© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning to everyone, and welcome to the first quarter presentation and a sunny day here in Norway. In the quarter, we continue to execute on our strategic agenda, focusing on value creation across the Nordics and in Asia. The mobile business performed well, and we see mobile service revenue growth in all the Nordic operations. However, the financial performance this quarter was impacted by copper decommissioning in Norway, higher energy prices, and project costs mainly related to the structural transactions we have ongoing in Asia. When it comes to revenues, this was held back by lower volumes in the Norwegian fixed line business and intensified competition in Thailand. But if we exclude for the copper legacy effects and also the businesses in scope for the 2 mergers in Asia, the underlying portfolio revenue growth was around 2%. There are several ongoing strategic alternate initiatives now in Telenor. We continue to build a stronger portfolio with our 2 large merger processes in Thailand and in Malaysia. We also continue our modernization and transformation programs. We are focused on building a digital telco, and I will come more back to that. And we are introducing new services to our customers on top of data connectivity. We are also running a Nordic-wide energy initiative aiming at both reducing their missions and increase the network energy efficiency. And as you can see on this slide, we delivered as cash flow this quarter in line with our expectations, which further improved Telenor's robust financial position. Then let me go to the operations and start with our 4 Nordic business units. I'm pleased to see a solid ARPU and mobile service revenues across the Nordic in this quarter. In particular, returning to growth in Sweden has been, as you know, an important milestone for us and something that we have been working hard on during the last quarters. And this quarter, Sweden is returning to a 3% growth with EBITDA following suit. Carefully selected market activities targeted at the high end of the value chain yield solid results in Sweden for this quarter. And as previously said, Sweden is a growth market, and we should take our fair share of that growth. In Norway, we see continued upselling and demand for value-added services driving a positive ARPU development. I'm very happy to see how we are able to serve our customers with digital services on top of data connectivity. And as I see it, we are a market leader in doing this, both in Norway and also across the Nordics. Mobile service revenues were stable year-on-year in Norway as the subscriber base is down 2%, coming from lower ARPU segments and data card. Today, I have also invited with me and Tone, Petter-Borre Furberg. He is the CEO of Telenor Norway. And he will go into more detail and information about the Norwegian operation. In Denmark, we continue to see solid performance with both ARPU and service revenue growth. And in Finland, upselling to higher speed support both ARPU growth and service revenues. And ARPU was slightly negatively impacted in Finland this quarter by lower interconnection rate, and the lower interconnection rate counted for around 1% point. Then some views on Asia. The competition and market dynamics in both Thailand and Malaysia remains tough. And this continued to impact our performance in this quarter. In Thailand, the ARPU is under pressure from a slow economic recovery in the country, impacting people's wallet. In addition, tourists and migrant workers are yet to come back while in Malaysia, the prepaid competition is leading to both negative ARPU and service revenue development. Both Thailand and Malaysia, as you know, have been very competitive markets for some time. And we, therefore, believe that by merging our entities, we will create stronger players that are better positioned to serve the customer demands in these 2 markets. Speaking about the 2 mergers, we have now in Malaysia received from the regulator a so-called letter of issues. This is a part of the regulatory approval process and is in line with our process expectations. We have together with our partner -- with our partner, the Axiata Group, responded to these items where we -- and where we stand today, we are positive. As we have said before, the closing of this transaction in Malaysia will happen in the second half of this year. In Thailand, we expect regulatory clearance to happen sooner within the first half of this year. And following this, we will launch the voluntary tender offer in [ TARA ]. Bangladesh and Pakistan delivered solid growth of 5% and 4%, respectively, driven by continuous growth in the subscriber base, but also growth in data demand. Data revenue increased to 28% in Bangladesh and 23% in Pakistan. With the additional spectrum that we have acquired the last 2 years in Bangladesh, we bought spectrum last year and we also bought some spectrum in this quarter in Bangladesh, and this -- and that together with investments into 4G network, we are now having a solid and robust data network. And we are well-positioned to take the increased data demand and subscriber growth following recovery from the pandemic as we see in Bangladesh. And with the investments we are doing in sales and marketing, we expect an improved EBITDA in Bangladesh going forward. Then let me talk about what we are doing on the climate side and on the energy side. As you know, we are committed to reduce energy consumption in all our 8 markets. And we have, therefore, established a group-wide structural project in line with how we are executing on our structural and modernization agenda. The project is both working on how to meet our emission targets, but also how to secure the most efficient energy consumption in all our networks. As a part of this work, I'm pleased to announce that we yesterday entered into a power purchasing agreement with NOS Hydro. This agreement will contribute to that new renewable and every project is realized and that new capacity is added. This is, as you can see on this slide, a 10-year contract with annual purchase of 330 gigawatt hours, equal to around 90% of the energy consumption we have in Norway. We started this project with Hydro a long time ago before the significant price increase that we have seen lately. And the agreed price is, therefore, more in line with price levels observed in the market before the recent price increases. For instance, if we have had this PPA agreement