Earnings Call: Q3 2018

Nov 15, 2018

Ladies and gentlemen, welcome to the Booth nine months twenty eighteen Results Conference Call. I'm now handing you over to your host, Corine Adams, Head of Bouygues Investor Relations, to begin today's conference. Thank you. Good morning, ladies and gentlemen. I would like to remind everyone that you can find on the company website at wwwbrig.com the earnings press release, the presentation we will be commenting on during this conference call, an Excel file with historical key figures for the group and each business and the company's financial statements. Statements made on this call are forward looking statements. Such statements reflect objectives that are based on management's current expectations or estimates and are subject to a number of factors and uncertainties that could cause actual figures to differ materially from those described in the forward looking statements. I would now like to turn the call over to Mr. Philippe Marien, Deputy CEO of Bouygues. Thank you, Karine. Good morning to all of you, and thank you for joining us. I would like to welcome everyone to our conference call to discuss Bouygues' nine months results. With me in the room is Christian LeCock, CFO of Bouygues Telecom. Following my comments, we will be answering your questions. To begin on Slide four, I would like to highlight the very good commercial performance in all our businesses as well as the strong results of Bouygues Telecom and TF1. First, all our businesses have achieved robust commercial performance. Bouygues Telecom net adds have accelerated in Q3 in both mobile and FTTH in a highly competitive market. At TF1, year on year TV advertising revenues increased by 7% in Q3 and by 2.5% for the nine months period, driven by the FIFA World Cup and back to school programs. And the construction businesses are well positioned in upbeat markets in France and internationally, with the backlog remaining at a record level at end September. And second, Bouygues Telecom continued to deliver strong earnings growth, thanks to a strategy focused on reliable and high quality networks and a simple and seamless customer experience. As shared with you on October 18, Bouygues Energy and Services has faced difficulties in the completion of three projects and Colas has experienced some challenges in its specialized activities in France in the RAID business and on the pipeline work site. This led to a decrease in the nine months twenty eighteen profitability for the construction businesses. However, net profit attributable to the group is up EUR83 million year on year, benefiting from an increase in Alstom's net contribution. Turning to key figures on Slide five. Sales were up 6% year on year, driven by all businesses. Like for like and at constant exchange rates, sales increased by 4%. Nine months 2018 current operating profit of EUR820 million was driven by the following factors: First, we benefited from a significant increase in the profitability of Bouygues Telecom in a highly competitive market with a year on year growth of €51,000,000 Second, TF1 delivered good results despite the cost of hiring the FIFA World Cup, thanks to an increase in TV advertising sales, new revenue sources such as the TF1 premium offer and the business ability to adjust its cost structure. Third, Bouygues Immobilier's current operating profit grew €17,000,000 year on year excluding the one off impact of next door capital gain of EUR28 million in Q3 twenty seventeen. And lastly, we experienced a decline at Bouygues Construction and at Colas as previously explained. Nine months 2018 group current operating profit also included EUR17 million related to the cost of acquisitions as well as the purchase price allocation recorded in TF1's Q3 twenty eighteen accounts. Please keep in mind that the PPA related to the recent acquisitions will be booked in current operating profit as soon as they are finalized. Operating profit was stable compared to the same period last year, slightly above EUR1 billion. It included notably non current income of EUR110 million in Q3 twenty eighteen related to the 1,800 megahertz frequency charges at Bouygues Telecom. Let me explain this. At end twenty fourteen, the CONSELE data consoled the decree published in March 2013, increasing the tariff of the 1,800 megahertz frequency fees used for four gs. While waiting for the publication of the new decree establishing the tariff, Bouygues Telecom maintained a prudent approach and continued to book charges at higher level. At end Q3 twenty eighteen, the French state confirmed that it was maintaining the tariff at its historical level with no increase. As a result, Bouygues Telecom canceled the charges accounted for prior 2018, generating non current income of EUR110 million. Finally, net profit attributable to the Group increased from a year ago, including Alstom's contribution of €230,000,000 in nine months 2018, a €125,000,000 increase over last year's contribution. Let us now turn to Slide six to see the net debt evolution from end December twenty seventeen to end September twenty eighteen. On Slide six, net debt was EUR5.5 billion at end September twenty eighteen, up by €3,600,000,000 compared to end December twenty seventeen. Compared to September 2017, net debt was up by €1,800,000,000 The increase over year end is explained by several items. First, an outflow of EUR1.6 billion in acquisition and disposals coming mainly from the following three acquisitions: Miller McAsphalt by Colas in Q1, Aufeminin by TF1 in Q2 and Alpiq Engineering and Services by Bouygues Construction and Colas in Q3. Second, 138,000,000 decrease in the line other due mainly to share buybacks and the other side of fewer stock options. And third, the usual business seasonality. Regarding change in operations, you can see that it is improving compared to the same period last year. Turning to the breakdown of operations, Slide seven, you can observe that net cash flow increased by EUR123 million year