Telenor ASA

OSE:TEL

Earnings Call Transcript 2020-Q4

[Sigve Brekke, President & CEO]

Good morning to everyone, and welcome to our Q4 presentation. Before I go into the Q4 numbers, I would like to take one step back and reflect a little bit about the whole year, 2020. When COVID hit us back in March, April, the situation was very uncertain. But due to the modernization efforts that we have done over the last several years, we were well prepared to meet uncertainties, and we saw how our way of work and our operational model could be used to handle the top line challenges and still stay focused on free cash flow generation. We also started last year with a Capital Markets Day where we will laid out our strategy for the coming 3 years. We talked about the three pillars: growth, modernization and responsible business. And despite the pandemic, we decided to move on with implementation of the strategic efforts. And we even saw an opportunity to accelerate some of these areas. We saw an opportunity to accelerate the digitalization of customer journeys, to modernize our organization even faster, but also to move towards our zero-touch operation. And as a result of this -- all this, I'm very pleased to see that despite the revenue challenges, we have delivered a 2% EBITDA growth and a free cash flow of NOK 21 billion. During the year, we also strengthened our responsible business. Empowering societies as a part of our purpose, true connectivity has never been more important. And I now see how that is also helping us and strengthening the way we work together with governments across our portfolio and with our stakeholders. And later in the presentation, I will give an update on how we are progressing on the climate ambition that we also gave in that Capital Markets Day presentation a year ago. We see the same uncertainties as we saw last year, also now going into 2021. However, as we did last year, we will remain staying focused on cash flow generation. We will continue to use our way of work and operating models to balance the uncertainty. And I'm going to give a little bit more insight on how we are doing that later in my presentation. As we have discussed now many times before, we are also focused on reducing our risk exposure in the Asian portfolio, and we continue to look for potential consolidation opportunities. And that will also be a focus in 2021. 2021 will be a year where we are handling the uncertainties and stay focused on the strength we will have coming out of the pandemic crisis. Before I go into the Q4 numbers, just a few words on the situation in Myanmar. We entered Myanmar in 2014, and we have been a part of the democratization process we have seen in this country, and it is sad to see that there is a step back on that happening now and I really hope that this is going to find a peaceful solution. The focus we have right now is to make sure our employees are staying safe, and also to provide our customers with services and the network. The network is up running. The distribution is up running and we are serving the customers, and we think this is very important also in this critical time. Then to the Q4. Let me start with the Nordics. I see a robust performance across the Nordics. And other than roaming, we see quite limited COVID effects across the 4 Nordic business units. At this time, I will claim that you see good performance across the 4 markets, including also Sweden and Denmark. It has been challenging for us in Sweden and Denmark over the last quarters, and I'm happy now to see that some of the turnaround initiatives that we have taken is now paying off, and we are moving back to a growth territory. In Sweden, we saw in the quarter a healthy intake of 15,000 new postpaid customers, and we expect a stabilization of the revenues of the top line in the second quarter this year. In Denmark, we see good delivery on EBITDA growth, backed by 2% higher subscriber base compared with last year. Then to Norway and Finland, I believe these 2 operations are good examples of what we can do across the 4 Nordic mature markets. At the Capital Markets Day a year ago, we talked about 3 growth ambitions in the Nordics. We talked about building a future-proof fixed network, modernizing the fixed network. We've talked about adding value-added services on top of data connectivity. And we talked about the opportunity that 5G gives us to upsell on speed, both on mobile and also on fixed wireless access, and this is exactly what we are doing in Finland and Norway. In Norway, we added 13,000 new fiber connections in the quarter, and we added 6,000 new fixed wireless access customers in the quarter. And the copper modernization program is ongoing. In 2020, we saw a decline in the DSL base of around 30,000 customers per month -- sorry, per quarter. And we have now around 135,000 DSL customers left in our network, and they are churning out now quite rapidly. Fortunately, we see that we are able to keep 90% of the lost revenues with offering these customers replacement products, being fiber and fixed wireless access. In Norway, we also see value-added services contributing to the mobile ARPU. These are services that we are putting on top of the data access. And then ARPU increase on the -- on mobile ARPU increase of 3% is coming from these services, despite a roaming drag of 3% points. In Finland, we saw an S&T growth of 2% and an underlying EBITDA growth of 6%. And we see this coming from the speed upselling from 4G to 5G. And typically, when a customer moves from 4G to 5G, the customer pays around EUR 4 more for that speed advantage. We now have 5G deployment in around 1/3 of the Finnish population. Then to Asia. Last year, we said that the biggest opportunity -- so sorry, the biggest uncertainty we see in our portfolio is the duration of the pandemic in Asia. Unfortunately, now we see the second wave coming, so it will take some more time before the Asian markets have recovered. And on this slide, we are showing the same graph, as I have showed you before, giving an indication of what's happening in both what we call them the developed Asia, Thailand and Malaysia, and also in the emerging part of Asia, Myanmar, Pakistan and Bangladesh. In Thailand and Malaysia, we see a continuous impact of the tourists and migrant workers that are not coming to the country because the countries are basically closed. And unfortunately, the market, especially in Myanmar -- sorry, in Malaysia, is also locked down. We have also seen an increased competition in these 2 markets. In Emerging Asia, we see the growth coming back, but the long-lasting situation start to have and overall economic effect. We expect a granular -- gradual recovery in the Asian markets during the second half of 2021. In 2020, we, as I said, got to test our ability to adapt to changing business environment, and honestly, I think we did quite well. And it came from the way we are operating our businesses. And we kept the operation going despite having 80% to 90% of our employees working from home. And this graph -- this slide, shows 3 examples on how we do that. Starting with Thailand, dtac in Thailand has been on a change journey now for several years. It started with the need of acquiring more spectrum. We did that. Then we had to build a competitive data network. That is now done. And then we had to refocus the operation. And now I will say that we are where we want to be, and I'm satisfied to see that efforts are paying off. dtac, as said, is hit by the strong position the company has in the migrant and the tourist segment. However, the organization is now refocusing and focusing their efforts on the domestic segment. And we see that in the domestic segment, and it's illustrated on this slide, that we have a good customer intake from September and onwards. In Pakistan, we are still waiting for more spectrum to be released in Pakistan. But in the midst of the pandemic situation, we have implemented a more granular cluster-based strategy. We are learning, then taking learnings from other Asian markets where we are basically going down almost to single base stations and single point-of-sale, making sure that we are utilizing and sweating our network assets as good as possible. This is why we see Pakistan is able to drive customer and revenue growth. And then to Myanmar. We have been hit by 3 separate issues in Myanmar. It was the SIM registration that the government implemented; it was the removal of the price floor; and in addition, the COVID situation. This has resulted in a massive reduction of multiple SIMs in the market, and all the operators have been hit. In addition then, an increased price pressure. However, this is a focused team. And I'm happy to see how we, despite these