Telenor ASA (OTCPK:TELNF) Q1 2022 Earnings Conference Call May 3, 2022 3:00 AM ET
Sigve Brekke – President and Chief Executive Officer
Petter-Børre Furberg – Chief Executive Officer of Telenor Norway
Tone Bachke – Executive Vice President and Chief Financial Officer
Conference Call Participants
Peter Nielsen – ABG Sundal Collier
Frank Maao – DNB Markets
Andrew Lee – Goldman Sachs
Terence Tsui – Morgan Stanley
Maurice Patrick – Barclays
Ulrich Rathe – Jefferies
Usman Ghazi – Berenberg
Nick Lyall – Societe Generale
Francesca Schild – Exane
Ondrej Cabejsek – Union Bank of Switzerland
Adam Fox-Rumley – HSBC
Good morning to everyone and welcome to the First Quarter presentation, and a sunny day here in Norway. In the quarter, we continue to execute on our is strategic agenda focusing on value creation across the Nordics and in Asia. The mobile business performed well, and we see mobile service revenue growth in all the Nordic operations. However, the financial performance this quarter was impacted by compared decommissioning in Norway, higher energy prices, and project costs mainly related to the structural transactions we have ongoing in Asia.
When it comes to revenues, this was held back by lower volumes in the Norwegian fixed-line business and intensified competition in Thailand. But if we exclude for the copper legacy effects and also their businesses in scope for their two merchants in Asia, the underlying portfolio revenue growth was around 2%. There are several ongoing strategic alternates -- initiatives now in Telenor. We continue to build a stronger portfolio with our two large merger processes in Thailand and in Malaysia. We also continued our modernization and transformation programs.
We are focused on building a digital Telco, and I will come back to that. And we are introducing new services to our customers on top of data connectivity. We are also running at Nordic wide energy initiative, aiming at both reducing their missions and increased the network energy efficiency. And as you can see on this slide, we delivered our cash flow this quarter in line with our expectations, which further improved Telenor robust financial position. Then let me go to the operations and start with our four Nordics business units.
I'm pleased to see a solid ARPU and mobile service revenues across the Nordic in this quarter. In particular, returning to growth in Sweden has been, as you know, an important milestone for us, and something that we have been working hard on during the last quarters. At this quarter, Sweden is returning to 3% growth with EBITDA following [Indiscernible]. Carefully selected market activities targeted at the high end of the value chain yields solid results in Sweden for this quarter. As I previously said, Sweden is a growth market, and we should take our fair share of that growth.
In Norway, we see continued upselling and demand for value-added services driving a positive ARPU development. I'm very happy to see how we are able to serve our customers with digital services on top of data connectivity. And as I see it, we are a market leader in doing this, both in Norway and also across the Nordics. Mobile service revenues were stable year-on-year in Norway as the subscriber base is down 2%, coming from lower ARPU segments and Data card.
Today, I have also invited with me and Tone, Petter-Børre Furberg, he is the CEO of Telenor Norway, and he will go into more detail and information about the Norwegian operations. In Denmark, we continue to see solid performance with both ARPU and service revenue growth. And in Finland, up-selling to higher speed support both ARPU growth and service revenues. ARPU was slightly negatively impacted in Finland this quarter by lower interconnection rate. The lower interconnection rate accounted for around 1% point. Then, some views on Asia.
The competition and market dynamics in both Thailand and Malaysia remains tough. And is continuing to impact our performance in this quarter. In Thailand, the ARPU is under pressure from a slow economic recovery in the country impacting people's wallet. In addition, tourists and migrant workers are yet to come back. While in Malaysia, the prepaid competition is leading to both negative ARPU and service revenue development. Both Thailand and Malaysia, as you know, have been very competitive markets for some time.
And we therefore believe that by merging our entities, we will create stronger players that are better positioned to serve the customer demands in these two markets. Speaking about the two mergers, we have now in Malaysia received from the regulator a so-called letter of issues. This is a part of the regulatory approval process, at least in line with our process expectations. We have together with our partner, the [Indiscernible] Group responded to these items and where we stand today, we are positive, as we have said before, that closing of this transaction in Malaysia will happen in the second half of this year.
In Thailand, we expect regulatory clearance to happen sooner, within the first half of this year. And following this, we will launch the voluntary tender offer in Thailand. Bangladesh and Pakistan delivered solid growth of 5% and 4% respectively, driven by continuous growth in the subscriber based, but also growth in data demand. Data revenue increased with 28% in Bangladesh and 23% in Pakistan. With the additional spectrum that we have acquired the last two years in Bangladesh, we bought spectrum last year and we also bought spectrum in this quarter in Bangladesh.
And this -- and that together with investments into 4G network, we are now having a solid and robust data network. And we are well-positioned to take the increased data or the mall and subscriber growth following recovery from the pandemic, as you see, in Bangladesh. And with investments, we are doing in sales and marketing. We expect an improved EBITDA in Bangladesh going forward. Then let me talk about what we are doing on the climate side and on the energy side.
As you know, we are committed to reduce energy consumption in all our eight markets, and we have therefore established a group-wide structure project in line with how we are executing on our structural and modernization agenda. The project is both working on how to meet our emission targets, but also how to secure the most efficient energy consumption in all our networks. As a part of this work, I'm pleased to announce that yesterday we entered into a power purchasing agreement with Norsk Hydro.
