Telenor ASA

OSE:TEL

Earnings Call Transcript 2018-Q2

[Marianne Moe]

Good morning, everyone, and welcome to the Presentation of Telenor Group's Results for the Second Quarter 2018. My name is Marianne Moe. I'm Head of Investor Relations, and I have the pleasure of guiding through the session here this morning.As usual, the results will be presented by our group CEO, Sigve Brekke; and the group CFO, Jørgen Rostrup. I hope you all have the presentation material available.And yes, after the presentation and the Q&A, there will be a separate media session as usual here -- for media present here at Fornebu. And you will have the opportunity to ask questions to the group CEO, the CFO and the Head of Telenor Norway.So with that and without much further ado, I leave the floor to Sigve Brekke to take you through the highlights of the operational performance for the quarter. Please, Sigve.

[Sigve Brekke, Chief Executive Officer and President]

Thank you. Thank you, Marianne, and good morning to all of you. And welcome to our Q2 presentation.I'm very satisfied with this quarter. We see good market performance. We continue to deliver on our transformational agenda that we laid out in the beginning of 2017. We added 2 million new subscribers in this quarter, and we also continue to monetize on our data investment, where we now have 54% of our customers are using data.We also continue our efficiency agenda, and despite tough comparables with the second quarter last year, we reduced 2% OpEx this quarter. And if we adjust for the onetime effects we had last year, it was a 4% OpEx reduction. And so far this year, we have reduced our OpEx with roughly NOK 1 billion. And we do that with our effort of digitalizing our business, digitalizing sales and marketing, reducing sales and marketing cost and the customer journeys and IT.In the quarter, Thailand has had a special focus, and this of course is due to the upcoming end of concession, and at the same time, we are repositioning the company to capture growth on digitalization and on acquiring postpaid customers.Let me then go through our main operations and the clusters where we operate in.Starting with Norway. In that competitive market, Telenor Norway continues to show strong performance in parallel with efficiency improvements. The second quarter is an important handset quarter in Norway traditionally. And a year ago, we introduced our swap program, the handset swap program, and we also took that external retail, and we see now in this quarter, that many customers have chosen to come and upgrade their device after 1 year.We also see that our new Flexi subscription targeting the mid- and high-end data users is very well received by our customers. And as a result, we were able to now grow postpaid subscriptions with 7,000 in this quarter. And as you can see from the left-hand side of this slide, the subscriber loss in this quarter is the lowest we ever had in 3 years. So we are now satisfied -- very satisfied with our competitive offers out in the market. The ARPU is still affected by lower roaming and handset-related revenues. But if you adjust for that, the underlying ARPU grew with 3% in the quarter, driven by continuous upselling. Thereby, most of that is happening additionally.In the fixed market, we continue to roll out fiber connections. And in this quarter, we added 7,000 new fiber subscriptions connections. The rollout is now picking up after a somewhat slow start of the year due to the winter, but it also took some time to ramp up the rollout activities. But you see now especially in June that we are able to having a higher rollout performance, and that will continue in the months to come.In Telenor Norway, we also continue our focus on efficiency. And if we exclude or adjust for new businesses acquired in the quarter and also cost transferred from group, the underlying OpEx reduction is around 3%. The 2 other Scandinavian operations, solid performance, both in Denmark and in Sweden. In Sweden, we continue with our simplification -- the business simplification program. And in this quarter, we rebranded our fixed business such that we now have Telenor brand coming through the entire business.And in Denmark, our transformation continues. As you remember, we started a turnaround program, and this is now resulting in 21% increase in EBITDA in this quarter. And we're quite pleased with how we are able to do that in a very, very competitive market.Going to Thailand. As I said in the beginning, we are building a platform for a future in Thailand. We're preparing ourselves for the end of concession in September, but we're also changing the way we operate in this market, including making ourself more efficient and using digital tools.And I must say, I'm very pleased with the way we are able to handle significant uncertainties in a very competitive market, and at the same way -- and at the same time, we are executing on a long-term strategy and focusing on value creation.The Thai market is changing from a typical prepaid-sensitive promotion-driven Asian market into a more European-like market with monthly contracts, data bundles and services. And in that transformation, in this quarter, we were able to add 154,000 new postpaid subscribers. And postpaid is now accounting for more than 50% of our overall revenues. And with the postpaid subscription, we see a significant lower churn, we see an also significantly higher ARPU, and that is then resulting in a 6% overall ARPU growth in this quarter. And if you adjust for the decline in international traffic, the overall subs and traffic revenues are actually stable in DTAC.On efficiency side, we are reducing -- the reduced regulatory fee is of course an important part of improved EBITDA, but it's far from all. We are focusing on making our sales and marketing more efficient. We are focusing on digitalizing the customer journeys. We are focusing on reducing manpower, and we are also then simplifying our business model. And as a result, in this quarter, we are seeing an EBITDA margin in the DTAC of 40%, despite we are now also having included spectrum payment to TOT. If I exclude for that, we have a 45% EBITDA margin in DTAC for this quarter.When it comes to spectrum and infrastructure, as I said, we are well prepared for the end of the concession regime in September. We finalized an agreement with TOT, giving us access to the 2,300 megahertz spectrum, which we can utilize until 2025. Our ambition is to have 7,000 sites on air, utilizing the 2.3 spectrum in the end of the year. Combined, the net -- densified 2,100 network, which is now covering more than 90% of the population, we have a very strong position for high-speed data.We are migrating 2G customers to 3 and 4G, and we've also secured a deal -- roaming deal with AIS as a backup. We are also now close to concluding infrastructure deal