challenges, have been able to rebuild a customer base, healthy customer base. And I see also this now continuing into 2021. And I really hope that we can continue doing this, knowing the situation around the coup and the challenging political situation that we currently are facing. Then I will give you a strategic update. And this slide is -- are -- is showing the 3 pillars that we talked about a year ago in the Capital Markets Day. And we are now -- have started already our implementation of our activities within these 3 pillars. Starting with the first one, growth. We believe, as we said in the Capital Markets Day also a year ago, that we can deliver revenue growth in our portfolio. And we want to demonstrate exactly that when they are coming out of the COVID situation. The 3 main growth areas we think that we can deliver growth on: it's data connectivity in Asia, it's value-added services in the Nordics and then later Asia, and it's what we call beyond core connectivity where 5G is an opportunity. Let me go a little bit into each of these 3 areas, starting with data growth in Asia. We see a significant ARPU uplift when our feature phone customers get his or her first smartphone. We see that coming in with a relatively low data usage, but then they quickly adapt to -- and start using the different data services, and the data consumption increases. And there is an affordability to pay for that. The smartphone penetration in these markets, it's still quite low. In Pakistan, Bangladesh, we still see that the smartphone, it's only around 40% of our customer base. And as you see on this slide, we are able to monetize this because there is a willingness to pay. In addition, we see an opportunity to also start focusing on the B2B segment across our Asian portfolio. We haven't done much of that in the past. We have mainly been a consumer of a B2C-driven operation, but we see opportunities now also in the -- especially in the SME segment, but also in the larger corporate clients. Then the other area, the value-added services in the Nordics, this is an attempt to then put close to core services on top of the data connectivity. And in Norway, we are doing that with security and insurance services, and we have demonstrated this now over several quarters in Norway. And as I have said before, around 2/3 of the mobile ARPU growth in Norway is coming from these new services, and it's starting to be sizable, as you also see on this slide, NOK 1.9 billion in 2020. We have set up a Nordic product house under our Head of the Nordics, U.K. and Finland. And the idea with this Nordic product house is to develop -- take learnings from what we have done in Norway, develop services and roll them out across the 4 Nordic business units, both in the B2B segment, but also in the B2C. And then after getting more experience on that, also do the same in Asia. The last area on this slide is what we call beyond core connectivity with 5G. We think 5G is an opportunity for us to actually move beyond only data connectivity. And we think 5G is an opportunity, together with other technologies like storage, like analytics, like AI, like edge cloud, to then give more to our business customers. And we want to go into this together with partners and also target specific verticals. Strategic partnerships, together with global companies, hyper scalers IT companies, where we can utilize our strong brand position in this market, our strong distribution in this market and our existing customer relation. We are now -- have now signed up MOUs with several partners and we have now test 10 pilots where we want to test this out, together with the partners. Pilots that we are starting in Norway, then Sweden, Finland, but also trying it out in Asia. And targeting both the private, so the corporate customers, but also public. Second pillar is modernization. We believe for us that modernization is a foundation for growth, and we will continue to focus on structural initiatives. We have reduced the cost significantly over the last years. And at the Capital Markets Day, as illustrated here on this slide, we talked about an ambition of reducing the cost around NOK 3 billion to NOK 4 billion in the coming 3 years, on top of the 3% OpEx reductions we have done in the previous 3 years. What we saw then in 2020 was that we actually reduced the structural cost with around NOK 1.5 billion, and 0.9 billion was then related -- more COVID-related costs.Some examples on how we do that, starting with the sales and distribution. Historically, we have had advantages with a physical mass distribution model across all our markets. Now we want to do the same by building a digital mass distribution where customers are being served by MyTelenor app, where retailers are being served with a designed retail app. And with this, we can get customers to talk to us digitally. And as said on this slide, one example of this is what we did in Pakistan last year, where we actually increased the digital recharge with 44%. The result of this, it's lower cost, less commission, fewer people on the street. It's increased customer satisfaction, but it's also an ability that we get access to more customer data such that we can do upselling. In addition to that, we are also looking at the same for our call centers. We have millions of calls going into physical call centers across Telenor today. We want to also then gradually replace that with digital tools. In The postpaid market, it's a little bit different because in the postpaid market, it's also a lot about device bundles. So we -- in the postpaid market, we also think that our customers will be digitally-first, but we also need to implement an omnichannel approach. Second area that we are looking at, it's the modernization of our organization. Digitalization is reducing the number of FTEs, and we saw that last year, and we'll continue to see that. And we are not changing the way we are organized in to be more simpler organizations, flatter and more agile. We are also implementing a flexible way of work and a trust-based leadership model. In addition, we are building future competence, lifting all our employees into what we think is needed for the future. We have implemented a 40-hour challenge, where all our employees are being given the opportunity to upskill themself within 5 future competence areas. And then on the infrastructure, in Norway, we are sunsetting the legacy fixed copper infrastructure. It goes on as planned, and we hope to be closing down that network in the end of next year. And in the whole Telenor Group, we are implementing a zero-touch operation using AI robotics and other technologies. And we are implementing a cloud-first strategy for data traffic and for our infrastructure. Today, 91% of all data traffic is on Telenor hybrid cloud. 56% of network functionality and 38% of IT processes are also moved to the Telenor hybrid cloud. Last but not least, responsible business. We believe that responsible business is an important part of maintaining and strengthening the trust in Telenor. And it is an enabler for business and for stakeholder dialogue and empowering societies. One central element in our responsible business strategy is to reduce our climate emission. At the Capital Markets Day, we committed to be carbon-neutral in the Nordics by 2030, and we said that we also want to cut the emission in Asia with 50% also by 2030. And we are committing now to use standardized measurements, where we can be focusing on both direct emission, so Scope 1 and 2, but also the indirect emissions, Scope 3. We have taken the first steps into this strategy, and I'm happy to see, as you also see on this slide, that we have now been able to break the energy usage curve, and we did that last year. We have achieved a 1.5% reduction in energy consumption, even though a total data increase with 42%. And we do this with infrastructure modernization, smart networks, smart network operation and investment into renewable energy. We have made a road map for all our 9 business units. And we have a clear plan in the Nordics towards a carbon-neutral operation by 2030. In Asia, the task is tougher, and more than 90% of our emission comes from Asia. And most of that is, unfortunately, related to dirty grids. And over the next 10 years, we forecast a 35% increase in energy consumption from increased data volumes in our networks. We will continue to work on modernization and utilize renewable energy to take down our energy consumption. But it will not be enough only to modernize our networks. So we then, therefore, also need to look into access to greener energy sources to reach our targets in Asia. That concludes my introduction, and I will then hand over to Tone, our CFO. Please, Tone.

