Earnings Call: Q3 2018

Oct 17, 2018

Good morning. Good afternoon, ladies and gentlemen. Welcome to Digit's conference call. Chairperson today is Mr. Alban Merty. Mr. Merty, please begin your call, and I'll be standing by for the Q and A session. Thank you. Okay, Charlie, thank you very much. Good afternoon, everyone. Thank you Welcome to BG's Q3 2018 results. With me is Vinny from IR our CFO, Nakul our CMO, Hi, Logan, our CTO and the rest of the management team are here as well. For today, I just want to quickly go through a couple of things that will launch first on the key highlights. We'll do a little bit of operational and performance indicators and then we walk you through some financials before wrapping up with 2018 outlook. Let me just get started on the first few slides here. For the 1st 9 months of 2018, we had healthy earnings and good development. On subscriber front, we held about 11.8 minute subscribers. The performance may be led by Internet growth. We saw from SunTrust for the first half of the year and then into Q3 as well. On the dividend, we currently are looking at a healthy return of CNY0.148 per share for the 1st 9 months of 2018. Service revenue tracking, as you can see, for the 1st 9 months is also positive. And EBITDA at 2.5% compared to the same period to this year. Some highlights On the performance, then you can also then link and get more further updates when Akko goes through the financial. Postpaid continues to perform at 14.9% revenue growth year on year. Prepaid, in spite of the overall prepaid decline, we still see triple Internet revenues growing at 9.6%. Internet revenues, First of all, touching 1,000,000 Internet subscribers and then revenue subsequently growing at 18.4%. On the efficiency side, and we focus on this from the beginning of the year, we continue to see 2 brands of Slightly more than 1%, 1% to 2% OpEx reduction in the year. We've got our margin holding at 46%. On the network side, the updates have been going on. The embargo has been listed and therefore we completed the wrong 4 gs. On the digital transformation, you probably noticed that we also launched some new features on MyDG and That continues to add capabilities onto our core platform business, digitizing that. Taking 2,800,000 subscribers in ITG, total value of close to $21,900,000 on upsell transactions. Customer open market. The satisfaction score continues to improve for us overall. On just a little bit on the market, Just to further appreciate the financial numbers. Basically, data monetization revenue growth has been a win for us. However, in the market, because it's B, that data price aggression is still there in the market with which goes up on packages and bundles. There is a device bundle flavoring on the market where there's increased subsidy And the continued decline in legacy voice and IT services. However, our focus areas mitigate around Those areas, looking at strengthening subscriber mix from the postpaid, mainly on the inside base. The Driving Internet monetization at the right kind of plan and packages for the segments that we are focused on. Making sure that MyDG It's able to differentiate not just from the surveys, but also now in the new pillars that we've introduced over the last quarter. And also concludes finding new efficient ways and using emerging digital channels for customers. Let me take a little bit of a deeper dive into the Internet growth. That's mainly coming from a couple of areas. One is 4 gs Plus network coverage, now close to 89% of the population coverage. LTA has also now crossed the 60 Saint Mark, covering about 170 cities across the country and fiber with no surplus 8.3 Metro traffic growth, the growth is on double digits at 60% year on year And on cost and cost it's 14%. On subscribers, as you can see on the trends on the chart, that both Internet and 4 gs Drivers are on the right trajectory. Average customer usage is also now slightly higher than the previous quarter at 9.1 Speak per user. On the revenue side, you can see the split between prepaid and postpaid, both showing positive momentum on the growth, which takes us then to the 18.4% year on year revenue growth that I mentioned and our profit profile of 1.5%. Let me do a transition slide between myself and Akul and on this last slide. First of all, on the core part of the business, prepaid Postpaid conversion and the 4 gs easy entry proposition is still core to our growth. Accelerating on high value postpaid, We're doing this on a device bundle and also on a proposition on borderless roaming mainly on data The value proposition on data and volume astronomy. And on sustainable Internet growth, we are now Looking at as we did in Q2 as well indicate that we're looking at the different segments and how people are subscribing to data on different sites that fits their usage profile. MyDG, they all give me my rewards and lots of surprises that was taken out of the market by the team. He does a good job in terms of finding some key differentiators in the market. Personalization of rewards, both from the Digi brand and also then partnering and many many locations nationwide. On the transactions and B2B opportunities, we see this focus from the teams and also making sure that the customer sees the value proposition