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Executives

Andreas Ekstrom - Head of IR

Lars Nyberg - President and CEO

Per-Arne Blomquist - EVP and CFO

Analysts

Peter-Kurt Nielsen - Cheuvreux London

Alex Duval - Goldman Sachs

David Wright - Deutsche Bank

Ulrich Rathe - Societe Generale

Andrew Lee - Citi

Maurice Patrick - Barclays Capital

TeliaSonera AB (OTCPK:TLSNF) Interim Report April 20, 2010 1:15 PM ET

Andreas Ekstrom

As to start, welcome everyone. My name is Andreas Ekstrom, Head of Investor Relations. With me today, I have our President and CEO, Mr. Lars Nyberg, and our Executive Vise President and CFO, Mr. Per-Arne Blomquist.

Before we start the presentation, let me just remind you that the presentation is available at our web page teliasonera.com and after the presentation by Lars and Per-Arne, we will also take your questions both from the floor and from the telephone conference.

With that I will leave the word to Lars.

Lars Nyberg

Thank you, Andreas. Good morning and welcome everybody. If you think I’m a bit stiff it’s because I’ve pain in my back and if make noises, it’s because of the pain in my back not the numbers.

I think we had again a very strong quarter, which I’m obviously very pleased with. Last year you remember when we talk growth we talk always organic in local currency, the cost of fluctuation which is really strong. Last year, in 2009, we had flat revenue growth which probably was one of the best results among the telecom operators in Europe.

Now, this quarter we just think is the most important result of the quarter is the growth, local organic growth of 2.5% which I’m extremely pleased with. You can see that we also improved our EBITDA margin and we’ve been doing that for several quarters. Obviously, if we are little bit helped by the growth, but we still benefit from the cost savings in ’08 and ’09 when we compare to first quarter of last year.

Talking about growth, this is the curve that you can see, the blue curve shows us the organic growth, I mean we were flat up and down little bit in the four quarters of last year and now we are clearly up to the 2.5%. What drives that? What is that drives the growth in the first quarter? I’m extremely pleased with our results in mobility in Sweden.

To be the number one by a mile with market shares over 40% and then growing the quarter by 9%, that’s pretty good I think, I did that, I’m very happy with that and obviously you can see that it is mainly the data that is growing, not voice and also it’s not only consumer driven. We made, you might not remember this, but two and half years ago, one of the priorities we had was to improve our business-to-business sales organization.

I think we are now starting to see some signs at least in Sweden of that work. So the growth of 9% is coming not only from the consumer side, but also from the business-to-business side. It’s not only Sweden that’s growing mobility, as you can see after having declines for a long time in Finland and Denmark, we are now growing in Finland and Denmark as well in the first quarter, only Norway is still down.

In the Baltic’s, we’ve had a challenge and we continue to have a challenge, we see the numbers are in terms of revenue down continues to be down, we had hoped during last year or may be the turn around would come somewhere around this time, it hasn’t arrived yet.

As we said in the fourth quarter, this is a challenge. I think the management teams in those countries have done a super job, I’ve said this before; they continue to be able to maintain the margin although the revenue is down 20% or something like that.

Our growth engine, maybe I have to stop saying, this is the only growth engine when Sweden mobility grows 9% that’s also growth engine actually, but the growth engine Eurasia has now in three quarters improved their growth rate. If you remember in the third quarter of last year, we grew 3.6%; in the fourth quarter we grew 7%; and now we grew 12.7%.

It’s well spread among all the countries the most important I mean those of you who follow us in detail you know that Kazakhstan is a heavy weight country in Eurasia, and you can see Kazakhstan growing more than 10% that’s very important. Obviously our new countries Uzbekistan, Tajikistan and Nepal are growing like 50% to 35%.

In Eurasia, we are also integrating Eurasia much more into TeliaSonera it’s a work that has been going on for two years. It’s really now a part of TeliaSonera in processes, in values, in priorities, and also to integrate Eurasia itself, we started to rebranding, because we had all different kinds of brands in Eurasia.

You can see the logo with the purple stone and we use the word Kcell for Kazakhstan, the Geocell – Tcell for Tajikistan and Ncell for Nepal, both Nepal it was called Spice Nepal and we want our customers of Eurasia when they’re travel in these countries to recognize that these countries belong together and they belong to TeliaSonera. We will continue, all the countries will have the same logo and the same construction of the names.

The only surprise I think maybe in the numbers is the CapEx being quite much lower than I think most people expected. Couple of reasons for that, we took a deliberate decision for Eurasia to wait with investment in the Eurasia, because we wanted to be absolutely sure, that we would get the growth. So that’s the biggest deviation from our plans, obviously now we have the growth, so we feel much more comfortable to spend that money and as I said, after the fourth quarter, I do believe it’s time for TeliaSonera to invest more.