[Tone Hegland Bachke, Executive VP & CFO]

Thank you very much, Sigve, and good morning, everyone. The solid results for 2020 demonstrates the strength of our operating model. The results for the full year are in accordance with the guiding we gave you. For 2020, we see a 2% reduction in S&T revenues, which has been under pressure from the pandemic. Through the year, we have steadily executed on our modernization agenda, and combined with other effects, we see OpEx reductions of 7%. As a result, we deliver a full year organic EBITDA growth of 2%. Solid operational performance, in combination with continued portfolio simplification, leads to a strong free cash flow of NOK 21 billion for the year. For the quarter, we see trends which are much in line with previous quarters. Top line remains under pressure, leading to an S&T decline of 3%. The strong momentum we have on OpEx, as Sigve has also explained, is resulting in a 7% reduction also for the quarter. As a result, organic EBITDA is stable compared to last year despite tough comparables. Let us now have a closer look at the group figures, and I'll start with revenues. Organic S&T revenues for the quarter, as I said, decreased by 3%. We continue to see the solid performance in Norway with a 2% S&T growth driven mainly, as Sigve also talked about, growth in domestic mobile services of 4%, which is coming from value-added services and upselling, with an ARPU increase of 3%. The S&T growth in Finland was 2% for the quarter and is driven by continuous upselling to higher data speeds and good momentum on the 5G subscriptions. In Bangladesh, we saw good subscriber growth of 1.4 million. However, S&T revenues decreased by 3% as a result of somewhat weaker economic activity. In Myanmar, the growth came in at minus 7%, which was aided by a positive one-off. As communicated, and as also Sigve talked about, we talked about this also at our third quarter, the suspended price floor regulation, the SIM reregistration and also the COVID restrictions, is impacting the numbers. Towards the end of the quarter, we saw positive subscriber growth in Myanmar, which we also saw continuing into 2021. In Sweden, we are rebuilding our customer base, but we continue to face tough competition in certain segments such as the B2B. This leads to a 6% reduction in S&T revenues compared to last year. And as also mentioned by Sigve, we believe we should see stabilization in Sweden in the second quarter of this year. For Thailand and Malaysia, the continued loss of tourists and migrant revenues and the increased competition, are the main drivers for the negative development we see in these markets. For the full year, we see the S&T decrease of 2%, where the main driver is the developed Asian markets, as we said, Thailand and Malaysia, and also the loss of roaming and then in particular, in the Nordics. Moving to a bit more on the OpEx. We delivered the strong OpEx reduction of 7%, both for the fourth quarter and for the year as a whole. In nominal terms, the reduction is NOK 2.6 billion. The reductions are seen across all categories and all operating businesses and are primarily driven by 3 elements. In 2020, as also Sigve talked about, we accelerated our modernization journey. The structural programs have delivered the strong NOK 1.5 billion in reduction. This is close to 60% of the total decrease. Of the structural programs, we see that network and IT modernization across several businesses accounts for almost 50% of these reductions. Further, we see that the direct effects of COVID are estimated to NOK 900 million. This is approximately 1/3 of the total decrease. We do expect parts of these costs to gradually return as we start to see market recovery and activity picking up. And finally, we see also that the lower investment level in 2020 and also lower other costs, such as salary increases and energy, leads to a lower-than-normal general OpEx increases across the businesses. In the fourth quarter, we deliver a stable EBITDA compared to 2019. And as you remember, in 2019, we ended the year with a solid 5% organic EBITDA growth. In addition to the strong performing -- performance in Norway and DNA, Denmark and Pakistan see improved EBITDA, driven by the better operational performance. In addition, the material positive EBITDA contribution from the other segment is a result of efficiency initiatives in the corporate functions, and also a more technical effect coming from that our satellite revenues now are classified as external revenues. And these are the revenues that we have in our JV with NENT, which used to be internal revenues. If we look at the full year EBITDA for 2020, we had a solid first quarter. And as COVID started to impact us towards the end of Q1, our operations in the Nordic proved resilient, except from the loss of the roaming revenues. In Asia, the pressure on revenue is following through to the EBITDA. And we have seen, as I just talked about, material pressure on revenues, in particular, in Thailand and Malaysia through the year. And then again, in the other segments, it's the same effects that I just talked about. Despite the top line pressure we've seen, the steady execution on our structural efficiency programs resulted in a full year EBITDA growth of 2%. Since our Capital Markets Day back in 2017, we have been systematically working on simplifying and develop our asset portfolio. Our aim has been to focus on core telecom assets where we believe we have the competence and