in Japan. On the digital side, we continue to strengthen our position as a trusted digital partner for SME Business Sector. We've taken out a core digital plan for the last couple of quarters and continue to build on that. Also taken an entry Enterprise level virtual ABS system or a business phone system called Omni and the innovation plan also He's still going to e commerce platform for the business segment. Akul, then I'm going to hand over to you for the financials. Thank you so much, Alban. Good afternoon, ladies and gentlemen. I'll take you through the financial performance a bit deeper into the numbers here. Let me start with slide number 8 to talk to you about the postpaid business. In Q3, we recorded a healthy growth in subscribers of about 14 90% year on year and about 2.8% quarter on quarter to approximately 2,700,000 subscribers. This is coming both on account of strong pickup on the Digi's new high value postpaid brands and also continued acquisition Momentum happens to be there in the entry level postpaid plans and prepaid to postpaid conversions. The ARPU remained resilient at ringgit. And as a consequence, the postpaid grew a healthy double digit of 14.9 percent And also 3.4 percent Q on Q to RMB640,000,000, approximately 43.4 percent of the total service revenue. The next slide, I just go a bit deeper into the prepaid performance. And as Alben mentioned, the Internet revenue climbed a healthy 9.6% Year on year to TRY 399,000,000, approximately 48% of the total prepaid revenue. However, it Trended 1.4 sorry, 1.5 percent lower quarter on quarter, consequent to the data price aggression, although the prepaid data usage and adoption has increased. The prepaid revenue continued to trend lower with a 9.1% reduction year over year and a 3.5% Q on Q anchored on stronger Internet revenue growth and improved margins. As a consequence, the total service revenue remained relatively flat With a strong subscriber base of RMB 11,800,000 and a healthy ARPU of RMB 41. The growth from Postpaid revenue, which is 14.9% and prepaid Internet, which is 9.6%, actually contributed to bolstering The decline in or actually was able to offset the decline in the prepaid legacy services that we have witnessed over the last few quarters. The Internet revenue as of all, as Alban mentioned, grew a healthy 18.4% year on year and also a 1.5% quarter on quarter, Now contributing to 55 percent of the total service revenue. Now I step into talking about our OpEx efficiency and the cost The focus, the cost of goods sold in this quarter increased 4.5% year on year and approximately 0.8% Q on Q, Mainly on account of increased demand for the device bundles. This was, to a large extent, offset by the improved traffic cost from Higher Internet revenue mix that we've had in our total revenues. The OpEx as a whole has reduced 1.2% Or 33.1 percent of the service revenue, which is mainly on account of the well structured operational excellence initiatives that we have been running For the last few quarters or I must say, for the last few years. These are namely on account of sales and marketing as well as Building new capabilities on the network operations side, yet managing to reduce our OpEx going forward as well. As a consequence, Slide number 12. Our EBITDA remained resilient at $725,000,000 and a healthy 46% margin, which is supported by a higher mix of Internet revenue and also efficient cost management. The profit before tax Improved 2.4 percent quarter on quarter to RMB 504,000,000 and this is post the network operating model transition cost that we incurred in Q2 of 2018 and a relatively modest depreciation of around RMB 194,000,000. The PAT remains steady at 23% or RMB368 1,000,000 and also up 2.5% quarter on quarter. Next Slide 13, on operating cash flow. PoPs cash flow strengthened 4% year on year At a 38% margin, this will flow through from a stronger EBITDA and also relatively lower CapEx spend this quarter. The CapEx investment were approximately 8.6% of our service revenue. However, we continue No, to deliver and work towards our ambition on the network KPI that we mentioned. And also as Alban had suggested, we see improved response from our customers on how they perceive our network? The next Slide, 14, on the return to the shareholders. The EPS, After accounting for the impact of MFRS fifteen has stood at a healthy SEK 0.05, The Board of Directors declared a 3rd interim dividend of $0.05 per share, equivalent to $389,000,000 payable to the shareholders on 20 December 2018. Digi continues to boast of a healthy balance sheet, which is demonstrated by solid financial capability And also ability to fund immediate as well as future investments and operational commitments. Our net debt to EBITDA reduced to 0.7 times, While our conventional debt to total assets remains steady at 21%. Slide 15, this is the impact of MFRS 15. As you noticed, our financials, we always do a comparison On the pre MFI scenario. And in this slide, we just give you an indication of what is the impact of this standard. Not dissimilar to what you saw in Q1 and Q2. We do see a reduction in Service 70 or 37, Which is more than offset by the increase in device 70 of 65. The OpEx is almost flat, only impacting to the extent of 3,000,000 It's a healthy