Telenor ASA

OSE:TEL

Earnings Call Transcript 2020-Q1

[Sigve Brekke, President & CEO]

Good morning to everyone, and thanks for joining this call in very extraordinary times. It's an empty audience here at Fornebu today, and I really, really hope that we soon can welcome some of you back when we have our quarterly presentations. It is a difficult time, both for companies and for societies. And Telenor, being a telecom company, I think our services and our purpose have never been more important. As we say it in our vision, connecting you to what matter most, empowering societies. And we see that coming through in our first quarter, but we also see uncertainties going into the second quarter. Some highlights from the first quarter. I think we believe we deliver a strong set of financials. Organic subscription and traffic growth of 2%, and together with a continued modernization and efficiency program, it's resulting in a 3% EBITDA growth. We also have a low CapEx in the quarter, giving us a solid cash flow generation. In Norway, we are pleased to see a continued strong ARPU growth of 4%. We also see that, that ARPU growth is driven by the new digital services on top of the connectivity. Security and storage services are becoming more and more popular with both our consumer and business customers. And in addition, in Norway, a continued strong focus on the modernization program and on efficiency. In Myanmar, the turnaround we started last year continues, and we see a very strong demand of our mobile services and data connectivity, 1 million new subscribers added in the first quarter alone, and also an increased data usage. 2/3 of our customers are now active data users. In addition, I also want to mention DNA in Finland continues a very strong performance and also dtac in Thailand. Let me then dig a little bit more into 2 of our business units, Norway and Myanmar, starting with Norway. As I said, Norway continues to deliver a very solid performance in all the segments. And the ARPU growth is coming through, both in the mobile business but also in our broadband business. And I'm very pleased to see now the momentum we have with our operation in Norway. Starting with the mobile side, a 4% ARPU growth also in this quarter. I remember, we have done that now several quarters in a row. And it's coming on the back of our investments into building a world-class network. It's really paying off. But it's also coming from the efforts of putting services -- digital services on top of the data connectivity and the focus we have had in services like security, like insurance and like storage. And these services are 100% digital, where we are utilizing our strong brand and the digital dialogue we have created with our customers. These services are -- we are seeing a growth of 48% year-on-year coming from these new digital services. On the broadband side, an ARPU growth of 11%. This growth is coming from new connections, upselling in data bundles and also increased DSL prices. We added 13,000 new fiber connections in the quarter and an all-time high 17,000 new fixed wireless connections. The fixed wireless access approach we have had on 4G gives us a very good customer experience, and that's also part of our 5G rollout plan. In total, again, we are more than offsetting the decline in the legacy copper fixed business with these new revenues. And we continue our modernization journey, faults- and legacy-free infrastructure position. But in Norway, modernization is more than only creating a future-proof network. It goes across all the segments and all categories. We have a very systematic approach, basically touching all the cost elements. And this program gives a good OpEx reduction of 4% in the quarter. Turning to Myanmar. As you all know, we started a turnaround program in Myanmar last year. And I'm very pleased to see that this strong development we saw in the second half of last year continues, with an impressive 25% revenue growth in the quarter. It's coming from 1 million new subscribers being added in the first quarter alone. And if you look at it from a year-on-year basis, we added 5 million new subscribers compared with the first quarter in 2019. In addition, we also see revenues coming from an increased data consumption. This is very impressive development because Myanmar continues to be a competitive market. And the performance comes again on the back of the investments we have done in our network, but also the approach we have in implementing a strong distribution. As I said, the data continues to grow at a high speed. 66% of our customers are now active data users. And on average, they are using 4.6 gig per month. That's why year-on-year, the data revenues grew with 51%. And the data growth is now compensating for the decline we see in the voice business, 4% decline in the voice revenues. Then, turning to the effect we see of the COVID-19 situation. The first quarter was a solid and a strong quarter. It's in line with the expectation we had when the year started. And it's also in line with the guiding we gave you at our Capital Markets Day 2 months ago. However, from the mid of March, we saw a change. And this change is mainly related to the lockdown situation we see in our Asian markets. And with the lockdown of these markets, we see closure of retail shops and travel restrictions. For example, 90% of the retail shops in Malaysia are now closed. And it varies from 90% to 30%, 40% in Pakistan. In Thailand, as another example, 50% of the retail shops are closed. And this is affecting the gross sales because in most of these markets, you have to do a fingerprint verification when you buy a new SIM, and that has to be done physically. And it also affects the people that are coming frequently to the shops to top up their prepaid account.And in addition, people are moving out of the cities and the daily earners working in the cities are losing their income. In addition to that, we also see a sharp decline in roaming revenues. That's mainly in our Nordic operations. We saw a 50% reduction in March and even more going into April. However, it's worth mentioning that on a group level, roaming revenues only account for 1% of the total revenues. We also see effects of fewer tourists coming into Thailand and then, not that many tourist SIMs being sold. So far, we have seen limited effect in the B2B segment, both in SMEs and with the corporates. And almost all of the B2B segment for Telenor Group is in the Nordics, and most of that, again, is in Norway. And in Norway, the telecom services are a part of the government stimulus packages. So it's covered by the packages that people can apply to. And