knowhow to create value. In 2020, despite being a challenging year, the steady execution of our strategy continued. During the year, we have entered an agreement to sell our financial services business. We have also sold Tapad and we have disposed a portfolio of development properties and the headquarters in Norway. In addition, we have made smaller strategic transactions to support some prioritized areas such as the acquisition of K&L Networks to support expansion of our IoT business. Total proceeds from sale of these assets amounted to approximately NOK 10 billion for the year. In 2020, we established our infrastructure company in Norway. We have so far seen good performance with increased external revenues, and we have a tenancy ratio of ground-based towers above 2. We are currently working on a similar setup for the owned towers we have in the Nordics, and we intend to be ready to disclose key figures for these operations within end of 2021. In Asia, we will take a market-by-market approach. Our focus remains to harvest operational synergies within this area. The aim going forward is to treat passive infrastructure as separate businesses in order to optimize the operational performance. Reported net income to equity holders of Telenor ASA in the fourth quarter was NOK 7.7 billion, an increase of NOK 5.9 billion. This was mainly due to gain on disposal of assets. The sale of Tapad contributed with a gain of NOK 2.1 billion, and the sale and partial leaseback of the headquarter office in Norway contributed with another NOK 1.2 billion. In addition, we see positive development in net financial items as a result of currency gains. The improvement in other is a consequence of the provision of NOK 1.7 billion we made in the last -- in the fourth quarter last year, related to the court ruling in India. For the full year 2020, net income to equity holders of Telenor ASA increased by NOK 9.6 billion to NOK 17.3 billion. This was primarily a result of a stronger EBITDA, but also lower taxes and the gains realized in the fourth quarter, as I have explained. In addition, gain on the completion of the transaction related to Canal Digital accounted for NOK 1.7 billion earlier in the year, and also the sale leaseback of the development properties in Norway of NOK 0.5 billion earlier in the year, contributed positively. In 2020, we deliver a free cash flow, before M&A, of NOK 12.5 billion and a total free cash flow of NOK 21 billion. As planned, CapEx increased towards the end of the year. In the fourth quarter, CapEx was NOK 5.8 billion, corresponding to a CapEx to sales ratio of 19%. For the year, CapEx to sales was 13%, as guided. CapEx was driven by network modernization in several of our markets, fiber and 5G rollout in Norway, and the 5G rollout in Finland. And also, network capacity and coverage expansion related to the 700-megahertz spectrum in Thailand in the fourth quarter. Free cash flow before M&A was NOK 2 billion in the fourth quarter, an increase of NOK 1.5 billion. The increased cash flow was mainly a result of the lower taxes, improved working capital, and also, we received a dividend of NOK 1.2 billion from [ Alanta ].Total free cash flow for the quarter was NOK 9.1 billion, and that includes the proceeds from the sale of the headquarters with NOK 4.9 billion and the sale of Tapad with NOK 2.4 billion. Higher EBITDA, the strengthening of the Norwegian kroner and a strong free cash flow in the quarter led to a leverage ratio of 1.95. This compares to 2.1 last quarter. Dividends, for 2020, the Telenor Board of Directors proposed a dividend of NOK 9 per share. The proposed dividend represents a total payout of NOK 12.6 billion to shareholders and gives an estimated dividend yield of 6%. The proposed dividend represent a 3% increase in ordinary dividend per share compared to 2019. Our current dividend policy remains with a year-on-year growth in ordinary dividend per share. Including this proposed dividend for 2020, Telenor will have returned NOK 85 billion to shareholders over the last 5 years. The dividend will, as usual, be paid in 2 tranches, in June and in October. Then moving to the outlook for 2021. We see the effects from the pandemic in our -- on our operations in Asia is ongoing. We also see lockdowns and closed borders continue into 2021. During 2020, we have accelerated modernization, and this contributed to a reduction of OpEx of the NOK 2.6 billion. We estimate that approximately NOK 900 million of these cost reductions who are directly related to the pandemic, and we see that these costs might come back as markets recover. Further, as you all remember, we had a very strong performance in the first quarter last year, which gives us tough comparables for the next quarter. In our outlook, we expect a gradual recovery in the Asian markets during the second half of 2021. Based on this and for the full year 2021, we expect both organic subs and traffic revenues and EBITDA to be around 2020 level. In the Nordics, we see an opportunity to continue to grow and capitalize on 5G. And for the year, we foresee a CapEx to sales ratio in the area of 15% to 16%. As Sigve mentioned, our strategic priorities remain and we confirm the midterm ambitions given at our Capital Markets Day in March 2020. So by this, Sigve, that concludes the presentation. I -- we are now ready to take calls, but I think we should try to limit ourself to 1 question per caller, if that is possible. So may we have the first question, please?