This agreement will contribute to that a new renewable energy project is realized and that new capacity is added. This is, as you can see on the slide, a 10 years ' contract with annual purchase of 330 gigawatt hours, equal to around 90% of the energy consumption we have in Norway. We started this project with Hydro a long time ago before the significant price increase that we have seen lately. And that grid price is therefore more in line with price levels observed in the market before the recent price increases.
For instance, if we have had this PPA agreement in place in this quarter, the energy cost in Norway would have been around 50 million to 60 million lowers than what we saw in the quarter. The project is expected to be finalized in the end of 2023 or beginning on early 2024. And with this, turnover is contributing to the green shift, as we are moving one step further on our part to deliver on our science-based target commitments. Then on our strategy execution, as I said, we are executing on our strategy for -- and what that means for this year is the following, Growth in the Nordics.
We see an opportunity in all our four Nordic markets to continue to grow mobile service revenues from up-selling, from 4G to 5G speed. But also, as I said, to put new digital services on top of the data connectivity. We have had success in Norway now for several quarters in a row. And we are now taking those digital services that we have some experience within Norway, and we are no taking that out in the rest of the Nordics markets. We had in this quarter a relatively slow start of the year on our fiber growth in Norway.
However, we expect to increase the fiber roll out in the coming quarters, as we also see a good demand for our fixed wireless access product. In Asia, we can capitalize on the data growth and also subscriber growth, especially in Bangladesh. And as seen from the financials, from the costs, we are prioritizing significant resources and efforts to complete our two merchants in Thailand and Malaysia. In addition, we are preparing for integration and synergy outtake as soon as detailed sections are closed. In the last quarter, I spoke about our plans to come add digital Telco and I talked about the technology part of that.
Today I want to talk about the customer part of what it means to become a digital Telco The digital Telco for us has an ambition to externalize our technology capabilities and support our customers to digitize and transform themselves. We have already delivered several customers cases, on private network and Edge. In addition, we continue to run several customer pilots. These cases are for customers in different industries like manufacturing, mining, health, utilities, media, and public agencies. Key value -- value for our customers are improved efficiency, safety, and sustainability by connecting numbers of devices and doing analytics on the information to automate processes.
One example of that is connecting robots on an assembly line and monitoring this to avoid time-outs and breaks in the production. Another example is how we in one of our Asian markets are using sensors and cameras to control on and off loading of containers from ships and vehicles for optimized placement and later automating the movements of vessels. Several of these examples requires local information storage, and short response time that can be provided with combination of mobile 5G network and its storage solutions.
To strengthen our capabilities to drive this industrialization, we have signed strategic global partnerships agreements with Amazon, AWS, Microsoft, and Google. These partnerships are used to both broaden our offerings to enterprises and consumers to run up-scaling programs for several critical areas, and to improve our own efficiency with Cloud native infrastructure solutions. Another example on how we are using new technology to monetize on customer demand is to joint venture agreements we [Indiscernible] signed with no recent companies are [Indiscernible], where the ambition is to be a leader in industrial security software.
As you know, Tyler nor has long and deep experience in infrastructure security, where all [Indiscernible] has long history of building industrial front-runners and strong software and data to actualization expertise. Together, we are now forming new company to deliver security solutions for both industrial companies, as well as selected a public agency. So that was a quick walk through of the quarter and also the focus areas that we have in the coming quarters and with this, I will then invite Peter Burritt the CEO of Norway, to go into a little bit more in debt to know which Operator, please Peter
Thank you, Sigve. And good morning, everyone. Let me start with some comments related to the Norwegian mobile markets. On the back of weaker subscriber development in 2020 and the first half of 2021, we see limited growth in subscription revenue this quarter. During the second half of 2021 and the beginning of 2022, we have refined our response of strategy to competitors moves, and we have now seen a healthy development in subscribers this quarter our strategy remains, however, to create customer value and growth through up sell of data and through value added services on top of connectivity.
And we have over several quarters managed to grow the ARPU both in B2C and B2B based on offering services by combining our brand and distribution capabilities into what customers deemed to be valuable. In this quarter as well, we deliver healthy ARPU, growth and we see continued demand for new services. For instance, we are currently experiencing strong interest from our business customers for security solutions. Telenor has as an owner of critical infrastructure, unique competence into how to protect ourselves.
But also, in how we can help our customers to protect their operation. The market for security services is estimated to grow 8% to 10% annually and is already a NOK 3 to NOK 4 billion market today. Since the beginning of this year, we have, for instance, signed 86 new contracts for security services to large and medium accounts in both public and private sector. And we have launched two important products this year, Safe Zone, which represents an expansion of our security service offering tailored for the SME market, and active response, where we offer monitoring and support related to customers endpoint devices.
It will take time, but it is our ambition to take a leading position in the cyber security market. Our focus will be to build services which support our customer's needs. In that respect Omni, which Sigve mentioned, our partnership with Aker and Cognite is important. Our customers are today focused on finding good solutions for how to protect their operations, their operational technology, and we believe Omni, together with Telenor, will be able to provide leading services in this respect. This quarter, we report growth in both mobile and fixed future revenues.