in place in this quarter, the energy costs in Norway would have been around NOK 50 million to NOK 60 million lower than what we saw in the quarter. The project is expected to be finalized in the end of 2023 or beginning on early 2024. And with this, Telenor is contributing to the green shift as we are moving one step further on our path to deliver on our science-based target commitment. Then on our strategy execution. As I said, we are executing on our strategy, and what that means for this year is the following: Growth in the Nordics. We see an opportunity in all our 4 Nordic markets to continue to grow mobile service revenues from upselling from 4G to 5G speed, but also, as I said, to put new digital services on top of the data connectivity. We have had success in Norway now for several quarters in a row. And we are now taking those digital services that we have some experience with in Norway, and we are now taking that out in the rest of the Nordic markets. We had, in this quarter, a relatively slow start of the year on our fiber growth in Norway. However, we expect to increase the fiber rollout in the coming quarters as we also see a good demand for our fixed wireless access product. In Asia, we capitalize on the data growth and also subscriber growth, especially in Bangladesh. And as seen from the financials, from the costs, we are prioritizing significant resources and efforts to complete our 2 mergers in Thailand and Malaysia. In addition, we are preparing for integration and synergy outtake as soon as these transactions are closed. In the last quarter, I spoke about our plans to become a digital telco. And I talked about the technology part of that. Today, I want to talk about the customer part of what it means to become a digital telco. The digital telco for us has an ambition to externalize our technology capabilities and support our customers to digitalize and transform themselves. We have already delivered several customer cases on private network and EDGE. In addition, we continue to run several customer pilots. These cases are for customers in different industries like manufacturing, mining, health, utilities, media, and public agencies. Key value for our customers are improved efficiency, safety and sustainability by connecting numbers of devices and doing analytics on the information to automate processes. One example of that is connecting robots on an assembly line and monitoring this to avoid failures and breaks in the production. Another example is how we in one of our Asian markets are using sensors and cameras to control on an offloading of containers from ships and vehicles for optimized placement and later automating the movements of vessels. Several of these examples requires local information storage and short response time. That can be provided with combination of mobile 5G network and edge storage solutions. To strengthen our capabilities, to drive this industrialization, we have signed strategic global partnerships agreements with Amazon, AWS, Microsoft, and Google. These partnerships are used to both broaden our offerings to enterprises and consumers to run upskilling programs for several critical areas and to improve our own efficiency with Cloud native infrastructure solutions. Another example of how we are using new technology to monetize on customer demand, is the joint venture agreement we yesterday signed with Norwegian companies, Aker and Cognite, where the ambition is to be a leader in industrial security software. As you know, Telenor has a long and deep experience in infrastructure security, where Aker and Cognite has a long history of building industrial front runners and strong software and data contextualization expertise. Together, we are now forming a new company to deliver security solutions for both industrial companies as well as selected public agencies. So that was a quick walk-through of the quarter and also the focus areas that we have in the coming quarters.
And with this, I will then invite Petter-Borre, the CEO of Telenor Norway, to go into a little bit more in depth the Norwegian operation. Please, Petter.
Thank you, Sigve, and good morning, everyone. Let me start with some comments related to the Norwegian mobile market. On the back of weaker subscriber development in 2020 and the first half of 2021, we see limited growth in subscription revenue this quarter. During the second half of 2021 and the beginning of 2022, we have refined our response strategy to competitors' moves, and we have now seen a healthy development in subscribers this quarter. Our strategy remains, however, to create customer value and growth through upsell of data and through value-added services on top of connectivity. And we have over several quarters, managed to grow the ARPU, both in B2C and B2B, based on offering services by combining our brand and distribution capabilities into what customers deem to be valuable. In this quarter as well, we delivered healthy ARPU growth, and we see continued demand for new services. For instance, we are currently experiencing strong interest from our business customers for security solutions. Telenor has as an owner of critical infrastructure, unique competence into how to protect ourselves, but also in how we can help our customers to protect their operation. The market for security services is estimated to grow 8% to 10% annually, and is already a $3 billion to $4 billion market today. Since the beginning of this year, we have, for instance, signed 86 new contracts for security services to large and medium accounts in both public and private sector. And we have launched 2 important products this year. SafeZone, which represents an expansion of our security service offering tailored for the SME market and active response where we offer monitoring and support related to customers' endpoint devices. It will take time, but it is our ambition to take a leading position in the cybersecurity market. Our focus will be to build services, which support our customers' needs. In that respect, Omni, which Sigve mentioned, our partnership with Aker and Cognite is important. Our customers are today focused on finding good solutions for how to protect their operation, their operational technology. And we believe Omni together with Telenor will be able to provide leading services in this respect. This quarter, we report growth in both mobile and fixed future revenues. For mobile, the growth is relatively modest due to the weaker subscriber