[Operator]

Maurice Patrick, Barclays.

[Maurice Graham Patrick, Managing Director]

This is -- you have Maurice here.

[Sigve Brekke, President & CEO]

I think we lost you. We lost the first caller.

[Operator]

Peter Nielsen, ABG.

[Peter Kurt Nielsen, Lead Analyst]

Yes, I'll restrict myself to one question. Sigve, your introductory remarks about Asia and continuing to see consolidation in Asia, you're sounding perhaps a bit more direct. You've said the same previously, but you sound a bit more direct. Are you sensing that you have something a bit more imminent? Or are you feeling a bit more confident that this is something you can achieve? Any elaboration there would be appreciated.

[Sigve Brekke, President & CEO]

Well, thanks for the question, and nice try. No, I think we are saying the same, as we said several times last year. And there is opportunities in the Asian markets. And as I have said, especially in Malaysia, in Myanmar and in Pakistan. And we are looking at those opportunities, but there are -- there is nothing more I can say at this point in time.

[Peter Kurt Nielsen, Lead Analyst]

Sigve, may I follow up and ask, is there any -- are you looking more on a country-specific country-by-country basis? Or are you still exploring opportunities similar to the one you had last year with Axiata, et cetera, on a broader scale in Asia?

[Sigve Brekke, President & CEO]

We are doing both. So we are looking at in-market opportunities, which we see, it's a lot of cost synergies coming out of that. But as we also said, when we were not able to conclude the Axiata deal last year, we are not ruling out. That similar structure could emerge again, so we are looking at both.

[Operator]

Terence Tsui, Morgan Stanley.

[Terence Mun-Sion Tsui]

I just had a question around the outlook, please. You delivered plus 2% EBITDA growth in 2020. You're guiding to around flat for 2021. And you made the point about the Asian market seeing some pressure. I was just wondering whether you can elaborate on why these markets are seen as more competitive. Or why you see the prospects for these markets compared to the last lockdown? And why perhaps you're thinking that -- is there going to be a greater negative impact in the upcoming year?