We will maintain, as you will see soon, we will maintain the CapEx being just shy of 15%, whether we get that there in the end we’ll see, but I’m clearly prepared to go there. And other reason is that there are fiber rollout, with the weather we’ve had in the first quarter it’s been somewhat slower than we anticipated and we’ve also been negotiating with some suppliers. So, I’m not unhappy that it’s lower in the first quarter and I’m not unhappy, but I’m not happy either, so we really need to see the investment pickup now in the coming three quarters.

This is old news. This is something as good news. We maintain the outlook for 2010. Obviously, I feel more comfortable with the first point somewhat higher, net sales being somewhat higher, I said that standing here in February, and obviously standing here now, I feel more comfortable with that statement and the rest is the same as before.

Okay, Per-Arne, you can go through some numbers in details.

Per-Arne Blomquist

Thank you very much. As Lars said, it was a solid quarter and we have been accused to be a bit boring. I don’t have a problem to be boring if that’s what is to be boring and top line growth, you can see here 2.5% in organic growth, you could also see the effect, the FX effect is close to 7% and I think that has been very good that we have a certain look that this was a last year, so we could see what is sort of down the line business doing.

When it comes to EBITDA, it was also up close to 9% in organic, local organic. EPS up with 6%, solid cash flow was up with 3.5%, but what I think perhaps is even more [enclosing] is that we now come closer to 150 million subscribers in our company and we have close to 50 million in our consolidated entities and more then 100 million subscribers in our associates. When we look at the last quarter here, our consolidated company has actually increased more 2.3 million subscribers compared to 1.3 in the (inaudible) associates. So we continued to grow all sort of customer base.

Mobility, continued growth, we could see that in Sweden and Spain, 4.9% in underlying growth, we have EBITDA increasing with 8.6%. If it take one of the drivers that’s the mobile broadband it’s up with 60% when it comes to subscribers doubling their data traffic, the volumes, and we have today close to 1.2 million customers on mobile broadband were roughly 500,000 of these all in Sweden and if you look at the Swedish numbers, they are growing their base with the close to 35%; and also doubling the traffic.

(inaudible) very solid, if we take Sweden more than 40% in the EBITDA margin, Finland more than 32% close to 33% and the both access were set before even though they have a downturn they have margins between the 36% to 42%.

When it comes to growth in broadband services, we have not been able to offset the downturn when it comes to the more traditional business that we have with IP based services even though today IP based service stands for 36% of our revenue. However, we are working very hard, continue to work very hard with the cost side, which means that we are up to closer 35% in EBITDA margin for the whole business area.

Sweden has done a good job as from continues to take down to close us, also felt down and they are between 33% and 41% in margins. You could also see that (inaudible) managed to be well about 30%, we see Lithuania that we’re losing there right now from 45% down to 41% on the margin side. However, I think that they have done a very, very good job when it comes to the cost sides, so we feel comfortable with the margin development right now.

Eurasia loss also mention and I use to sort of divide this into lets say two entities, we have Kazakhstan, Azerbaijan and Georgia who were sort of the big entities. There we have the Kazakhstan growing with the close to 12%, we would then take the other entities we have growth as we said Tajikistan 41%, Uzbekistan 50%, and (inaudible) close to 40%; and in this area we have also increased during the last year with 21% when it comes to subscribers. 4 million subscribers have been added on to our customer base and we have today 23 million subscribers.

Some comments upon some of the line items that we have starting of course with the cost side, you can see here for the group down with 3% we are down on the personal side of 9% as well as on IT, increases amount on marketing usually in Finland we’ve also down with 11% to 13% on personnel and also IT. Meanwhile you can see advanced going up and that doesn’t mean that we have sort of high new facilities. We have accounts certain conflux and we have taken of course with that, so the underlying is because this flat or even somewhat down.

Income from associated companies down with 18% basically we have negative impact from Turkey well goodwill impairment we have also some regulatory issues hitting the result. Turkey today is a bit tougher market to be in, but Turks the list is one of the actually early amounts of this market it stands for very high portion over their earning capacity. We could also see that Russia is still pretty well more or less flattish with somewhat down compared to last year.

Financial items down with 42% that is combination of the dollar interest rates are going down the (inaudible). We also have a somewhat lower net-depth. For a time being the Eurobond market is the very, very liquid and opened and very deep and we are trying to utilize this and we have done that at the last year and we will look at those opportunities going forward to refund ourselves in the Eurobond market, but for us as a solid company is a very, very good opportunities to still get the loans for a very, very good pricing right now and I want to test how long this could last, but we will take the opportunity on a way to refund ourselves in this market.

Income taxes slightly up and raising for the increase in the effected tax rate as not we have less all the income from our associates usually normally have set of positive impact on the tax rate. You could also see here about, we talked about pay a taxes last year, they were slightly above 4% to 5% and we set up they will come up and we all know coming closer to the 80% that we talked about and that is to the paid taxes as a share are report to the income taxes.