For mobile the growth is relatively modest due to the weaker subscriber development last year outweighed by continued ARPA growth of approximately 3%. The growth in fixed future revenues is lower than previous quarters as a result of lower run rate on new fiber and fixed wireless access connections. I will cover that more in detail on the next slide. We designed -- we announced the decision to close the copper network in January 2019; and looking back, that was a bold decision. We believe we are leading this transition in Europe and it is tough and hard work.
In the quarter, we decommissioned 23,000 DSL retail lines and 29,000 ports lines, which means that we now have around 35,000 DSL lines and 51,000 ports retail lines left by the end of the quarter. Most of these will be addressed in the second quarter, leaving relatively small number of connections in the second half of the year. These are addresses, in most cases, which are waiting for new coverage or fiber connections to be installed.
We have experienced a revenue decline of $2.1 billion retail revenues since the start, and we estimate a headwind of approximately $900 million for the decommissioning in 2022. As in this quarter, the year-over-year effects on retail service revenue will be approximately $200 to $230 million per quarter in 2022 and is estimated to be roughly a $150 million in Q1 2023 and $90 million in Q2, 2023. We expect only minor effects from the second half of 2023. The regulator has requested us to maintain the DSL service for wholesale customers until September 2025, while the ports network will be closed for all customers by year-end.
We are working with our wholesale customers to find good solutions for their customers to allow for a migration to new technologies. So, by the end of this year, we expect to have a remaining cost base of approximately $400 to $500 million down from $1.2 billion in 2018. The main cost components is power and rental with fault correction, and indirect costs as a smaller portion. Fiber and fixed wireless access revenue has had an annual growth rate of 24% the last years. And we believe this market will continue to grow in the coming years.
We have seen some reduction in connected fiber accesses the last quarters. This is partly due to prioritization of 5G investments, but also facing of installations. And lastly, with a larger fiber-based, nominal churn to wholesale and competitors has increased in the period. As [Indiscernible] [Indiscernible] phase gradually moves into more marginal areas, we see examples of edges of nearby rollout, where area serving the same households. However, as the rollout cost in Norway is quite CapEx -intensive, we do not foresee a large trend of overbuilt in this market.
During the decommissioning, we have utilized fixed wireless access based on 4G to improve the service to the customers. As the service is now provided on 5G, we see increased customer demand and interest also for using this as a household program. We have in the quarter launched fixed wireless access products towards the vacation segment. And this is also contributing to the expected growth we see in this market. Then finally, looking forward to the 2023 situation, we will in our retail business, be a completely legacy free operation.
Our 5G roll out and modernization program is running at a very high speed and we are planning for a completion of the 5G modernization program by mid-2024. We continue to see opportunities for profitable investments in fiber and are evaluating the possibility of establishing a passive fiber infrastructure company. We believe the remaining cost benefit from copper amounts to around 500 million and we will see cost benefits from a gradual reduction in the wholesale customer base. Thank you and now over to you Tone.
Thank you very much Petter-Børre. Let's go through the financials. We continue to execute on a forceful agenda of modernizing our operations and preparing for new structures in Asia. We are setting ourselves up for growth in the Nordics by 5G investments. And with fiber and fixed wireless to replace the old copper lines in Norway as Petter-Børre just went through. This quarter we also start to report separately on the towers we own 100% in the Nordics. In Asia, we continue to see growth, both in Bangladesh and Pakistan.
And we are well on our way to close the two very large M&A transactions in Thailand and Malaysia. Both these transactions hold significant synergy potential, and we are by them also setting ourselves up for market leading positions in Asia. In the quarter, we also completed the sale of Telenor Myanmar under extremely challenging conditions. We see top-line growth in most operations, except for the copper legacy business in Norway, again, as Petter-Børre went through, and in Thailand and Malaysia, which are markets that currently face very tough competition.
Looking at the portfolio, excluding these three elements, we see around 2% growth. Organic EBITDA declined by 2.5%. This was held back by three main elements contributing in total with a drag of four percentage points to the EBITDA. These elements include the copper legacy, again, higher energy prices, and cost-related to the portfolio development. Free cash flow came in at NOK 3.6 billion and NOK 2.4 billion excluding divestments. Our financial position is solid, and we have a net debt-to-EBITDA of NOK 1.9 at the end of the quarter.
Moving to revenue. As mentioned, we see service revenue growth in most of our operations. We are especially pleased to see that the investments we have done in sales and marketing in Bangladesh and Sweden are paying off, and that we continue to see service revenue growth in the Nordic operations, excluding the copper. The growth in Bangladesh and Pakistan was primarily driven by continued growth in the customer-based, supported by higher data usage. That the [Indiscernible] just presented a copper decommissioning in Norway, which gives us a headwind of around NOK900 million or around 1% for the quarter, and also the same impact for the full year.
In Thailand and Malaysia, we see tough competition as mentioned. We see this particularly coming through in Thailand where the ARPU declined by 7% as you saw on the slide Sigve showed. Moving to OpEx, on the back over close to 9% decrease in OpEx over 2020 and 2021, an increase in this quarter is not so unexpected as we see activity pick up. In this quarter, we see that continuing the modernization and the increased efficiency across the organization more than offsets salary increases and resulted actually in lower personnel cost.