with CAT, giving us access to the concessionary assets, both on tower and on fiber.As you know, we decided not to participate in the 1,800 auction last month, which then failed. When it comes then to the August planned 1,800 and 900 auction, we will consider this when all the terms are clear.In Malaysia. Malaysia, it's what I call the star of this quarter. I'm very pleased to see the strong operational results coming out in this quarter. As in Thailand, we also see the Malaysian market changing, and we are repositioning Digi now into focusing more on data bundles, pre to post migration and digitalization of the business. That led to a 2% growth in ARPU and a 3% growth in subs and traffic revenues. Postpaid revenues grew 15% in the quarter year-on-year, and prepaid Internet revenues grew by 21%.It's also -- I'm also pleased to see that we continue our improvement on the Net Promoter Score. And in this quarter, we became #1 on Net Promoter Score in the market. With this performance, we believe that we are able to continue to take market share on revenue in Malaysia.On the efficiency agenda, 4% EBITDA growth year-on-year. We had a one-off last year of NOK 75 million, and if I adjust for that, the EBITDA growth is 10% in this quarter. And to summarize, a very strong quarter for Digi, and we are demonstrating how to -- how a focused repositioning and strategy execution is getting results. Moving to emerging Asia and Bangladesh. Customer [ uptake ] continues in Bangladesh. We added 1.7 million new subscribers in this quarter, and we also grew number of data users with 2.3 million. Still a way to go. We estimate that the real penetration in the Bangladeshi market, if you adjust for the multiple sims, is between 55% and 60%, so there's still lots of customers out there that are not even connected to basic services. We had a muted revenue growth in this quarter. Sub and traffic grew 3%. That is due to several weeks of bad weather, which gave us power and network outages. And we also saw an increased competitive pressure. However, we believe that we took market share in Bangladesh in quarter 2 -- quarter 1, and we also believe that, that is continuing into quarter 2. And figures from June and July show us an improved growth rate going into Q3. The 4G rollout is on plan. We expect to have around 5,000 4G sites on air in August. We have currently around 2 million 4G customers, and when the customer migrate from 3G to 4G, we see a significant ARPU uplift. Smartphone penetration is still low in this market. We grew 4 percent points on smartphone penetration in this quarter and we have now around -- estimate around 33% of our customers having a smartphone. And therefore, we see opportunities for profitable data growth going forward also. And in the second half of the year, we see improved revenue trends in Bangladesh as we see in Pakistan, and on top of that, the data growth.In our 2 other emerging Asian markets, Myanmar, we saw Mitel launching their services in June with very competitive pricing. In such a multi-SIM market, we expect customers to try out a newcomer.Our strategy is to stay focused on what we have done since we launched. There is no surprise to us that a fourth operator was coming, so we are preparing for this since we launched. And our strategy is to having the best network, having the best distribution and also focusing on competitive offers and building brand.In Pakistan, good performance with an 11% EBITDA growth in the quarter coming from 4% subs and traffic growth. The countrywide taxation on cellular services that had put pressure on growth the last quarters was fortunately removed in June. And if I exclude for those taxes, the growth -- actual growth would have been more than 7%. And going forward, these taxes will no longer have an impact. And as in Bangladesh, we also expect Bangladesh -- Pakistan to deliver on better figures into the second half of the year.I want to close off with this Slide. And this is a slide showing market share. Market share development quarter-on -- quarter by quarter. We are often being asked if our efficiency and transformation agenda is hampering the growth opportunities and hampering the market positions that we had. And I'm very pleased to see that, that's actually not the case. We are keeping or growing our market share across our portfolio, growing in 2 markets, in Bangladesh, as you can see here and in Malaysia, and keeping in the rest with one exception, which is Thailand, where we have chosen to stay out of aggressive prepaid device subsidies and instead focusing on EBITDA and cash flow growth to prepare ourself for the future.We -- this is the quarter 1 figures which then are public figures from our competitors, but we have implemented a measurement system where we follow this month by month, and we believe that the same trend will be seen in the second quarter. We are not sacrificing on our market position.This is not easy. It's not easy to keep your focus on taking share and at the same time, implement the efficiency measures and the agenda that we have, but our regular performance system is now enabling us to stay very close to what's happening in the various markets, close to measure their relative performance, being revenue market share, being subscriber market share or even the Net Promoter Score, and we measure that also monthly basis. Being close to benchmarking best practices across and implementing that in cost-efficient measures in other markets. Being close on scrutinizing every dollar or Norwegian krone being used on CapEx but also staying close to understand when we see opportunities like we saw in Norway in this quarter. We saw an opportunity to increase our market spending and the result of that is that we took 7,000 new postpaid subscribers.This is a slide showing market share in the revenue, but we are also measuring market share on EBITDA and even down to cash flow to make sure that we are value driven. And we want to be seen as a value-driven and value-focused company. And just to give you some numbers then from the clusters, we see that in developed Asia, Digi we increased the market share on EBITDA -- when you compare the EBITDA level on -- in the industry, we increased the market share on EBITDA with 4 percent points in Digi. When you look at Thailand, for example, even though AIS is double the size as our operation, we are not far from them in the actual cash flow generation. Or in emerging Asia, we increased the market share and EBITDA in Grameenphone with 3 percent points. Or moving to Norway or to Scandinavia, we believe that even in Norway, we increased the EBITDA market share with 0.5 percent point in the quarter.Summing up, solid quarter, solid performance, a solid base for continuing to deliver on our efficiency and transformation agenda.And with that, I hand over to Jørgen for the financials.