on year driven by Bouygues Telecom and TF1. Net CapEx is up EUR216 million due mainly to Bouygues Telecom. And last, working capital requirements decreased by roughly EUR150 million year on year benefiting from an improvement related to operating activities. We still expect net debt of around €4,000,000,000 at year end. I will now turn the review of operations starting with the construction businesses. Let's begin with the backlog on Slide 10. The commercial momentum in our construction businesses remained strong in the 2018, in line with the first half trend. Indeed, the group construction businesses strength and its positioning as developer, builder and operator bring us favorable competitive advantages in markets demonstrating strong worldwide demand over the long term. The backlog evolution at end September twenty eighteen reflects the trend we explained to you during our Capital Market Day. First, the backlog at end September twenty eighteen of EUR33.8 billion reached once again a record level, up 13% year on year and up 15% at constant exchange rates, reflecting a higher demand for more complex and sophisticated projects. Second, the Bouygues Construction and Colas International backlog was 59% of total backlog as head September compared to 56% over the same period last year. This demonstrates growing globalization in the construction sector. And third, 49% of Bouygues Construction's backlog at end September twenty eighteen had an execution date of more than two years versus thirty five percent ten years ago, illustrating the longer duration of the projects. Let us now turn to France, where we have good visibility as illustrated on Slide 11. In France, commercial momentum is good with a backlog at 10/2018, up 5% year on year. This momentum is driven by tenders for the Grand Paris project, demand for renovation of building and infrastructure, the construction of new complex projects and the need for maintenance in roads and rail. Some significant contracts have been booked in Q3 twenty eighteen, including the laying of truck and catenary on Link 15, Southeast of Grand Paris for EUR108 million, the renovation of the Seventeenth Boulevard Montlanc and old administrative city in Paris for EUR146 million, this project is one of the 22 sites in the call for tenders for reinventing Paris. And outside of Paris, commenced a unique program bringing together a concert hall, an exhibition center and a sport hall in Orleans for €107,000,000 Let us now move to International Markets, where the Construction businesses achieved strong commercial performance. International markets are globally dynamic, especially in countries where the group has a long standing presence. In this environment, the international backlog was up 20% year on year, excluding Miller McAsphalt and at constant exchange rates. Orders for the quarter notably include two major contracts, the construction of the main tunnel for the M4M5 WestConnex Link in Sydney for around EUR650 million and the construction of Cambridge University's Physics Laboratory for EUR281 million. Let's now move to the nine months results for the Construction businesses. Turning to Slide 13. We're up 6% year on year and up 4% like for like at constant exchange rates, reflecting the good commercial performance of our construction businesses in France and abroad. The construction businesses' current operating profit was EUR406 million compared to EUR579 million in nine months last year. I would like to focus on the following points. First, the increase in profitability at Bouygues Immobilier, excluding the next door one off impact of EUR28 million in Q3 twenty seventeen. Bouygues Immobilier's ninth month current operating margin reached 6.5%, up 0.9 points year on year. Second, the strong performance of building and civil works activities at Bouygues Construction with current operating margin at 4.1% in the nine months, improving by 0.4 points year on year. This level of margin is particularly high compared to a normative level of 3.5%. You know perfectly that we can be above or below this level depending on the start date of new projects in the pipeline. Third, Colas performed well in Road in France in the nine months. Sales in the Road business were up 10% in France and current operating margin was up 0.4 points in the first nine months of twenty eighteen compared to the same period last year. Now let me turn the call over to Christian. Thank you, Philippe. As you will see, Bouygues Telecom's very good commercial momentum has continued with strong financial performance in Q3 twenty eighteen. Starting with Slide 15, you can observe that we maintained very good performance in mobile during the quarter despite heavy promotional activities in the market. We won 475,000 new mobile customers in the 2018, of which 199,000 were new planned customers, excluding M2M. At end September twenty eighteen, Bouygues Telecom served 15,800,000 customers. All in all, 1,400,000 mobile customers have joined us in the first nine months of twenty eighteen. This success is the result of our Protegy Mobile since end twenty thirteen to differentiate through the quality of our four gs network, which improves customer service. According to asset collector survey, and as shown on Slide 16, Bouygues Telecom is ranked number one in world areas and all the towns of less than 10,000 inhabitants in voice, SMS and mobile broadband. And Bouygues Telecom is recognized second and operated France, thanks to the quality of its mobile network. This excellent position is acknowledged notably in all areas where we are ahead of SFR while we have the same coverage and share the same network. It demonstrates the quality of our technical network teams. Bouygues Telecom continues to strengthen its leadership in four gs through coverage, transportation, optimized frequency and network management. At end September twenty eighteen, Bouygues Telecom attained ninety eight percent four gs coverage and expects to reach 99% at end twenty