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Executives

Jesper Wilgodt – IR

Johan Dennelind – CEO

Christian Luiga – CFO

Analysts

Stefan Gauffin – Nordea

Thomas Heath – Handelsbanken Capital Markets

James Britton – Nomura

Terence Tsui – Morgan Stanley

Maurice Patrick – Barclays Capital

Barry Zeitoune – Berenberg

Nick Lyall – UBS

Ulrich Rathe – Jefferies

Lena Osterberg – Carnegie

Jakob Bluestone – Credit Suisse

Keval Khiroya – Deutsche Bank

Dominik Klarmann – HSBC

Peter Nielsen – CAI Cheuvreux

TeliaSonera AB ORD (OTCPK:TLSNF) Q4 2013 Earnings Conference Call January 30, 2014 3:00 AM ET

Operator

Jesper Wilgodt

Welcome everyone to the presentation of TeliaSonera's Fourth Quarter Full Year Results for 2013. I'm Jesper Wilgodt of Investor Relations and with me today to present, I have our CEO, Johan Dennelind; and also CFO, Christian Luiga. After those presentations, we will have a question-and-answer session and we intend to close this within an hour. So by that I hand over to Johan, please.

Johan Dennelind

Thank you Jesper and welcome all even if you’re appear today than last time I understand those were busy morning in the reporting of the other companies. But welcome any way for you live and also for the people online. We will take you through some of the highlights and lowlights of the quarter before Christian will go through some of the more details on the numbers. If I want to summarize the fourth quarter at least then we if you look in organic local currency excluding acquisitions disposals. We’re flat on revenue and EBITDA actually. We see continued growth in Eurasia even if it's down somewhat, it's still 8% local organic growth with improved margins in Eurasia which is encouraging. We also see if you look one level below you see improving trend in the consumer mobile space in the Nordics which will go a bit more into detail. We continue to strength our corporate governance and compliance agenda across the group. We also as you know implemented a new operating model, announced new operating model to go live April 1st and the Board approved for recommendation today dividend of SEK 3 per share for the full year.

So those were the highlights. I will go through now a little bit more the details of some of the numbers. Reported down yes, but again in local organic pretty flat on net sales. We are up on CapEx both on absolute and in relation to sales mainly 4G and fiber coming through in many other countries. We then commit very hard to delivering an even better internet experience throughout our operations both in fiber and 4G and on the fiber side we are now at approximately 1.89 million fiber deployments across the group and what we see when we do fiber is that we increase also the loyalty for more of our services to our customers. So this is a way of sort of getting into the homes to strengthen the customer relationship. Also want to note that our international carrier having a good quarter but also strategically important now when we’re delivering even more data and internet traffic through our networks.

On the 4G side all of our European operations are live on 4G and we see great uptake and customer response to the speeds and the quality that we’re delivering. On the Eurasian side we have a couple of operations 4G, obviously the big market Kazakhstan we have not succeeded in getting 4G into Kcell [ph] and as you know we also wrote down some of that in January or in Q4 we announced earlier in January related to that but we’re still working hard to get our 4G licensed across our operations.

When it comes to the data and the internet traffic and to monetize this we talked about this in the past and we continue to monitor this closely. This is an indication that we’re still around 50% monetization of the increased data. Still heavy volume and demand on our services, 60% volume growth and around 30% data revenue uptake and then if you split around on the build revenue side we see that we’re growing now in Denmark, Spain, Norway which is encouraging.

If you don’t split it one in different way, consumer and enterprise, we see on the Nordic side consumer that we have a positive trend when it comes to the build revenue. So as we know the build revenues here are excluding the interconnect but then we have growth, an increasing growth on the consumer side. Very, very positive and Finland turned positive in Q4 which is additionally encouraging. On the B2B then however we are seeing a strong price pressure across our footprint and also on the build revenues we’re decreasing our footprints. So this is something that we have not talked much about in the past but this is very obvious when we break it up this way and to cumulate it a little bit there is strong improvement programs going on the B2B side across the group.

Quick look at Sweden, if you break it up the mobility broadband we are down on reported and organic in Sweden mainly related on to the B2B up slightly on the margins but a lot related to the interconnect and Chris then will go a bit more into the details on the Swedish profitability. On the broadband side same development I will say in terms of the traditional fixed, traditional voice revenues are declining but at the same time pretty good uptake on the fiber deployment and the IP traffic. So the balance is the challenge but it's according to expectations.

On Finland as I said promising sign across both the broadband and mobility especially mobility consumer where we by the way today or yesterday launched a new pricing plan according to our data pricing models trying to capitalize also better the data growth in Finland we will see how that goes. One more point on Finland is that the improved EBITDA margin is partly also lot to the cost initiatives that we had throughout last year.