We are now carefully running selected sales and marketing activities, which generates higher cost than we had during the pandemic. This quarter, I mentioned particularly the investments we do in Sweden and in Bangladesh, which contributes to approximately 75% of the increase in sales and marketing costs. The portfolio development in mergers in Asia added another NOK 100 million in cost. Finally, energy costs increased by compared to last year, mainly driven by Norway and Pakistan in line with the graphs that we showed you in the third, fourth quarter, last year.
As Sigve mentioned, we have been and are addressing the energy cost increases by focusing on reducing energy consumption. In the Nordics and Asia. And run this as one of our structural projects. Further, once the PPA comes into operation towards the end of 2023, early 2024, this will significantly limit risk of the recently experienced price increases in Norway. So, summing up, the OpEx increase seen in this quarter is mainly a result of planned activity related to the development of the company, together with the higher energy prices which are addressed by separate facilities.
Moving to EBITDA, we report an organic EBITDA decline of 2.5% in Q1. As said in my introduction, we have three particular elements negatively impacting the EBITDA this quarter. As I said, the higher energy costs in Norway and Pakistan contributes with approximately 1.2 percentage points. The project costs related to the portfolio development contributes with approximately 0.8 percentage points. And finally, the decline in the Norway legacy impact, and business impact the Group EBITDA with approximately 2% compared to last year.
The combined effect of these four -- three elements was around four percentage points on the EBITDA in the quarter. Moving to the Tower business. As previously communicated, we now have in place separate reporting and governance for our fully owned Nordic tower assets. And note that the two JVs we have in Sweden and one JV we have in Denmark are not part of these financial numbers. Total revenue in the quarter amounted to NOK 760 million of which approximately 80% is from anchor tenants. Total EBITDA after lease was NOK 340 million and we have an EBITDA after lease margin of 45%.
Telenor in fact represents approximately 75% of the total. Mobile tenancy ratio was on average 1.6 in the quarter. As discussed in the last quarter, we have in total 21,000 fully owned sites of which 16,000 are mobile sites. In addition, we have around 10,000 sites in our joint operations in Sweden and Denmark, of which Telenor owns 50%. For the full year total revenues are estimated to be around NOK 3 billion, and the EBITDA after lease margin to be in the mid-forties for these fully owned Towers.
Our focus to improve the financial and operational performance include focus on increased external revenue, but also through tightening up legacy and increased efficiency and processes improvement. Furthermore, we see additional value creation potential in our joint operations and are exploring alternatives for these assets. Going forward, we will continue to have a separate focus on Towers and Infra structure, and how to drive value from this portfolio. Moving to net income, we deliver a solid 6.6 billion of net income to equity holders this quarter.
Q1 last year, as you remember, we had a material negative impact from the impairment of Telenor Myanmar. Looking past this, the contribution from the running operation is fairly stable year-over-year. However, we do have a couple of positive items, lifting the profits this quarter. We have 1.7 billion gain on disposal of the open universe and SBU fiber in Sweden following the closing of this transaction in the quarter, we further have additional 2.5 billion reversal of tax expense and 200 million reversal of net financials following the court ruling in favor of Telenor related to losses incurred in India.
CapEx for the quarter is in line with the plan and is primarily driven by the 5G roll out in the Nordics, the fiber investments in Norway and network investments in Thailand. Free cash flow for the quarter ended at 3.6 and 2.4 billion excluding M&A. This generates a further improvement our financial flexibility and leverage this quarter stands at 1.9 times. To summarize, for Q1, our mobile businesses overall perform well. However, our financial performance was held back by some specific factors, such as the fixed transformation in Norway, higher energy costs and project costs together with tough competition in Thailand.
We have taken several actions and believe this will contribute to mitigate these negative factors, particularly in the second half of the year. For the rest of the year, we expect a continued strengthening of ARPU in the Nordics and higher fiber roll out in Norway. We also expect a gradual recovery in Thailand. While at the same time, we acknowledge the increased global uncertainty. Our cash flow in the quarter was good and leverage declined to 1.9.
This means that we maintain a strong financial position and high financial flexibility. Our guiding for the full year remains unchanged. Now, Capital Markets Day. We are pleased to welcome you all to a Capital Markets Day on September 20th here at Fornebu, where we will go through the business more in details. Among other things, we will provide more information about our ambitions in the Nordics, our plans for value creation in Asia, and our strategy for passive infrastructure. Then Petter-Børre and Sigve, I believe we are ready for the Q&A. Moderator may we have the first question
Thank you. [Operator Instructions] We'll pause just a moment to allow everyone an opportunity to signal for question. Our first question Peter Nielsen from ABG. Your line is open. Please go ahead.
Two questions for Petter-Børre, please, if we have the opportunity and then if I may a quick follow-up for Tone. Peter, you spoke about and Sigve spoke about increasing fiber take-up and growth in the coming quarters. Can I ask, have you changed you -- have your expectations for the copper revenue recapture towards the tail end of the copper closure, has that improved since you're speaking about a stronger fiber take-up in coming quarters?