we, therefore, see and we consider the B2B revenues going forward as relatively robust. On this chart, the waterfall chart here, you see that the revenue development is mainly coming from Asia, where we have a relative stable situation here in the Nordics. The effects we saw in the second half of March is then going to continue into this quarter, second quarter. And as I said, it's mainly coming from the lockdown situation we see in the Asian markets. And according to the Asian governments, the plans they have is to gradually open again these markets during May and maybe also into June. However, there are uncertainties on the duration of the lockdowns and when the lockdowns will be lifted. In this situation of uncertainties, our focus is, therefore, to secure our cash flow.And to do that, we are looking at how we can create flexibility throughout both the CapEx and the OpEx programs that we have and how we can adjust that. To have this focus on securing our cash flow, we are working very closely with our operating units. We are monitoring our business very closely. We are delivering and focusing on our modernization and structural programs, as we explained at the Capital Markets Day. We are optimizing our sales and marketing activities through the situation. And we are constantly finding new ways to reach out to our customers, both physically and digitally. And we are also now experiencing how to run our infrastructure automated -- more automated and remotely.The last 3-year focus has been to modernize our company. And this has made us more robust to handle the situation and uncertainties we are now in. And in this extraordinary situation, it can be even an opportunity for us to speed up some of the structural programs we explained to you at our Capital Markets Day 2 months ago. And we are encouraged by the fact that we are now able to run our operations from the home offices in all our business units. And we are learning every day how to operate our infrastructure digitally and to move physical interaction with our customers to digital channels. To give you some examples, starting with the left-hand side of this slide, from Bangladesh Grameenphone, we see a significant 43% growth across digital channels since the lockdown started or since the COVID-19 situation started. This is then coming from moving our customers into their MyGP or MyTelenor app, which we also now are implementing and pushing in all our markets. So we are moving the physical interaction with our customers to top up into digital channels.In the middle here, we are also explaining what we do on the data traffic. This increase we see here on the slide is now happening across all our business units, with the biggest data increase in Asia. In Asia, we see a data increase varies from 21% up to 42% since the crisis started, whereby in the Nordics, we see mainly a growth in voice traffic. For example, in Norway, we have seen a 50% increase in the voice traffic in the last 2 months. The network investments we have done in all our business units are now really paying off -- is now really paying off. This is why despite this volume increase, our customers are satisfied and actually, we are measuring this with our network NPS. And since the crisis started, we have seen a stable or increased NPS development in all our markets.To the right-hand side of the slide, in such a critical time, we are also proud of the investments we have done into automization and AI and machine learning. Automization and AI is enabling predictive network management and self-healing faults. This reduces the need to visit sites caused by incident or performance issues. And today, 100% of our NOCs, or network operating centers, are enabled and tested for working from home. And 5 out of our 9 business units are now fully operating their infrastructure operations remotely, whereby the 4 remaining also do this partially. At the Capital Markets Day 2 months ago, we presented an updated strategy. It's a strategy to continue the strategic direction we have been on, and it's basically to modernize our company and makes us fit for future challenges and opportunities.As you may recall, what we presented is a strategy built around these 3 pillars: It's about growth, it's about modernization and efficiency and it's about responsible business. And this strategy is not going to change, even in the challenging situation we have now. To summarize with some examples. On the growth pillar, in the first quarter, we do see growth now in adjacent services, as I explained in Norway, and we are going to take that experience into other markets. And we see real growth opportunity in Asia coming from increased data consumption. On the modernization, the current situation shows us that we actually can accelerate our digital customer interactions. In Denmark, for example, we have seen an increase of digital sales with 30% during the last 3 months -- last 2 months. And as I explained, in Grameenphone, 50% increase in a digital top-up, similar trends we see in all our business units.Another example is customer service, which we now have enabled from home. And 4 of our 9 business units are now fully operating customer service remotely. And the last pillar, responsible business. We are working with governments and our customers to ease the situation they have. Example of this is how we are sharing analytics, mobility data, anonymized and aggregated data with health authorities in the markets where we operate. Another example is how we have enabled and pushed online learning. And the third example, it's with the increased COVID-related fraud, we are focusing on security services for our consumer and business customers. And on top of that, we are also actively helping our B2B customers with the extraordinary situation they're in. I'm now going to hand over to Jørgen. But before I do that, as you know, Jørgen will take over as a head of our Asian businesses, starting actually in some few days, May 1. So this is his last quarter presentation, Jørgen. And Jørgen, you have been really instrumental in the way we have been building and driving our modernization strategy in the last 3 years. And now our new CFO, Tone Bachke, is going to take over that and focus on that further. I'm looking forward to Jørgen taking charge in Asia, based out of Singapore, with the team. With that present in the Asian market, we will be able to even better stay close to our Asian business units and to drive the performance further and also be closer to handling challenging government relations. On top of that, Jørgen will also focus and looking for value-creative structural M&A deals. So with that, Jørgen, please.