addition into our EBITDA of $25,000,000 With this, I hand over to Alban to take you through what we are Going to do beyond core and also the guidance for the whole year. All right. And just wrapping up the last part of the presentation. I think in most brands, I think we just ultimately look at the heart of the brand beyond just the things that we do in the marketplace. And I think one area here that we focus on a lot is the development of employees As we try to digitize ourselves in the core part of our business, while embracing new innovations and still keeping customers at the core of our effort. What you see here is engagement programs that we run internally and learning and development programs that we run for the employees. On the right side, you also see a little bit more what we've taken out And while we're pushing Internet, it's also important to make sure that we are inclusive in terms of what we take out to the Precisely. And here you'll see some different ways that it's articulated in the country, particularly focusing on youth, Where we have engagement and the news and key influences. The Yellow Heart program holds all of this together, which basically looks at how The brand and what does it mean in terms of inclusion, both on physical as well as the digital inclusion? The last part here is on Digital Academy, something that we have tested out and it On future digital skills training across the country, we've done this now in 20 fully equipped digital Internet centers, mainly located in urban For occasion and secondly, some rural community. We've seen actually very positive pickup of this. And as you can see, Have you been able to touch close to 500 students in this through this program? This is the next slide. Just to introduce to all of you of things that have changed on the company structure on the chair. Hakon has basically our 2nd Chair of DG from September 1. Anna She also joined as the new Board of Directors, with Bethany Khokon. She has now started on the 16th October. And just to introduce Elizabeth, He's actually joined us with David Halloung as the Chief Human Resource Officer for Digi. The 2 changes on the Board and one at the management level. And maybe just to also share with you that we're humbled to receive recognition as the top 50 company Company globally and actually ranked top 5 in Asia and 1st in Malaysia for diversity and inclusion index, which Digital and Xumi Cloud will be Just on the last slide, on just some guidance. No real Change on the guidance that you've given from the previous quarter, but we have given you a year to date position as well. Service revenue at 0.9%, EBITDA margins at 46.4% and CapEx service revenue ratio at 9.6%. And just to leave you with a note that we are continuously looking at how can we ensure that there is sustainable Internet growth, I would be focused on the pre to post conversions and also the plans that we shared with you previously as well on high value plans, Including positions in the consumer and business side of the business. On data driven insights, customer segmentation that continues A trend that we believe we will be much more capable of doing. We've seen that that's being done right now in IPG and the other applications that's bigger to market. Efficiency remains the agenda across the whole company, and that's a joint effort across all divisions in the organization. And we have been committed. We have been empowering Malaysians with the freedom to connect. With that, I'm going to end Presentation and then I'll let Charlotte to manage the Q and A. Thank you. Ladies and gentlemen, we are now calling for questions. Our first question comes from Rishi of BNP Paribas. Please go ahead. Thank you very much. My questions are for Alban, please. Firstly, do you still see In view of the policy risks around broadband pricing, can you give us your thoughts on potentially what the short- to medium term impact might be on DG? And secondly, at what percentage of service revenues do you think We can reasonably expect voice revenue decline to stabilize. And finally, can you give us your initial thoughts on what DG's 5 gs network strategy might look like and any potential time lines that you might have in terms of investments and launch, etcetera? Thank you. Rishi, thank you for the question. Let me just get the first one. The first one was on the policy and profit pricing. Is there any impact short term or medium term impact on Then you asked about what percentage of service revenue we're expecting on voice decline. And then on 5 gs, Some sort of indication on our strategy. So let me just take the first one on broadband pricing. I think you're referring to what's been In the media, on broadband pricing. But let me just take a step back and answer in 2 ways. One is on the mobile broadband and the mobile side, We have basically gone as in the market with extremely affordable fluorescent services for many years now. I think Digi's position has always been taking mobile Internet and affordable provision both on prepaid and postpaid. What you've seen is also a lot more bundles in the mobile space where there's voice data bundles And that shift has also taken place in the last couple of years, having more data. And that's the voice minute, if you