Spain this year the Christmas campaign started a bit earlier and we invested quite heavily in the market to improve our position and to gain share. It's an increasingly competitive market in Spain both from the three big ones but also from the MVNOs. So our Q4 is growth in terms of a lot of equipment and devices slightly up on build revenues but also quite high subscriber acquisition cost in Q4 but we’re gaining share and we’re building a stronger position in Spain.

And Eurasia is of course still our growth engine around 8% on local currency with an improved margin up to almost 53% strongly driven by Kazashthan and Kcell [ph]. On the CapEx side slightly down but we’re investing as much as we can on the 4G, 3G and internet side.

A quick look at the data revenues that are now becoming visible from low levels but now increasing heavily. Data growth in Eurasia is to hold 40% and now accounts for about 13% of the revenues in the whole portfolio. So data increasingly important in Eurasia.

Couple of words in my sustainability agenda, we are including this more and more in our overall strategic agenda including it in our initiatives which we’re rolling out across the group and couple of examples there are our code of conducts which now completed about 90%. We’re strengthening the anti-corruption training and improving that framework. We have as you know also following the latest news streams as opted a freedom of expression policy which we announced last year and yesterday the Board also approved a new sponsorship policy to deal with a difficult environments that we’re in.

And as you also know there is an ongoing revenue of our transactions in Eurasia led by the Board and helped out by Norton Rose and Mannheimer Swartling. It's still ongoing but we are expected to close in this quarter leading up to the AGM early April. And a couple of words looking forward, we’re in the middle of our strategic review. The focus right now is to get back to winning in many of our markets but we have lost market share over the last couple of years strengthening the propositions and the offerings but also investing in the product and the networks to make sure that we stay competitive or increase our competitiveness. We have simplified and clarified our structure through the new operating model where we transfer more decision making locally and also merge fixed mobiles into one responsibility in order to address the consumer demand and the B2B demand which is much more converged and we’re operating according to.

We have a team [ph] also to revive innovation which is key to the future relevance and we have kind of slowed down there lately and now we’re trying to revive that and get back on commercializing some of the great ideas and the skills that we have in the company and needless to say rebuild reputation is a core part of our agenda integrated in every we do. Last year we’re taking steps in the right direction.

For next year or for this year rather 2014 we’re looking at a pretty flat development on revenue and EBITDA slightly up on the CapEx to support the growing demand for our internet services across the group and with that Christian I will hand over to you to take us through the numbers in more detail.

Christian Luiga

Thank you. Good morning everyone, Christian Luiga, CFO. I would like to start with summarizing the full year. We’re closing at full year not only a quarter and then we are meeting the outlook, we gave in the beginning of the year with flat revenue, the increase in the EBITDA of 1.7% in local currencies and increased margin and EPS is quite a lock down but that has it's natural courses in the onetime effects and the tax and the currency effects. Over the past years we have had a declining growth rate as you have noted and we have then been able to balance this quite well on the cost side. So we have a good balance between revenues and cost which has been important throughout all years.

The main reason for this is the cost efficiency program that we have been running and this started in 2012 October. We told you that we would cut cost OpEx excluding Spain with SEK 2 billion and that would also affect 2000 employees in TeliaSonera. Throughout 2013 we have actually made over 2000 employees redundant so therefore the redundancy program is closed. The cost for this program became less than we expected at 1.2 billion. We will continue to drive cost on other types throughout 2014 and we still expect to meet our original targets.

The margin has gone down in the last quarter compared to last year. There is a couple of effects, Johan talked about Spain. Spain had a quite high sat [ph] cost in quarter four compared to last year. We also have a slight decrease in mobility Sweden. Mobility Sweden have two main effects on its profitability one is the sales that we talked about which has one time it's effects more of sales character last year on delayed big large customer count but also a declining overall B2B build revenue trend. On top of that the variable pay in quarter four this year was higher than last year.

Overall otherwise it was quite flat profitability in Sweden. On top of this we have four storms in Sweden this quarter in quarter four and we also have some fixed assets that we’ve been writing down. There is not non-recurring.

Year-on-year we did increase 0.5 percentage point on 12 month rolling. Currency plays a higher profitability level than the group on average. It has a bigger impact on the EBITDA than it has on the revenue side.

We have talked about the interconnect and I just want to visualize the impact from it not only on the mobility side which is 3.5% but also in the group side, it's 1.7 percentage point on the group level revenue just from the interconnect effects in mobility. These have a much less effect on the profitability as you know and you also know probably that it will be a less impact in 2014.

Encouraging is to see the B2C sales in the broadband Sweden, it's going up and this quarter it's plus a couple of percent and 2/3rds of that comes from the quite aggressive fiber rollout in Sweden but we have one time charges. We had one all time high fiber roll out in Sweden this quarter of 12,000 single dwelling units installed and the other part is hardware sales where actually the tablets was the Christmas present of the year as you know and that also boasted revenues somewhat. But more importantly the price increases we have come with on TV and fixed telephone you have started to get some impact in quarter four. It still hasn’t given the full effect. In quarter one it will slowly come into full effect not from the beginning.