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

Thank you, Sigve, and good morning to everyone. Should I also dare then, to say good afternoon to Asia? Looking back at Q1, I'm pleased to see that we also, this quarter, are modernizing according to our plan. And as Sigve said, that will continue to be a key priority, and we feel it is more right than ever before. We gave you an update on the strategic direction and ambitions for the coming 3 years at our Capital Markets Day in beginning of March this year. Since then, we have seen the COVID-19 situation increase in both magnitude and in severity globally, primarily from the latter part of March. And as such, our Q1 figures have only limited impact from COVID-19, approximately NOK 150 million or so on the EBITDA.The service we provide are critical to people and societies, especially, as we say, in demanding times like we now have. So therefore, of course, it is our highest priority to making sure that we continue to provide reliable, high-quality services to our customers. That is job number one. The network and IT modernization we have been doing throughout the last years has enabled us to have a better platform, competencies, and also ability to deal with situation like this. And I must say, it's impressive to see how my colleagues, while most people are working from home offices, are able to run our networks and operations as smoothly as we do. As Sigve mentioned, we see the duration and also the authorities' decisions and of this, as a consequence, its impact on the prepaid markets in Asia as the biggest uncertainty going forward.If you have a look at the group figures for the quarter, total revenues increased by NOK 4.4 billion or approximately 16% compared to last year, predominantly as a result of DNA inclusion in the numbers of NOK 2.4 billion and then currency effects of approximately between NOK 1.5 billion and NOK 1.7 billion. In the quarter, we delivered an increase in organic subscription and traffic revenues of 2%. As Sigve was pointing to, during the quarter, we continue to see impressive subscription and traffic revenue growth in Myanmar of 25%, driven by the strong subscriber uptake we have seen during the past year. We also see continued solid performance from Norway with both growth in mobile, where the ARPU increased then by 4%, and in the fixed business. Within fixed, we see that revenues from fiber and fixed wireless access is also, this quarter, able to offset the copper-related decline. Who would have thought that a couple of years ago. It's very good for us. This quarter, we have recorded high 30,000 new additions of customers in copper-replacement products.Bangladesh delivers 4% growth in the quarter, but has, during the quarter, also lost 1 million subscribers. But it's important to acknowledge that this is only a result of some difficulties we had getting hold of new number series from the regulator. In March, Grameenphone has -- was allowed to conclude and to recycle close to 8 million phone numbers, so easing the number situation the coming months. And we are very pleased that the regulator found a solution to this issue. In addition, the growth in Thailand was 3% in the quarter.In Sweden, we continued to see pressure on subs and traffic revenues with a decrease of 4% in the quarter. Tough price competition in B2B segment continues to weigh heavily on the revenue development during the quarter, but also B2C see some negative development. Pakistan, the growth continued along the same lines as previous quarters, with a decrease of 11% related to the tax issues last year. As we have said, during the quarter, we see limited impact from COVID-19. However, towards the end of the quarter, we start to see FX materialize predominantly from prepaid in Asia and also from roaming revenues. And to date, we see little impact on Nordic B2B revenues.We see solid OpEx reduction of 2% in Q1. We have steadily progressed on our modernization journey, which we talked about in our Capital Markets Day. This 2% reduction across the group is in line with our midterm ambition of 1% to 3% reduction per year. And we believe we have very good and firm cost control across the group and in all business units, which this slide, where many are circulating around 0, also should give an indication of. If you take a look at the OpEx per category, we see there is an improvement across the 3 largest categories. The improvement in sales, marketing and commission is spread across almost all companies, while lower personnel cost is a result of organizational modernization initiatives, primarily in Norway, in Pakistan and also in Thailand. We see increased energy cost also this quarter, primarily driven by the same factors as before, it is Pakistan and increased network footprint in Thailand. And then, if we look at the development per business units, I would like to highlight solid cost improvements in Norway of 4% and cost improvement in Pakistan of around 8%.First quarter was a solid quarter when it comes to EBITDA growth, showing a 3% increase compared to last year. The improvements were driven then by strong growth in Myanmar, subs and traffic revenue growth and efficiency improvements in Norway and revenue growth in Bangladesh and Thailand. On the negative side, we see reduced gross profit in Malaysia, its higher handset subsidies and also reduced contribution from international traffic. Furthermore, subs and traffic revenue development in Pakistan and Sweden are taking