[Sigve Brekke, President & CEO]

Yes. I cannot comment specifically on each of the markets. There's a lot of uncertainties. And what we tried to say in our presentation is that we see the growth coming slowly back in the Emerging Asia, Pakistan, Myanmar and Bangladesh. But we see also the continuous effect of the lockdowns in Malaysia and Thailand. So it's too uncertain to see when these markets are coming back. And that uncertainty is what we have built into the guiding.

[Operator]

Johanna Ahlqvist, SEB.

[Johanna Ahlqvist, Analyst]

Yes. Then a question on maybe -- 2 actually. It's a follow-up on your previous question on the guidance, you state what you say in terms of expectations for sort of Sweden and also Asia. But how about Myanmar? Sort of how do you predict to get back to growth in Myanmar in your guidance of flat EBITDA? And then a sort of question on my own is related to CapEx, if I may. Given the 5G rollout coming up, I guess, CapEx is up in the Nordics for 2021. So I'm just thinking, is there any country where you expect CapEx to decrease this year to sort of compensate for that growth? Or is it -- yes, that's the second question.

[Sigve Brekke, President & CEO]

Yes. I can take the Myanmar, and then maybe you take the CapEx, Tone. On Myanmar, well, as we -- as I also said in my presentation, we are kind of coming back in Myanmar after the SIM registration process that took down a lot of numbers of SIM cards, not customer. Remember that this is a market where a SIM card and a customer is 2 different things, most customers would have SIM cards from -- multiple SIM cards from all the players. So we are coming back from that, and that is what we saw in the fourth quarter. And we hope that, that will continue going into this year. How the current political situation is going to influence that, that's way too early to say.

[Tone Hegland Bachke, Executive VP & CFO]

Yes. And then on the CapEx, we have a 13% CapEx to sales in 2020. So we are now indicating a growth up to 15% to 16%. And you're right that we have in 2020, had a high CapEx level, both particularly in Norway and Finland based on the 5G rollout and also the fiber in Norway. And we will continue to prioritize these investments. And then we have our standard approach of looking at CapEx investments across the portfolio based on the outlooks we see on a continuous basis. But given that we indicate to spend more, we will increase our spending, of course, in 2021.

[Operator]

Frank Maaø, DNB.

[Frank Maaø, Analyst]

Yes. So I was wondering if you could elaborate a little bit about the cost development in the Norwegian and Swedish operations, if you could go a little bit into how that developed in Q4 compared to your expectations. Were there any particular effects around perhaps costs related to the handset cycle? Or anything around the progress of taking out structural costs that was different from what you had expected? Or was everything basically in line, and so you're happy with the progress on cost takeout in Norway and Sweden? That's my main question.

[Sigve Brekke, President & CEO]

Yes, Frank. No, the -- I think we are happy with the efficiency in Sweden and Norway also for the fourth quarter. But remember that this goes a little bit up and down, and between the different quarters. And the main cost reductions you see in these 2 markets is coming from FTE reduction, it's coming from IT simplification and it's coming from the digitalization of the customer journeys. That's where the cost reduction is coming from. And sometimes, we see bigger takeout costs in the quarter, and sometimes, it takes some time. So there is nothing new to that. I'm actually -- I must say that I'm very pleased with both Sweden and Norway when it comes to their ability to kind of in Sweden turnaround operation and still be cost efficient and create a more lean organization. And in Norway as the incumbent, being able to now compensate for legacy revenues and also for roaming effects and still grow the top line and also had that efficiency in parallel. So this is something that will continue also in the coming quarters.

[Operator]

Andrew Lee, Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

A quick one for me on cost cutting. So you've normally had a cost-cutting tailwind that's enabled your EBITDA trends to be superior to your revenue trends over time, particularly last year. And so it looks like -- surprised that with flat revenues, you don't have your cost cutting that's able to deliver better than flat EBITDA growth for 2021. Could you just give some color on that, please?

[Operator]

Well, we took down 7% of our OpEx last year, 7%, NOK 2.6 billion, and we did that. I'm not using the word cost cutting, I'm using the word the effects of the modernization agenda that we have, because most of this is now coming from the structural initiatives. I think Tone said in her presentation that out of the NOK 2.6 billion, NOK 1.5 billion last year came from the structural initiatives, and that's going to continue. And of course, there is tough comparables there because we have done this now for many years. So we will continue to do that. I'm also quite confident that what we do on the structural efficiencies is not hurting our growth ambitions. And I think Norway is the best, and even Finland is -- are the 2 markets where we actually demonstrate that, that we are making ourself more efficient. We are able to take down OpEx. At the same time, we are able to grow the customer relationship, and with that, ARPU. So that is the balance that we are going to continue to do. And -- but again, you cannot think about this as every quarter being the same. It's the same question that -- or the same answer I had to Frank. It -- because these structural initiatives, some of them are long term. Some of them are investments before we can yield some results. So that's why this differs a bit from quarter-to-quarter. But we stay focused on our ambition on reducing cost. 1% to 3% is what we said at the Capital Markets Day. We took down much more in 2020, but we have to look at this in a little bit longer horizons.