want to put it there or almost unlimited voice minute In some of the postpaid plans that you see. And that's mainly because of trends and competition in this space has always been there on the mobile space. On broadband, I think in general, I think it's an opportunity for broadband writers To continue to evolve in the marketplace, I think there's always that potential. But I think what's important is that the various segments Has the right price range and the forward range that's suitable for them and the packages that they want to sign up for. And I believe that we have that right On service revenue, are we expecting further service revenue decline? I think what we've seen is that on the prepaid side, Voice decline was definitely there. On the postpaid, how we have turned that around, We've sold a lot more commitment and bundled plans. As Lois also mentioned this before in previous quarterly announcement, It's actually changed its strategy very early on to look at how do we actually bundle trends in the postpaid space. So if you ask me if the trends are we expecting further decline on voice? I don't think you would see I don't think that you would see better subscribers to change that mix, but I think you will see more customers signing up for bundle Where there is both Internet and voice bundle that is the customer care. And the customers when the trend is right or when the time is right for them, they will switch between voice and data that we are building for that On 5 gs network strategy, as you've seen, there's been some indications on 5 gs trials that were discussed. We will be part of that. I think together with Telenor Group, we have basically done some 5 gs trials and in the midst of this 5 gs trials. We will be part of the 5 gs trials in Malaysia and we will ensure that we are part of Rolling up 5 gs and looking at 5 gs opportunity moving Murphy? On voice revenue decline. Can you just check at the moment how DG allocates revenues or ARPU between voice and data for your bundled plans? And then follow-up on the 5 gs question. Do you have any early indications of when the company may start investing in earnest in 5 gs technology? Yes. So I think on the first one, I don't think we have given a split or we will give a split between how we allocate it. I don't think you need a little bit of a further breakdown, you can then follow-up with Vimi separately. But just on the second question on 5 gs, Actually, to be very honest, I think there is a couple of things here that we need to look at. One is the technology itself, the spectrum, the device availability In the market, all these four things have to come together before you start making decisions to when are you going to launch 5 gs or what's the next step of 5 gs. I think the most important principle is that we will be part of the in 5 gs trial and we will ensure that the gene has the right position to continue to the 5 gs space The time and opportunities, right. Appreciate your thoughts. Thank you. Thank you. Thank you. Our next question comes from Nomura, Mr. Gokbal Kamal. Please go ahead. Yes. Hi. Thanks for the opportunity. Some comments on competition would be helpful. Do you see further pickup in competition, On the data pricing side in the market on the ground, how do you expect that to pan out for the medium term? And what does So that mean to your revenues maybe in 2019, would you expect revenue recovery to growth levels? 2nd is your data consumption is obviously up, but your costs are quite well controlled. Do you think that the current margins and CapEx levels are Thank you. We can just address the first two questions. In terms of the data pricing movement, We will proceed and continue to be active offering from preferred postpaid and for the different segments. For DG, if you look at the last 2, 3 quarters, we're happy with our strategy. If you look at one slide just now on the Internet, both usage as well as the revenue development. I think the segmentation model that Yes. To your second question on the cost structure and Do we see it sustainable for the future? I think JT takes a lot of pride in saying that we run structural operational excellence I mean, initiatives and whether it's on the sidelines of sales and marketing activities, including commission and asset valuation, Moving towards digitalization capabilities and also running operating model shifts on the network side, All of these are sustainable initiatives that we continue to run. So and hence, what we believe is that The kind of cost structures that we are running are the ones which are going to be sustainable going forward. Obviously, what we need to also factor in is the continued expansion that we're going to do built into the network to give better experience to the customers. So that is one area that we're going to balance it Amit, however, our cost structures are we did a lot of financing that these are sustainable structures that we want to maintain for the future. Thanks. Just a follow-up question to follow-up on the comments on the pricing. So would you expect Revenue growth coming back to the business maybe by next year? Or do you expect pricing to remain core elevated? I can take it. We actually don't give any guidance for 2019 for now. So this is think we will