And do you see that once you are done with copper closures, there is still room for growth in fiber in Norway over the coming years beyond 2022? And then, Tone, a quick follow-up on your comments on mitigating actions that should improve EBITDA trends in the second half. Can you give us -- can you elaborate a bit on what kind of mitigating efforts you have made and are making? Thank you, please. Thank you.
Yeah. Thank you for the question. There is -- for 2022 and the years to come, the link between the corporate decommissioning and the fiber growth is actually less and less. So, there are actually three very important drivers for why we believe that the fiber growth will pick up towards the end of the year and continue into '23 and '24. And that is good execution in terms of actually growling out new coverage areas. It is strong churn management and focus on it.
As I said, with a bigger base, we now see nominal churn being a little bit higher, but it's still requires the same kind of management and churn. And then of course, to utilize the network that we have built by densifying it. And with the copper network gone, that then densification will be crucial because the few remaining customers that are holding onto the DSL lines will then not have any alternative. So, I'm relatively confident that we are going to see increased numbers towards the end of the year. And yes, we believe that there will be growth also in the years to come.
Yes, and when it comes to mitigating actions, as Petter - Børre said, continue to grow the fiber is an important action for us this year. We also have and continue to run our structured programs, which are important in respect of continue to modernize the company and also develop the cost base in the most efficient way. Now, this also, as we say, including energy. Further, we believe there will be opportunities for growing ARPU in the Nordics on the back of increased service offerings. And finally, the way we are managing and steering our businesses in Asia with focus on profitable growth.
That's great. Thanks a lot, both. Thank you very much.
Our next question. Frank Maao from DNB, your line is open. Please go ahead.
Yes, good morning, everyone. So, my question is really about the timeline for eliminating the last 0.5 billion kroner of legacy costs. Could you please give us some color on the progress that you expect on the timeline for that, please? And if you also give us some feeling, let's see, when it comes to how we see the risks relating to the approval processes, of the mergers in Asia and how comfortable you are with those approved processes? Thank you.
Started I can start with 4-500 million that we estimate is the remaining cost base related to the corporate network. It will decline over, we estimate the next two to three years, and that's of course, partly related to the wholesale customers being faced out. But it is also the fact that we are expecting that we will be able to start closing down network elements and parts of the network already from next year, as we've now emptied the retail part of the network. So, a higher reduction in the first phase and then gradually facing out and to some extent linked then to the wholesale customer base. As I said in the speaker points earlier, also, the majority of these costs are related to electricity, or power consumption, and rental of locations than in network elements where they are standing. Petter.
Yes, to merger processes. I will say I'm fairly confident that we will get their regulatory approval both in Malaysia and in Thailand. We have been in frequent dialogue with the regulators. We have answered to their questions and what we have seen so far, it's exactly what we expected. In Malaysia their list of issues that they came out with a couple of weeks ago, were very in line with what we talked. And the process now is that they are expecting -- there's a hearing process and that they will make their final decision very soon in some few weeks.
So that's going fine. Same in Malay -- in Thailand, the regulator has the deadline internal as a part of the regulations, and it seems like they're following that process. Also, as we expected. So of course, we can never be a 100% sure because we haven't got any pre -approval, but I'm fairly confident that this is going on as planned.
Our next question, Andrew Lee from Goldman Sachs, your line is open, please go ahead.
Good morning, everyone. It's obviously, only a couple of months since we last heard from your full-year results. But big changes in many things, including the cost inflation, outlook. And so, I guess the key question, a lot of investors are asking is given that shifting the cost inflation outlook, how you have got the confidence to raise rate guidance. This specific question just on durability to pass-through cost inflation to customers.
We've heard a lot from you and peers about ability to pass-through high cost to customers in the Nordic area. Be good to get your view on that. And then also how the ability to pass-through high cost to customers differs between your Nordic and Asian assets. So, if you could give us a greater insight in your ability to mitigate with the top-line, these coasting inflation precedent across the group that will be really helpful. Thank you.
Yes, let me start with addressing your question and then Tone could add. But first of all, I don't agree to what you said that a lot have changed since the first quarter. I don't think that there are any surprises here. We are executing our strategic agenda. As Petter-Børre talked about on getting rid of the legacy copper investments in our network in Norway, and that has an effect. So, there's no surprise there. Energy prices as they're affected by, but it shouldn't be any surprise there either.
And on top of that, we are spending significant resources also on the cost side of our merger processes in Asia. But then to your question, we have historically taken -- raise prices several times. And the way we are looking at that is that we are increasing the value for our customers. So, when they're getting more -- giving them more speed migrating from 4G to 5G, we're pricing that. When we are giving them digital services, like the security and the infill projects we have had in Norway and that they're running out, really taken out in other Nordic business units, then we are pricing that.
So, this is something we have done several times. And this is something that we are constantly looking at. However, we don't want to comment on what we may do in the coming quarters. And the reason for that is also that we do not want to in anyway do enterprise signaling. But this is, of course, something we constantly are looking at. In some of the contracts in Norway, Peter, I think we also have index regulations in the contracts so that we can more automatically do that.
In Asia, it's a little bit different, especially in Thailand and Malaysia due to the very competitive landscape we there now see and also that those markets are not really coming out of the pandemic yet. However, in Bangladesh we're following the same logic with now a very strong 4% network, a very strong distribution. We also have the ability then to look at prices to look at that in line with inflation, also raising inflation costs.