eighteen. In London areas, Bouygues Telecom is finalizing the completion of the shared network with 87% rollout at end September twenty eighteen and ninety five percent expected at end twenty eighteen. In dense areas, we anticipate adding 2,000 additional sites by 2022 to identify the number of sites and prepare the arrival of five gs. In parallel, Bouygues Telecom has optimized its network configuration and reallocated bandwidth to four to offer higher speed to customers through spectrum aggregation. After the 700, 800, 1,802,600 megahertz bandwidth, It is now the 2,100 megahertz 10 ks be used for four gs. Moving to Slide 17. We see that FTTH net adds are accelerated in Q3 twenty eighteen. Bouygues Telecom won 71,000 new FTTH customers in the 2018, resulting in a total number of FTTH customers of 467,000 at end September twenty eighteen. FTTH customer base has more than doubled compared to one year ago and represents 13% of the fixed customer base. We expect this positive trend to continue, supported by an increase in premises market and the success of our new range of offers launched last April. At end September twenty eighteen, Bouygues Telecom had a total of 6.3 marketed promises. The number of promises marketed will continue to accelerate in 2019 in order to meet our goal to market 12,000,000 premises by end twenty nineteen and 20,000,000 premises by 2022. Overall, the total customer base reached 3,600,000 broadband users as end September twenty eighteen. Slide 18 highlights the sharp increase of Bouygues Telecom's profitability in the first nine months of twenty eighteen. Total sales were up 6.5 year on year. Sales from services rose 5%, thanks to continued growth in the customer base and the positive impact of the launch of a new range of fixed and mobile offers in Q2 twenty eighteen in a highly competitive market. In the 2018, mobile plan ABPU slightly increased compared to the third quarter of last year, and fixed ABPU stabilized at EUR25.5 per month compared to Q2. EBITDA for the nine months was €931,000,000 an increase of 15% year on year. Moreover, EBITDA margin on sales from services was up 2.7 points to 29.4%. Excluding the impact of the 1,800 megahertz currency charges, EBITDA margin would have been up 2.1 points. This is due to the fact that 2017 EBITDA would have been higher without the provision we accounted for last year for the use of our 18 megahertz frequencies. Operating profit was 44% compared to the first nine months of 2017. In Q3 twenty eighteen, it notably includes non current income of EUR 110,000,000 related to the 1,800 megahertz frequency charges accounted for pre year 02/2018, as explained previously by Philippe, and EUR 60,000,000 related to the transfer of sites to Cellnex. World CapEx of €920,000,000 in the first nine months is in line with expectations for 2018. I would like now to focus on our B2B segment. Looking at Slide 19, the B2B market represents a strategic priority for Bouygues Telecom. Bouygues Telecom Enterprise is today the third B2B telecom operator in France, thanks to continued investments in proprietary mobile and fixed infrastructures and high quality customer service. It offers a full range of mobile, fixed, Internet and network innovative solutions as well as unrelated services such as digital, cloud and security. Its mobile market share is over 20% in France, with a presence in 35% of large companies and 10% of SMEs. In fixed, the market share is lower at around 3% but growing steadily. Our ambition is to strengthen Bouygues Telecom Enterprise position in both mobile and fixed: first, by expanding fixed market share and new innovative services for large companies and midsized businesses and second, by increasing mobile and fixed market share in the fast growing SME segment, notably to external growth. This explains why we decided to undertake negotiations to acquire a 43.68% interest in Keio Communications. Let us now move to Slide 20 to give you more details on this company. Keio Communications is a telecom operator targeting exclusively SME and inside businesses, which represents a market of around €3,500,000,000 TEO Communications benefits from strong assets, well known brand with an excellent customer satisfaction level, a strong expertise in marketing and advanced digitalization and simple, wearable and competitive solutions with a fully internal controlled technical platform. It is growing complementary virtual and convergent offers in fixed with a strong exercise in advanced digitization to Bouygues Telecom Enterprise. Clear Communications has a customer base of 14,000 clients and 200,000 end users. For 2018, sales are expected to be up 30% compared to 2017, with current operating profit of €3,100,000 Keio Communications is a Peri Q1x growth listed company. Bouygues Telecom acquired a 43.6% interest in Keio Communications in an off market block trade, coincide at €34 per share. The €34 price share values 100% of the share of Kayo at around €67,000,000 The public tender offer is expected to close during H1 twenty nineteen, and the completion of the transaction is subject to usual conditions. Thank you, Christian. I would like to briefly comment on the financial statements. We have already looked at sales and current operating profit shown on Slide five. Let us now have a look at other income and expenses contributing to operating profit on Slide 22, which shows an improvement of EUR 116,000,000 year on year. This improvement is explained mainly by the non current income of EUR 110,000,000 at Bouygues Telecom, as said before. Cost of net debt decreased slightly. Turning to Slide 23, you can see that income tax expenses increased slightly, leading to an effective tax rate of 30% for the first nine months 2018. Moving to the associates and joint ventures line, the change is explained by Alstom's net contribution of €230,000,000 in the first nine months 2018 versus €105,000,000 in the same period of last year. Finally, we will turn our attention to the outlook for the