do or actually cover up when we talk about Q4. But what we can say is that the market continues to be Quite competitive and there is some pressure on data monetization. What DG will continue to do is to drive Internet adoption And we have a strategy of how we drive Internet as far as getting new customers to start using data with Bite size offerings, which I heard that is the Chilli Putty or the bite size Internet message that we have. And on the slightly more mature customers, it's about driving Increased usage and also all the premium ones to drive further growth as far as selling data bundles and getting The spot for adoption increase in the market. So these are focus areas. I don't see the focus areas changing in Q4 or also in 2019, It's difficult for us to give you guidance on what 2019 is going to look like right now. Thank you. Thank you. The next question comes from Sean of Eastspring. Please go ahead. Hi, Sean here. I have two questions. One is on the CapEx. Just want to check whether is there a result I'm taking the CapEx as the government which help us pay the spend more On enhancing your coverage? And second, on your postpaid growth, you mentioned that I mean, the pickup on the higher value plan is getting more robust. You see ARPU increase in the near term? Thank you. Sean, just if you can repeat your first question, it was around CapEx, but can you just repeat it, please? Yes. Your CapEx guidance is on the low teens, right? Just want to check whether is there any risk on the uptake on your CapEx spending in next few quarters? Okay. Yes. Thanks for the question, Sean. So our CapEx spend this quarter was about 8.6% Of the service revenue, which is slightly on the lower side, especially keeping in mind our guidance for the year. We've actually slightly tweaked our guidance for 2018 and now versus the 10% to 12% which we indicated last quarter, now we are a little more targeted in saying that it will be between 11% to 12% For the year. We believe that our CapEx spends, especially what we are forecasting and actually guiding to the market, are actually Quite sufficient to give the good quality experience to the customer. We are currently at approximately 90% on 4 gs penetration and also about 61% on LTE Advanced. And so we will continue to spend in the areas where we I believe the customers need a good experience. And the 11% to 12% that we've guided for the year is actually sufficient for the set purposes. What 2019 is going to hold in for us is something that we're going to come back, as I mentioned earlier, for Q4. And obviously, quite a lot of investments going forward are also going to be on the sidelines of Capacity enhancements because the experience of the customer as the data consumption continues to surge It's going to be very, very important for us to manage. Okay. Thank you. Thank you. The next question comes from Alex of Ambank. Thank you for the opportunity. I have 3 questions. One is regarding the broadband. One of it was addressed. I just want to follow-up on the broadband issue. With the new MSAP ruling, would DG now consider moving into fiber, being one of the players? And with your 8,000 over kilometers of fiber, is that now open for other players to make use of them? What would that mean In terms of your revenue, where you could potentially charge others who may be using your Fiber, existing fiber, that's my first question. My second question is regarding your spectrum for the 700 Could you give us any further clarity on when will debt be announced? And the third question is pulling up on Sean's question regarding your CapEx. I think for the 9 months so far, I think your Spending is about 10% of service revenue for the main month. And your guidance is about level to 12%. So should we be looking Higher spending in this continuous quarter, which we are in now, 4th quarter. Yes. Alex, thank you for the question. I think the first part of the first question was on the MSAP and whether DG is looking into advertising. Yes, we are reviewing our the MSAP agreement, and we are currently using the time frame to put an agreement in place That will allow us to decide later whether we are doing or pursuing it as an opportunity or not. But for now, we're looking at the MSW Documented agreement and we are finalizing it. And once we finalize it, then we'll come back after we are done with the basic access agreement. On the second part of that first question, which is we use our 8,000 kilometers of fiber. I think we will. Yes, okay. So on the EPOS 5,000 kilos of fiber, We will enhance and support the speakers, but that will be based on our capacity and the requirements that we have for our own I'll take your third question, Alex, and this was around the CapEx guidance and whether you see a higher spend Q4, yes. I mean, because on a YTV basis, if you see a 9.6% and the fact that we guide between 11% to 12%, which means that you will see Enhanced CapEx spends in Q4. And this is basically on the areas of giving an improved 4 gs network experience with additional capacity deployment For our customers. Yes. We had a question on 700, which let me just add. On 700, is there any indication? Currently, no further indication than what we have known before, Alex. I think we are still waiting for MCMC To