We have seen change in CapEx mix, we have also talked about that the Eurasia should go down and more stabilizing revenue growth together with also quite heavy build out in the previous years, takes it down in percentage of sales a little bit. Meanwhile the 4G and fiber investments are increasing between 2012 and 2014 we will double the investment and money in 4G and in fiber.

The fiber investment itself increases over 45% this year. The number we saw on the picture before from Johan was that we had 1.8 million fiber installments right now, 645,000 of those are expected to go up next year and the reason is simply fiber and 4G. We declared in May this year that we would change our strategy on the coverage side in all Nordic markets and also in Baltics and the main effect on the roll out will come next year and the pace we have in fiber is increasing every day so we expect it to also increase next year.

Cash flow is healthy, it's down compared to last year but I would say we’re above our own expectations in quarter four. If you remember in quarter three we told you that we would expect a low cash flow in quarter four due to payments from consumers coming in the third quarter instead of the fourth quarter depending on when you pay on last day of the month or the first day.

The next part in the quarter but the pressure and the work we have had on working capital gives effect. More people internally think about when we pay our vendors and not only that we should pay our vendors and that has an impact in the first year we have had this really big effect from cash flow on that, on top of that we have good tax situation and that will also change next year. On the full year we’re of course very satisfied with going from 12 billion to 14.4 billion which is up 20% on cash flow and it's just very good.

We have therefore a solid net debt position of 55 billion going into the year. The net debt to EBITDA is within the lower part of our range 1.5 to 2. We will have a dividend coming, we have refinancing of 8 billion coming in the first quarter but we feel quite comfortable for this and we have a healthy liquidity position going into this quarter than this year.

Taxes and the non-recurring we announced on the 16th of January and I don’t I’m not going to go into them in detail right now but the tax effects I just want to point out you tend to forget about them, last year we had actually a decrease in the Swedish tax and therefore we got a positive effect on tax and this year we had a decrease in Finish tax but we had a negative effect on that. It's not so easy to understand why but we have quite a little deferred tax assets in Finland and therefore we had a negative effect this year. And the total impact was actually about 1.8 billion on the tax line. So it has a significant impact.

Finally summary, revenues and EBITDA flat in the quarter. Efficiency measures are on track, net debt EBITDA in a solid position going into 2014 and we propose an increase of 5.6% in dividend to SEK 3. Thank you.

Johan Dennelind

All right. Thank you Christian. Time to open up for some questions and I think we will stick to traditional start with (indiscernible) and maybe we should over here with Eric [ph]. We have a microphone.

Question-and-Answer Session

Unidentified Analyst

I was just wondering about further about the B2B and B2C market in Sweden mobility. Could you help us understand that diverging trends and to what extent they are also linked to subscriber growth.

Johan Dennelind

Generally speaking the B2B segments across the board as I said we’re facing competition but also heavy price erosions on core services. We see that we’re overly exposed in the large enterprise public sector where the price pressure is even stronger than in the SME and Soho sector but as we speak I think we’re getting more and more into the right position in these various segments but it is still in a decline mainly related to the price erosion on the larger companies. We’re we believe on that side maintaining market share but probably slightly softer on the market share in the lower segments. On the revenue split?

Christian Luiga

Around 50-50.

Unidentified Analyst

Is this just in Sweden or generally?

Johan Dennelind

It's mainly Finland and Sweden.

Stefan Gauffin – Nordea

Hello Stefan Gauffin with Nordea. I would like to focus on Spain. We have seen competition increasing this year, you had fairly low subscriber intake at least if you compare to last year and we have also seen service revenue growth turning negative and despite weaker intake we see that the underlying margin it was 2.8% in Q4 at least having agreement with Telefonica and that you will see some positive impacts on EBITDA from that next year. Can you just comment on how much we should expect from that and finally the Former CEO tried to sell the Spanish operations just wondering Johan looks at that if that is to be part of the core operations of TeliaSonera or if you’re looking for an exit. Thank you.

Johan Dennelind

So as I said in my introduction we took a stance that being in Spain committing to Española’s we need to grow share because we’re still subscale and so we have invested in the market this quarter and the Christmas campaign came earlier we started the Christmas campaign earlier and there is a couple of factors driving this fact. The subscriber acquisition cost higher in the quarter partly because there is higher gross adds than before so we’re taking share. We think at least we’re net winners in the porting game but we also think we’re gaining share overall. Secondly the handsets are becoming more expensive as the consumer base that we have are moving up to smartphones so the (indiscernible) for the smartphones since even greater subsidy for the smartphone is increasing and then also we have invested more in marketing during Q4. So those three together impact the EBITDA significantly in Q4 from quite low level so that’s why we have such big impact on the margins but you’re right underlying 2.8%.