Cash flow two parts here about more less as equal and we have a minus on working capital side. We have paid pretty much our supplies this quarter look though have investments down in December last year, which means that working capital is going up at the same time we have a taken down CapEx which means that we are slightly up on the cash flow. Continued to have the solid financial position 1.2 in that depth-to-EBITDA. We have a good mature to schedule, we have where that this here repay the close to $5 billion in bounce we haven’t found any major refunding in the market, but you could also see that we don’t have any major refunding needs during the coming year, we could manage with the sort of our operating cash flow.

Finally return on equity, which I think will become more and more important year for this industry slightly up compared to December, and now close to 15.5, return on capital employed 15.6 and as you could see equity/asset ratio and net debt/equity ratio well above a loss year and I think we are having a very, very stable financial situation right now. I’ll stop there.

Andreas Ekstrom

Okay, then it’s time for Q-and-A. Lars, you’re able to stand up.

Lars Nyberg

Yes.

Question-and-Answer Session

Andreas Ekstrom

I think that we start with the few questions from the floor before leaving over to the conference call, but we start with the question from [Swan]. Please introduce yourself with you name and company please.

Unidentified Analyst

Good morning this is (inaudible). I have a question regarding Finland, on the fixed line side in Finland, which surprised me little bit with weaker revenue at least than I had expected and I couldn’t find the reason in the operational data. So, if you could discuss Finland a little bit? Second question is, on the associated companies, do you have a view on the outlook for the associated companies for 2010? I mean are there any specific guidance for the consolidated part of the company, but if you could also give some highlights on the associated?

Per-Arne Blomquist

If I start with Finland, clearly there has been a shift much faster, and much earlier in Finland from fixed to mobility, which you haven’t seen to the same extent in Sweden and as you I think you know that we believe that the fixed network is going to be very important for telecom operator going forward because of the unlimited demand for bandwidth. What drives that is video I think, so what we call triple play is going to be important and to a fix points the fixed network is the best solution, we just introduced IP TV in Finland; and we are expanding that and we are investing in fiber in Finland.

So yes, we have a downturn that’s slightly bigger than may be we had hoped for, but I feel pretty confident that the, fixed network in Finland and in Sweden and in some of the Baltic states is going to be very important for a company going forward and that’s why we invest in fiber, we talked about that in last quarter. We don’t make any outlooks for the associated companies. I think MegaFon is doing very well, of course we’re not happy with the performance of Turkcell, but that is for the Board of Turkcell to deal with and I’m not on the Board (inaudible).

Lars Nyberg

We take the next question from Lars.

Lars Soderfjell - Alandsbanken

Looking at broadband services Sweden and EBITDA margins, two years ago we thought about this is a 30% business, year ago so 35% business, now 40% business. I mean, is this as viewed as it gets or do you see additional for them?

Per-Arne Blomquist

Next year 50 unit.

Lars Soderfjell - Alandsbanken

Exactly?

Per-Arne Blomquist

I don’t think so.

Lars Soderfjell - Alandsbanken

Could you talk a little bit about I mean how you see the margin development and what else how much more you can get out of it, is this as the full benefits from the Coastal zone?

Per-Arne Blomquist

Those are short term answer or medium term answer and maybe you can think about that. There’s a longer one that I’d like to talk about and that’s a little bit to Sven’s question. If we can provide 100 megabit or gigabit per second to fix places like homes and offices, I think the ARPU will go up quite dramatically.

The question is, what’s the margin going to be on part of that ARPU? We are spending right now a lot of time with [Marlene Fleming], we’ll take over the broadband prefer (inaudible) because she is spending all her time on strategy and how did we get grow of this business and I’m convinced that we won’t get growth, I’m not sure when and it’s not in the short term, but maybe it’s in the medium term, it’s certainly in the long term.

Lars Nyberg

When you look at the margin, I don’t think that you to expect this to sort of increase. I mean we have still have the effects from a very tough cost cutting program last year, which will effect us positively this quarter perhaps also next quarter, but then as far as I think is equation of the balance between getting growth, having the right customer cares and all list. So I think somehow we also have to invest, but because being at 40% is very, very good. I don’t think that relations to increased dramatically from that.

Lars Soderfjell - Alandsbanken

I mean it should decline much either from this level and should think about it, but this as of 40% business going forward?

Per-Arne Blomquist

I think that’s optimistic to be honest with you. I think it probably will decline and then maybe will pickup in my vision for the vision we have is coming then I think it my pickup. If I had that better go down, I wouldn’t better go up.

Lars Nyberg

Let’s take one more question from the floor, Stefan on the phone call.

Stefan Pettersson - Nordea

First question regarding subscriber in take in Sweden, which declined this quarter and it seems to be decline in the prepaid subscriber base. Can you just explain what is happened? Have you cleaned up subscriber base? Secondly, at least against my numbers there was a large your report numbers to be divided to my forecast on wholesale business and can you explain what has happened in the wholesale business leading to rather weak sales development.