development last year, outweighed by continued ARPU growth of approximately 3%. The growth in fixed future revenues is lower than previous quarters as a result of lower run rate on new fiber and fixed wireless access connections. I will cover that more in detail on the next slide. We designed -- we announced the decision to close the copper network in January 2019. And looking back, that was a bold decision. We believe we are leading this transition in Europe, and it is tough and hard work. In the quarter, we decommissioned 23,000 DSL retail lines and 29,000 POTS lines, which means that we now have around 35,000 DSL lines and 51,000 POTS retail lines left by the end of the quarter. Most of these will be addressed in the second quarter, leaving relatively small number of connections in the second half of the year. These are addresses in most cases, which are waiting for new coverage or fiber connections to be installed. We have experienced a revenue decline of $2.1 billion retail revenues since the start, and we estimate a headwind of approximately NOK 900 million for the decommissioning in 2022. As in this quarter, the year-over-year effects on retail service revenue will be approximately NOK 200 million to NOK 230 million per quarter in 2022 and is estimated to be roughly NOK 150 million in Q1 2023 and $90 million in Q2 2023. We expect only minor effects from the second half of 2023. The regulator has requested us to maintain the DSL service for wholesale customers until September 2025. While the POTS network will be closed for all customers by year-end. We are working with our wholesale customers to find good solutions for their customers to allow for a migration to new technologies. So by the end of this year, we expect to have a remaining cost base of approximately NOK 400 million to NOK 500 million, down from NOK 1.2 billion in 2018. The main cost components is power and rental with fault correction and indirect costs as a smaller portion. Fiber and fixed wireless access revenue has had an annual growth rate of 24% as the last years, and we believe this market will continue to grow in the coming years. We have seen some reduction in connected fiber accesses in the last quarters. This is partly due to prioritization of 5G investments, but also phasing of installations. And lastly, with a larger fiber-based nominal churn to wholesale and competitors has increased in the period. As the land grab phase gradually moves into more marginal areas, we see examples of edges of nearby rollout where areas serving the same households. However, as the rollout cost in Norway is quite CapEx intensive, we do not foresee a large trend of overbuilt in this market. During the decommissioning, we have utilized fixed wireless access based on 4G to improve the service to the customers. As the service is now provided on 5G, we see increased customer demand and interest also for using this as a household broadband. We have, in the quarter, launched fixed wireless access product towards the vacation segment, and this is also contributing to the expected growth we see in this market. Then finally, looking forward to the 2023 situation. We will, in our retail business, be a completely legacy-free operation. Our 5G rollout and modernization program is running at a very high speed, and we are planning for a completion of the 5G modernization program by mid-2024. We continue to see opportunities for profitable investments in fiber and are evaluating the possibility of establishing a passive fiber infrastructure company. We believe the remaining cost benefit from copper amounts to around NOK 500 million, and we will see cost benefits from a gradual reduction in the wholesale customer base. Thank you, and now over to you, Tone.
Thank you very much, Petter-Borre. Let's go through the financials. We continue to execute on a forceful agenda of modernizing our operations and preparing for new structures in Asia. We are setting ourselves up for growth in the Nordics by 5G investments and with fiber and fixed wireless to replace the old copper lines in Norway as Petter-Borre just went through. This quarter, we also start to report separately on the towers we own 100% in the Nordics. In Asia, we continue to see growth both in Bangladesh and Pakistan, and we are well on our way to close the 2 very large M&A transactions in Thailand and Malaysia. Both these transactions hold significant synergy potential, and we are by them also setting ourselves up for market-leading positions in Asia. In the quarter, we also completed the sale of Telenor Myanmar, under extremely challenging conditions. We see top line growth in most operations, except for the copper legacy business in Norway, again, as Petter-Borre through and in Thailand and Malaysia, which are markets that currently face very tough competition. Looking at the portfolio, excluding these 3 elements, we see around 2% growth. Organic EBITDA declined by 2.5%. This was held back by 3 main elements contributing in total with a drag of 4% points to the EBITDA. These elements include the copper legacy again, higher energy prices and costs related to the portfolio development. Free cash flow came in at NOK 3.6 billion and NOK 2.4 billion, excluding divestments. Our financial position is solid, and we have a net debt to EBITDA of 1.9 at the end of the quarter. Moving to revenue. As mentioned, we see service revenue growth in most of our operations. We are especially pleased to see that the investments we have done in sales and marketing in Bangladesh and Sweden are paying off, and that we continue to see service revenue growth in the Nordic operations, excluding the copper. The growth in Bangladesh and Pakistan was primarily driven by continued growth in the customer base, supported by higher data usage. Petter-Borre just presented a copper decommissioning in Norway, which gives us a headwind of around NOK 900 million or around 1% for the quarter and also the same impact for the full year. In Thailand and Malaysia, we see tough competition, as mentioned. We see this particularly coming through in Thailand, where the ARPU declined by 7%, as you saw on the slide, Sigve showed. Moving to OpEx. On the back of close to 9% decrease in OpEx over 2020 and 2021, an increase in this quarter is not so unexpected as we see activity pick up. In this quarter, we see that continuing the modernization and the increased efficiency across the organization more than offset salary increases and resulted actually