full year. As you can read on Slide 25 and as stated at the beginning of this call, we confirm the outlook shared with you on October 18. This concludes my presentation. Operator, please open the floor for questions. Okay. So as a reminder, we do have some questions coming Okay. So our first question comes in from the line of Ben Nicholas calling from HSBC. Please go ahead. Hi, good morning. First question on telecoms. Mobile ARPU growth has accelerated in Q3 despite a very strong push on promotions in September. On the other side, your broadband ARPU is under tremendous pressure at minus 5.6%. Can you explain the underlying factors driving both ARPUs? And my second question is on Energy and Services. Obviously, you had big losses in The UK. Just wondering if you have a specific strategic plan to reorganize the overall operation. If yes, what could be the role of Alpiq? And eventually, what could be done in France where Energy and Services appears to be a subscale to me? Thank you. So about the ABPU, first on the fixed, yes, we have a decrease in ABPU compared to Q3 twenty seventeen, but the level is stable compared to last quarter. The decrease compared to last year is the same things as the like quarter. We have a decrease in commissioning costs from around EUR 60 paid at the beginning by the customer to EUR 30. We still have the effect of the promotions. And we also have a mix effect because the weight of the cable offer in our installed base is coming smaller and smaller, and this kind of clients have a higher ABPU. It's on the fixed above the mobile. We are very happy to be able to stabilize our ABPU due to the fact that we are able to monetize the quality of our network and the quality of our services while following promotions made by competition in the similarly with value statements. So regarding Energy and Services, so first, the very poor results and the losses are coming from three very specific and unique projects, in fact. So first, we have to deal with these three projects. One is under contractual and legal discussion with the client and the two others are on the commissioning phases. So we are totally under an operational issues and set of measures. More generally, regarding Bouygues Energies and Services, we have to improve the profitability of this activity as a whole and mainly by moving from lower margin generation type of businesses to higher generated margin generation business. It was, in fact, the move that we have done with these three projects. Unfortunately, the start was not good, but the idea remains the same to move to more industrial activity. So we will put that in place in the coming months. That's for Bouygues Energy and Services. Alpiq will help Bouygues Construction to reinforce its energy and services activity as a whole, but we don't want to merge the two companies. Clearly, Halpeak has some very good expertise in terms of industrial activity, in terms of power stations, construction and activities. So we will reinforce the general activity, but we don't want to use Alpiq to help Bouygues Energy and Services. We will continue to split the two activities under the leadership of Bouygues Construction. Okay. Thank you. The next question comes in from the line of Thomas Moreno calling from UBS. Please go ahead. Hi, good morning. Good morning. Hi, good morning. I just had a question about your Australian JV with Lendlease. I had two questions actually. The first one being, are you consolidating the results of this JV? My second question is Lendlease announced last week that they announced last week a US350 million dollars provision due to difficulties in NorthConnex, which is a project that is managed by this JV with you. Do you expect to report any losses in relation to this project going forward? Thank you very much. Yes. So the regarding the press release of LandLib, unfortunately for them, the only reason of their provision is not NorthConnex project. NorthConnex is part of their provision. For sure, we are facing some difficulties on this project with Lendlease. And obviously, we already booked overruns on this project in the nine months for sure. However, as you have seen, we were able to deliver a global margin of 4.1% in our Building and Civil Work activity, demonstrates that we have also very, very good projects in front of this one project with some overruns for sure. That's the reference for the North project. Obviously, we are totally involved in this project, and we take our share of our overruns. But as you have seen, this overruns on this project has no negative impact as a whole for the profitability of the Building and Civilization. Recognize losses in relation to this project during the nine months results? Yes. Thank you. But it's part of the very, very good profitability of building and see that. Our life is made on a daily basis with a series of good projects, a series of very good projects, a series of bad projects and a series of very bad projects. In fact, the point is to have a good balance between all these elements. Unfortunately for us, during Q3, we had these three projects regarding Bouygues Energy and Services specifically, and the balance was not good in the Q3. But life is made of good and bad projects in this business. Again, I repeat, the explanation of the whole provision of Landis is not linked only to the NorthConnex project. Sorry. And in relation to my first question, you are then consolidating fully consolidating the results of this JV? Yes. Yes. For our share, yes. For our share, it's joint venture. So we take our share to 50% on this project. Okay. Thank you. But part of our operational results. As for every JV, there is no difference between this one and all the JVs we have all over the world. Okay, thanks. The next question comes in from the line of Fredrik Boulan. Please go ahead. Hi, Fred at Bank of America. Thanks for taking the question. First of all, I would like to come back to the previous question on mobile ARPU in particular. We're