Nothing to add to that, Sigve.
Thank you. It's very helpful.
Our next question, Terence Tsui from Morgan Stanley. Your line is open, please go ahead.
Yeah, good morning, everyone. Thank you for the question. My question was around your comments that you made in Asia and your expectation to see slightly Pan, profitable growth throughout the rest of the year. I'm just thinking, what's -- you can -- how do you feel about the competition levels? Because you've said many times the competitive environment is very intense. As I understand, 5G pricing is in some instances, but like 4G pricing, what do you think is going to be the trigger to see a bit more rational contribution for the competition, for the rest of the year to enable you to achieve your guidance? Thank you.
No, I think there are two issues there. One is related competition and the one is related to COVID recovery effects. In Malaysia and Thailand, we see that these markets are still recovering from COVID. And I mentioned that in my presentation, tourists had -- are yet to come back, migrant workers are yet to come back. And these two segments, we actually just -- we have historically been very strong in -- both in Thailand and Malaysia. So that they -- this is rough competition and this new -- have recovery effect.
However, we think that, in the second half, their recovery out from COVID is going to ease a bit of the pressure we see now on revenues. In Bangladesh is different. In Bangladesh, we see now that most of the COVID effects are out. So, for us in Bangladesh, it had been so important to strengthen our data connectivity. That's why we had bought spectrum two times, I think, in the last two years. And obviously, that is giving us a very good market position.
And that's also why you see, now, Bangladesh is coming back with a quite healthy revenue growth in this quarter. And that is going to continue in the quarters to come. In Pakistan, we also have a good quarter behind us. And we see that in Pakistan, the market is also recovery. However, in Pakistan, there is a limitation to how much data we can offer due to our spectrum position. But of course, we will try to follow and take our fair share of the growth in the market.
That's great. Thank you, Sigve.
[Operation Instruction] We'll take our next question. Maurice Patrick from Barclays. Your line is open. Please go ahead.
Hey, good morning, guys. I'm Maurice for Barclays. If I could ask a bit about your view on infrastructure as a whole. I noted in your comments in the presentation you talked about exploring a passive fiber company in Norway. And of course, now you're on the Tower side, you're reporting separately, there's a hint around JV structures. Just curious to hear your view really around -- your view of ownership with the infrastructure. To what extent the separation is about showing better financial disclosure or whether it's running differently or in fact, potentially selling stakes? It would be helpful to get your view on that. Thank you.
Thank you, Maurice. As you know, for us, the core of the operation and an improvement of operations is a key focus area for us. That has been the focus when we separate out the towers together with increasing the external revenue. Going forward, we will also continue to have this focus, this separate focus on the Tower and infrastructure and how to drive value from that. We are also as Petter-Børre said, evaluating whether there is any potential in fiber for us, as you know, we have significant investments. We believe there is continued growth in this market. And this is something we are constantly evaluating. And it's a topic we will typically come back to at the Capital Markets Day in September.
Our next question, Ulrich Rathe from Jefferies. Your line is open. Please go ahead.
Thank you. My first question, there is a comment, in the I think it's the release, that the pressures from the first quarter will continue to the second quarter. I think you gave some color on your prepared remarks. But when we look at Q2, are they already offsetting improvement somewhere else, or does this essentially mean that the EBITDA momentum in the second quarter would be similar to the first quarter simply because the pressures are continuing and everything else stays the same.
Obviously, you're not going to guide, but in terms of color on the shape that will be helpful. And then, I wanted to ask two clarifications only; one is, what exactly do you define as project cost when you talk about the different buckets of cost pressures, but what exactly is project cost? Is that the mergers or -- essentially just an open question? And then, the last clarification is EBITDA eliminations spiked to almost NOK500 million this quarter, which I think historically is an absolute high point so that suggests that you have essentially profits in some of the operating divisions that are a bit higher than there should be if the eliminations were allocated. Could you essentially explain where these eliminations are coming from and what caused them to spike in the first quarter? Thank you.
Yes, as you said, we will not provide any guiding for the quarters of the year but as I also said, we are looking into constantly how to make sure that we have the best operation and can improve the financial performance. And we do see that there are earlier effects of some of the initiatives that we are initiating already in the start of the second quarter. But then we say that we expect the full effects to come in the second half of the year. Project cost is typically cost related to M&A transactions and structured activities. This quarter, the main items is, as I said, Thailand and Malaysia. But of course, we also have some cost related to the exit from Myanmar. When it comes to EBITDA the eliminations are mainly related to the towers and the assessments between the segments India reporting then the tower operations. And that is also why you see these being at the higher level now than they have been in the past.
Thank you very much.
Our next question. Usman Guazi from Bloomberg, your line's open, please go ahead.
Hello everyone. Thank you for the opportunity. I've just got two questions, please. The first question was just on the announcement today that you're looking to set up this [Indiscernible] frequent Norway. I just wanted to understand the purpose of it. Is it to leverage third-party financing to be able to increase the build beyond which you couldn't do on your own, or is it a monetization or is a priority kind on monetization of the infrastructure? That is the first question. And then the second question was just going back to Thailand and Malaysia, just wanted to get an understanding for how quickly would you expect the synergies from the transactions to begin to be delivered? Thank you.