announce the next step on the 100 megahertz process. Okay. I just want to follow-up on the broadband Are you opening up your 8,000 fiber to the market? I just couldn't quite catch Yes. The remarks earlier, I'm just wondering, you mentioned something about 5,000 kilometers which should be open. Is it to Hi, this is Joakim from Corporate Affairs. Let me just clarify the question a little bit, The reply a little bit. The mandatory standard of access requires us to provide access to access seekers, other operators that are coming in On a case by case basis and based on the capacity that we have as well, we will enter into separate arrangements with them. And now we know with the Medici standards on excess pricing, Those prices are also regulated by the government. So we will evaluate it as required and we are obliged to just turn around with Okay. Sorry again, if you can follow-up on that, would you be required to put a bit more CapEx Now to upgrade your fiber network, if other access tickets would come into your network in terms of Increasing the capacity or the speed? We don't see that so much for now, Alex. That's all I can say. Okay. Thank you. If you don't mind, can I just answer one of the questions that Sean had asked, which We finished out? And this was basically on account of the take up in the higher ARPU affirmative. We will continue with our strategy. In the affirmative. We will continue with our strategy to see how we can see better traction on the high ARPU brands. This is one area that Digi hasn't had enough focus in the past. But with the fact that we had 900 megahertz available for us on 1st July 2017, we actually upped the ante to get the premium customers and this is what we're going to focus on going forward as well. Thank you. Are you ready for the next question? Yes, please go ahead. Okay. Our next question comes from Prem of Macquarie. Please go ahead, Prem. Hi. Thank you for the opportunity. Two questions from me, please. First of all, were you a bit disappointed with the revenue development this Quarter considering the tax holiday and the fact that there was a feel good factor amongst the consumers. Price points out there appear to be relatively steady. So where exactly is this aggression coming from? And do you think that we are at the start of another drop off in pricing? Or do you think we will at least have some stability here for Future growth, that's one. Secondly, the comeback to this regulatory risk question, if I could ask it this way, In your interactions with the regulators post elections, do you get the sense that they would Now switch the focus to mobile operators in trying to drive down price points? Or do you think that the focus It's a lot more in terms of quality of service. And to add on to that one, Do you think there is a risk given that the mobile operators also hold fixed line licenses? Do you think that there may be Some added pressure to force you into the fixed line business as well. If you could help us understand how those conversations are going? I think if you look at the competition in the market, right, obviously, a combination of many things, There's a lot of free data, there's also some price movement. Some of this offering is really at the channels, Not necessary. Not necessary is the both the line kind of offering. So as a result of this, of course, if you look at the business by the 2 parts on the postpaid, there you can see A lot more stable and there's a lot more bundle and combination of voice data. On the prepaid, Because of the activities, the sales activities, right, they still be do you see that there is some High growth, high churn going on. And usually if you pick the You can get a lot more free data. So as a result, it's also No, not. I mean, you're impacting the loyalty as well as the worldwide. And there is some SST The SSP did shift the revenue in September. It will be subject to I think the foreign book segment is subject to All right. Okay. So just on the second question on sort of a little bit of broad question from you on interaction with the regulators And if there's a sense of the mobile operator. I think that's for the regulator to respond. But I think just one comment there is competition in the market is extremely healthy. And I think you've seen mobile prices over the last couple of years Included more offers, much more affordable brands in the market. On the second question on whether it's added pressure to force this into fixed line. As I indicated earlier, I think we're reviewing the MSP agreement, and I think we will look at it and explore opportunities just beyond fixed as well. I mean fixed one of it now, but we are looking at all sorts of future technologies and future capabilities for the company. Last year, you also have been talking about digital opportunities that we will explore In call and out the call. It's just the same. We will treat it as the same and explore it. But as far as the M and A agreements are concerned, We are reviewing it and working on it. And then once we decide what to do with it, we will come back to all of you. Okay. All right. Thank you very much. Thank you. Our next question comes from Arthur of Citigroup. Your question. Hi, thanks for the opportunity. I just wanted to go back to the question