down the EBITDA somewhat. Reported net income to equity holders of Telenor ASA in the first quarter was NOK 0.7 billion, a decrease of NOK 3.1 billion compared to last year. Increased EBITDA was more than offset by negative development in net financial items of approximately NOK 4 billion, driven by mostly unrealized currency losses of NOK 2.7 billion. There was a positive gain of NOK 0.4 billion last year. So the change is NOK 3.1 billion.Telenor, as you know, holds debt in different currencies as hedges to foreign net investments. The depreciation of the Norwegian kroner has led to both investments but also debt in all of these currency to increase, measured in Norwegian kroner. For debt held locally in the various opcos and debt in Telenor holding company that qualifies for hedge accounting, there is obviously no P&L effect. We have liabilities in U.S. dollar to fund and hedge the investments in some of our Asian operations. Most of this U.S. dollar debt does not qualify for hedge accounting, and hence, the currency impact is taken over P&L rather than directly towards the equity and hence, balance sheet. This is the main driver behind the reported currency loss in Q1.From an economic perspective, the principle of allocating debt to protect asset values in various currencies have been effective during the quarter. In this quarter, we see neutral effects on the equity in respect of the currency effects. Then, in addition to explain the result, depreciation increased by NOK 1.5 billion, primarily as a result of the consolidation of DNA, that's NOK 0.6 billion. And then 2 more factors, higher depreciation in Norway, NOK 0.3 billion, due to increased asset retirement obligations related to the copper sunsetting and higher fiber investments, and NOK 0.3 billion in dtac from network built during last year.CapEx this quarter shows a reduction compared to both last year and previous quarters. The level is affected by low investments in both Bangladesh and in Thailand. The changes we see this quarter also demonstrates that we have flexibility on CapEx. As we have described earlier, we are running a dynamic CapEx allocation process where the Chief Technology Officer of Telenor and I are allocating additional investment funds throughout the year to business units based on profitability assessments of different cases. In situation like the one we see today, this setup increases our ability to maneuver and to adjust investments levels to protect cash flow. And as you know, for Telenor, in the end, besides running the solid networks and taking care of our people, we care most about free cash flow development. Free cash flow in the first quarter was NOK 3.8 billion, including NOK 1.2 billion from the first of 4 installments received related to the sale of our operations in Central and Eastern Europe in 2018. Free cash flow before M&A was NOK 2.7 billion, an improvement of NOK 1.1 billion compared to last year, despite the negative impact of the deposit made to BTRC, the regulator in Bangladesh, of NOK 1.1 billion. The increased cash flow was a result of higher EBITDA, improved working capital and then an effect from Sweden last year, the payment of the 700 megahertz spectrum license at that time. Over the course of Q1, we have seen material weakening of the Norwegian kroner compared to all the currencies Telenor is exposed to, with, for instance, 7% and 19% depreciation against the euro and the dollar, respectively. This has a direct impact on our net debt, which this quarter has increased by 15 -- approximately NOK 15 billion driven by FX movements only. We are therefore reporting a leverage ratio in the upper end of our targeted level. And then bear in mind, please, leverage is measured using the closing rate of the quarter, while the last 12 months EBITDA is using the reported numbers and hence, the developing, at that time, currency situation, using the same FX rate on EBITDA as debt leverage ratio remains unchanged from last quarter. Let's talk about the outlook. As you have seen, we delivered solid Q1 results in according with our previous financial guidance. However, the COVID-19 situation has increased the uncertainty and the visibility the next weeks and months to come. We will closely monitor, as Sigve said, the development, and we will take necessary measures to ensure business continuity first and performance and cash flow generation next. The main uncertainty we see now is related to duration and then also to authorities' decisions going forward. This will, in particular, impact prepaid markets in Asia. In addition, as we said, we have seen roaming revenues coming down, but bear in mind, that is only accounting for 1% of our total revenues. Management focus now is on CapEx and cost management in order to secure resilience in cash flow generation. So therefore, due to the increased uncertainty going forward, we now have a new outlook, which is saying lower subs and traffic revenues compared to previous guidance, reduced EBITDA growth compared to previous guidance, CapEx through sales of around 13% as opposed to the previous 15% and finally, our CapEx focus and continued cost management will secure resilience in cash flow, we believe. And then for the medium term, we, of course, maintain our financial ambitions. Then, I believe we are ready for a Q&A session, Sigve. And please, everybody, state your name and where you -- and the company you're representing. And then moderator, may we have the first question, please?