And we’re in Spain we’re investing in Spain to create value in Spain so that’s the answer on the last question and on the tower of course we haven't moved over all the towers yet, so we will have more onetime effects from the transfer to Abertis but we also have an impact on COGS it will actually have a positive impact on COGS in the next year. How much do we say that?

Christian Luiga

An estimate of around 10% definitely we will achieve when it's fully implemented.

Johan Dennelind

But I wouldn’t expect that in the first until after the first half year when we have transferred the towers.

Jesper Wilgodt

All right any further questions here from the floor? Thomas?

Thomas Heath – Handelsbanken Capital Markets

Thank you. Thomas Heath here with Handelsbanken Capital Markets. Few questions on the increased CapEx you mentioned fiber and you mentioned 4G is there any particular geographical focus, be curious to know. Secondly, on EU roaming there has been a lot of noise during this year and there are some proposals maybe some delays, what’s your best guess how this will play out? Thirdly you mentioned increasing data volumes in international career, is there any hope that we could see some margin up lift if that becomes a more scarce asset going forward? Thank you.

Johan Dennelind

On the CapEx side generally speaking we are investing more in 4G and fiber across the board. As you know we recently secured importing spectrum both in Finland and Norway so those are being increased in importance and also in the CapEx over the coming period but we’re also in the middle of Sweden which is a strong commitment to the internet boon that we see across the board. On the EU roaming side nothing new really, we continue our work and our monitoring and our lobbying to make sure that we are heard as an industry and as a company. We do it together; we do it along but nothing new. On the data volumes again on the retail side we’re seeing a conversion of 50% which is okay I would say but the backbone side and on the fiber side the carrier improvement in Q4 is mainly driven by voice minutes still but we’re improving our position. I think the second or the largest IP carrier which now has scale enough to good negotiations, good scale effect for our retail operations. So that’s very important. You want to comment on the capability Christian specifically for?

Christian Luiga

No I think I mean all Nordics and Estonia as well we’re going to follow-up and the TT-Netvaerket in them is also going to continue to be best in class 4G for next year.

Jesper Wilgodt

Should we open up for some questions from the telephone line please?

Operator

(Operator Instructions). The first one comes from James Britton. Please ask your question.

James Britton – Nomura

I have got two questions please. Firstly on the slum in business trends can you just clarify whether or not there is any sort of cannibalization issues here as business customers now move over the new pricing model on mobile to the new flat rate model. Is this an issue for business is what it has been for consumer not too much in Sweden but across the European sector in general? And then secondly a question on the revenue guidance. I’m interested to sort of see what level of conservative assumptions are incorporated here. You mentioned the interconnect [ph] drag which uses, you got improving consumer trends in the Nordics. So what are the worsening impacts which will hold you back from positive growth? Are you expecting actually a step down in enterprise? Thanks.

Johan Dennelind

Thank you. On the B2B side I’m not as clear on the cannibalization and not the same risk I would say but that is something we’re now monitoring. We’re launching various propositions across the board also to get the monetization going on the enterprise segments but not as clear as before on the cannibalization we had in consumer and then I don’t like the word cannibalization by the way I think it's about simulation in the new trend than in the new way of using our services and on the revenue guidance I mean there are certain areas which are under the heavy pressure and mainly in the B2B space again where we see positive trends on the consumer side and still growth in Eurasia but again if you take it on net sales level you still have the interconnect effect, you still have currency effects, you still have the currency effects to get into consideration. Anything to add on the revenue mix the next guidance Christian?

Christian Luiga

No I think you see the upsides in a correct way but on the fourth quarter compared to the full year on Eurasia you see also the trend that it will be a little bit slower because Uzbekistan had a quite significant impact this year. So that you’ve to consider as well.

Jesper Wilgodt

All right next question please.

Operator

Your next question comes from Terence Tsui. Please ask your question.

Terence Tsui – Morgan Stanley

I have got a couple of questions, please. Just firstly on the efficiency measures you mentioned in the redundancy programs now over, so maybe can you talk about some of the other cost areas that you are focusing on to meet some of your cost based targets for 2014? Secondly just on Eurasia I was wondering if you can give us a bit of an update on MCR [ph] regulation in Kazakhstan whether you see any risks of asymmetric MCRs [ph] and being implemented and finally just very quickly given the events in emerging markets maybe you can just remind us of any cash repatriation issues if you’ve any in any of your emerging markets. Thank you.

Christian Luiga

Well let’s start with the cost split. We will continue to focus where we have also started in the IT area and the structural cost area. It also comes back to marketing and we have done efficiency program in reducing marketing but not on the volume but the spend itself by doing better purchasing. For example we combined broadband and mobility marketing departments in Sweden last year and that has given some efficiency effects, that kind of structural changes will give continuous effect.