You want to do the first one?
Yes, I can do the first one. As Petter-Børre said, we are evaluating this. And in this evaluation, it's both considering what we believe will be the potential and the required investment levels going forward. When it comes to this market and this business opportunity. But it's also, of course, having a monetization side. So, we consider both of these elements as part of our total evaluation that we will do.
On your second question. We are -- as I said, we are spending significant resources now in both Thailand and Malaysia, partly on getting the two transactions approved, but mostly on preparing for the integration. And that is going very well. It's everything from putting a new joint management in place, to detailing out how to hit the ground running when it comes to start executing on some of the cost synergies, but also on the market position. So, at the moment we get there, they have final approval and they have done with the VTO process, then we will start executing. And we are very prepared for really doing that from day one. I cannot tell you exactly when the synergy costs are being taken out, but I can confirm that we are very prepared to do that as soon as possible. In Malaysia, we have talked about the cost synergies that we aim to take out. I think Tone, we have talked about around NOK 2.5 billion.
NOK 2 billion, yes.
We have NOK 2 billion in Malaysia. And then in Thailand, we haven't given you the final number. We have said that the Thai [Indiscernible] are much bigger, but it will come back to what we believe when it comes to synergies in that market.
Our next question, Nick Lyall, from Society [Indiscernible]. Your line is open. Please go ahead.
Yeah good morning everybody. Can I ask two please, Sigve. The first one with Petter-Børre being, maybe could ask about how you expect to protect yourself against, Lyse and Ice getting together? Are there anything you are planning? I mean, would you be more restricted, say, for example, on mobile price rises in future? Do you roll out fiber faster? Do you focus more on conversions? Could you just discuss the risks there and the protection you have against that? And then second, just to come back to the time merger. Again, can I just ask, what is there a discussion there? Could you give us some idea of timing of possible as the merger? And is there a discussion as well of European style remedies or is it a straight yes on new process. Could you just update us on the process, how that works in Thailand, please? Thank you.
You can start with your new competitor.
So of course, the merger or acquisition of Ice by Lyse and Altibox, is a major change in the market in Norway. How it will play out is still difficult to say. We are, of course, then preparing for the possibility, as you mentioned, that this will be a much more FMC type of market. We have now three players in the market with both fixed infrastructure and mobile infrastructure. So, it's natural to think that that could be the way that the market would develop, but it's a little bit early to say. And -- but their benefit then for Telenor to have a strong position both within the fixed broadband market and the mobile market, I think is good and it will protect us to a large extent from potential threats of this market moving more to an FMC market.
Just to add to what Petter said, before I go to Thailand, remember that we are having a significant investment now into rolling out a 5G network in Norway. We will be covering half of Norwegian population around mid to this year [Indiscernible], and then we will continue in 2023, and then early in 2024, we will have covered the entire population with our 5G network. There is nobody even close to the network presence or the coverage that Telenor has in Norway.
So the benefit of having a network that basically covers you everywhere you go, also in the middle of nowhere where you may have your cabin, it's really what we have been able to monetize going back, and that's also what we are going to monetize going forward. So, we have a very, very strong position in Norway on that. And on top of that, as Petter also talked about, we are really trying to position ourselves on services on top of just the data connectivity.
And I think we are the only one in Norway now that are able to both deliver those value, service, and products to the customers, and also being able to getting paid for it, so that's actually we're going to continue with. Then, to Thailand. Well, as I said, we are fairly confident that we will get their regulatory approval within the first half, meaning during the second quarter. That's the dialogue we have with the regulator now. I cannot give you any specific on what potential revenues may be.
But as you have seen so far, we think that there is nothing unexpected here that we haven't built into our business plan. That's why I'm saying that I'm fairly confident. And then as soon as we've got that regulatory approval and it seems like it's happening faster in Thailand than what it has the situation in Malaysia then we're ready to do the detail and then we are ready to, as I said, go with the Merck entity.
I think you mentioned revenues, Sigve. I was actually asking about remedies just in case new spectrum remedies or tower remedies. Is that what you meant?
Okay. Perfect. Thank you very much.
Our next question Francesca Schild from Exane, BNP, Paribas. Your line is open. Please go ahead.
Great. Good morning. Thanks very much for taking the questions. I've got two, um, follow-up on Asia. In respect to the deals, should we expect additional cash to materialize on completion? And then just more broadly, go farther overshooting through DC in the region and what is the drastic for your remaining agency, Sigve? Thank you.
Now we don't have any more to say about the completion. As I said, we have announced the cost synergies we expect from Malaysia to [Indiscernible] in cost synergies. And we have I think we said when we announced the PTX ideal, that merger here is around three times bigger than it does in Malaysia. But you didn't give you a new synergy cost synergy number, but we will come with that later. So that's what we're looking at there. And then there will be BTO also in Thailand and we of course we don't know. We have made clear what to retail price is, but we don't know how many of the existing shareholders that want to sell service that price. Then you all still offer our second question on Asia. You'll sort of have also bought the bigger plants yes.
Pension is on that. Do you expect additional cash return materialize on the completion?