in lower personnel cost. We are now carefully running selected sales and marketing activities, which generates higher cost than we had during the pandemic. This quarter, I mentioned particularly the investments we do in the Sweden and in Bangladesh, which contributes to approximately 75% of the increase in sales and marketing costs. The portfolio development in mergers in Asia added another NOK 100 million in cost. Finally, energy cost increased by compared to last year, mainly driven by Norway and Pakistan, in line with the graphs that we showed you in the third and fourth quarter last year. As Sigve mentioned, we have been and are addressing the energy cost increases by focusing on reducing energy consumption in the Nordics and Asia and run this as one of our structural projects. Further, once the PPA comes into operation towards the end of 2023, early 2024, this will significantly limit the risk of the recently experienced price increases in Norway. So summing up, the OpEx increase seen in this quarter is mainly a result of planned activity related to the development of the company, together with the higher energy prices, which are addressed by separate activities. Moving to EBITDA. We report an organic EBITDA decline of 2.5% in Q1. As said in my introduction, we have 3 particular elements negatively impacting the EBITDA this quarter. As I said, the higher energy cost in Norway and Pakistan contributes with approximately 1.2% points. The project cost related to the portfolio development contributes with approximately 0.8% points. And finally, the decline in the Norway legacy impact business impact the group EBITDA with approximately 2% compared to last year. The combined effect of these 3 elements was around 4% points on the EBITDA in the quarter. Moving to the tower business. As previously communicated, we now have in place separate reporting and governance for our fully owned Nordic tower assets. And note that the 2 JVs we have in Sweden and 1 JV we have in Denmark are not part of these financial numbers. Total revenue in the quarter amounted to NOK 760 million, of which approximately 80% is from anchor tenants. Total EBITDA after lease was NOK 340 million, and we have an EBITDA after lease margin of 45%. Telenor Infra represents approximately 75% of the total. Mobile tenancy ratio was on average 1.6% in the quarter. As discussed in the last quarter, we have in total 21,000 fully owned sites, of which 16,000 are mobile sites. In addition, we have around 10,000 sites in our joint operations in Sweden and Denmark, of which Telenor owns 50%. For the full year, total revenues are estimated to be around NOK 3 billion and the EBITDA after lease margin to be in the mid-40%s for these fully-owned towers. Our focus to improve the financial and operational performance include focus on increased external revenue, but also through tidying up legacy and increased efficiency and processes improvement. Furthermore, we see additional value creation potential in our joint operations and are exploring alternatives for these assets. Going forward, we will continue to have a separate focus on towers and infrastructure and how to drive value from this portfolio. Moving to net income. We delivered a solid NOK 6.6 billion of net income to equity holders this quarter. Q1 last year, as you remember, we had a material negative impact from the impairment of Telenor Myanmar. Looking past this, the contribution from the running operation is fairly stable year-over-year. However, we do have a couple of positive items lifting the profits this quarter. We have NOK 1.7 billion gain on disposal of the Open universe and SDU fiber in Sweden following the closing of this transaction in the quarter. We further have additional NOK 2.5 billion reversal of tax expense and NOK 200 million reversal of net financials following the court ruling in favor of Telenor related to losses incurred in India. CapEx for the quarter is in line with the plan and is primarily driven by the 5G rollout in the Nordics, the fiber investments in Norway, and network investments in Thailand. Free cash flow for the quarter ended at NOK 3.6 billion and NOK 2.4 billion, excluding M&A. This generates a further improvement to our financial flexibility and leverage this quarter stands at 1.9x. To summarize, for Q1, our mobile businesses overall performed well. However, our financial performance was held back by some specific factors, such as the fixed transformation in Norway, higher energy costs and project costs, together with tough competition in Thailand. We have taken several actions and believe this will contribute to mitigate these negative factors, particularly in the second half of the year. For the rest of the year, we expect a continued strengthening of ARPU in the Nordics and higher fiber rollout in Norway. We also expect a gradual recovery in Thailand, while at the same time, we acknowledge the increased global uncertainty. Our cash flow in the quarter was good and leverage declined to 1.9%. This means that we maintain a strong financial position and high financial flexibility. Our guiding for the full year remains unchanged. Now Capital Markets Day. We are pleased to welcome you all to our Capital Markets Day on September 20, here at Fornebu, where we will go through the business more in detail. Among other things, we will provide more information about our ambitions in the Nordics, our plans for value creation in Asia, and our strategy for passive infrastructure. Then Petter-Borre and Sigve, I believe we're ready for the Q&A. Moderator, may we have the first question?
[Operator Instructions] We'll take our first question, Peter Nielsen from ABG.
Question for Petter-Borre, please. Now we have the opportunity and then if I may, a quick follow-up for Tone. And Petter, you spoke about, and Sigve spoke about increasing fiber take-up and growth in the coming quarters. Can I ask, have you changed your expectations for the copper revenue recapture towards the tail end of the copper closure? Has that improved essentially speaking about the stronger fiber take-up in coming quarters? And do you see that once you're done with the copper closure, there's still room for growth in fiber in Norway over the coming years beyond 2022? And then Tone, a quick follow-up beyond your comments on mitigating actions that should improve EBITDA trends in the second half. Can you give us -- can you elaborate a bit on what kind of mitigating efforts you have made and/or making?