[Andrew J. Lee, Equity Analyst]

Can I just -- as my follow-up question, can I just have a clarification on your comments on consolidation at the start of the presentation? Were those comments restricted to Asia? Or did they -- would you include Nordic consolidation in -- amongst those ambitions?

[Sigve Brekke, President & CEO]

No, they were not restricted to Asia. We also think that the Danish market should be consolidated. However, it's more challenging, as you know, in Europe due to the EU's competition authorities views on this. But I will say the same in our Danish operation.

[Operator]

Ulrich Rathe from Jefferies.

[Ulrich Rathe, Senior European Telecommunications Analyst]

I wanted to explore a little bit the assumptions or expectations or drivers of your expectation of a recovery in Asia in the second half of this year. Is this essentially based on trends you're already seeing? You seem to sort of be talking about things -- I mean in some markets, getting better already. Is this essentially rising for those trends and that's where this comes from? Or is it a top-down view on the impact of the vaccinations and the pandemic sort of petering out? Or what exactly are you assuming when you talk about that recovery in Asia in the second half?

[Sigve Brekke, President & CEO]

No, it's a top-down estimate. And it is based on what we see now in Malaysia, for example. The country is closed, the markets are locked down. And what we see in Thailand, also a closed country, no tourists coming back. But it's also based on -- that we think we will see coming back or recovery in the second half. So we don't know, of course. We don't know when the vaccine is coming to these markets. We don't know what the government policies are going to be. But underlying is that we see, especially in the emerging markets that the growth is coming back slowly, and the markets are also opening up. But this is uncertain, as it was when we went into the pandemic in March, April last year. So it's uncertain, and that's uncertainty we have built into the outlook. And again, as I think we have said many times, our only way to handle that uncertainty is to stay focused on balancing the top line with cost efficiencies such that we can keep kind of the cash flow generation.

[Ulrich Rathe, Senior European Telecommunications Analyst]

That's great. Can I just ask one quick follow-up on market share in Norway mobile? Obviously, you have a challenger that is growing in the market, and you are highlighting the opportunities through the value-added services. So is the sort of focus on the value-added services, upsell opportunity, if you will, is that essentially meant as an indication that the market share drift towards the challenger will continue, and you're just going to try to drive revenue through that? Or do you think the market share trends could stabilize at some point?

[Sigve Brekke, President & CEO]

Well, Norway has been, is and will be a competitive market. The competition remains, and we see now competition both from the 2 other network players, but also for the more than 15 service providers we have in Norway. There's almost 20 offers you have in the Norwegian markets. So for example, if you see in the fourth quarter, I think we added 3,000 new postpaid subscribers, but then we lost on the very price-sensitive segment, which is basically prepaid cards. And you see that the customer market share is, because of that, going down. But we stay focused on the most valuable customers and we stay focused on engaging even more with those customers, and that's why we have that value-added services. We would welcome the competitors to do the same because we think there is a room to actually give services to our customers, which we have demonstrated. So I can not answer your market share question because what we are focusing on is basically to give our customers what they want. And we think that close to core services, like security and insurance, is something that we should actually deliver because it's something that we can use our trusted brand to give our customers, and this is early effects. I think as I showed in my presentation that the revenues coming out from this value-added services last year was around NOK 1.9 billion. But I think it's only 10%, 15% of our customers that so far are taken it up. So this is something that we will gradually built up with the entire customer base, but also look at other type of close to core services. And then export that to the rest of Asia -- sorry, rest of Nordics. That's also planned.

[Operator]

Ben Lyons, Credit Suisse.

[Benjamin Lyons, Research Analyst]

I just had a question on pricing strategy in the Nordics and given the success of the speed pricing in Finland. Are you still looking to do a more-for-more strategy in the other markets? Any color on the impact of the Telia strategy up there would be great as well.

[Sigve Brekke, President & CEO]

What was the second part of your question? I missed that.

[Benjamin Lyons, Research Analyst]

So any color on the Telia strategy update would be great.

[Sigve Brekke, President & CEO]

No, I'm not commenting on competitors' strategies. That's up to them. But to your first question, yes, we have had some success on the speed-based pricing in Finland. And we also see some potential of this in Norway. We introduced a new tariff next -- last summer, which is basically unlimited data, but you have to pay then for free speed. And we have got a very good feedback from our customers on that tariff. And we will use that tariff also to try to upsell speed on 5G in the Norwegian markets. And of course, when we are launching 5G in Sweden and Denmark, that's something we are going to see a potential doing in those markets as well.

[Operator]

Ondrej Cabejšek, UBS.