No. We don't expect the cash return on completion. A Sigve said, in Thailand there would be [Indiscernible]. Depending on the uptake on the [Indiscernible], there would be a cash outlay. And then also we have a small cash outlay of $72 million in Malaysia at completion. So, the cash returns, they will come once the synergies start materializing and the operations are jointly. Of course, then we will receive dividend as part of our ownership in these assets.
And then I also think I heard you asking about what else in Asia. And as we have said several times and there is no change to that, we continue to also look for opportunities in Pakistan. But in Pakistan will then be the only business unit in Asia that we are not number 1 in the market and we are also continuing to explore potential more regional structural arrangement, as we talked about several times before. But there is nothing new to be said about that, so I don't know.
Thanks very much.
Our next question Ondrej Cabejsek from UBS. Your line is open. Please go ahead.
Hi, and thank you for taking my question. I wanted to follow-up firstly on the cost side. I know you said you don't guide on the questions, but in terms of just the project costs and selling and acquisition costs that you mentioned were pretty high this quarter. Are the -- for example, the project costs, are they front-end loaded or should we expect them to be around the same amount per quarter until we finish or close these transactions? And then in terms of the selling and acquisition, you mentioned you did a look in terms of Sweden and Bangladesh this quarter.
So, can you just describe, specifically also with Sweden, the activity, is that continuing into the second quarter? Are you happy with the performance as it gives you a good basis for the rest of the year in terms of growth? And just a follow-up. In Sweden, you highlight all these additional costs, but you also had a pretty strong EBITDA performance. So, could you help us reconcile those two things? Thank you very much.
Yes. As you say, it's difficult to give an indication of these cost between quarters. But of course, as long as we're running these projects and until the completion, there will be cost related to it. Remember, the size of these transactions is significant, and it is only natural that there is cost related to being able to close, and as Sigve says, prepare the integration for a very good start of the joint companies. In Sweden, of course, we will not talk about how we will act in the market. We believe we have had a good success over particularly this quarter, but also we saw it at the end of the fourth quarter on how we are successfully managing our ability to gain new customers, particularly in the B2C segment in Sweden, and we are particularly pleased with that. When it comes to the EBITDA performance, that is, as you say, it is good. It's coming mainly from the revenue growth, but then, it's also coming from the cost improvements that we do see in the portfolio in general.
Thank you. And if I may, one short follow-up on Sweden? Basically, I know you said you cannot signal anything in terms of pricing, but do you even believe that you have scope to do something in Sweden because I think even Hutchinson has increased some prices recently. So, is Telenor today in a state following -- you said couple of quarters of pretty good trends, do you think you're in a state that you can even think about following the market in that sense? Thank you very much.
While thanks for trying you again. As I said, we're not doing pricing going. But what I can say is that we see Sweden as a growing market. We see that from our own results, but we also of course see that from our competitors. And our positioning this way, this market is to come back to where before we starting to -- to slow down a little bit on market share. But our position is not to aggressively destroy that data revenue industry revenue potential that we've seen Sweden. Of course, we are not a market-leader in Sweden, we are following that followers, we will -- we will carefully look at how the market is moving and then we will do what we think is right.
Thank you very much.
On to our next question. Adam Fox-Rumley, HSBC. Your line is open. Please go ahead.
Thank you very much. I just have two follow-ups, please. At the end of the Norwegian presentation, you talked about investments easing off till the 5G roll out is complete. And you gave good description of that finishing early in 2024, I think, but I wondered if you could round out that discussion across to the rest of the Nordic markets and talk about the phasing there. And then secondly, on Norwegian fixed line, I just wanted to clarify, if you've effectively given up on upon getting any leniency from the regulator on your wholesale obligations? Is that come to any prospects to change their country? And thanks.
Yeah, I'll just start with the investments. As we say, we are currently and have been now for a couple of years running out -- rolling out the 5G in Norway and Finland. And particularly as Petter-Børre and Sigve alluded to in Norway, with this large operation, we have, these are significant amount. We will also and are continuing -- starting to roll out 5G in Sweden and Denmark. But in these markets, as I also talked about, on the towers, we have more joint operations structure, which means that the CapEx intensity on us is slightly lower in this market. And there is an expectation that once the heavy investment cycle on 5G is easing off, that there should be a potential for a lower CapEx to sales ratio.
And then to the regulatory requirements on loss in Norway. Let me split it into two parts. One part is related to the old copper network, where there is currently requirement on us to keep that network up for DSL customers until September 2025. That is something that where we are now constructively working with the wholesale customers, to try to find good solutions for their customers. So that they also can migrate on to new technologies. And we're offering them both access to our fiber network wholesale interface and also to our fixed wireless products, also on a wholesale interface.
In addition, of course, to the fact that in Norway, there are other fiber providers and mobile providers as well, which are also potentially offering this access. The second part is with respect to the future regulations. We are currently under a regulation to provide this access both on fiber, then on DSL. And we believe that the regulator will make changes to that, and because Telenor is no longer at dominant player in the fixed broadband market. And we see that other players, and particularly on the regional basis in Norway, are now more dominant players. So, there is a process ongoing where the regulator will come out probably with new regulations when it comes to the fixed market in a year's time.
By that, we complete. Thank you, everyone for listening in and thank you for the questions and have a nice day.