Yes. Thank you for the question. There is -- for 2022 and the years to come, the link between the copper decommissioning and the fiber growth is actually less and less. So there are actually 3 very important drivers for why we believe that the fiber growth will pick up towards the end of the year and continue into '23 and '24. And that is good execution in terms of actually rolling out new coverage areas. It is strong churn management and focus on it. As I said, with a bigger base, we now see nominal churn being a little bit higher, but it still requires the same kind of management and churn. And then, of course, to utilize the network that we have built by densifying it. And with the copper network gone, that densification will be crucial because the few remaining customers that are holding on to the DSL lines will then not have any alternative. So I'm relatively confident that we are going to see increased numbers towards the end of the year. And yes, we believe that there will be growth also in the years to come.
Yes. And when it comes to mitigating actions, as Petter-Borre said, continue to grow, the fiber is an important action for us this year. We also have and continue to run our structural programs, which are important in respect of continuing to modernize the company and also develop the cost base in the most efficient way. Now this also, as we say, including energy. Further, we believe there will be opportunities for growing ARPU in the Nordics on the back of increased service offerings. And finally, the way we are managing and steering our businesses in Asia with focus on profitable growth.
Our next question, Frank Maao from DNB.
So my first -- my question is really about the time line for eliminating the last NOK 0.5 billion of legacy costs. Could you please give us some color on the progress that you expect and the time line for that, please? And if you also could give us some feeling, Sigve, when it comes to what -- how you see the risks relating to the approval processes of the mergers in Asia and how comfortable you are with those approval processes?
I can start with the NOK 400 million to NOK 500 million that we estimate is the remaining cost base related to the copper network. It will decline over we estimate the next 2 to 3 years. And that's, of course, partly related to the wholesale customers being phased out, but it is also the fact that we are expecting that we will be able to start closing down network elements and parts of the network already from next year as we've now emptied the retail part of the network. So a higher reduction in the first phase and then gradually phasing out and to some extent, linked then to the wholesale customer base. As I said in the speaker points earlier also, the majority of these costs are related to electricity or power consumption and rental of locations and network elements where they are standing. Sigve?
Yes, to the 2 merger processes. I will say I'm fairly confident that we will get the regulatory approval, both in Malaysia and in Thailand. We have been in frequent dialogue with the 2 regulators. We have answered to their questions. And what we have seen so far, it's exactly what we expected. In Malaysia, the list of issues that they came out with a couple of weeks ago were very in line with what we thought. And the process now is that they are expecting -- there's a hearing process and that they will make their final decision very soon in some few weeks. So that's going fine. Same in Thailand, the regulator has a deadline internal as a part of the regulations. And it seems like they are following that process also as we expected. So of course, we can never be 100% sure because we haven't got any preapproval, but I'm fairly confident that this is going on as planned.
Our next question Andrew Lee from Goldman Sachs Group.
It's obviously only a couple of months since we last heard from you at your full year results, but big changes in many things, including the cost inflation outlook. And so I guess the key question that a lot of investors are asking is, given that shift in the cost inflation outlook, how you have got the confidence to reiterate guidance. I had a specific question just on your ability to pass through cost inflation to customers. We've heard a lot from you guys and peers about ability to pass through higher cost to customers in the Nordic area, be good to get your view on that. And then also how the ability to pass through high cost to customer differs between your Nordic and Asian assets. So if you could give us a greater insight in your ability to mitigate with the top line, these cost inflation pressures across the group, that would be really helpful.
Yes. Let me start with addressing your question, and then Tone could add. Well, first of all, I don't agree to what you said that a lot have changed since the first quarter. I don't think that there are any surprises there. We are executing our strategic agenda. As Petter-Borre talked about on the getting rid of the legacy copper investments in our network in Norway. And that has an effect. So there's no surprise there. Energy prices, we are affected by, but it shouldn't be any surprise there either. And on top of that, we are spending significant resources also on the cost side of our merger processes in Asia. But then to your question, we have historically take -- raised prices several times. And the way we are looking at that is that we are increasing the value for our customers. So when we are getting more -- giving them more speed, migrating from 4G to 5G, we are pricing that. When we are giving them digital services, like the security and the insurance products we have had in Norway and that we are running out really taking out in other Nordic business units, then we are pricing that. So this is something we have done several times. And this is something that we are constantly looking at. However, we don't want to comment on what we may do in the coming quarters. And the reason for that is also that we do not want to, in any way, do any price signaling. But this is, of course, something we constantly are looking at. In some of the contracts in Norway, Petter, I think we also have index regulations in the contracts so that we can more automatically do that. In Asia, it's a little bit different, especially in Thailand and Malaysia due to the very competitive landscape we then now see and also that those markets are not really coming out of the pandemic yet. However, in Bangladesh, we are following the same logic, with now a very strong 4G network, a very strong distribution. We also have the ability then to look at prices, to look at that in line with inflation of raising inflation costs.