seeing offers from Bouygues Telecom at €5 €10 I'm just trying to understand what the percentage of gross adds you're making on those very cheap offers and what the dynamic you're seeing elsewhere in terms of upselling to drive overall ARPUs to increase. Secondly, we're seeing strong growth in other telecom revenues outside of service revenues. Can you detail, for instance, for the first nine months, out of €760,000,000 of revenues, what's low margin hardware versus tower sale? What's recurring from nonrecurring if we look at this business stream in a couple of years? And then more broadly on the construction side after the warning, maybe a month after the warning, if you could come back a little bit on your view on what you call normalized margins. For instance, in the construction side overall, do you think as early as 2019, we can go back to above 3% levels and towards your normalized margins? If you could shed a bit of light on phasing here. Thank you very much. Okay. So I start with your last question. So regarding the evolution of the margin in construction, there is absolutely no chance from our point of view with what we have said on the third second of October during the Capital Market Day. So we remain with the same idea of what we call normative margin in the construction for Colas, Bouygues Telecom Bouygues Construction and Bouygues Immobilier, so absolutely no change, 3.5% for Building and Civil War and Bouygues Construction, between three point five percent and four percent for Colas and around 8% for Bouygues Immobilier. So we remain with this idea. Again, the counter performance of 2018 is only due to these one shot issues. Regarding the precise target for 2019, we will explain that at the beginning of the year when we achieved our plans, and we will present our 2018 results. So same target for 2019, we will speak about that beginning of 2019. So I agree on so about your two telecom questions. I will begin with the amount of other sales revenue. The other sales revenue has increased by €30,000,000 in Q3 twenty eighteen compared to Q3 twenty seventeen. This increase is explained by mainly three elements. First, we had an increase in term of accessories and unsets sold to our clients. Second, as you said, we have the effect of the CELMEX contract with a positive impact on sales, but margin impact on EBITDA. And last point that we will see also the next coming year, due to the way we are accounting for the connecting the revenue and the cost for connecting FTTH customers. So we have a revenue coming from the building operators. We have also a cost to pay to the building operators. And third, we have a federal cost to pay to the subcontractors. So you have kind of revenue, but it's not a real revenue, I would say. And it is increasing this year because we have more FTTH subscribers, and it will continue for the next year. About the mobile adPU, we'll just remind you that in the mobile market, there are two segments. First, the SOAR segment, which represents less than onethree of the mobile market in terms of value. We value this market at around EUR 4,000,000,000. The competition of this mobile market is very, very strong on the solar market with promotions, flash sales, lifetime tariffs and so on. And so the volume of growth ads is very high on this market and the churn rate is also very high. So but it is not very important because we do not have some variable commercial costs for gross adds made on this market because this is a new web, a new market. On the other hand, you have the high end offers. The market is quieter, so around EUR 8,000,000,000 per year in term of value. We are very happy with our market share on this market. On the strategy, we meant to continue to focus on monetizing the quality of our network, of our four gs network. You we present you that we are now one in the world areas in France, number two in average for our mobile network quality and also to monetize on this market the quality of service. On this market, we are able to upsell our clients to sell them more services, to upsell them to a bigger offer with newer services, new more data and so on. And that's why the mix of that, that we are able to stabilize our IPP, while we are able also in the time to continue to increase our number of clients. Thank you. Maybe just a follow-up on other sales. If you could give us a rough idea at this stage for the first nine months, what is split into three different brackets and what handsets, what's selling ex contract, what's going We on very do not disclose that. Thank you. The next question comes in from the line of Thomas Codre. Please go ahead. Yes, good morning. Thanks for taking my question. Question on telecoms and your guidance, actually given the performance that you've delivered over the nine first months of the year in terms of EBITDA and growth in services revenue, I'm wondering why you're not being more specific or ambitious in terms of full year guidance as far as sales from services growth is expected and also as far as EBITDA margin is expected? And concerning specifically the EBITDA margin guidance, can you please confirm that the guidance is also true if we're excluding the impact of the cancellation of the provisions of the 1,800 megahertz frequencies? Thank you very much. So about turnover guidance, we do not change our guidance. It is more than 3%. I always said that the important term is more, so it will be more than 3%. We do not have any guidance in EBITDA level and EBITDA margin. And about the consideration of charges, what is exactly your question, sorry? Well, you have a guidance of EBITDA margin should be higher than in 2017. Yes. And I was just wondering if that guidance was also true if we were taking the 2017 basis excluding the provision on the 1,800 megahertz fee? The 2018 EBITDA is, I would say, the real one because we do not have anymore this kind of charges in our EBITDA. What you should do is to restate the 2017 EBITDA towards the real level of last year