Lars Nyberg

If as talk with the mobile subscribers I think we are in slightly down on prepaid but we actually increasing on postpaid. So, I think that I don’t see as to the major shift is not to very big division, but now if we have done in the extra things but it’s…

Per-Arne Blomquist

It’s part of our clean up in our prepaid brand called [hail book] that we have – that stands for majority of that decline so you should see there is some one time item.

Lars Nyberg

But what I think is more encouraging as actually about we are increasing our postpaid and when it comes to wholesale I think they are in the business where you could see a pretty tough competition on the price competition, I think that’s effecting them (inaudible) and that’s -- you might expect not to be extremely volatile, but it could be a bit volatile from quarter-to-quarter given the mix of service at the best sellers.

Andreas Ekstrom

We will come back to floor in a short while, but in the meantime let’s open up for question on the conference call now. Operator, could we please have the first question.

Operator

Your first question comes from Mr. Peter-Kurt Nielsen - Cheuvreux, London.

Peter-Kurt Nielsen - Cheuvreux London

I had two questions for Lars, please. Firstly, Lars, as you started out by saying, the Swedish Mobile business has performed, the stellar performance for the last 12 months basically, nonetheless you've implemented some management changes in this business area and in the Broadband business. This does reflect or a changed approach of philosophy or strategy to your Mobile versus Broadband business going forward? Anything you could elaborate on this for us or what we should expect from TeliaSonera going forward and second question, it's now been six months since you announced the agreement with Altimo and I appreciate there probably hasn't been much neutral report, I'm sure you would have done so if there had been, but could you give us a status update on exactly where we are now and if you remain as confident now of completing this transaction as you were six months ago?

Lars Nyberg

Well, I have been wrong on the growth rate of mobile Sweden five quarters on the row, because I predicted not to be as strong it has been and I’m saying through my colleagues down there you know one day I will be right. The question is just went and I love to be wrong this way no problem with that. That management changes that you refer to has nothing to do with it changed priority or direction in mobile.

We are in one of the issues that we are conformed did way is a tradition of working installed pipes. I talk about one company and I made a number of changes in this company where I have ask people to leave because I felt they don’t really willing to work in one company. They wanted to work in their own company and I will continue to do that if I find that necessary.

I will say that they have a management team today in TeliaSonera that is better than anything I have seen or work with and I think that’s the main reason why this company has made so much progress in the last couple of years. All the issue of optimal, maybe the most important question and most important answer is no, I have not changed my opinion on optimize or being able to deliver the value, because you remember I said, I think it’s in very important agreement, but the value of the agreement is in the execution of the agreement.

I have also said that we will start focusing on Turkey; we would like to see that being resolved and later on we will file a request in Russia for an authorization from the authorities to form this and we all know that there are some place will prefer this not to happen, but there is no need to file that request yet, because we would like to see if we can resolve Turkey, first with these partners on Turkey.

No and I have no details to report of progress, there is some progress but not significant to report or confidential, so I don’t want talk about it, but there is some progress and my optimism for making the deal is a similar to it was in the fall of last year when I presented it.

Operator

Your next question comes from Mr. Alex Duval - Goldman Sachs.

Alex Duval - Goldman Sachs

I'm going to pass it over actually to my colleague Tim Boddy, for me.

Tim Boddy - Goldman Sachs

Thanks, Alex. I just wanted to ask about the situation in Spain. Obviously very strong revenue quarter coming at some short term expense, I just wonder if you could tell us mobile about your thoughts on Yoigo and whether the goal to breakeven by the end of the fourth quarter is missing an opportunity to significantly build the business in these market conditions, which should be favorable for its proposition.

Secondly, I wanted just to ask a little bit about the potential for corporate domestic recovery in the Nordic markets, what signs you're seeing of that, obviously, we had some signs I think in the Swedish Mobile business, but what can we look forward to if we were to see a reasonable economic recovery in your fixed business in the Nordic market? Thank you.

Lars Nyberg

Yes, I believe that if you manage a company, I think you need to stay your course, you cannot shift course every quarter or every half a year, because the 30,000 people will not follow you.

I have stated very clearly how I feel about Diego, and I haven’t changed my mind. I’m very pleased with the performance from (inaudible), I’m very pleased that as you said, we had significant growth in the first quarter that did bring some additional cost, but we are shifting from prepaid to postpaid and it’s a very good sign for this operation; and we are still committed to deliver an EBITDA positive result in the fourth quarter and there after I don’t want to see any red numbers, so it’s not only one quarter, because in one quarter anybody can fix. Strategically, I have also said not changed my mind. What was the second questions Arne?

Per-Arne Blomquist

But the copper segment in…?

Lars Nyberg

The copper segment, in my view you all think that?