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

Thank you, Sigve. Yes, as Sigve is alluding to, we believe that this is another solid quarter delivered by Telenor, building on the good traction and the good performance from last year.Financially, I would like to highlight that we are still growing our core revenues while we are seeing OpEx reduction of the magnitude of NOK 400 million adjusted for onetime effects that we saw last year and that we talked about as well last year, all in line with our expectations.So far this year, also EBITDA growth is 5% year-on-year accumulated. And in June, we initiated a 2%, new 2% buyback program of shares, which will return approximately NOK 5 billion to the shareholders.When it comes to revenue, we continue to grow our subscription and traffic revenues 0.5 percentage points. And for the first half, the growth is slightly below 1%. Bangladesh, Pakistan and Malaysia as the key drivers for that, but we also see good results, as Sigve was alluding to, in other markets from ongoing effort on renewing our revenue base.We are in particular encouraged to see Digi continue their positive momentum from their repositioning last year and having the second quarter in a row with growth. Also rebound in Pakistan is encouraging and the same -- the development we see in Grameenphone in particular in June gives us reassurance of improved growth rates into Q3.Reported revenue declined by 3% or NOK 0.8 billion in the quarter, of which NOK 0.7 billion was a result of unfavorable foreign exchange movements. If you adjust for these foreign exchange effects, the largest explanation for the decline was lower interconnect revenues, loss of fixed legacy revenues, loss of wholesale revenues and special numbers regulation in Norway. In total, the decline in these revenues were in the magnitude of NOK 0.4 billion.If we adjust gross profit for the NOK 200 million that we have spent paying for spectrum lease to TOT in the quarter in Thailand, the 2,300 spectrum, this payment started, I believe, April 25, so we have 2 full months, May and June of payments of approximately run rate of NOK 100 million per month. If we adjust for that and we adjust for the loss of wholesale revenues, our special numbers in Norway in the magnitude of NOK 145 million, we see that gross profit follows the growth in subs and traffic revenues with approximately 1%.Efficiency, Sigve was quite clear. We're very dedicated. We continue our program. Last year, Q2 was the first quarter with significant visible cost reductions, NOK 0.6 billion in that quarter, including NOK 0.2 billion in positive onetime effects that we discussed at that point. We continue to see further progress this quarter, which is good on the high comps that we had to bring with us from last year.Underlying OpEx reduction this quarter is NOK 400 million, 4% when adjusting for these onetime effects. We believe again this strong performance, it is according to our expectation. So far, we have taken out approximately NOK 1 billion, close to NOK 1 billion in OpEx reduction and are trending towards the higher end of the 1% to 3% reduction per year that we communicated 1.5 year ago at Capital Markets Day.And then we are pleased to -- once again this quarter as last quarter, to see a balanced set of cost reductions for the quarter. We are also, as Sigve was referring to, seeing that we -- reducing spend on sales and marketing are not impacting the development in our market share in any negative way.EBITDA margin remained stable in second quarter at high levels. It's obviously then a combination of subs and traffic development and OpEx reduction for the quarter. Looking at the first 6 months of the year, we see an improvement of strong 2 percentage points in EBITDA margin. Growth in high margin core revenues, subs and traffic, the 0.4% increase combined with the strong efficiency improvements gives us 0.5 percentage points of EBITDA, organic EBITDA growth this quarter. Then keep in mind again the high comps, the demanding comparables from last year and also that NOK 0.2 billion in one-off items. Adjusted for these items, organic EBITDA growth was 2% for the quarter compared to last year.CapEx was NOK 3.4 billion in the quarter or around 12%. Year-to-date, CapEx is somewhat lower than planned for, and there are several reasons for this. Sigve was touching on it.We have the later -- somewhat later-than-expected clarity on the 2,300 megahertz spectrum in Thailand, so we had a delayed start-up in the rollout of that. And we have talked about weather conditions, whether it is in Bangladesh, Pakistan or Norway in the first quarter and a somewhat delayed ramp-up in the fiber in Norway.We expect this to be