EBITDA. And with that, you will be able to compare the margin of last year to the margin of this year. I think that we gave you all the figures to be able to do that. As we said to you, that's the difference at nine months for the nine months between last year's EBITDA without 18 negative frequency charges and the EBITDA of this year is 2.1 points, if I have Okay. The figures, Thank you. We have all the figures to calculate. The next question comes in from the line of Jakob Bluestone. It's Jacob here from Credit Suisse. A couple of questions, please. Firstly, just on the construction side. When you preannounced, you mentioned that you weren't expecting any spillover effects, such from the rail strikes, I think, into Q4. Can you just confirm that, that is indeed still the case? So is Q4, I guess, going be a slightly cleaner quarter? And then just secondly, the telecom side, on the Kayo acquisition, can you maybe comment on what sort of synergies you see? And presumably, you need to get to majority ownership before you can realize those synergies. And then just finally, on spectrum in France, can you maybe comment a little bit on your sort of expectations about the 3.5 gigahertz license allocation, which I guess is next year. Given what we've seen in Italy, do you see any risk of sort of runaway auction in France? Or is your sense just generally that the French authorities are pretty rational these days and not trying to maximize proceeds? Thank you. Okay. So regarding your first question, definitely, we confirm that we have taken all the negative impact in Colas Rail. So we will have what you call a cleaner quarter. And so the fourth one will be definitely clean regarding the negative impact of the in Colas Rail. So first, for your question on KYO, our main goal by acquiring KYO is to be able to increase our market share, of course. But also KYO, as I said, very good assets in terms of IT, good clients process and so on. They are very digital. And they are very digital and so very, very good thing for us. I cannot speak to you about synergy level as there will be IPO. And so I cannot disclose anything before the IMF prospectus. Your last point was about 3.5 gigahertz frequency. We do not know now if there will be some option or not. Of course, if there is some option, we will look at them. If there is no option, we will also look at this band because this band is very important for five well, we expect that we hope that the price won't be the same as Italy because we think that the French government's main goal is to split frequency equally between all operators as they did at the beginning of this year with the new deal signed between all the four operators and the government. Thank you very much. No more questions? Operator? Operator, please. No more connection. Hello. I can confirm you are still connected in the conference. Okay. Next question. The next question comes in from the line of Josh Hallett. Please go ahead. Hi guys. Thanks for taking my question. My first question is just on your performance, particularly on mobile, is pretty remarkable given where the market is. I was just wondering if you could explain why you think you're doing so much better than competitors and where you think you're taking subscribers from? And then that being the case, was just wondering, is your view on consolidation still that you think this is something that's very positive and should be done? Or are you kind of happy with just carrying on growing organically? And the final question on that consolidation point is, Altice like the only realistic option given you already have integrated you've done a lot of work together on the infrastructure, the fixed and the mobile side. Does that mean that basically it's the only option if it came to M and A in France? Thanks very much. So regarding consolidation, again, is the consolidation is absolutely not at the agenda for many reasons. And the first of them is the fact that there is no seller. So if there is no seller on the market, obviously, consolidation is not possible. Again, I repeat that in case of possible consolidation Bouygues Telecom will consider consolidation deal as the actor of the consolidation. We want to remain in this business. And if we are able to grow in this business, why not? But again, there is absolutely nothing today leading to think about that. And so our target is clearly to develop the company and to take benefit from our positioning and to continue to grow and to reach the level of free cash flow we want to reach. Regarding the dynamic of the market and the reason of our good dynamic, Christian? Yes. The result of our good dynamic is the result of our strategy in mobile. We are now increasing our market share in London Solar, thanks to the shared network we rolled out with SFR. And it is also a result that really the asset to put us in the first place for the quality of our network of mobile network in this area. So it's only the result of the job we've done for now two or three years now. So bigger network, good quality of the network, good quality of our customer care processes and the quality of our outlet network. So again, quality, which was the one of the three pillars of our strategy in 2015, and the result is the fact that we are able to grow despite the very competitive environment. Again, we consider that the mobile business is not a commodity business because there is difference between the various operators. And when you offer more quality, are better and you are in a better dynamic than competition despite, again, a very aggressive price on one part of the market. Great. Thanks very much. The next question comes in from the line of Jerry Darlis calling from Jefferies. Please go ahead. Yes. Good morning. Thank you for taking my questions. First question is related to the fee reduction on the 1,800 megahertz frequency. Does that have a cash flow impact on Bouygues Telecom? In other words, we're actually paying out cash at the higher provided level in