[Operator]

Our first question today comes from Maurice Patrick from Barclays.

[Maurice Graham Patrick, Managing Director]

It's Maurice here from Barclays. Just a question on the modernization program related to COVID-19. I mean you've made the point this morning, articulately, that you see the mathematical impact of roaming and tourism. You do talk about how physical channels are closing or have closed, but actually, customers are adapting and NPS is actually flat to up. I mean you've led, I guess, you've levered using the age of modernization and digitalization compared to many of your peers in Europe and in Asia. I'm just wondering if you see this as an opportunity to differentiate against the competition for the coming weeks, but also beyond COVID-19, given the investments and decisions you made in that respect and looking at what your peers are doing.

[Sigve Brekke, President & CEO]

Yes, Maurice. I don't think I want to comment too much about what our competitors are doing. But let me try to explain why I think we are in a quite solid position in what we are doing. I think it's basically about 3 things. First, it's about digitalizing the customer journeys. This is something we have been doing over the last 2, 3 years through the digital app with our customers, as I used as an example from Grameenphone, but also through other digital channels, including the call center. And now we see that those efforts is helping us in a situation where neither the call center agents are at work nor the shops are open. So we have kind of the platforms and the instruments and the tools in place to quite quickly digitalize the customer journeys. The other bucket would be on the digitalization of our infrastructure. And I was actually quite surprised myself that we were able, in a matter of some few days or weeks, to actually now operate our network operating centers and IT infrastructure remotely. And I think we -- that also, coming from what we have done in the past, bringing all the data traffic up in the cloud, but also implementing automated robotic systems to run the infrastructure. So this will help us, I think, to further bring down the cost. And the third bucket, it's what Jørgen talked about, the dynamic CapEx approach. And I think we went into, or Ruza, our CTO, went into quite some details on that in our Capital Markets Day, on how we are systematically bringing down CapEx cost, CapEx efficiency with the global procurement center, but also with a very hands-on approach, actually bringing down this to one single site is a factory. And now we see how that is enabling us actually to handle the traffic increases without increasing the capacity investments, how we are able to balance traffic amongst the base stations. So those will be the 3 bucket areas where I think we both have a little bit edge versus others, but also where we can even speed up the programs and the plans we had.

[Operator]

We move on to our next question from Peter Nielsen from ABG.

[Peter Kurt Nielsen, Lead Analyst]

Just a question on Norway, please. As you highlighted, a stellar performance from Norway with the fixed copper replacement products sort of more than making up for the decline in the legacy revenues. Are there any specific early gains here? Or -- what I guess what I'm driving at, is there any reason to expect this should not continue for the coming quarters as well? It is outstanding. But still, is there any reason to expect it should not continue? And may I just follow-up with a quick one for Jørgen, please. Jørgen, could you elaborate a bit on the lower CapEx outlook. 2 percentage points is still quite a lot. Where is this coming from? Does it impact the 5G rollout in Norway? Any color you can give us?

[Sigve Brekke, President & CEO]

Yes, maybe I can take the first question first. Yes, I think you used the word a stellar performance. Actually, that's a good word. I should have used that myself when I described Norway. It is really an impressive performance we see in Norway. And so what we are doing now is just to continue the modernization program. We are continuing to roll out fiber. We are -- and we don't really see that the COVID situation is impacting that a lot. We are continuing to roll out our fixed wireless product on 4G, and we are continuing also to plan for the 5G going forward. There may be some timing issues on 5G, but on the fixed wireless product on 4G and on fiber rollout, we're going to continue with that. So I don't really see any major issues in delivering on that modernization program. However, things could, of course, turn into more challenges in Norway. But as we see it right now, that's the plan.