caught up and to increase CapEx the second half. We are at good speed in fiber rollout in June, and that is continuing July and going forward. We will do the 4G rollout in Bangladesh, and we are also densifying the networks in Thailand. So we maintain the CapEx outlook for the year unchanged.So the P&L is a clean set of numbers also this quarter. Net income is around NOK 2.6 billion, which means NOK 1.78 per share. As you can see also, there is other items of negative NOK 375 million, primarily related to workforce reductions in Malaysia related to outsourcing of networks operations to Ericsson also related to group restructuring and to manning reduction continuing in Norway.Depreciation increased also this quarter, some NOK 250 million, as expected and the same reason as we talked about last quarter, primarily related to Thailand and related to the end of concession in September. And as we said in first quarter, this number will come significantly down in Q4.Net financial income and expenses this quarter is negative by almost NOK 1.7 billion. This is predominantly a result of unfavorable foreign exchange movements. Dollar has appreciated to -- compared to Norwegian krone almost back to the same extent as we had opposite effect of in the first quarter, so that is NOK 1.4 billion in negative effect on that.We are hedging net present values, not the equity in our subsidiaries, so we can therefore not use hedge accounting in an efficient way. And therefore, we see these effects coming on our P&L.And as you can see from the right-hand side of the slide, the effects of the new accounting standard, IFRS 15 continues to have marginal impact for Telenor. Free cash flow second quarter was NOK 3 billion. This is a decrease from the NOK 6.9 billion we had last year, but then remember, please, mainly the -- due to the proceeds that we had from online classifieds and also from sale of VEON shares. And then also this quarter we have NOK 0.9 billion in settling of accounts related to the completion of the India transaction. Cash flow from operating activities has also been impacted this quarter by higher income taxes paid of NOK 1.1 billion, so that is the other effect.If we then look at the ordinary cash flow statements and elements that are not shown here, we have paid NOK 2.7 billion in the quarter to the Norwegian state for their shares of the share buyback program in order to ordinary dividend in the magnitude of NOK 6.3 billion in the quarter. Total payment in the quarter to shareholders has been NOK 9 billion. Year-to-date, free cash flow amounted to NOK 5.6 billion or NOK 6.5 billion excluding M&A effects.Balance sheet continues to be solid. Net debt is 1.1x EBITDA. We increased net debt by NOK 6.9 billion during the second quarter. This is primarily explained again by the payout of around NOK 6 billion in dividends to shareholders and a NOK 2.7 billion repurchase of shares from the Norwegian state as already mentioned.Then we have said over and over again and we still would like to say it, attractive shareholder remuneration is a key priority for Telenor. 2018 will be a record year for us in terms of distribution to shareholders.This quarter, we have paid out the first tranche of the ordinary dividend and then second tranche will be paid out in November. In total, the ordinary dividend represent a 4% increase from last year. Then as I mentioned earlier, we have initiated the 2% buyback program of shares, which will return approximately NOK 5 billion to shareholders.And as previously communicated when we announced the disposal of the CEE operations, we intend to pay out a special dividend of NOK 4.40 per share following completion of that transaction. The completion is still expected to take place during third quarter this year. In total, this should mean that shareholders' remuneration this year will amount to NOK 23 billion, NOK 24 billion, which is an all-time high for the group.So landing this, when it comes to the outlook for 2018, we maintained a revenue guidance of 1% to 2% of organic growth of subs and traffic revenues, 2% to 3% growth in organic EBITDA and NOK 17 billion to NOK 18 billion in CapEx. This is based on the fact that second quarter is confirming what we -- the strategy, and we see tractions in the things we do, and we see result from that effort coming. So we see good development. We see also easier comparables in several of our markets in the second half. And then on the other hand, there is still some moving parts so to say in Thailand, so we are leaving the guidance unchanged as of now.I believe this should be it; maintaining our market positions and maybe also maintaining the tradition of Q&A. Please come on, Sigve and Marianne.