The personnel reduction will give some extra impact next year as well because not everyone went home 1st of January, 2013 of course. The Kazakhstan position maybe…

Johan Dennelind

Yeah there are no news on that one I mean negotiated process that are being negotiated between the operators so further cut in the beginning of this year from 13 to 11, around 15% which has been agreed between the operators. We will see about the regulator going forward.

Terence Tsui – Morgan Stanley

And the final question the repatriation of cash, yes. In Uzbekistan we have had the problems since 1.5 year ago and we have no signs of how we’re going to handle the repatriation of cash from Uzbekistan and so that is an issue. I think we have flagged that and talked about that earlier. In the other countries we have no real issues with conversion of cash between dollar and the local currency. In the past we have had a little bit issues with the government on getting the stamp on the dividend but to pay back our loans and to pay the interest and pay in and out money and we actually have all the money in dollar in the country that is not an issue. So it's more to get the sense from the bank like in the 70s in Sweden. So that’s the position right now otherwise we don’t have any issues at all in Eurasia.

Jesper Wilgodt

All right, shall we move on to the next question please?

Operator

Your next question comes from the line of Maurice Patrick. Please ask your question.

Maurice Patrick – Barclays Capital

This is Maurice from Barclays. Sorry to get back on the B2B versus B2C area but just curious to get your signs and thoughts on the B2B areas the extent to which the pressure is structural also do you think it's temporary or permanent? Is it just competition or is it corporates and government is able to spend less through efficiencies. Just walk us through perhaps some of the more detailed trends and that will be very helpful. Thank you.

Johan Dennelind

Yeah so just coming back to a little what I mentioned initially then, we are quite overrepresented, strong market share, strong position when it comes to the larger enterprise, corporates, public sector. They are getting increasingly good in negotiation and procurement which is good but it also puts, they are procuring in a different way and we need to move ahead and be able to deal with that in a better and more holistic way so convergence on consumer is also converge, happening convergence on enterprise where they want to be able to procure the full communications with the services and that’s provinces where we have Cygate who is doing really well in packaging our enterprise solutions but that’s a very tough market, strong competition but mainly it's related to price erosion in renegotiating deals.

Maurice Patrick – Barclays Capital

Fixed on mobile, should we not think about them as representing more in enterprise space?

Johan Dennelind

No you should think about them as a converged proposition, converged services where they are more and more procuring the full range of services from us and that’s also when you’re in negotiations for the full portfolio services we need to strength our capacity and capabilities.

Jesper Wilgodt

Okay next question please.

Operator

Your next question comes from Barry Zeitoune. Please ask your question.

Barry Zeitoune – Berenberg

Just a few general questions please. In terms of margins it's interesting that you’ve got another billion (indiscernible) cost cutting to come through, yet you’re still guiding for flat margins and that’s despite Eurasia being a higher margin region and continuing to grow relative to the rest of the group. So where is it that you expect the margin pressure to come from in 2014? And then in terms of B2C and versus B2B again, can you give us some idea of the relative margin differences between the two mobile businesses, B2C and B2B for the group and how those diverging trends are likely to impact your margins over the coming quarters and indeed maybe years as well and my last question is just whether you can give it a longer term stare on how we should expect CapEx to develop because it's obviously going to be going up in 2014 as you invest more in fiber and 4G. Should we think of that as more of an exceptional year and that we can expect to more normalize kind of 13%-14% CapEx to sales ratio after that? Or should we expect CapEx to sales to remain higher at kind of 14%-15% level for the longer term? Thank you.

Johan Dennelind

As you know we’re only guiding for 2014 and we’re upping our guidance for CapEx 2014 mainly related to 4G and fiber as we also said in Norway, Sweden, Finland where we recently have initiated those 4G and fiber programs. So that’s what we say about 2014 and then we will have to come back on the future further down the road.

Christian Luiga

And let me talk a little bit about margin, we know we have a margin pressure on cost of goods sold and not only even if we drive OpEx we have a pressure in the broadband side not at least, we talked about that before. And increase in revenue comes from a low margin business mean while the decrease comes from a high margin business. The other factor is that we gave our OpEx excluding Spain and that also have a lower margin than the rest of the group and as it increases it will also have an impact on the margin. That’s the two factors I would like to point out and on the B2B, B2C side we do not give any numbers of the margins.

Jesper Wilgodt

All right. Should we see if there are any questions here further on the floor? We have one.

Unidentified Analyst

(Indiscernible) gave a kind of indication or not guidance maybe but indication a few years ago that she hoped that fixed lines that were broadband services should flatten out in 2015. How do you look on that now? I mean I guess she was hoping that fiber would grow more than the drop in the fixed line side and how do you look at that today?