Per-Arne Blomquist

Yes, but I think that we have seen some positive signs in the Swedish especially with the mobility and I don’t think that the business thoughts to recovery I mean, if you look at the local, as it is multinationals that have taken out an enormous amount of costs; and then I’ll need to start to sort of take care all the business so I’ve to go for growth as well and I think that will have a positive impact on us.

Lars Nyberg

We can see it in the final.

Per-Arne Blomquist

We could see that in the final definitely in Sweden not so much in Finland and I always skeptically above both them or kind of would I come bit late about the thing that positive signs will see or actually here in Sweden, and they are very encouraging.

Lars Nyberg

Yes.

Andreas Ekstrom

Okay, thank you Tim let’s take one more question from the call, before I’m moving back to the firm. Operator, please.

Operator

Your next question comes from [Damien Maltarp - Credit Suisse].

Unidentified Analyst

I’ve got two questions. Firstly, the Swedish regulator seems to be proposing that you’re allowed rate of return on fiber should be equivalent to that on copper, and I’d be interested in your thoughts on whether that is appropriate? Secondly, just on Eurasia, there seem to be some comments recently about you might be interested in fixed line operations in those markets. Maybe you can just expand on the strategy there, if it does make sense to move into fixed?

Per-Arne Blomquist

Let me start with the last one then, there is no difference in my view on Eurasia than to [fast] our home markets. I believe the fixed network will be important in those markets too. The question is what sort fixed network is available and quite often it’s a bad quality and so on, we are actually having discussions, when if we can build and we cannot build in every country, but in some county we can build the back hold for the mobile that’s fiber. Could this split off from that back hold and provide fixed service that is an interesting idea, I think if we get that opportunities to question of regulation etc. I think we will be generally interested to have that dialogue, because we do believe at the fixed network is important and the first question was…?

Unidentified Analyst

Regarding regulation?

Lars Nyberg

I don’t know, there are two issues in regulation if you talk Sweden, when they come to fiber. The first issue is that the regulate, they would like us to open up our fiber for other users, actually the industries changing somewhat, you could think of the industry in three layers, you could think all the [Scanova] layer, the communication operator layer and the service provider layer and if we talk about opening up on that networks for a service providers, I think that’s absolutely something we should do.

The more traffic we have in our network to better half we are, although I would suggest that if we open up for others then other should open up for us if you would like to. So that’s it from in own issue. The issue is that one you talked about and that’s the return on investment. We need to be showed that we have a reasonable return on investment and I don’t want to start negotiating that point, it’s the return on copper is to the fiber, I’m just repeating that.

If we going to invest, I don’t know what the numbers are going to be over a couple of years, but let’s say at least more than 10 billion Swedish, if our shareholders going to invest more than 10 billion in fiber in Sweden over the number of years then they are demanding from the Board and the Board from the management that we feel reasonably secure, that we will get reasonable return on the investment.

Andreas Ekstrom

Let’s go back to the floor and we have a question from Lena.

Lena Osterberg - Carnegie

Two questions if I may. First would return to the wholesale side. I was wondering you said that you have significant thing into FX effects, if you could say something about the currency split of sales in wholesale and also a bit of a black box, but maybe some sort of rough guidance and then the second question is on your cost cutting going forward, could you maybe just say some, which areas you’re looking into, which regions and what part of the business?

Per-Arne Blomquist

Let me start with the last one. This is a very important question, not only for the results, but for the culture. I’m saying we’re in the journey, we’re trying to change this company fundamentally and the 2008 and 2009 program, where we took out through 2900 people it was finished last year and we’re very successful compared to historical performance. We have never been able to reduce costs from this company or we talked about our environment, now we did.

We decided in the group management end of last year that we do not want to have another big drop down program, because we’ll not sure that will be the good thing for the company. However, we said very clearly to everybody in this company. Now you have to manage your cost, the cost for the company going to be flat and the cost aren’t go up in Eurasia that means it has to come down somewhere else, and we are following this very carefully now, because the power of TeliaSoneram, if we can get the 200 top mangers to own this issue about cost.

Cost is not only for me going down, is also go down here and invest that money here. I’ll give an example, our customer service broadband Sweden is not performing for six months. We don’t be have answering times that are totally unacceptable to me; and I think we need to spend more money on it, but then the manager got to find that money somewhere else and if you have a company of 30,000 people and that kind of system works and we have a very strong company.

Its going to very telling, because these four quarters and this year are good these 200 people are in managing cost, because it’s the only way to manage cost in this company is behind on me, or the group management as not a good method. So I expect people to look for cost reductions everywhere, do you really have to do this, do you really have to do that, do you really have to have consultants to this amount in this company et cetera, et cetera, et cetera.

You show on the numbers that Per-Arne showed you that in the first quarter we increased marketing, and they’re happy about that, because we took down marketing quite a bit last year. Because, I want to increase CapEx, I want to increase marketing, I want to gain market share, I want to grow, but we don’t have any free money. So you should follow the cost number these four quarters going to very exciting, more exciting than watching paint drawing.