earlier on 5 gs. I'm just wondering, What did you need in terms of spectrum in order to offer this service? Would your current bank be sufficient to do 5 gs properly? I had a second question as well with regard to the bundling comment earlier. I understand you mentioned that there's some increased Competition on the banking side. If you could provide any flavor on what's happening there, what's driving competition in that front, how it's changed? Thank you. We were actually looking at the 3,500 spectrum. That is what we would consider using at this point in time. Whether we would use our current cycle, we have not decided at this point in time, but we will come back when the time is Sorry, just to clarify, you don't feel the need that you need more spectrum going forward to offer 5 gs? Happy with the 3,500 and the current spectrum now? We don't have the 3,500 spectrum now. So that would be the spectrum then that we will be And definitely, we will definitely need more bandwidth on the spectrum. Just to add, that's why I Sorry, sorry, I didn't talk about 5 gs and what we want to do on 5 gs. I said 4 things that need to come into play before a country decides about 5 And spectrum is definitely one of them and 3,500 is not made available to the operators to use and that could be one of the bands that We could use a 5 gs, but I think for that one, we need to come back when we know both the regulators and the operators have had that discussion. And maybe, Laure, just on the bundling question. I think in terms of the bundling, right, really I think just Showing in more data allowance in the quarter into the packages. So this will of course, it continue to drive high usage, So quarter on quarter, you've seen increases in terms of the allowances? Thank you. Thank And our next question comes from Rajan of JPMorgan. Hi, good afternoon and thank you for the presentation. Just a couple of questions from my side. Firstly, on fiber, with the continued strong growth in data usage, How do you see a need to fiberize the base station and basically strengthen your fiber holdings? And a related question would be, does it make sense to build the fiber assets or buy them? The second question is on OpEx. I think Digi, along with Telenor Group has done a really good job of Reducing OpEx, how much room is there to cut more cost of the business? Thank you. Hi, this is Jason Sevan. With regards In regards to the fiberization, with the growing data, definitely, we will be looking at fiberization of our backlog and also to the side effects, nothing new for us. We have been doing this for many years now in building that footprint. Whether we supply or lease the model or build model, That's dependent on what makes sense for us and we will review that from time to time and we also work through optionistically on collaboration with companies. I'll take the next question. Rajan, this is Nafu. Thanks for this. So your question is on the OpEx and how much more room it is for us to cut. Quite honestly, we don't look at OpEx in this way. I mean, our intention is not to cut At cost at the cost of driving growth. So that for sure is not our intention. Our intention is, as I mentioned earlier, How to grow sustainable models of cost efficiency. And our change in operating model of the network side One example, if we did in Q2 or Q1, which actually is going to help us in that direction. So this cost efficiency is built into the DNA of the company as much as growth is in the DNA of the organization as well. And this is what you're going to continue to see going forward from our side. Okay. Thank you. Maybe one quick Follow-up. On the fiberization, you said that this has been happening for a while. What percentage of the base stations are now fiberized? So basically, we will fiberize our sites as and when we feel the need and again, growth in capacity and the site Yes, Rajin, we don't know about Rajin. So we believe that there is a demand in that area or the market. And so in order to sort of assure customer Yes. We roll out hybrid to the site. That's not something that we are holding back on. What we've seen in the The last 2 years is that before gs and before gs pick up and that's why you see the users also increasing on the Internet usage and the subscribers. Therefore, there has to be a correlation between experience. And when that happens, then we would try to exercise. Okay. Thank you. Thank you. Our next question comes from Srini of Deutsche. Hi, thank you very much. Just a couple of questions. One, just wanted to, What do you call circle back again on the MSAP question? The MSAP agreement you just put out talks about fiber access for HSBB. Does that mean it also includes your fiber? Because at least the agreement, the pricing determination seems to only talk specifically of HSV Fiber or so that's the first question. 2nd, you mentioned about You having to offer capacity subject to your own capacity. Fiber technically at least capacity constraints are quite minimal, especially based on, I mean, if you have thermal equipment. So Just want to understand how could you be capacity constrained on optical, which has been laid fairly recently? 