Johan Dennelind

Well what we say about this year we’re not breaking that down in detail but as Christian pointed out Q4 has composite signs on the B2C side in Sweden for broadband. So whether that’s sustainable or not we will see but there are some good trends on the fixed telephone that we have worked hard with to stay relevant in that space and also had some price increases recently.

Unidentified Analyst

Just a question on Spain and the sort of strategy in Spain because if you look only on Q4 it seems like you want to defend your market share basically at any cost. How should we look at Spain?

Johan Dennelind

Well I think we need to look at Spain if you’re in Spain which we’re then we need to make sure that we take a long term view on what we do in the market and then it's still about growth to get to a small sustainable level where profitability can’t kick in to our expectations and that’s what we’re doing. We’re investing in the market to gain share which we’re doing but it comes to the higher which we don’t know [ph].

Jesper Wilgodt

Maybe we should move over to the telephone line, I guess there are more questions over there. Operator?

Operator

Your next question comes from Nick Lyall. Please ask your question.

Nick Lyall – UBS

This is Nick, UBS. Can I ask two please? On the you said that the Swedish weakness in due to B2B price erosion but churn is up heavily in the fourth quarter as well. So do we need to conclude the B2C is maybe feeling a pressure on churn and competition and not on the revenue side, could you just reassure as the B2C isn't seeing churn rising. And on the quad play comment you mentioned about fixed and mobile unifying from a group level. Are there any markets where you would focus on quad play obviously Spain but any others and then final one was just Turkey, you’ve not mentioned anything about the Capital Markets Board guys taking seats on the Board but if you’ve spotted any differences in governance any more hopeful of a dividend return could you just tell us about any developments in Turkey please?

Johan Dennelind

I will start with the last one again, CMB in Turkey. As you know the Board is now comprising members from Capital Markets Board but also two independent members that we actually nominated and they were elected to the Board. There is proper governance in Turkcell still in that sense that we have a Board. We regularly meet with the Chairman of Turkcell and voice our opinion as a large shareholder. So in that sense I feel that we’re in a good situation influencing as much as we can but obviously it's not a substantial position where we’re very clear on our expectations what we need to see happening and getting back to proper corporate governance and on that side getting back to proper corporate governance is complicated. There are both legal processes ongoing but there was a relationship the management and discussions ongoing to greater extent now than in the past. So that’s what I can say on Turkey. On the quad play question well obviously where we can and where we need to stay relevant through customers we will entry into a converged proposition but obviously we don’t have that everywhere. In Spain for instance we have a partnership with Telefonica which is starting to at least be noticed even if it's small but whether we take that further to quad play or not that remains to be seen. We’re happy to say though that in Sweden the consumers are increasingly demanding our TV services for instance and we’re happy to see that.

On the B2C Sweden, yes there is a high churn in Q4 and it's mainly related to prepaid actually growth on postpaid attracted by our new price plan on (indiscernible) which is called where we have the text and voice unlimited and then you buy your data plans which is very encouraging to see.

Jesper Wilgodt

All right. Thank you. Next question please.

Operator

Your next question comes from Ulrich Rathe. Please ask your question.

Ulrich Rathe – Jefferies

I have just three questions. My first one is on working capital I mean there has been a sort of pretty good development, the fourth quarter you mentioned that in your presentation and understand this sort of really an asset behind, it is not just the timing issue as I understand it. Could you sort of indicate how much further that could reach in 2014, I’m interested in some guidance or indications of an ongoing working capital and improvement. Second question is coming back to some an earlier comment on the interconnect. If I turn this statement about the interconnect headwind reducing next year, one can sort of turn the argument around and simply say well, I mean on an underlying basis you actually took back [ph] the revenue trend in the group actually it will be worse in ’14 and ’13. Is this sort of the way you think about this really or is this sort of coming back to another question, is this a degree of conservatism backed into the guidance and my last one is sort of the big picture strategy. Johan when you came in I think you pointed in June and came in September and there are things that you’ve changed notably in your structure although I note here that’s been under the eagle. I mean the company was run as I understand it on a country based structure it's not, it has been switched back to a product based structure now switching back to a country based structure. So it's maybe not necessarily sort of the decisive force in restarting momentum there. I’m just wondering what are your thoughts on the adjustments to the big picture strategy that (indiscernible) needs at this point in time and also whether what you have announced so far talking about the price already your final word on it or whether there will be sort of something of a pretty major announcement maybe later this quarter or later in the year where you really sort of set out your long term vision of where you want to take the company in the next 3 to 5 years. Thank you.

Johan Dennelind

When it comes to the strategic review which I said is ongoing then implies that we’re not done yet and we will get back on what that means but meanwhile we’re doing the changes that I feel is necessary in order to address the shortcomings and one of the shortcomings that we have seen is our competiveness in certain markets and some of the aspect lies in the fact that we’re not addressing our full potential with our full range of services under one clear accountability and that’s happening with the new structure and with the new operating model.