Unidentified Participant

I think I take the slightly more detailed question on the FX in wholesale and we’ll see frequent and disclose a bit more information about that going forward, but what I can say today is about 60% as in Swedish grown up, about 20% is in Euro and the remaining is split between dollars and the British pound. Here we go and we take the next question from Michael.

Michael Andersson - Evli Bank

Margins skips going up and CapEx’s keeps gets going down and then you can still, you a firmly say that we’ll keep the 50% some kind of target at the same time you doesn’t seem that you sound very eager. We’ve talk about broadband expansion in Sweden’s on but still is there any regions or business is now that you are feeling starting to feel kind of strength, because you reached at your target, but it’s not like your running out today fixing things. So, I don’t some, because this trend has been ongoing for quite sometime now?

Per-Arne Blomquist

Yes this is a bit of a scitsofernic subject. I believe and I said that, I think there is a degree of automation in CapEx situations. I think it’s an issue of culture and I think we have done while we’ve enabled to do is to raise the focus on is it really necessary. I made that joke is now a nine months ago so, but I have repeat it, because it held to something about the culture. So somebody told me in broadband Sweden that there was request for investing in replacing 430 poles up in the northern Sweden because the yield number blocked in.

The only problem was that the person who made the request didn’t think because, if you how many customers we had on those poles: One, in the (inaudible) poles we had one customer Telia (inaudible), I’m pretty sure that investment would have past couple of years ago, obviously it doesn’t past now. So that’s one side of it, we are expanding capacity and coverage in the mobile networking Denmark and then Finland that’s no overview I think we should done that the year earlier actually onsite.

We were careful in the first quarter of Eurasia, the big expansions are in Uzbekistan and Nepal and obviously, we’re going to rollout the 4G, the 4G rollout in the first quarter was very small. The rollout will be 25 setters in Sweden this year, it means all 25 will have to be delivered in the important second and mostly in the second half of the year, and four setters in Hawaii. So, I think we are clearly back en loaded, but I did say the target is still to be shy of 15 whether we get there on not is not an issue.

Rolling out the fiber is complicated this is not a rollout like the copper. We are very selective, we don’t even talk about partial visiting, we talk about blocks where did you rollout fiber and how do we get roll fiber this is fairly complicated, and we have said to mall on to this yield, don’t rush to spend the money. The money will be there in January also if you are late, no problem, but do it right now, because it’s such a big investment and is so important that we do this right. So, I feel pretty good. Thanks.

Andreas Ekstrom

We have a question from Jan Dworksy – Handelsbanken.

Jan Dworksy – Handelsbanken

Thank you, Jan Dworksy from Handelsbanken. Just coming back to the top line I think some months ago or some quarters ago, there was this fear that it was a bit late cyclical and high unemployment will hit you later in the year. Do you feel confident that it won't happen and that was a fear that didn't materialize?

Lars Nyberg

Yes, I probably lean towards that conclusion today unless we have a double dip of course that changes the whole game, but I don’t see signs that are negative for the growth. That’s why I said this morning, of course I feel more comfortable now with having given the forecast somewhat higher net sales than last year at the first quarter with 2.5% of course, I feel much more comfortable. Let’s see the second quarter and then we’ll have to think whether we’ll say something more positive than somewhat, but I think it looks good.

Per-Arne Blomquist

I mean I think you have to be bit more specific as well, because Sweden is sort of long place that have very stronger economical environment that (inaudible) something differently. Well we did not really see a turnaround come here and we planned to be a bit later in the Nordic area. So, I think we have to be a bit more specifics as well we look at the different (inaudible) of that question.

Jan Dworksy – Handelsbanken

Then when it comes to cost and the headcount continues to come down and particularly in the Nordic area? Are we at an end of that or?

Per-Arne Blomquist

Yes, it’s coming down because the way we reported, we only report when they actually (inaudible) to leave, all right till they leave they are on our headcount. So the reductions are really now a result of decisions taken earlier. The cost will be flat we have said that means that shortly not a room to increase the number of employees. I expect and I really hope that it will be flat, which means that the number of employees will not change up or down significantly and I think this is more important from a cultural aspect than actually from the both the line aspect.

Jan Dworksy – Handelsbanken

Just an additional question on fiber, is a conclusion to these discussions with the regulator, does that have any impact at all on how much you will spend this year on fiber?

Lars Nyberg

Well it could if we would conclude or at least be afraid that it looks like we’re not going to get some sort of reasonable return then we will stop the investment that’s for sure. I hope that we can conclude the discussion before the mid-year and I hope, certainly hope for our safe, but also from the country sake that we will get a reasonable environment to invest, let’s say SEK $10 billion and I would expect to go that way but you never know.

Operator

Your next question comes from Mr. David Wright - Deutsche Bank.