[Marianne Moe]

Thank you, Jørgen. Yes, as usual, we'll start a Q&A session by taking questions from the audience present here at Fornebu before we open up for the conference call participants. [Operator Instructions] May we have the first question, please? Any questions from the audience here at Fornebu? If not, we'll go straight to the conference call participants. May we have the first caller, please?

[Operator]

Your first question is from Peter-Kurt Nielsen from ABG Sundal Collier.

[Peter-Kurt Nielsen]

Yes, my main question would be, first and foremost, on the improved net adds momentum as you talked about in Norwegian mobile, could you talk a bit about what's been the driving factor for this? Whether it's your new family and friends offering or you're seeing a positive impact of pushing a bit the convergence? And then just to follow up, please, do you have any comments to expectations for the announced merger this morning between Telia's business in Norway and that of TDC? Do you think this will have any impact on the market? Will you -- make you perhaps push forward your FMC offerings a bit?

[Sigve Brekke, Chief Executive Officer and President]

Yes, I think I can address that question, starting with the announcement this morning. We don't see any big effects of that. We have seen Get having different owners and now it seems like they are getting a new one. And this is and has always been a competitive market, and it will continue to be. And now we see some consolidation then in the market, but other than that, we don't see net effect of that. We are very satisfied with the strong position we have on fixed ourself. We are, as you know, continuing now to take market share on an aggressive fiber rollout. And on top of that, we also have a good position on TV with our Broadcast division. So that's obviously going to continue. Your first question. I think that we see now in the quarter that this swap program on handset really works out. When we extended that from our own distribution into external distribution, we see that this is becoming very popular. And on top of that, also the Flexi program, which is tailor-made for the mid- and high-end users has also been very, very well received by the customers. And on top of that, we have family and friends packages. We have [ inference ] included in the old packages, and I think we are able now to demonstrate that for our high-end customers, our offers are very attractive. So it's an effect of things that we have done and that we are also introduced in this quarter. And of course, we are going to continue to focus on that.

