On Wednesday, TeliaSonera AB (OTC:TLSNY) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
The Danish Market
Lars Nyberg – President and CEO: The Danish market?
Sven Skold – Swedbank Markets: Danish market, yes.
Lars Nyberg – President and CEO: Well, I think we saw a decline in the EBITDA margin in Sweden. You shouldn’t forget the absolute number. I mean it’s 42%. I wish you had 42% in some other countries. We are the number one player in the Swedish market and I think we have therefore responsibility in how we act in this marketplace. That’s why we did not participate in the price war, or whatever you want to call it, that occurred during the quarter. I think if we can stay north of 40% in our home market, I think that’s an acceptable result and then not losing market share that’s the other point. I think I said already five weeks ago when I came in here that if you have like 40% market share, it’s not theoretically sound to think you would like to have more as the number one player. So I must tell you, I’m pretty happy with the position and what happened in the Swedish market in the second quarter. I haven’t seen the numbers of the competitors, obviously except three maybe, but Tele2 and Telenor, et cetera. I have to wait a little bit for actually those numbers before I’m really certain how good or how we should see the – but the performance in the Swedish market, I mean Per was saying we have been growing for 22 consecutive quarters, it’s pretty good I would argue. With regard to the rumors about Yoigo, I mean first of all we don’t comment on those kind of rumors, but I mean there is no secret that I have said one day we will see if we can sell Yoigo. That’s not secret. I want them to play the second half, so that’s what I have said and now there are rumors and tomorrow there will be other rumors. We learned long-term ago not to comment on the rumors. Denmark, there must be rumors and I don’t comment on rumor. So I don’t know.
Per-Arne Blomquist – EVP and CFO: Let me just put some more flavor on the Swedish market, if I may. Remember that there was a one-off item in Q2 last year, so the margin in Q2 last year was a little bit artificially high. So the drop year-on-year is more 1% than the 3% reported. I think the feeling is that the competitive environment is a little bit more stable now than it was in the beginning of the Q2. I am sure there are aggressive offers out there in the market but not by a mile as aggressive as they were in the beginning of March or April. So, a little bit more rationale competitive environment now at the end of the second quarter. We can leave the microphones to Stefan.
Stefan Gauffin – Nordea: Stefan Gauffin, Nordea. First of all, I would like to come back to the margin in Swedish mobile and just if you can quantify extra cost for retention caused by the campaigns by Tele2 and 3, just to –sort of the extra cost for that. Secondly, I was a bit surprised by the strong subscriber intake in Spain, given that we have seen the regulators numbers for April and May and you also say that you have launched new offers in June. So, could you say something about the development during the quarter on subscriber intake is still a massive subscriber intake in June or – and then also I was a little bit surprised by the ARPU development in Spain. I know there was interconnect cuts, but what kind of impact did the offer have the ARPU development?
Andreas Ekstrom – VP, Group IR: Those I think was a record in the level of detail question that we had in a long time. Where shall we start? Apparently, my margin explanation was not enough from Swedish mobile. Per-Arne, I leave that to you.
Per-Arne Blomquist – EVP and CFO: But I think that, first, we did not really quantify the extra cost we have if we have had extra cost for the marketing. Then if you look at the retention, I mean we have had a very low churn rates still in Sweden, more or less at the same rate. There has not really a decrease or increases. It’s still at 15%, 16%. So I think you have to remember the 42% it’s a very, very good margin. I think that’s where you should stay. If you then don’t take Spain, you have to remember that during the second quarter, we have had a severe financial crisis that more or less exploded at the beginning of June, and of course that affects the market conditions as such and it will be interesting to see, as Lars said, what has happened with the other operators when they come out. That’s why I highlighted that the billed revenue is actually increasing with 18%. We have a good (indiscernible) customers which means that we are doing something right in the market. I don’t want to go into the details how it looks during the quarter. But we’re talking about the quarter. The operating model looks pretty well right now with the market conditions we have in Spain, but of course it’s very, very tough market given the financial environment.
Lars Nyberg – President and CEO: Yeah, and as I have said, we have to wait until we see the competitors’ numbers, but I mean Telefonica reported for the first quarter a decline of 18%, and we have an increase in the second quarter. We will see what they say about second quarter.
Andreas Joelsson – Enskilda Securities: Andreas Joelsson, Enskilda Securities. A question on Turkcell. Do you think it is a possibility to have another AGM before the Privy Council has said their ruling?