David Wright - Deutsche Bank

Could I just, and I apologize if I've missed some previous comments, but could I just confirm what you meant when you said you haven't changed your mind strategically on Yoigo? Does that mean that this is still an asset doesn't fit within the strategy of the group and that is an asset for sale and then second of all, again, you said you haven't changed your opinion on the Altimo agreement. When you first signed that agreement did you expect the kind of shareholder objection from MegaFon that you currently have. Thanks.

Lars Nyberg

Well on Yoigo, yes, I haven’t changed my mind, I will prefer to invest that kind of money elsewhere in other markets, maybe in Eurasia or speed up if fiber in Sweden or whatever. So, that’s my opinion and it’s not an urgent issue and certainly if we reach which I said before, I expect we will reach the breakeven point in the fourth quarter, is not an urgent issue. If somebody wants to buy, they have to pay a good price for it, because you can not takeaway from the management in Yoigo that they have done a super.

If they come to a breakeven result with let’s say 2.5% market share by the end of this year and they have done it faster than most other people tried and that’s where something to me and to our shareholders and so I have no urgent need to give it to the black hole, because it’s not going to be a black hole by the end of this year, but strategically, I think the money can be invested more profitably for us elsewhere.

David Wright - Deutsche Bank

Second question on Altimo, or the deal that we announced?

Lars Nyberg

Well, we had a discussion with what you call other shareholders in MegaFon that this TeliaSonera I met him many times and we had the discussion with him and the reason why we choose Friman among this of course very simple, Mr. Friman and the Altimo company are co-owners not only MegaFon nut also in Turkcell. So by joining with Mr. Friman we thought and still think that we’d be able to find a solution both for MegaFon and Turkcell. Of course, I realized (inaudible) disappointed, which he has explained in different ways, several times.

Ultimately I hope that Mr. (inaudible) actually joining us in this adventure. I think it could be beneficial for him and as we certainly beneficial for us. We don’t need him, but he would be an owner in a company that owns two operators MegaFon and (inaudible) that should be very attractive to him.

David Wright - Deutsche Bank

If I could just have a follow-up very, very quickly, if there was an approach from Svyazinvest to maybe run some kind of fixed and mobile operations in Russia would that change your mind on the deal?

Lars Nyberg

No

Andreas Ekstrom

We take another question from the call, operator please.

Operator

Your next question comes from Ulrich Rathe - Societe Generale.

Ulrich Rathe - Societe Generale

It's Ulrich Rathe for Soc Gen. Two questions please. One is in your release it sounds as if you're saying in Q1 you've held back across the group not just in Eurasia and I think during the conversation now you've already indicated that maybe in Swedish Fixed. Future quarters will maybe see somewhat higher investments in terms of OpEx. I'm talking about the marketing investments, not CapEx. Could you give us a sense of the geographic spread of where you are looking to maybe ramp up your OpEx, your marketing spend, your market investments elsewhere? That would be my first question.

Second question is a very short one is about the constant currency growth. You're highlighting constant currency growth very strongly in all your results, but of course inflation in some of those countries is actually quite high and that obviously devalues the currencies in a very natural way. So I'm just wondering is this maybe not a false incentive to go for growth potentially in countries with very high inflation if you just look at the constant currency growth?

Per-Arne Blomquist

Let me start with the OpEx and one of the challenges that we’ve been touching upon this couple of times in this conversation. One of the big challenges is to reallocate cost not to add cost, but to reallocate cost and we have free priorities in this company. The cost actually going to competitive. The quality networks and the customer service unique customer experience that is the three prior to TeliaSonera has been for long time we’ll continued to be forever in my opinion.

So, how do I relocate cost to those priorities from other sources of cost, is I think the biggest challenge. So, yes I expect just step up in Eurasia in general terms, because they’re growing so much. So Nepal OpEx is going to go up, marketing Nepal is going to go up, probably in Uzbekistan too. As we implement fiber in Sweden or in Finland, I am pretty sure marketing will go up for triple-play, but we got to find that cost somewhere else, because not necessarily is all these investment in OpEx on top of everything else.

This is exactly the whole point I’m trying to make with the 200 managers to have to manage the cost, because I cannot stand here until somebody in broadband Sweden what cost should be saved and where if he usually to spend it, that’s their responsibility, but what I am saying is the cost for the group going to be flat no please manage it.

Ulrich Rathe - Societe Generale

The second question about currency, why were emphasize this so much I mean, first of all, if you remember the volatility has been very high on accounts to FX on last year when we in the reported figures you could see that we had a growth, we think before it was very important to say that this is currency driven. In the same way, we doing it right now on the FX have turned in the different way. So, I think that’s the first to say.

Secondly, if you look at the market have operating in the Eurasia, I think that we are talking about growth rate of 40%, 50% (inaudible) more precisely that is what we are striving for nothing else.

Andreas Ekstrom

Thank you, Ulrich, my colleague is indicating that there two remaining questions on the call please operator the next one?

