TeliaSonera AB Earnings Call Nuggets: Market in Finland and General Strategy for Norway

TeliaSonera AB (TLSN) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.

Market in Finland

Per-Arne Blomquist – Acting CEO and President: If you start with the different markets in Nordics, I think that we have had a, I’d say, rather calm first quarter, but we have pressure especially on the voice side and that was we can see. I think the toughest market right now seems to be Finland, where we have more price competition than I see in the other countries. But otherwise, I will say that the first quarter has been pretty calm. You talked about Uzbekistan, we have improved the margin due to the fact we’ve actually changed management a year ago when have taken out quite lot of cost. So it went up dramatically, whether we could keep (them on) this level remains to be seen, but I think at least they have come up to more or so sort of average within the Eurasian business as we have not seen before. The last question was?

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Jesper Wilgodt – Head of IR: It was on the new subscription and I can take that one. I mean we’ve had a quite good pickup ratio and roughly 20% of new sales since we launched in the consumer segment.

Per-Arne Blomquist – Acting CEO and President: Stefan 23%. I checked. I think it’s taken up in a more positive way.

Thomas Heath – Handelsbanken: Thomas Heath with Handelsbanken. Few questions, if I may. On competitive pressure in Finland, it seems quite a lot that this is your own TeleFinland brand and also (indiscernible). What’s the sort of pricing strategy from TeliaSonera’s point of view in Finland given that it’s just three players and the market is heating up? That’s the first question. Then second on the cost cuts in or the lower cost in Mobility, if you could shed some light on the components there, how much is staff, how much is lower handsets in Q1 and so forth?

Per-Arne Blomquist – Acting CEO and President: If we start with Finland, I think we have introduced a new offering called (Zorpia) which has been pretty successful. To some extent, it might have been a bit also even too aggressive on the price that I’m going to try to adjust that. Otherwise, Finland as such has been a very – is a competitive price market I would say and that has been for a couple of years. I think we need to find ways to actually increase, especially in pricing for mobile data and therefore this kind of new model that we introduced in Sweden, I hope we could also some point in time introduce in Finland to have a better connection between consumption and also what you pay for that. Then we had, cost, Christian…

Christian Luiga – Acting CFO: Actually in Mobility Sweden, it was Mobility Sweden or Mobility Group you talked about? Well, it actually comes from both personnel expenses and marketing expenses and other expenses as well. So it’s a combination of all three areas. I would say it’s no one that is bigger than the other one. Then we had …

Jesper Wilgodt – Head of IR: Okay, Lena.

Lena Osterberg – Carnegie: Lena Osterberg, Carnegie. I was just wondering little but about Spain since you decided to keep Yoigo. The margins were weaker in the quarter. I was wondering how much of that is seasonality? Should we see that every year or is there any other costs in the margin in the quarter?

Per-Arne Blomquist – Acting CEO and President: Well, partly I would say it’s seasonality and we also have some offerings at the beginning of the quarter that was – costed us a bit, otherwise I don’t know what you say on Spain, the margin.

Christian Luiga – Acting CFO: Well, the margin improved year-on-year and we have our seasonality effect in quarter one where the marketing campaigns so actually – the Christmas campaign are in January not in December like yet, and you see that from last year as well.

Andreas Joelsson – SEB: Andreas Joelsson, SEB. A follow-up on Spain, the subscriber intake was a little bit lower than usually and also churn higher. Is that also seasonal effect? Then on Turkcell, there is an AGM coming up 22nd on May. What are your plans for that when it comes to trying to get the dividend out of Turkcell what is your strategy, what do you believe the others are up to?

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Per-Arne Blomquist – Acting CEO and President: If I start with Spain, I think it’s important for us to make sure that we also get to underwrite quality customers. Sometimes we have taking in too much and shown out too much, so that has been sort of one of the efforts that we have tried to do during the first quarter in Spain. We will see going forward whether we can increase the intake or not. I think it has been also pretty aggressive on the price side at Spain, a lot of (indiscernible) have come out with new offerings, which also explains part of the churn, but I’ve tried to resist our self from just having a high intake and then high churns, we’d rather go for higher quality on the custom base than the higher churn rate.

Christian Luiga – Acting CFO: Just to add there, you can see the churn is coming from the prepaid side…

Per-Arne Blomquist – Acting CEO and President: Then when it comes to Turkcell, it is difficult to comment upon this. I mean we have an AGM at 22nd of May and it remains to be seen what will happen there, but I mean I will (forward it) when it comes to dividend, so we would like to take out the dividend from 2010 and 2011 whether (option or not) that’s another issue.

Jesper Wilgodt – Head of IR: All right, should open up for some questions from the conference call. Operator, please go ahead.


General Strategy for Norway

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Ulrich Rathe – Jefferies: Two questions, one is in Norway, I’m just wondering about sort of general strategy. Tele2 yesterday sort of reaffirmed these longstanding targets about really taking up the number two slot and gaining share within on an ongoing basis and isn’t this now a time for Telia to really hit back more aggressively, maybe even sacrificing some margin rather than following the Finland playbook and essentially giving up the number two position and then starting to fight back more aggressively, just wondering what you’re thinking is sort of in a big picture here. The second question I have is, on Spain, it looks to me as if the service revenues, the ARPU sort of driven revenues have actually decelerated in local currency terms, quite significantly in terms of trends. Is there a particular reason why this is sort of a lot weaker than they was in the fourth quarter, is it just general sort of price competition or what you attribute that to?

Per-Arne Blomquist – Acting CEO and President: The first question was about Norway. First of all, it depends on also how you measure your market share. I’m more for measuring revenue market share than same (cords), because that was actually the end rate – the intake for you. We will never be able to compete with Tele2 on price. They will always undercover. So that’s not a strategy yet to go forward. We have to find other offerings that attract the customers in the Norwegian market, and I think that what we have talked about now with this kind of how many of packet of (indiscernible) Sweden might be something that could be – something that could be launched in Norway, but to try to compete with Tele2 on price, that will never work. Then we had Spain, the service revenue, yeah, what do you say?

Christian Luiga – Acting CFO: Well, you want to answer.

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Ulrich Rathe – Jefferies: No, just if you look at the numbers, we can see that the billed revenues and servicing revenues, growth is approximately similar in this quarter versus the previous quarter. So I don’t know if you want to add something about.

Christian Luiga – Acting CFO: No, we have seen MVNOs coming in actually on the prepaid side and pushing the price down, but not so much on the postpaid side and that’s come back to the quality of the customers we’re trying to attract and the minutes of use in Spain as a market is also declining.

Per-Arne Blomquist – Acting CEO and President: I would also remind that the first quarter in Spain is also very weak after Christmas. So it’s a normal trend. I’m not surprised to see this.