Nothing to add to that, Sigve.
We'll take our next question. Terence Tsui from Morgan Stanley.
My question was around your comments that you made in Asia and your expectation to see slightly better profitable growth throughout the rest of the year. I'm just thinking what you're going to -- how do you feel about the competition levels? Because you've said many times, the competitive environment is very intense. As I understand, 5G pricing is, in some instances, below 4G pricing. What do you think is going to be the trigger to see a bit more rational contribution for the competition for the rest of the year and to enable you to achieve your guidance?
No, I think there are 2 issues there. One is related to competition and other one is related to COVID recovery effects. In Malaysia and Thailand, we see that these markets are still recovering from COVID. And I mentioned that in my presentation, tourists are yet to come back, migrant workers are yet to come back. And these 2 segments, we have historically been very strong in, both in Thailand and Malaysia. So that -- there's a rough competition. In addition, you have that recovery effect. However, we think that in the second half, the recovery out from COVID is going to ease a bit of the pressure we see now on revenues. In Bangladesh it is different. In Bangladesh, we see now that most of the COVID effects are out. So for us, in Bangladesh, it has been so important to strengthen our data connectivity. That's why we have bought the spectrum 2 times, I think, in the last 2 years. And now we see that, that is giving us a very good market position. And that's also why you see now Bangladesh is coming back with a quite healthy revenue growth in this quarter. And that is going to continue in the quarters to come. In Pakistan, we also have a good quarter behind us. And we see that in Pakistan, the market is also recovering. However, in Pakistan, there is a limitation to how much data we can offer due to our spectrum position. But of course, we will try to follow and take our fair share of the growth in the market.
[Operator Instructions] We'll take our next question. Maurice Patrick from Barclays.
I'm Maurice from Barclays. If I could ask a little bit about your view on infrastructure as a whole. I noted in your comments in the presentation, you talked about exploring a passive fiber company in Norway. And of course, now you're on the tower side, you're reporting separately and there's a hint around JV structures. Just curious to hear your view really around your ownership of the infrastructure. To what extent the separation is about showing better financial disclosure or whether it's running it differently or in fact, potentially selling stakes would be helpful to get an update or view on that.
Thank you, Maurice. As you know, for us, the core of the operation and improvement of operations is a key focus area for us. That has been the focus when we separate out the towers together with increasing the external revenue. Going forward, we will also continue to have this focus, this separate focus on the tower and infrastructure and how to drive value from that. We are also, as Petter-Borre said, evaluating whether there is any potential in fiber for us. As you know, we have significant investments. We believe there is continued growth in this market. And this is something we are constantly evaluating, and it's a topic we will typically come back to at the Capital Markets Day in September.
We'll take our next question. Ulrich Rathe from Jefferies.
My first question is, is a comment in the -- I think it's the release that the pressures from the first quarter will continue to the second quarter. I think you gave some color in your prepared remarks. But when we look at Q2, are they already offsetting improvement somewhere else? Or does this essentially mean that the EBITDA momentum in the second quarter would be similar to the first quarter simply because the pressures are continuing and everything else sort of first day is the same. Obviously, you're not going to guide, but in terms of a bit of color on the shape, that would be helpful. And then I wanted to ask to clarifications only. One is what exactly do you define as project cost when you talk about the sort of different buckets of cost pressures? What exactly is project cost? Is that the mergers? Or -- I mean, essentially just an open question. And then the last clarification is EBITDA eliminations spiked to almost NOK 500 million this quarter, which I think historically is an absolute high point. So that suggests that you have essentially profits in some of the operating divisions that are a bit higher than there should be, if the eliminations were allocated. Could you essentially explain where these eliminations are coming from and what caused them to spike in the first quarter?
Yes. As you said, we will not provide any guiding for the quarters of the year. But as I also said, we are looking into constantly how to make sure that we have the best operation and can improve the financial performance. And we do see that there are early effects of some of the initiatives that we are initiating already in the start of the second quarter. But then we say that we expect the full effect to come in the second half of the year. Project cost is typically cost related to M&A transactions and structural activities. This quarter, the main items is, as I said, Thailand and Malaysia, but of course, we also have some costs related to the exit from Myanmar. When it comes to EBITDA, the eliminations are mainly related to the towers and the assessment between the segments in the reporting and then the tower operations. And that is also why you see these being at a higher level now than they have been in the past.
We'll take our next question. Usman Ghazi from Joh. Berenberg.
I just got 2 questions, please. The first question was just on the announcement today that you're looking to set up this passive fiber in Norway. I just wanted to understand the purpose of it. Is it to leverage third-party financing to be able to increase the build beyond which you could do on your own? Or is it the monetization or is the priority kind of on monetization of the infrastructure. That was the first question. And then the second question was just going back to Thailand and Malaysia. I just wanted to get an understanding of how quickly would you expect the synergies from the transactions to begin to be delivered?
Do you want to do the first one?