Lars Nyberg – President and CEO: Yeah, I think there is a possibility and I hope it would happen. I think it’s in everybody’s – nearly everybody’s interest and I realize that Cukurova it’s not in their interest because de facto as I said before they have a veto right as long as we don’t have more independent directors. But the Turkish authorities decided that the biggest (30) companies in Turkey should have a certain number of independent directors. We are very supportive of this. This has been discussed for years. It is now a decree, a law which Turkcell has to comply with. Common sense, (indiscernible) start ruling soon, but I think CMB has a responsibility to help to create that AGM. So I am really trying or we are focused on working on it trying to help to get there. Now, if we don’t get there in the fall, the issue as I said will be resolved I think by the Privy Council decision end of this year, beginning of next year. The Company is doing somewhat better now, but I still believe that this is a big distraction for management, has been for two years now and has affected the performance of the Company. So it should be in most people’s interest to resolve this issue.
Andreas Joelsson – Enskilda Securities: May I also ask on Finland and the performance there and how you should term Finnish operation now?
Lars Nyberg – President and CEO: I think we have to be honest. I think we’ve been beaten the last four to eight quarters. We felt this already a year ago and that’s why we made some changes. We did change the organization structure in Finland by appointing a Head of Sonera in Finland, Robert Andersson who joined us in May, I believe. I think that will make a big difference, because Sonera is a big company and they need a face, public face who is responsible for Sonera, who is Mr. Sonera, who is there every day. I think that plus what I call some multi-market operation, it’s all about the product portfolio also. It’s not only about the performance of individual people, it’s also about having an attractive product portfolio and particularly in B2C, I think we have been losing more than B2B. I think we know the challenge and I have some confidence that we will at least gain something back.
Andreas Ekstrom – VP, Group IR: I think we’ll leave the world on the questions to the conference call. Operator, can we have the first question please.
Andy Parnis – UBS: This is Andy Parnis at UBS. I’ve two questions. The first one was sort of a bigger picture question. What kind of growth fell to 0% or flat in the quarter? Do you think it’s now possible to get this sort of back positive, back above 1%, 2%, 3% in the sort of medium term, or should we now expect to be flat or even slightly negative going forward? Then the second question, I guess probably related is on Danish service revenues seems to have remained on minus 20% in the quarter. (You voiced) that this is also going to turn bit more negative now, 3 seems to have lowered its pricing on its main brand and reintroduced subsidies into the market?
Lars Nyberg – President and CEO: Well, if I look longer term, not like next quarter or this year, the answer on growth in mobility is going to be data. I don’t think you’re going to see growth on voice. Actually I think we will see further declines on voice. So, changing the business model to a data pricing which is very strongly related to how much you consume, I think, is going to be the answer. Now the fundamental was good, is that the third of surfing on the mobile is something people like. You look at the roaming prices. We reduced the roaming prices, one of the operators in the world a year ago, quite dramatically for Nordic and Baltic and then we went more or less to the rest of the world in the last 12 months. We can see how the traffic is growing very rapidly in mobile data outside of Sweden and Swiss go to the other countries and they know it’s a SEK49 per day and I feel safe with it and I think is a reasonable price, they start surfing. So there is an underlying need for our services. So that’s a good thing. The question is, can we monetize it? That’s why I showed you the picture where we have a 90% growth in volume and a 30% growth in revenues, still relatively small number compared to the voice business but that’s going to be the challenge. We look three years from now, we got to have another balance between the source of revenue being voice and being data. Data going to be the big portion of the revenue compared to voice, and if you have a flat fee on voice like the Verizon introduced, like I expect the industry to go towards, the key is going to be data, and an underlying demand for it, I think, is unlimited. The appetite for bandwidth is unlimited. I don’t think the fundamentals are wrong, I think we have a transition period as an industry.
Per-Arne Blomquist – EVP and CFO: Denmark, yes, I mean it’s – they have had another very tough quarter and I don’t know how much actually this will be impacted by the new offerings from 3 but what I know from our side is, we also tried to gain some kind of momentum with our 4G launch that we have made and I hope that that will help us on how to improve the numbers over time, but Denmark is a tough market and you should remember that we have a pretty large number of MVNOs that are also (reporting) on the prices, it’s not just on the 3.
Lars Nyberg – President and CEO: Well, I think back to this business model a little bit. In the market with three or four players, the number one player has a special responsibility I think on how to act. I think we take that responsibility in the Swedish market. I believe Telenor, at least, sometime take that responsibility in the region markets and TDC does not take that responsible in Danish market. TDC has more than three I think fighting brands that are pushing down the prices in the whole marketplace. We don’t disclose for a good reasons I suppose, the EBITDA margin any longer on mobility. Last time they did it couple of years ago, it was 30 and it’s not higher today, I can guarantee to. So if the number one player has 30 then the market is going to be very difficult for three or four players and the consequence of that is, that if you want to us to invest more money, we’re going to be hesitant. So this is an issue I think, it’s a balance for the regulators to ensure that we have investments in the marketplace to have a modern infrastructure. At the same time, we need to have a return on investment and in current profitability in Denmark, I’m not interested to invest much more in them.