coming or some other need, is 5G in the blocks. I mean the equipment vendors of course are creating conditions where the next wave of investments sort of becomes available.

So I was just wondering philosophically how you think about this, because I remember sort of – I don’t think it was the last good remark to say, but three times back there was your presentation from India, let’s address that you could run it even way below 10%, which of course is not really the outlook at this point in time. So I am just wondering while you talk about that underlying 10%, do you really think this is the long-term CapEx intensity of the telecoms operator or why you’re bringing this up?

Jon Fredrik Baksaas

I think you’re right in observing that. Things will happen three year time perspective and new things might pop up on the horizon, but given where we are, I think we still can keep it in that framework that has been presented here. And of course, we could run the group tomorrow, both on OpEx to sales and 8% CapEx to sales for a quarter, for a year, well in a half year. But the longer-term positioning beyond such a short-term horizon would probably erode our market positions pretty rapidly. And this is what is the dynamics of this industry is to find a reasonable balance on when do you take the new generations of networks, when do you launch the new G, the 4G in this respect. And I believe on the 3G in the Asian countries and in rough terms I would say that the maturity on Europe, seeing 4G is for sure there.

There is a question mark on 3G still in Asia, in some countries, but the way we look at it in Thailand, of course it’s a phenomenal development for 3G. We could have stayed out of it and chose not to go for it. But of course it would erode the position of dtac in a very, very short period of time. So the option of not doing the right things in a balanced way, short-term, long-term is our decisions basically.

Richard Olav Aa

Yeah, but there are also some very important fundamental changes and that is that the operators are sharing a lot more. I think if you look at Sweden, we are running these numbers, but that is unachievable because of the network sharing and also leveraging scale with partners and customer care and managed service, okay. You’re shifting some CapEx to OpEx, but you also see the productivity, again, down Sweden. India has taken this to the extreme where everything is shared and everything is done by partners.

But this is the way to go for the telecom industry, also in the future as you have to build this very fast networks that you have to share more on the spectrum, you have to share more on the network and also leverage your vendors, and these trends with continuous CapEx disciple, of course you will have hikes where you have to do investments, like you do for very good reasons in dtac now. But I probably would say that the underlying CapEx in a mobile operation with network sharing and good leverage with partners is below 10%.

Marianne Moe

Maybe we should also add that the network swaps we have done over the last years have made us more flexible when it comes to adding new technologies, new G’s than we were in the old days.

Jon Fredrik Baksaas

And can we seen also as a consequence of us being able to run more or less nominal OpEx development. If you haven’t done the swaps, we would probably be in the higher on OpEx quite easily.

Marianne Moe

Next question please?

Dominik Klarmann – HSBC Trinkaus & Burkhardt AG

Dominik Klarmann, HSBC. You’ve referred to the European telecoms package a couple of times and sounded quite negative on it. Could you just elaborate a bit on what makes you so skeptical and whether it’s just the rooming bit of it or other initiatives within the package? Thank you.

Jon Fredrik Baksaas

My point is that I think Europe basically has missed the chance of 4G and the commissioner question seems to be an agreement with the industrial associate, forgets about 4G and let’s take 5G instead. I mean that’s a too simple solution. 4G will play it’s role in Europe, no doubt about that. But Europe could have taken a more ambitious root on the clearing spectrum availability across 28 countries in a harmonious way rather than to leave it to 28 national regulatory boards to sort of evaluate timing, but its timing and terms.

And as a consequence of that, you get a much lower development to 4G and we see the benefits of 4G being at display in United States. We’ve got high expectations, the players have deployed big investments. They have access to harmonize 700 spectrum. AT&T cover basically the states with 25,000 base stations only, of course there you could start, you could question capacities on that. But still it has given the boost to the U.S. operators in such a way that Verizon basically is capable of doing what they have done in the deal making with Vodafone.

And in that respect, Europe has been lagging in investments and also then of course lagging in seeing the expectations attached to those investments. And in that respect, if you think about it, if Europe for the last three years basically have been running 4G at the same space, at the same speed as what has been done in United States.

Then CapEx might have been 12, 13, what would I know as opposed to 8, to 9. And 3 to 45 percentage points of difference with three years time in this industry, would probably have created a lot of innovation, would probably have created a lot of employment, would probably have put this industry a little bit back on being a bit aggressive on this future rather than having to run to Brussels and complying for Brussels which is focusing primarily on end user prices and the next €0.01 of termination rates to be cut.

And that’s the big difference, whether it’s an incentive friendly kind of regulatory package that’s noted, up against a consumer friendly package which are communicated. And this I think is the big difference, this is where I have had some energy on it.

Marianne Moe

Okay, then we have time for one last quick question and I believe it was Andrew Lee. I am sorry that’s all we have time for.

Jon Fredrik Baksaas

Last question.

Andrew J. Lee – Goldman Sachs International

I was actually just going to ask about the consolidation potentially in Denmark and Sweden, given you laid out your M&A but is there any reason that you couldn’t be or wouldn’t be the consolidator in either those markets and could you still definitely in Denmark for the long-run given your mobile only strategy and potentially that puts you at risk given TDC is pushing to convergence there?

Jon Fredrik Baksaas

I think Richard you had a pretty good package, that question was packaged pretty nicely in your presentation, so why don’t you take a second round on it?

Richard Olav Aa

I can give it a short time in Denmark, definitely, it would make sense to consolidate and same with Sweden, but more so in Denmark, where you have basically over capacity on every corner on spectrum, on networks, on shops and everything. But we also see that the Danish regulations have been very strict, I mean, we just tried to sell some small TV assets in Denmark a couple of years back and it was stopped by the regulator.

And also to make big synergies in a consolidation in Denmark, you probably would have to look to take the networks down from now it’s three networks, because we have the sharing with Telia and down to two, that is what the big moment. And that will make all the sense in the road, but will, our regulator approve it, I don’t know, may now I’ll push from Brazil to make the European telecom stronger and allow more consolidation, maybe that will help, but still I think these are very earlier days to see.

And then of course you also need some morbid to dance with, and that’s also not so easy when you look at the Danish puzzle.

Marianne Moe

And that concludes the Q&A session, and also the program here in the auditorium. Fredrik, would you like to say some words to as closing remarks.

Jon Fredrik Baksaas

Yeah, thank you for that. Thank you all of you for coming here this afternoon. I hope you take the opportunity to address some deep dives if you have with my colleagues outside. It’s our ambitions to continue and drive Telenor in this space. We have taken it into a pretty visible position in the industry at large and in particularly in Asia, we have great visibility. We feel that we have managed our overall sales through lot of challenging times in Asia. We know times like that might come again, and also we have to trust the capacities in the group to address them.

So two of my colleagues, our investor relations and others that has contributed to this presentation, thank you very much. You have been excellent audience, not too many disturbances by emplaces and that kind of stuff, but nonetheless it’s been a very good section from our perspective, so I hope you run from here and think well about Telenor in the continuation. Thank you.

Marianne Moe

Thank you, Richard and Fredrik. As I have indicated before, it’s not over yet. We now have the pleasure of inviting you to the breakout sections with management from Norway, dtac and Telenor Europe. But for those of you leaving now, I would like to thank you for attending our Capital Markets Day this year. Thank you.

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