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

Yes, and Peter, regarding the CapEx numbers and our outlook. Yes, it's a significant numbers. But first, it is illustrating the way we think about these things and the way we try to operate and the way we try to handle activity levels in the group. So as Sigve is saying, and as we have talked about before, it is an indication that we are working very closely with the business units integrated and that we are spending time on these processes and these decisions. We assume that none of our programs will change because of this adjustment. So basically, what we have talked about, that goes for Norway and also other countries, we plan to continue with all our main programs, but we are adjusting a little bit. Some of this will be coming from the natural consequence of the COVID itself, i.e., there is lower activities in all our market, or should I say, in most of our markets. So it comes by default. But of course, a significant part of this change is actions that we are making, decisions we are taking and, should I say, some delays. So there might also be some of the programs that will be somewhat delayed, but we are not talking about years here. We are talking about months, and we are talking about previous -- the calendar year is, as we know, from January to December. And maybe we need to spend the first quarter for a couple of things that we plan to have done within the year. So it's minor adjustments. It's no strategic shift. It's no significant delay in any key programs. But it might be a little bit adjustments across the board in order to facilitate for this.

[Operator]

We move on to our next question now from Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

My question is about the impact that you mentioned on the prepaid markets in Asia from the virus directly. Would you disaggregate that a bit between situations where simply not possible to top up because I think in many cases, cash still needs to change hands, a possible economic impact that you're already seeing or potentially less demand? Could you sort of just unravel the elements that would weigh on prepaid top-ups a bit and also what countermeasures you can take? I understand these digital top-ups go up -- they go up -- only go up certain groups in the population because not everybody has the ability to transfer money electronically. So what countermeasures can you take in this situation?

[Sigve Brekke, President & CEO]

Yes, thanks for the question. I think there are 2 effects. One is a sale effect and also selling new SIM card. And remember, then, in these markets, most customers have more than one SIM card. And they are very price-sensitive and they go and shop for the best promotions out there. So -- and in most of these markets, you have to have a physical verification of your fingerprint. And that has to be done physically. And that's why you see that the sale is going dramatically down when the outlets are closed. However, the flip side of that is that the churn is also going down. So there is basically less activity in the market with these churns customers shopping for the best offers. And with that, of course, also come reduction in commission being paid to the retailers. So it's not much we can do with that. Then, we have to wait for these retail shops to be open again. And the other effect is on the top-up. And again, in several of these markets, people are used to go and top up maybe once or twice a week, and they are very cash-driven. So they go to the physical outlet. And when that is not possible anymore, we have to do it digitally. And this is why we now see that we haven't seen much change in the customer demand because people are then moving very quickly into digital top-ups. And that happens across the markets. So we see now a growth in digital top-up transactions rather than the physical. So a 50% growth in Bangladesh only in 2 months or in 6 weeks is showing exactly that. So that's what we are doing, pushing our digital channels with our customers. And that works very fine because we were well prepared for that. And then I don't think, according, as I said, to the Asian governments, they plan to open up most of these markets during May. We don't know if that happens. So it may go into June. But I think we do not expect those markets to be closed very, very long. I don't think the economy in these Asian markets can afford that. So we will probably now see in the coming few weeks, more physical and more digital interactions, and we are well prepared to do that. And then hopefully, the market will open up again.

[Operator]

We move on to Terence Tsui from Morgan Stanley for our next question.

[Terence Mun-Sion Tsui]

I had one on Sweden, please. The revenue and EBITDA decline was quite severe in Q1. I'm just wondering if you can give us a bit of color about your Swedish business, what you need to do to turn that around to get to, hopefully, revenue growth in the future.

[Sigve Brekke, President & CEO]

Yes, we are not happy with the development in Sweden. I think I can be that direct. And Sweden, it's now the market where we see the most challenges. A year ago, it was Thailand and Myanmar, and as you know, we have demonstrated our ability to turn that around, and also Pakistan, which is also, now, I think, refocused in the way they operate. So now our focus also on the group level is on Sweden. And it is -- so we -- it is kind of 2 things that we're trying to do. One, it's to also, in Sweden, modernize our infrastructure. We are in the midst of modernizing our IT infrastructure, implementing a new BSS platform that will enable us to more efficiently come out with new products and have more flexibility on that. And we are also now in the midst of modernizing our network infrastructure. And the other part, it's to come out with more competitive offers in the markets. We, in Sweden, we are not incumbent, as you all know. We are #3 in the market. So we will stay competitive. But at the same time, we will be value-driven. And that's exactly what we are trying to do, see what we can now offer our customer services, but at the same time, secure the profitability going forward. So we are in the midst of that program now. So I don't think I can go more into details. And then, ensuring you that this is on top of our priority now to return into growth in Sweden. Having said that, and as the Q1 report also shows, we are having a good cost performance in Sweden. So we are -- and that's coming out of the modernization that we do in the Swedish business as well.

[Operator]

We now move on to Andrew Lee from Goldman Sachs for our next question.