So, we will get back to you on as we go along with the updates on our strategic framework. When it comes to the working capital I think Christian has the perfect answer for you there.

Christian Luiga

Well as you see I’m always a little bit hesitant to give you too much guidance on the working capital going forward and when you’ve a program like this, this year starting it, it always have a onetime push up on the working capital. Meanwhile we do introduce for example a handset of balance sheet where we get that finance of balance sheet and that helps our cash flow and we will continue to do elements like that into our normal practice and not just do onetime things like moving vendors to the other side of the quarter and I believe still that we have some room for improvements however I don’t want to give any guidance for next year on the working capital at this point but handsets is a typical thing where we have worked and we also have worked with on the CapEx side with our vendors of making sure we pay when we feel we have received proper goods rather than just according to plan. Do you want make any comment on how we see the topline development?

Johan Dennelind

Well not much more than I said, well there are some areas they are under pressure, there we see encouraging signs but we still have headwinds of the main drivers so to say FX, interconnect buying let’s say that’s a positive signs is consumer, build revenues, data plans the monetization of that, the challenges are in the B2B space which we have talked extensively about today. We have the positives of Eurasia still growing but less so than before and still with the heavy FX exposure. So all in all our best judgment for the moment is flat.

Ulrich Rathe – Jefferies

Can you just follow-up on area is there any sort of sense of a timeline when you might come back to the market and sort of discuss and layout sort of your bigger picture plan. Is it Q1 story still? Is it a Q1 sort of announcement maybe?

Johan Dennelind

We will talk about it as we go along, we haven't set a firm deadline for such discussions but we’re improving as we go along. We’re changing as we go along. So if there is anything that comes out a big thing that we will obviously talk about it.

Jesper Wilgodt

Okay we have couple of questions here from the floor.

Lena Osterberg – Carnegie

Thank you. Lena Osterberg from Carnegie. Just wondering a little bit about the move now that you’ve announced to country based structure and I understand it, it brings you closer to the market you can be faster in new products and service that you launched tailored to each market but also from sort of group synergies point of view? Doesn’t it reduce the scope to implement cost savings and to get our synergies?

Johan Dennelind

What is very important to mention here and thank you for point that out, the local accountability doesn’t mean local autonomy. So we’re also strengthening the group functions called Good Commercial Group Technology where we strive for excellence in supporting the local countries but they also have a synergy responsibility because in the current model we already have areas with strong synergies. In the mobile space for instance we have a common operations for some of the Nordic countries and that’s not going to be automatically dissolved rather keeping it and strengthening is part of the model. So it's just clearer, interface is clear accountability, stronger focus on key strategic areas including synergies from group.

Jesper Wilgodt

We have one more here.

Thomas Heath – Handelsbanken

Thank you. Thomas Heath again, few more if you don’t mind. Firstly on the longer term in Eurasia when growth tilts to data. Do you see a risk that you’ve to increase smartphone penetration and drive handset subsidies pressuring margins? And then more specific question on Norway. Norway is a bit in flux after the drama around the licenses in December. Just wondering whether TeliaSonera would consider a network share with Tele2 on a similar way that Tele2 did with Telia in Sweden or if that’s completely ruled out by the experiences in Sweden? Thank you.

Johan Dennelind

Emerging markets first, naturally these markets are not used to subsidies which is good but as we want people to use smartphones in these countries we’re increasing the simulation somewhat but here we have a chance to control it from the beginning rather than being in at the full subsidy market. So I think we’re comfortable that we can control it within our own expectation. So it's not a default situation and I rightly pointed out the data growth is extremely important for these markets I rather you see increased CapEx to support demand.

Norway we’re very happy that we secured the spectrum that we need and we’re now full-steam ahead in building out stretching out our both depth and breadth of the coverage and quality to challenge Telenor in Norway and we have energized team in place. So whether we will look at those business develop opportunities coming up we always do.

Jesper Wilgodt

Thank you. Should we move on to conference call again?

Operator

Your next question comes from the line of Jakob Bluestone. Please ask your question.

Jakob Bluestone – Credit Suisse

I have two questions firstly just getting back to your point on pressure in the B2B segment. I mean it sounds like that it is sort of a broader issue in terms of repricing the back book of your customers there. Could you may be give us a sense of what proportion of your customer is in the B2B base are up for renewal this year? Just give us a sense of how long do you think this process of moving customers to cheaper plans will take? And then secondly I mean looking at your service revenue growth in Sweden, to sometimes it's ARPU. It's gone negative now. I mean over what timeframe do you think you can get overall growth in Sweden back into positive territory? Thanks.