the past. And to that extent, would there be a reversal going forwards? Second question is on fixed broadband. It would be interesting to know, please, what proportion of your fixed broadband base is currently on some form of promotional price? And then finally, also on fixed broadband, you mentioned that one of the reasons why the ARPU trend appears a little soft is because of the dilutive effect of cable customers coming out. Wondered if you could confirm, please, how many cable customers remain and for how much longer that cable attrition is likely to remain a drag? Thank you. Well, first question about the impact of the frequency. So there is a noncurrent income of the EUR 110,000,000 related to the 18 megahertz frequency charges has two effects: first, an increase in term of cash flow from operations before tax and so an increase in term of free cash flow, excluding working capital requirements. But in the same time, as it was only a provision, we have a deterioration in term of working capital requirements. So in total, the impact of the free cash flow is not all on the free cash flow after working capital requirement is at zero, excluding taxes because, of course, we have some tax due to on the profit we made this year. Your second question was about our percentage of clients in our fixed broadband that are in the commission. So we do not disclose this kind of information. And it's very difficult to give you an answer because you have clients, of course, after maybe €5 you have the clients at €10 you have clients at €15 at €25 So what is the why do you put the level below the one you have some you consider your clients are in promotions? And remind you that in the fixed market, all operators have lower tariffs for the first year for their clients. So the first year, when you pick some clients, during the first year, the clients are at a lower level, but not at just very big level of promotion. It could be clients, for example, at 19 for the first year and then maybe EUR 29 the year after. Your last question was about our number of clients in Cable. So we do not disclose this kind of information also, but the number of clients is decreasing very quickly, and they were very high in the past. And now we are migrating these clients to our FTTH infrastructures. Could I just follow-up, please? Thank you for that. In terms of fixed broadband ARPU, in the grand scheme of things, are you confident that we will see some sort of improvement in that fixed broadband ARPU trend? I mean, must be a lot of customers on promotional pricing at the moment. And as those customers go back to list, would that make ARPU should improve? So in the fixed market, our strategy is still the same. We want to attain 4,000,000 customers in the midterm, so let's say, two or three years. And we our marketing strategy is focused on that and not on ABPU. And also, I remind you that globally, we are not focused on our level of ABPU. What is important for us is the growth in terms of turnover turnover billed to the client, revenue billed to the client. That is the important figure. Thank you. The next question comes in from the line of Eric Lemuria. Please go ahead. Yes. Good morning. I've got three questions, if I may. First question, what is your current perceptions of the margin within your backlog today? Second question, what is the impact of Alpiq in your order intake and order book figures at end September? I suspect it's small, but just checking. And the last question regarding Bouygues Immobilier. Reservations are down 9% in the residential segment. When do you think this decline will be translated into revenue decline? Alpiq has absolutely no impact in our September figures, neither in term of backlog nor in term of net sales, not in term of results. So no impact on IP except obviously in our balance sheet in terms of acquisition, but no impact in terms of operational figures. Regarding Bouygues Immobilier, clearly, have a decrease in reservation mainly for private investor in the private investor segment. Know that we have seen that since the beginning of the year, in fact, compared to 2017 when this segment was at a very high level, thanks to low interest rates and the L P laws of the by to rent scheme. The effect is decreasing in 2018 and it's true for the whole sector and XCT and Kaufman had the same comment as us. Clearly, even if the product is a good one, the financial environment is good. The general environment is not good for this type of investors because of relatively negative speech from the French government and from the French President regarding real estate investors, the increase of all the taxes, the new tax regarding the property and no more financial investment. Resulting tax for the future income tax in the future, all these negative noise are not good. And the result of that is clearly a relatively big decrease in term of resolution on this segment. As a despite that, and even if it is a decrease compared to 2017, if you look at a longer period, clearly, we have a relatively good level in absolute term in term of reservation. The consequence of that in term of net sales is with the time lag of eighteen months, something like that. Okay. Eighteen months. And what about your perception of the margin today in your backlog for Construction and Colas? Do you think they are above or below other No, no, is no specific comment on the margin in the backlog. We see no real movement increase or decrease. Okay. Thank you. The next question comes in from the line of Alexander Ronsier. Please go ahead. Hello. Thanks for taking the question. I just wanted to come back on the 1,800 impact at the telecom unit. Can you just clarify if the impact in the adjustment is evenly split across every quarter? And thus, if you can extrapolate the nine months into the full year for the comparable basis next year? And then secondly, on the profitability and the organic improvements still on telcos, is there any specific action you've had on your cost