2nd. But 3rd, if I may ask on your OpEx, what you noticed obviously is it's been Pretty good reductions on the sales and marketing side. And excluding the traffic, the falling effects on account of traffic, which is More likely, I'm assuming, because of legacy services falling. But do we expect the current level of sales and marketing spend, which have come off Even if I look at a run rate basis, to further fall off as more penetration of your MyDigi app happens, is there some kind of a But so to say, linkages to that where you are averaging about $120,000,000 to $130,000,000 on sales and marketing and kind of So the level of almost 140 plus year and a half back. So if you highlight if that's where we will see Fall in our sales and marketing spend. And finally, On a midterm basis, the overall sector revenues don't seem to be growing No other company revenues. You've always done a pretty robust job of maintaining profitability and cash flow. But Do you see any chance of revenue growth? Because revenue growth seems to be completely missing even if I look over a 3 year period. So how do you manage under that scenario? Is there no opportunity for you to Grow revenues from the current base. I understand the postpaid, prepaid, what do you call, substitution, but overall service revenues are not growing actually. So Any commentary on that, that would be helpful. Thanks. Srinivas, thanks for your questions. I'll take the first two. This is The first question, HSBP has been added on to the mandatory The standards list. And now you see there's the management standard the excess pricing on HSBC has been added on to that list. It does not include the fiber that we have right now. So that's the first question, right? Secondly, how do we determine When we leave Saibov, it's basically based on the needs of the access seekers to us and our capacity and our ability to support their needs and the rules that they are seeking for. I know this is sometimes a difficult area to understand. If you could just kind of Happy to provide more clarity after this call through Winnie, if you can send some questions through. You can always take it through that. I'll take the next two questions, Srini. First one was on the sales and marketing side. I just want to correct here. See, there are 2 elements. 1 is the traffic charges, which is included as part of cost of goods sold, and that has seen a 16.3 ready? Percent reduction year over year. This obviously is a combination of factors. I mean one is that as The IDD and the voice traffic goes down, then obviously we see a reduction in terms of our IAS cost. And this also has an element of how efficiently we manage our cost structure. Then on the sales and marketing side, the 9% that see year over year reduction. This is again a combination of many factors. You actually spoke about YIGI. What our intention to do is how do we digitalize our sales. I mean, whether it's on the acquisition or whether it's selling reloads, We just want to make sure that we give the best customer experience to our customers. And by giving a good experience on MyDG, which means Single click purchases of data packs or roaming passes and we had mentioned about 21,900,000 upselling transactions. It's It's actually a testimony to the fact that this digitalization strategy is going quite well for us. All of this is not going to I mean, there is no way you're going to compromise on our growth ambition In order to cut costs. So that is something I can confirm that you will not see from our side. How much more scope it is Actually, it depends on the digitalization story that continues to run quite well for us. So the more we are able to drive digitalization, the more we will be able to manage Cost structure definitely going forward. Your last question is any chance of growing service revenue? I mean, yes, you can say that there has been some challenge in the industry. But let me just take a step forward on how the last 2 years worked for us. I mean, as you would know, I mean, it was an year of transition for us as we moved out from the ITD segment and started focusing on growing Postpaid as well as the data revenue, sir. We see quarter on quarter and of course year on year strong growth in postpaid. This will continue to be a focus for us going forward as well. Additionally, I mentioned earlier our focus on B2B. With a good spectrum portfolio with us, with the fact that we have a focused approach in going for Small and medium enterprises and also the fact that we have good digital service offerings in our portfolio, this actually opens the door to speak to the customers that haven't historically been interested in taking services from Digi. And this will obviously be along with postpaid, Along with Internet growth, one of the growth engines for us going forward. As far as the guidance of 2019 and how much is the growth we expect To come out of it is exactly not possible for us to give you an indication. We'll come back in Q4 on what the guidance for the next year will be. Thanks. Thanks. This is helpful. Thanks a lot. Thank you. Yes. Shailesh, thank you very much then. So I just close and just end by thanking everyone for taking the time. Thank you very much for all the questions and thanks for the support. Enjoy the rest of the day everyone. Thank you very much. Thank you. This concludes the conference. Goodbye. Have a good day.