Yes, I can do the first one. As Petter-Borre said, we are evaluating this. And in this evaluation, it's both considering what we believe will be the potential and the required investment levels going forward when it comes to this market and this business opportunity, but it's also, of course, having a monetization side. So we consider both of these elements as part of our total evaluation that we will do.
On your second question, we are -- as I said, we are spending significant resources now in both Thailand and Malaysia, partly on getting the 2 transactions approved, but mostly on preparing for the integration. And that is going very well. It's everything from putting a new joint management in place to detailing out how to hit the ground running when it comes to start executing on some of the cost synergies, but also on the market position. Such at the moment, we get the final approval, and we have done with the VTO process, then we will start executing. And we are very prepared for really doing that from day 1. I cannot tell you exactly when the synergy costs are being taken out, but I can confirm that we are very prepared to do that as soon as possible. In Malaysia, we have talked about the cost synergies that we aim to take out. I think we have talked about around $2.5 billion.
$2 billion, yes.
Yes, $2 billion in Malaysia. And then in Thailand, we haven't given you the final number. We have said that the Thai merger is much bigger, but we will come back to what we believe when it comes to synergies in that market.
We'll take our next question. Nick Lyall from Societe Generale.
Can I ask 2, please? The first one with Petter-Borre, maybe could I ask about how you expect to protect yourself against Lyse and ICE getting together? Are there anything you're planning? I mean, would you be more restricted, say, for example, on mobile price rises in the future? Do you rollout fiber faster? Do you focus more on conversions? Could you just discuss the risks there and the protection you have against that? And then secondly, just to come back to the time merger again. Can I just ask what, is there a discussion there? Could you give us some idea of timing if possible, of the merger? And is there a discussion as well of European style remedies? Or is it a straight yes or no process? Could you just update us on the process and how that works in Thailand, please?
You can start with your new competitor.
Yes. So no, of course, the merger or the acquisition of ICE by Lyse and Altibox is a major change in the market in Norway. How it will play out is still difficult to say. We are, of course, then preparing for the possibility, as you mentioned, that this will be a much more FMC-type of market. We have now 3 players in the market with both fixed infrastructure and mobile infrastructure. So it's natural to think that, that could be the way that the market would develop. But it's a little bit early to say. And -- but their benefit then for Telenor to have a strong position both within the fixed broadband market and the mobile market, I think is good and it will protect us to a large extent from potential threats of this market moving then more to an FMC market.
Just to add to what Petter said before I go to Thailand. Remember that, we are having a significant investment now into rolling out our 5G network in Norway. We will be covering half of the Norwegian population around mid this year, Petter-Borre?
Yes, half, yes. This year, yes.
Yes. And then, we will continue in 2023. And then earlier in 2024, we will have covered the entire population with our 5G network. There is nobody even close to the network presence or the coverage that Telenor has in Norway. So the benefit of having a network that basically cover you everywhere you go. Also in the middle of November you may have your cabin. It's really what we have been able to monetize going back, and that's also what we're going to monetize going forward. So we have a very, very strong position in Norway on that. And on top of that, as Petter also talked about, we are really trying to position ourselves on services on top of just the data connectivity. And I think we are the only one in Norway now that are able to both deliver those value service and products to the customers and also being able to getting paid for it. So that structure, we're going to continue with. Then to Thailand. Well, as I said, we are fairly confident that we will get the regulatory approval within the first half, meaning in -- during the second quarter. That's the dialogue we have with the regulator now. I cannot give you any specific on what potential revenues may be. But as we have seen so far, we think that there is nothing unexpected here that we haven't built into our business plan. So that's why I'm saying that I'm fairly confident. And then, as soon as we have got that regulator approval, and it seems like it's happening faster in Thailand than what it has the situation in Malaysia, then we are ready to do the VTO and then we are ready to, as I said, go with that entity.
Okay. Good. I think you mentioned revenues there. I was actually asking about remedies, just in case spectrum remedies or tower remedies. So that's what you meant. Was it...
Yes.
We'll take our next question. Francesca Schild from Exane BNP Paribas.
I've got 2 follow-ups on Asia. So with respect to the deals, should we expect additional cash returns to materialize on completion? And then just more broadly, what further opportunities do you see in the region? And what is your strategy for your remaining aging portfolio?
Now we don't have any more to say about the completion. As I said, we have announced the cost synergies we expect from Malaysia, $2 billion in cost synergies. And we have -- I think we said when we announced the Thai deal, that the merger here is around 3x bigger than in Malaysia, but we didn't give you any synergy -- cost synergy number, but we will come with that later. So that's what we are looking at here. And then there will be a VTO also in Thailand. And we, of course, we don't know -- we have made clear what the VTO price is, but we don't know how many of the existing shareholders that want to sell at that price. Then you asked -- what was your second question on Asia? Sorry. It was about the bigger plans.
But just on…
Yes?
But just on that, do you expect additional cash returns to materialize on the completion?