base? Or is that just like directly flowing through from your increased service revenue? And secondly, on that same question, if you could give us a little bit more color on how much is actually driven from the shared network rollout with SFR? And what's left given your target of 95% rollout on your shared network by 2018 end? Thanks. So first about the 18 mega sequences, as the decree taken by the government has been published in Q3. All the impact has been taken by us in Q3. So we are cutting for these charges, these provisions last year and the year before and also in Q1 and Q2 twenty eighteen. And we reversed this provision in non current income for the period before the 2017 and EBITDA for the charges we have taken in Q1 and Q2. So you have a positive impact in Q3, but no impact if you look only at the nine months period because there is no more 18 megahertz charges in our account for the total year for this total year. So clearly, thousand and eight the first nine months twenty nineteen are total normal year regarding this item. Okay. And thus, if I can just follow-up on that, I can if I want to just rebase 27% 1Q to 3Q, I can evenly spread the difference between your organic improvement and reported improvement. Sorry, I didn't catch what you said. It's just with the fee that you were provisioning before. Were you provisioning the same amount across every quarter or? Okay. That's clear. Your second question was about the improvement on our EBITDA. So of course, a big part of the improvement is coming from our service revenue growth. We also still focus, of course, on our level of cost. And we expect to have, in the next coming years, improvement coming from FTTH due to the fact that we won't have to pay anymore the fees to Orange for the copper local loans. And your third question was about How much driven by Chanticleer? What is our market share driven by our share network with SFR? Yes, we are improving our market share in the rural areas, thanks to this network. In some part of France, our market share was very, very low. And we are also increasing our commercial presence in this part of France, and we will roll out some shops in this part of France next year. That's very clear. Thanks. The next question comes in from the line of Giovanni Montalti. Please go ahead. Thank you. Good morning. Can you give us some more color about the current trading in France on the telecom market? Is there any sign of improvement or any sign of further deterioration? And leaving consolidation aside, do you think current dynamics that are apparent are pretty tough, especially at the low end of the market are sustainable into next year, you would expect the same level of commercial intensity, promotion intensity in 2019? Thank you. So about the current trading in telecom in France, I just would like to remind you that Q4 is always, as each year, a very promotional period because in Q4, you have Christmas sales and unfortunately, Christmas appears each year. So I think it will be the same this year. We'll see. But the current direct dynamic is still the same. So very high level of promotion in the mobile business on the SIM only mobile market. As I said, the premium market is much quieter with the ability to sell quality to our clients. And on the fixed, we picked up some promotions. It was the case especially in Q3 because you have the back to school period in September, which is a special period for the fixed because this is when family is moving from a house to another one. And so that in September, especially, you are able to take some clients in the fixed better than on other players. And sorry, if I may, on the 2019 outlook, do you think market dynamics, if they are today, are sustainable? Do you think I don't know. It's not we will see. But what is important for us is the growth in terms of sales. It is not by ABPU that we will increase our profitability. It is with our sales growth, and we'll continue to focus on this next year or so. You can have a decrease in ABPU just because of a mix effect. For example, if you take a huge number of clients in the C1B, Web only market, but still have a stable level of clients in the premium market, you will see a decrease in term of ABPU, but this is a positive impact in terms of total sales. So don't focus too much of ABPU, it is not a good indicator. No, that's clear. That's clear. But if I may, I just wanted to understand if you know, very aggressive promotions like selling Simoli for €5 with general debt allowances for life, these type of dynamics. At some point, worried that this may represent a drag also for the premium market because I mean if the low end of the market goes too low at some point there could be some spillover effect also at the higher end Do you have any concern on this side? We are not the best to answer to this question because we never start the promotion. We only answer to promotion. So please ask this question to the promoter of this very aggressive policy and you will have an answer. For us, we only be in the position of duplicate promotion. So if the promotion continue through some actors, definitely we will continue to reply. If there is no more big promotion, then we will come back to a more smoother situation. So clearly, the adversity of the market doesn't depend on us. Very clear. Thank you very much. Alberto? We currently have no further questions coming through. So one last reminder, it's star one on your telephone keypad if you would like to ask a question. So no more? We have no further questions coming through. Okay. So thank you for joining us today. We will be announcing full year 2018 sales and earnings on the twenty first February twenty nineteen. Should you have any questions, please contact our Investor Relations team. Thank you very much and have a good day. Bye. Ladies and gentlemen, this concludes the Bugouard third quarter twenty eighteen results conference call. Thank you all for your participation, and you may now disconnect your handset.