[Andrew J. Lee, Equity Analyst]

I had a question on the COVID impact and then a question on the Axiata talks. On the COVID impact, I think you're pretty clear that it's duration rather than scale of that impact, that's the key uncertainty for you. You're very helpful in giving the NOK 150 million impact in March. And I think you mentioned on the slides and in your commentary that, that's really the second half of March. So just for us to get a sense of the run rate into Q2, at least, for the time being, again, ahead of the lockdown removals, should we consider the kind of monthly run -- the full monthly run rate to be more like double that NOK 150 million at NOK 300 million? Kind of any color you can give on the scale of the run rate into April would be really helpful there. And then secondly, just on -- just the second question was on the Axiata talks. There was speculation at the start of the year that they had restarted. And in March, there was press speculation that they've collapsed due to uncertainties of [indiscernible]. I just wondered if you can make any comments on this.

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

So you were breaking up a little bit on the Axiata question. So Sigve will try to comment on that, but you might have to fill out the question a little bit. On the COVID question, I'm afraid we will have to disappoint you a little bit. So I appreciate that you acknowledge that we have given the guidance in the numbers for the first quarter, NOK 150 million, so 1% of our EBITDA basically in first quarter. And we have also indicated that, as I said, and I believe Sigve said as well, it came late in the quarter and after Capital Markets Day. So there are some indications. To convert that to a run rate for a second quarter, I'm hesitating to do. We obviously have our estimates and views on it. But as we know, this is a moving target. And for everybody, COVID situation globally is volatile and hard to read. The most important thing for us is that we don't think this is changing our operations or our deliverables to the customers. We believe that we also are able to protect our cash flow quite efficiently in this situation. And we are maintaining our medium-term view of the company and of the strategic priorities. Sigve, Axiata?

[Sigve Brekke, President & CEO]

Yes, yes. Just before I do that, what both Jørgen and myself have tried to emphasize here, it's our focus on cash flow generation and the flexibility we have with being very close to both CapEx and OpEx developments in the markets. And that, I think, what you should expect us going forward. On Axiata deal, just reminding you on what we said in October last year, when the deal broke off. It was due to uncertainties that the discussion ended. And -- but we did say that we are not ruling out that this deal or similar deals could come back. That was what we said. And that is what we say now also. There is no ongoing discussions as of now, but I'm not ruling out that structure like this could come back. And that's also why I said when I kind of gave my wishes to Jørgen, that this is one of the things that he and his team also will focus on going to Asia to look for those value-creative structural opportunities.

[Operator]

We take our next question from Siyi He of Citi.

[Siyi He, Vice President]

Just have a question on the strong growth in data consumptions in Asia. I'm wondering if you can comment on whether you have managed to monetize some of the growth. And I know it might be a little bit earlier and just for your views on how do you see the data usage pattern postlockdown and maybe the monetization opportunities. And my follow-up question is also on the traffic increase. Do you think that you have sufficient spectrum and the network capacity to cope with the current demand increase?

[Sigve Brekke, President & CEO]

Yes, we are, in some markets, monetizing on the growth. For example, Bangladesh -- I'm sorry, Myanmar, 25% revenue growth is coming from 1 million new subscribers, but it's also coming from a quite significant growth in data. 4% revenue growth in Grameenphone, despite us not being able to actually -- to have a lot of new sales due to the -- not getting number series, also coming from data growth. So this, we are very focusing on this to monetize the data growth. On your second question, yes, I think this is going back to what our CTO explained, actually, in the Capital Markets Day, how we are looking at CapEx efficiency, not only OpEx efficiency, but CapEx efficiency, being able then to deal with increased consumption in our network without having to match that with capacity investments. So that's exactly what we do now. We are basically treating every base station, every site as a factory and trying to utilize as much as possible from that factory's capacity. So we are spreading out the traffic between the sites. We are trying to spread out the traffic throughout the day, trying to get it out from the peak hours and staying very, very close to actually utilizing what we already have invested. So the traffic increase that we have seen the last 2 months, both on the data in Asia, but also on voice in the Nordics, actually comes with an increased customer satisfaction. So it's not such that, that increase is giving adverse experience from the customers. It's the other way around. And that's a focus going forward also. So our networks are well equipped to take the traffic and the growth that we currently see.

[Operator]

We move on to questions from Henriette Trondsen from Arctic Securities.

[Henriette Trondsen, Research Analyst]

Henriette Trondsen in Arctic here. First one is on Myanmar. Myanmar was especially strong this quarter on subs and traffic revenue growth. You touched a little bit on this, but any reason that this will not continue? Have you seen any changes to competition in Myanmar? And the second one is on spectrum. Have you gotten any indications that the current corona situation will postpone or there will be any changes to potential spectrum auctions or allocations?