Johan Dennelind

Well there is somewhat connected those two questions but if you start with the B2B it's not as easy to say, there are certain plans that we’re converging the B2B customers to. It's rather driven mainly from the renegotiations of bigger structural offerings to these corporates but I think and we’re not going to go into any details what’s the plan for each and every country on the renegotiation well Top 4 negotiation et cetera. I think the comfort giving you there is there is being a B2B improvement program ongoing for quite some time so this is nothing new. It's just that we now speak about it more openly to you but certainly we will have high attention on improving our propositions in this segment.

When you then move into Sweden as we have talked about today it's very clear that we have a consumer underlying growth in the important segment and that I think is a key takeaway but again the B2B is not so that’s why you have a pressure on the topline for Sweden so those B2B questions are kind of connected for the two but we will get back with updates as we go along.

Jesper Wilgodt

Okay next question please.

Operator

Your next question comes from Keval Khiroya. Please ask your question.

Keval Khiroya – Deutsche Bank

I’ve got three questions please. First on Spain, can you tell us exactly how many convergence customers you now have? And obviously your competitor pushing ahead fairly quickly with that product and second on Eurasia you talked about it briefly but could you tell us exactly how much in dividends you repatriated during 2013 and number three on Eurasia again, when it comes Uzbekistan are you expecting a new entrant this year and when Nepal is in market structure changing given from understanding the regional players have been given nation-wide licenses as well.

Johan Dennelind

Yeah starting from the bottom, Uzbekistan and Nepal we do expect competitive landscape to change. We have said in the Q3 report we’re saying it again. We don’t think that’s a two player market neither of those. We haven't seen any entrance so far. We expect them to come during the year and that’s also included in our guidance. When it comes to Eurasia dividend, Christian?

Christian Luiga

We will have to come back on that.

Johan Dennelind

We will have to come back on that and Spain convergence and as I said you’re starting to gain some attention and attraction, numbers are small.

Jesper Wilgodt

Good, next question please.

Operator

Your next question comes from Dominik Klarmann. Please ask your question.

Dominik Klarmann – HSBC

Just two questions left, on Kazakhstan I mean you stay on the potential new mobile entrant and then on the fiber uptake in Sweden in the past. I guess the old management has talked about bottle-necks to satisfy the demand there just wondering if that’s still the case that there is pent up demand in whether we can expect an acceleration of the fiber uptake during this year? Thank you.

Johan Dennelind

The fiber side in Sweden there is a high demand than we can supply but we also as Christian have access to mostly dwelling units, i.e. multi-resident apartments where we haven't got full penetration so that’s an upsale opportunity but we do expect a continuation of high investments in fiber in Sweden and we also on the same topic say that we are investing and acquiring local networks from cities in Sweden. So that’s part of the strategy. We also acquired by the way a come up in Sweden in Q4 to strengthen our propositions to the consumers in these fiber places.

In Kazakhstan we don’t see that happening unless the 4G license is changed the landscape and there is one 4G license in Kazakhstan which is still being used on a small scale.

Jesper Wilgodt

Okay, thank you. Couple of questions, still. Okay take next one. Operator?

Operator

The next question comes from the line of Peter Nielsen. Please ask your question.

Peter Nielsen – CAI Cheuvreux

Thank you. You discussed all the major issues, just a couple of specifics please. Finland, you are seeing finally improved trends (indiscernible). Do you believe you’ve turned the corner here now and that we’re moving towards overall revenue growth and also improve margins going forward and just secondly and finally, you’ve previously given us indications for the expected trade and paid taxes et cetera. Is that something which Christian is prepared to provide for the coming year? Thank you.

Johan Dennelind

B2C Finland has turned corner I would say, the momentum has been good, it's building up during Q3, Q4. Whether it's sustainable or not I hope we haven't kind of suffocated the business with too much savings on the marketing side that remains to be seen because as you have seen the OpEx savings are quite big and the margin improvement is quite strong in Finland but we believe we have the right place at least now in the consumer space.

Christian Luiga

And tax we expect a 20% tax rate and 80% payout ratio going forward.

Jesper Wilgodt

And I think we’ve time for one final question.

Operator

Your next question comes from (indiscernible). Please ask you question.

Unidentified Analyst

I just want to clarify what you expect for Spain, you said now you had investment strategy in terms of market share. So should we expect this kind of strategy for let’s say the coming quarters or perhaps years.

Johan Dennelind

Well I think I just going to be repeating what I said, we’re not going into details on Spain specifically for 2014. I’m commenting on Q4 in ’13. I said we took an approach where we want to invest in that important Christmas campaign period which started earlier and actually ran in as you know Spain has a Christmas which is later into January. We maintain that investment over the holiday season now we’re revaluating the impact of this and the quality of the consumers that we have attracted to see what we will go on from here but we’re in Spain and investing in market share.

Jesper Wilgodt

All right I think that’s one hour. So thank you everyone for coming here and listening. Thank you.

Johan Dennelind

Thank you very much.

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