[Operator]

Your next question is from Maurice Patrick from Morgan Stanley.

[Maurice Graham Patrick, Managing Director]

It's Maurice here from Barclays. Question really on Thailand. You made some points about deciding on the bidding strategy for spectrum once you have clarity on the auction process. So maybe a few words just in terms of the densification efforts you're currently making, if you need additional spectrum on top of the 2.3 and 2.1 that you have, and the extent to which you need new spectrum over the next 3 to 5 years?

[Sigve Brekke, Chief Executive Officer and President]

You'll comment on that?

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

Yes. What we have said before and what also you and I have talked about is that when it comes to too many comments around spectrum situations, we refrain from that. It's a very liquid situation. So we are always evaluating any spectrum process that takes place in any of our markets. Our main concern -- main focus, I should say, is to make sure we have good spectrum covering the expectation for our customers. That also goes for Thailand, and we are sure we will -- we have it today, and we are sure we will have it tomorrow. We see good development and get effects from the 2,300 spectrum that we have talked about previously. We decided not to participate in the previous spectrum auction simply because it wasn't value-adding for Telenor to participate. And as Sigve said, it also failed, and we will evaluate the next spectrum auction that is coming up when we see the full details of that auction, and we are working on that right now.

[Sigve Brekke, Chief Executive Officer and President]

But just adding to what Jørgen is saying. With the 2.1 spectrum, we already now have densified and with then access to, yes, almost 60 megahertz on the 2.3 spectrum. It's a fantastic high-end spectrum band, which we now are now deploying and will deliver very good data services. So in that sense, we see now that this is very well received by the postpaid customers. That's why we added 154,000 new postpaid subscription this quarter alone.

[Operator]

Your next question is from Terence Tsui from Morgan Stanley.

[Terence Mun-Sion Tsui]

I have a question on Myanmar, please. Perhaps you can share with us a bit more color about the -- perhaps on the competitive dynamics ever since the fourth entrant launched. Just wondering now whether it's quite common that operators are pricing below the regulatory price floor that's been set?

[Sigve Brekke, Chief Executive Officer and President]

Yes, I think it's still too early to say. They launched just a month ago in June, and they came with quite attractive offers below the threshold that was set with the regulator, and they got -- they were allowed to do that as promotional activities. But then after the promotion has expired, they need to go back. The rest of the industry have sticked to that regulatory floor, also the price floor. So I think it's too early to say. And in the midst of this, the best thing we can do is just to continue to execute on our strategy, having the best network, having the best distribution and also having competitive offers.

[Operator]

Your next question is from Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

I'd like to come back to Thailand. You're obviously hesitating a bit to sort of comment specifically on the upcoming auctions and your strategy there. That's understandable. Just wondering if you can answer sort of some of the concerns in a different way. If you were to operate such as a network at 2.3 gigahertz and you would not have access to any lower band spectrum, obviously you would incur CapEx and a large part of that is done, I understand, already. But to what extent do you see yourself at a disadvantage with regards to operating cost? Because the very dense networks presumably also incurs higher OpEx in terms of backhaul needs and maintenance on a very large number of sites. But do you think such a network can be competitive from a cost perspective? That would be my first question.

[Sigve Brekke, Chief Executive Officer and President]

You want me to take that? Well, I cannot answer your question because that's in the mix of the calculations that we are having.

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

I wanted you to say that.

[Sigve Brekke, Chief Executive Officer and President]

And of course, we will have a disadvantage with not having the lower spectrum. However, you can also continue to densify the network as we already do, and this is basically a financial calculation. Having said that, I think too, having the bandwidth we now have on 2.3 is giving us also cost advantages, because we can deliver data volumes and capacity needs that you need to invest yourself, although if you have a much lower bandwidth. So it's a calculation that we're making. And the reason why we didn't participate in the last auction was just that they didn't -- the figures didn't match up. We are a value-driven company. We are not buying spectrum and throwing money out there if it's not needed, and then it's better for us to densify the network as we did in 2.1 and then roll out the 2.3. So those are the numbers that we are looking at, and that's impossible to finalize that calculation before we see all the terms for the upcoming auction.