[Sigve Brekke, President & CEO]

Yes, Henriette. On the Myanmar, it's -- as you probably know, it came from both new subscriber additions and it came from a quite significant data growth in Myanmar. Now we also see that Myanmar had some lockdowns in the retail. So what that will mean in terms of our ability to continue to grow customers is too early to say. But we are going to continue to focus on the data growth going forward. And -- but it's just uncertain how the lockdown situation and the COVID-19 situation, how hard it's going to hit the Myanmar society and the retail chain. So I basically don't know that. On the spectrum, I think that's too early to say. The governments have not given any clear signals on that in the various markets. However, we don't need any urgent spectrum as of now. So lack of spectrum is not hampering what we're going to do this year.

[Operator]

We now move on to Nick Lyall from SocGen for our next question.

[Nick Lyall, Equity Analyst]

Just a couple of questions, please. Really on the breakdown of the NOK 150 million, please, firstly. Is it fair to say the vast majority of that is roaming initially, given it's quite late in March? And then second, coming back to the point about usage as well, if possible. Specifically, on COVID, how does the -- how do the lockdown restrictions, so the verification and the lower sales compare to the increase you might see in some of these prepaid data volumes? Can customers actually afford to see their ARPUs go up in a lot of the markets? And do you think that might compensate partly or for at least some of the lost sales in the shops?

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

Nick, we can hear you. You're probably not on a Telenor line, but still we could hear you. So you're all fine. We don't have much more guiding to the NOK 150 million. It's a mix of the 2 elements that we have pointed to. And it's a fair mix of it. So we don't have more guidance to that. Sigve?

[Sigve Brekke, President & CEO]

Yes, on that second question, I think it was about affordability. I think again, that's too early to say. I don't think we have seen any affordability issues in our Asian market. It is basically the lockdown of the retail shops. However, it's, of course, uncertain for us as for anyone else to know what will be the long-term macro effect of the COVID-19 situation in these markets. That, we don't know. But we will stay competitive, and we will make sure that our products are, of course, both competitive and affordable.

[Nick Lyall, Equity Analyst]

That's great. And is it possible just to ask on the B2B exposures in some of these markets? Are there any markets that we should watch some sort of smaller business exposures like maybe Malaysia or Thailand, that you'd be a bit more concerned about despite not maybe having big enterprise exposure out there?

[Sigve Brekke, President & CEO]

No. I think the -- both the enterprise and the B2B exposure we have in all the Asian markets is very, very low. Most customers are on individual subscriptions. So I don't see any effect of that. So B2B is basically Norway and also a little bit in the rest of the Nordics. And as I said in my intro, we think that the B2B revenues, which account for around 10% of our revenues, it seems to be quite robust going forward.

[Operator]

We take our next question from Frank Maaø from DNB.

[Frank Maaø, Analyst]

So my question is about prepaid and the comments you made about digital recharge and -- when we're referring obviously to the emerging markets part of Telenor in Asia. Do you have any numbers as to what percentage of the prepaid customers in Asia that are actually using digital recharge as opposed to physical recharge? And as for the physical recharging, do you have any impression of how much that is impacted as of now?

[Sigve Brekke, President & CEO]

Yes, Frank, a good question. I don't have that number on top of my mind, but the various business unit has that. So I think you should align with IR after the call. So the only thing we talked about today is the 50% increase in digital recharge in Bangladesh, a small example of how quickly the customers are adapting to digital top-ups rather than going physical. But the number, I don't have that on top of my mind.

[Frank Maaø, Analyst]

But could you comment on whether or not this increase, for instance, in Bangladesh, comes from a significant base? Or is it from a fairly low base, for instance?

[Sigve Brekke, President & CEO]

No, it comes from a quite significant base. But again, I don't recall the actual number. So -- but I think IR can, if you call them, can give you some more details on this.

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

Very good. Thank you to everybody. Sigve, do you want to say anything before we close down?

[Sigve Brekke, President & CEO]

No. I think that it is extraordinary times. But in extraordinary times, I also think it's important to stay the focus, and that's exactly what we try to do. We are not slowing down on our modernization programs. We are not slowing down on our structural initiatives that we have discussed with you several times. And we are trying to use the strength we actually have to maybe even accelerate that. So that's the status. And as I also said, it's interesting to see how adaptable we are, in very short time, actually running the entire Telenor from home offices. That is even better than what I expected. So that's where we are Jørgen.

[Jørgen C. Arentz Rostrup, Executive VP & Head of Asia Business]

Thank you, everybody. Take care. Be careful.