[Ondrej Cabejšek]

I've got a short follow-up question on the CapEx question previously. So you invested 13% to sales in 2020. You're guiding for 15%, 16% in 2021. And then midterm, you stick to the 15% target. Does that mean that kind of 1 percentage point invested potentially in 2021 is enough to catch up i.e., are you confident that you haven't fallen behind any competitors, especially in Asia? Is this what the kind of guidance means? And then my own question, please, in terms of infrastructure optionality in the Nordics, are we talking about something more along the lines of the DNA Telia announcement? Or is there potentially something more substantial from a capital perspective?

[Tone Hegland Bachke, Executive VP & CFO]

Yes, if I start with CapEx, as you say, we have a guiding of around 15% for the 3-year period. We delivered a 13% or invested for 13% in 2020. And we now see that there are opportunities that will increase the potential in 2021 for increased CapEx. We do not think that we missed out on anything in 2020. But -- and we are looking into 2021 and prioritizing our CapEx investments based on the opportunities we see. I'm sure you've also seen the guiding also from some of the Asian BUs like Malaysia, where they are also indicating a higher CapEx spend. So we are focused on investing what we need to invest to maintain and grow our market shares also, of course, in the Asian markets. Then on infrastructure, we set up the Norwegian company, and we see that we get a lot of gains out of the focus we are able to put on by having this separately operated under a dedicated management team. So our primarily focus now will be in the areas where we have owned towers like in Sweden and in DNA to look for similar setups in these countries, and also to establish these operations the same way we have done in Norway. And then we take this step by step as we have done and see which opportunities we see going forward.

[Operator]

Florian Henritzi from Bank of America.

[Florian Henritzi, Research Analyst]

I have more of a macro-related one. Could you elaborate a bit more how you think about FX risk related to the Asian operations? I mean several of these economies, they are a bit under pressure from COVID, which might negatively affect their currencies. I mean I understand a stronger NOK might help you from a sort of net debt perspective. But are you sort of concerned that this kind of potential FX weakness could potentially offset any organic growth you have from Asia? And just secondly, as a quick follow-up, could you remind us how much of your CapEx is typically paid in U.S. dollar versus local currency, especially in the case of your emerging markets?

[Tone Hegland Bachke, Executive VP & CFO]

Yes, FX risk in Asia. We -- this is, of course, as you say, these countries come from time to time under pressure. And we have seen during 2020 that they have held up against particularly the dollar then, pretty firm. But going forward, that is, of course, something that can happen, but we will have to manage that as we have done in the past, managing these operations. In respect to CapEx in U.S. dollars, I think we will have to revert to that figure. You can take that with the Investor Relations team.

[Operator]

Usman Ghazi, Berenberg.

[Usman Ghazi, Analyst]

Hello. I just wanted to make sure you can hear me.

[Sigve Brekke, President & CEO]

Yes, we can.

[Usman Ghazi, Analyst]

Great. I've just got 2 questions, please, if I can. Just on Sweden, you've indicated confidence in turning that business around. But I see Tele2 today have actually I guess, their commentary is suggesting there will be no growth in -- that they see in Sweden until 2022. So just -- I mean in terms of the competitive dynamic, it still seems quite a volatile market, particularly in B2B. So just wanted to see if -- what kind of risks and opportunities you see on your Swedish kind of estimate there. And then just the second question, a very quick one, was just on the towers. Is maintaining control over the tower portfolio important for Telenor? Or would you be happy to offload it if you get a -- given the entry of American towers in the European market, et cetera? Seems like you could monetize that one.

[Sigve Brekke, President & CEO]

Yes. I will do Sweden and then you can do the infrastructure, Tone. No, I think what we hope for in Sweden is that we will stabilize the revenues in the second quarter. And then out of that, come back to growth. That's the plan of the second quarter this year. Yes, the competition in the B2B segment is still quite tough, and especially in the public sector. We stay focused on there, and we are really value-driven such that if it doesn't make sense for us, we will not even try to win some of those tenders. So the growth you see now coming out of Sweden, it's in the B2C segment, mainly. And we added 15,000 new subscribers in the quarter alone. And that is what -- why we now see that we are getting back into the growth area.

[Tone Hegland Bachke, Executive VP & CFO]

Yes. And then on infrastructure, we have various operating models for towers today. We lease towers, we own towers in joint ventures, and we have our own towers, as we said. So we used 2 operating towers together with others and also on our own. So I think we will have -- we will look at this also a bit from market to market. For some markets, it's -- we don't foresee to give up control on towers, whereas in other markets, we might have a more pragmatic control as we all -- pragmatic approach as we already have today in this area. But the primary focus now is to focus on the operational perspectives, to grow revenue, to reduce costs, have efficient investments and by that, improve the profitability of this part of our business.

[Sigve Brekke, President & CEO]

It seems like there are no more callers left. No? Okay, thanks for the questions. Thanks for following our presentation, and we hope to see you soon again. And until then, stay safe. Have a good day.

[Tone Hegland Bachke, Executive VP & CFO]

Thank you. Bye-bye.