Operator

Your next question comes from Andrew Lee - Citi.

Andrew Lee - Citi

Just a couple of questions, firstly on the [boos-ex] you said, you haven’t feel the turnaround the edge, but (inaudible) on the organic basis. Do you think we can see organic growth in this taking top lines as some point through the year and then what point do you think you could turnaround this year and your last year, if you see too ambitious now for those to?

Secondly, on management compensation bit more sensitive, you announced the salaries will be raised for 30% as a result with the boast decision with the AGM to remove this variable element and could you give us a bit more color on this decision and do you think this will make you more difficult to in sense of your senior management team going forward?

Per-Arne Blomquist

You’re right, I’m there still now is -- is much better options on the other two competitors and I just set it here because was a couple of weeks go and also (inaudible). I think they have done a great job on accounts to prepare on self for the year about then I think they would probably join in the obvious time if I understand as correctly, and that will of course help their internal market and there was a great to much better stability in their own market situation, but whether help me that will comeback to growth this year or next, that’s difficult to say. I think it’s completely different picture when it come to (inaudible) they are much settle deeper recession still and that will take time and especially last farewell will have a tough time and especially (inaudible) will have a tough time (inaudible) and all this goes, I think that will take time.

Lars Nyberg

On the compensation, I’m very pleased that we have been able to put this question to that. We’ve added open for a year and I have spent way too much time on this issue. I haven’t changed my mind, and I’ve been very clear and I think the whole group management, I know the whole group management stands united on this.

We believe in variable pay, provided the variable pay as a limit or ceiling is very well measured on criteria degree for all that stuff, we did that. We look in the last three years, we had a record profit last year and payout was 38.5 and the maximum was 50 and we got 38.5. I think that indicates that the criteria of last year were good, so the board were paid have been capable of second to right criteria.

Now I think is unfortunate, we loose these two that I think is a disaster, no I don’t think is disaster, but I think it’s unfortunate and I hope that one day we can introduce both short term and long term incentive plans including the roof management, it’s a bit strange that the top ten people are the only once who don’t have a variable pay in this company.

Andreas Ekstrom

We have a last question on the conference call, operator please.

Operator

Your final question comes from Maurice Patrick - Barclays Capital.

Maurice Patrick - Barclays Capital

Couple of questions, I think it quite important not just for yourselves, but for the effect was hold, which perhaps you could expand bit more and what you’ve said already. When you look at the mobile revenues in the Nordic area, you’ve seen acceleration in growth and have explained that generally been driven by mobile broadband and smartphones.

To be just expanded visions on these drivers and talk about things such as, are you seeing ARPU following for people who are taken those devices? What kinds of update are you seeing and how far down the evolution products are we and how much more to go and just on the capital expenditure side, a lot of people are fearsome that you’ll see higher CapEx because of all these traffic and what steps you’re putting in place other than the LTE rollout to manage that? Thank you.

Per-Arne Blomquist

Let me start with the last question. The first thing we did was a year ago to put caps, flat fee with caps, because if you have an absolute flat fee you can yield this much you like that will not work when the growth is with this. The good news is that we believe the more as low applies to the equipment so we believe that we were basically get double capacity for the same cause for every 18 months or 24 months or whatever that the time horizon is, and you can see cost for equipment coming down for the last couple of years quite dramatically.

We will come back to this issue I think we need to do a little bit more home work on it. I feel comfortable that we can handle the growth rate in traffic volume without having to spend in a significant amount of money extra in CapEx, but it is vital that we manage the growth of the traffic volume inline with our ability for the same cause to grow the capacity of the network, that’s sort of the challenge and it’s a very interesting exercise again its not boring at all and I have seen this before some of you might also have seen it in the memory capacity, in microprocessor capacity in the 80s and the 90s exactly what happened and I think we are seeing some similar technology development in telecoms and if that is true then I think this would be much lesser issue than most people fear we are talking we will come back to be later on this issue. Of course it was not the question.

Lars Nyberg

Yes the first question was if I am right about ARPU on a smartphone

Per-Arne Blomquist

Not the smartphone, was that right Maurice

Maurice Patrick - Barclays Capital

Its just to understand overall revenues of those who are taking the middle data products what’s happening to that revenue stream and for those who are taking is what’s happening to help me to understand what the penetration is and what (inaudible) you are seeing?

Lars Nyberg

It’s a bit of a difficult question I think I refer it in the slide presentation that loss have showed you where you see the growth year-over-year where you can see that data is up by quite a lot and that is obviously smartphones and mobile broadband the interesting thing in that group is I think is that voice is (inaudible) and that goes for all phones not just for smartphones so I on your question I would say that its at least not down for the people not taking the smartphone slightly up would be my best guess.

Andreas Ekstrom

Okay I think that we close it here. Thank you everyone for your questions and for your claim and I’ll see you back here in the summer. Thank you.

Lars Nyberg

Thank you.

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