[Ulrich Rathe, Senior European Telecommunications Analyst]

And if I may follow-up, in Norway and the EBITDA sort of trends. Obviously, the comparables in the quarter so far in 2018 have been rather volatile. And I know you usually don't give guidance on divisions, but can you give some sort of sense whether you'd be able to hold EBITDA in Norway stable in the second half, give and take, compared to the 4% decline that we're now seeing in the second quarter?

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

It would be a shame to break a good tradition of not giving guidance on business unit level now before the summer, so I'm not going to do that. We have volatility on the top low numbers, so on the top of the revenue stack, there are some volatilities, whether it's roaming or it is other issues, it's 3- and 5-digit numbers this quarter, et cetera. But we focus a lot more on the total revenue base, and we also have a tremendous experience and a proven track records of renewing that revenue base and maintaining it and developing it. And we basically feel the numbers from Norway is strong also this quarter. It builds on a very strong last quarter -- last year, and we are quite satisfied both with the numbers and also with the measures taken. And Sigve has talked about the new acquisition of customers, which is very interesting. We are increasing the fiber customer base, and we also continuing renewing the company and transforming the company, including making it a more robust and efficient company. So we are quite pleased with the numbers, and then you will always see fluctuation in the quarter-on-quarter, but that is of less importance to us.

[Operator]

Your next question is from Victor Höglund of SEB.

[Victor Höglund, Analyst]

I was just wondering on the revenue contributors for the second half of this year, where do you see the main opportunities and the main traction? If you can just explain a bit there on Pakistan, because now this tax is gone and last year you had the tax and you mentioned how you trend now. I assume it should be possible to think that second half in Pakistan could be very strong given the trends. And then just a quick follow-up on a previous question on Norway, phrasing it a bit different. If -- are you going to invest much longer in building the customer base or was this sort of a special situation here in Q2 and maybe we think -- we see costs coming down ahead and then you'll get the benefit from the new customers or just dynamics in Norway, how you plan to run it on marketing versus customers and costs ahead would be helpful.

[Sigve Brekke, Chief Executive Officer and President]

Yes, start on your revenue question. As I said in Pakistan, if we adjust for that tax, the actual growth, underlying growth was around 7% in the quarter. I cannot give you any guiding on what that growth number will be in the second half of the year. But we see that the growth is picking up. We saw that in June and we see that in July and going forward. So we think Pakistan will be a growth market. We see the same in Bangladesh coming from growth on the 4G customers but also coming from now weather being more normalized. Again, we see the growth figures picking up both in June and going into July. So those will be the 2 main growth markets. Then we see that we have a good traction in Malaysia. We did well -- very well in the second quarter. We did very well in the first quarter, and what we have seen so far in the third quarter is that, that development continues. So I'm very happy with that as well. The 2 uncertain markets in Asia, it's Thailand. We don't -- we of course cannot be very precise on predicting what's happening around the concession end. And then in Myanmar, which I already commented on. In Europe, I think Norway is doing well. The underlying ARPU growth in Norway is 3%, and that's been that for actually several quarters in a row. And we see no reasons why this should be changing going forward. Then to your second question, of course, we stay competitive in all the markets in Norway as well. And when we see opportunities then we spend some more money. That's what we did in the second quarter, and that's what we are going to do in the following quarters also. The customer fall we have seen in the past is very much coming from data cards that is now churning out of the market and also from low-end customers. We stay focused on the value customers, the high-end customers, the postpaid customers, and those are the ones that we continue to upsell. So we are going to stay competitive in the coming quarters also as we did in the second quarter. But again, I cannot give you any guidance on what that means in practice, but that's the way we operate.

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

May I add, Sigve, that what we did in Norway this quarter is not anything special compared to what we did, for example, in Bangladesh in last year. We did the same when we saw the opportunity to have strong effects from extra marketing spend, as we will do when we see strong effects from employing capital in other ways. The whole point with our combined growth focus and restructuring efficiency focus is to be more granular in the end. It's of course to reduce spending and so on. But the main point is to get a higher return on what we spend to become more granular, more precise, to question old habits and to create new better habits and then deploy capital accordingly. So this quarter was Norway. We had a previous quarter, it was the Bangladesh, and we'll see what we do in the second half. We will focus on cost and spend where we see that we have good effects from extra spending. And that will then hit the cost line, but that will be well worth in order to achieve other things that is important for us.