No, it's -- we don't expect a cash return on completion. As Sigve said, in Thailand, there will be a VTO. Depending on the uptake on the VTO, there would be a cash outlay. And then also we have a small cash outlay of $72 million in Malaysia at completion. So the cash returns, they will come once the synergies start materializing, and the operations are jointly. Of course, then we will receive dividend as part of our ownership in these assets.
And then I also think I heard you asking about what else in Asia. And as we have said several times, and there is no change to that. We continue to also look for opportunities in Pakistan because Pakistan will then be the only business unit in Asia that we are not #1 in the market. And we are also continuing to explore potential more regional structural arrangement, as we have talked about several times before, but there's nothing new to be said about that as of now.
We will take our next question. Ondrej Cabejsek from UBS.
I wanted to follow up, firstly, on the cost side. I know you said you don't guide on the progression. But in terms of just the project costs and selling and acquisition costs that you mentioned were pretty high this quarter. Are these, for example, the project cost -- are they front-end loaded? Or should we expect them to be kind of around the same amount per port until you finish or close these transactions? And then in terms of the selling and acquisition, you mentioned you did a lot in terms of Sweden and Bangladesh this quarter. So could you just describe specifically also with Sweden, the activities? Is that continuing into the second quarter? Or are you happy with the performance? Does it give you a good basis for the rest of the year in terms of growth? And just a follow-up, in Sweden, you highlight all these additional costs, but you also had a pretty strong EBITDA performance. So could you help us reconcile those 2 things?
Yes. So it's -- as you say, it's difficult to kind of give an indication of the cost between quarters. But of course, as long as we are running these projects, there will be and until the completion, there will be cost related to it. Remember, the size of these transactions are significant, and it is only natural that there are costs related to being able to close. And as Sigve says, prepare the integration for a very good start of the joint companies. In Sweden, of course, we will not talk about how we will act in the market. We believe we have had a good success over the -- particularly this quarter, but also we saw it at the end of the fourth quarter on how we are successfully managing our ability to gain new customers, particularly in the B2C segment in Sweden, and we are particularly pleased with that. When it comes to the EBITDA performance, that is, as you say, it is good. It's coming mainly from the revenue growth, but then it's also coming from the cost improvements that we do see in the portfolio in general.
And if I may, one short follow-up on Sweden. Basically, I know you said you cannot signal anything in terms of pricing, but do you even believe that you have scope to do something in Sweden? Because I think even Hutchinson has increased some prices recently. So at Telenor today and the state following you said a couple of quarters of pretty good trends. Do you think you're in a state that you can even think about following the market in that sense?
Well, thanks for trying you again. Well, as I said, we are not doing price signaling. But what I can say is that we see Sweden as a growing market. We see that from our own results, but we also, of course, see that from our competitors. And our position in the Swedish market is to come back to where before we're starting to slide a little bit on our market share. But our position is not to aggressively destroy that revenue, industry revenue potential that we see in Sweden. So of course, we are not a market leader in Sweden, and we are followers. So we will carefully look at how the market is moving and then we will do what we think is right.
We will take our next question. Adam Fox-Rumley from HSBC.
I just had 2 follow-ups, please. On the -- at the end of the Norwegian presentation, you talked about investments easing after the 5G rollout is complete. And you gave a good description of that finishing early in 2024, I think. But I wondered if you could round out that discussion across the rest of the Nordic markets and talk about the phasing there? And then secondly, on Norwegian fixed line. I just wanted to clarify, have you effectively given up on getting any leading from the regulator on your wholesale obligations? Does that come to the -- as any prospects to change there come to the end?
Yes. I can start with the investments. As we say, we are currently and have been now for a couple of years, rolling out the 5G in Norway and Finland, and particularly as Petter-Borre and Sigve alluded to, in Norway with these large operations we have, these are significant amounts. We will also and are continue starting to rollout 5G in Sweden and Denmark. But in these markets, as I also talked about on the towers, we have more a joint operations structure, which means that the CapEx intensity on us is slightly lower in this market. And there is an expectation that once the heavy investment cycle on 5G is easing off, that there should be a potential for a lower CapEx to sales ratio.
And then to the regulatory requirements on us in Norway. Let me split it into 2 parts. One part is related to the old copper network, where there is currently a requirement on us to keep that network up for DSL customers until September 2025. That is something where we are now constructively working with the wholesale customers to try to find good solutions for their customers so that they also can migrate on to new technologies, and we are offering them both access to our fiber network, wholesale interface, and also to our fixed wireless product also on a wholesale interface. In addition, of course, to the fact that in Norway, there are other fiber providers and mobile providers as well, which are also potentially offering this access. The second part is with respect to the future regulations, we are currently under a regulation to provide this access both on fiber than on DSL. And we believe that the regulator will make changes to that because Telenor is no longer a dominant player in the fixed broadband market. And we see that other players and particularly on a regional basis in Norway are now more dominant players. So there is a process ongoing where the regulator will come out probably with new regulations when it comes to the fixed market in a year's time.
By that, we complete the Q&A. Thank you, everyone, for listening in, and thank you for the questions, and have a nice day.