[Sigve Brekke, Chief Executive Officer and President]

And just adding one more comment. We see now the result of the investments we have done in the network over the last few years. We have 4G now on 99-point-something percent -- 99.4% of the population. It's 4G everywhere. And not only 4G, the speed experience you have with our 4G network, it's superior, and that is what we now see that the customers are satisfied with. They basically use our 4G services now rather than connect to Wi-Fi when they are watching their content. And this is the reason why we are able to constantly upsell and upgrade our customers to richer data packages, and that trend is going to continue.

[Marianne Moe]

Let me also just add that on seasonality in the Norwegian mobile market, Q2 and in particularly June is a very important season for handset sale in the Norwegian market, and that was why it was natural also to focus a bit on that this quarter, this year. In addition, we combine that with the new Flexi product that we had launched in March, and it was natural to make some activities around that, and we are very pleased with the uptake we see on those products.

[Operator]

Your next question is from Henrik Herbst from Crédit Suisse.

[Henrik Herbst, Research Analyst]

I had one question and one follow-up. Firstly, in terms of CapEx, as you point out, you're now a bit below sort of the run rate to hit your guidance for the full year. I was just wondering, I mean, I guess there are some limitations in terms of how much you can practically spend like building out fiber in Norway, seemed to -- there's sort of a cap in terms of how much you can actually do over a certain amount of time. Just wondering, is it fair to assume that you probably end up at the lower end of your CapEx guidance and maybe some will spill over into 2019? And then the follow-up is also on CapEx and on Thailand, where you point out the relationship between you and AIS and how you're having high market share, I think you said on free cash flow. Is that necessarily a good thing, I guess, when the market is increasingly moving towards 4G, data usage is going up the way it is. Wouldn't you want to invest a little bit more? Is that sustainable basically or should we expect that gap to close?

[Jørgen C. Arentz Rostrup, Executive VP & CFO]

Yes, there are 2 main reasons why we are below the spending plan, and that is Norway and Thailand. So we are definitely planning to invest in Thailand, which we have done for quite some time now. We have densified the networks, and we will continue to do that and also continue to roll out the 2,300, so I fully subscribe to your comments, we do not lack any willingness to invest in Thailand. Then we believe right or wrong that we are fairly efficient in the way we roll out. We also believe that we have significant advantages now from our global procurement company and our global procurement philosophy. So we think we are also, in that sense, fairly competitive. And we will spend the money on Thailand. When we compare the cash flow, it is still a recognition for us that we can do what we want on the network rollout side and still on a cash flow basis, appear to be very competitive, and it's just to compare the numbers. When it comes to Norway, we have a run rate in June, July, which tells us that we will get very close to the plans we have had for the year, if this kind of continues and we see no reason why it shouldn't. Obviously, there is a limit to how much you can roll out, but we think we are well within those limits. If I were to put a flavor on the '17 to '18, I agree with you, I would probably put the foot on the lower end rather than the higher end.

[Marianne Moe]

And we have now come to the last caller in the line today.

[Operator]

Your final question is from Usman Ghazi from Berenberg.

[Usman Ghazi, Analyst of Telecom]

The impact from the special numbers and the wholesale revenue declines was higher than expected this quarter. I was just wondering if you could give us an indication of what this impact was in Q1, and whether this higher rate of impact, the NOK 150 million year-on-year decline is what you expect for the next 2 quarters into 2018.

[Marianne Moe]

I believe, Usman, it was broadly in line with our first quarter. It's around NOK 100 million on the mobile wholesale contract, and then around NOK 50 million on special numbers.Okay. If that was it, then we have approached the end of session here today. As I mentioned earlier, there will now be a separate session for media present here at Fornebu, and my colleague Atle Lessum from the communication department will take you to that session.So thank you all for attending the session here today. Have a great summer, and see you at the third quarter presentation. Thank you.

[Sigve Brekke, Chief Executive Officer and President]

Thank you.