Good morning, and welcome everyone to our third quarter presentation. Welcome to our Q3 presentation. I want to start this presentation with repeating the value creation strategy we presented a month ago at our Capital Markets Day. One was to become a leading Nordic telco. This means growing core connectivity and services and focus on margin expansion through modernization. Two, a strong Asian entity operating more independently from the rest of the group. A cash flow-focused Asia, realizing synergies in two merged entities and drive operational performance. Three, a leading Nordic infrastructure company. Our focus will be to develop and monetize our infrastructure. Four, a new and focused approach to develop our adjacent businesses. We want to develop some of the assets that we already have, and we want to unlock the value of assets through transactions and partnerships.
Let me then go through this quarter's result. As you can see from these highlights, we have already started to execute on our reshaped Telenor strategic agenda. In the quarter, Telenor continued to deliver service revenue growth, and I'm especially pleased with the Nordic Mobile growth of more than 4%. I believe this is a strong support for our profitable growth ambition in the Nordics. As we have said, we currently have a significant cost headwind from energy, especially in Norway, Denmark, and in Pakistan. The impact in the third quarter and will continue to constitute a headwind for us until we start receiving energy from the PPAs that we have entered into for Norway and Denmark. These two PPAs have a significant lower price than the current spot price that we currently see.
In Norway, these arrangements will start coming into effect in the fourth quarter next year, and in Denmark, late in the year after. In the quarter, we executed on the first step of crystallizing value in our infrastructure business, with signing an agreement to sell 30% of our fiber company in Norway. With this transaction, we can increase the fiber rollout in Norway. Shareholders will benefit through a share buyback program, and in addition, we will strengthen our balance sheet. Another key part of the value creation strategy is the two big mergers in Asia. In the quarter, we have received regulatory clearance in Malaysia. As expected, it took some time, and we will now move on with the final approval from the stock exchange and our shareholders.
As we have said, I expect this transaction to close in the fourth quarter, and we are well-prepared to start realizing the synergies. In Thailand, we yesterday received a regulatory notification. As presented, some of the remedies needs clarification, and we will now seek to engage in a dialogue with the regulator to seek further clarifications. Let me then turn to the Nordic business. At the Capital Markets Day, we told you that we believe in growth in the Nordics. I'm quite pleased to see that in the third quarter, it's supporting this ambition with an overall growth across the portfolio. The growth is driven by two trends. First, a focus on core connectivity in all the segments, both mobile and fixed. Second, by growing services beyond connectivity. Security is such a product for both the consumer segment and the business segment.
In these services in Norway, these services currently accounts for 18% of the mobile revenues, with a growth this quarter of 12%. A key element in our strategy is to develop these services together with partners, then to sell it to our customers using our brand and distribution strength. By providing more value to our customers, we have during the quarter done price increases in all our Nordic markets. We have done this selectively across our customer segments, and we see the effect of this starting to come true now. Some of these increases are lifting the price on existing price plans, some is for new sale, and some are related to new offerings and new services. Let me then deep dive into Norway. In Norway, as you can see on this slide, we see growth in what we call the legacy-free service revenues.
In the quarter, these revenues grew with 3.1%. As mentioned, we have a headwind related to the high energy prices. Adjusted for that, and also adjusted for the copper decommission, we see the top line growth resulting in an underlying EBITDA growth of 2.3%. Going forward, this is not enough. As we stated at the Capital Markets Day, our ambition is to deliver EBITDA growth of mid-single digit based on an OpEx reduction in the Nordic of 1%-3%. For the years to come, this means that we in Norway, and also in the other Nordic markets, expect EBITDA to grow faster than our revenues. To succeed with our ambition on profitable growth, I have a special attention to a continued modernization of our business in Norway.
With the copper shutdown now coming to an end, we see a potential for additional simplification and modernization in Norway. New modernization initiatives are being implemented to improve operational efficiencies and customer experiences with positive impact on the OpEx level in 2023 and the following years. Our plan is that this will be an important contributor to the EBITDA growth in Norway in 2023. Our new Nordic setup is also expected to contribute to modernization and operational efficiencies in both the support functions and as well in the area of technology and IT. We will come back with more information about the plans we have in this area in our Q4 presentation. Moving to Asia. In Asia, we are progressing with the structural transactions in Malaysia and in Thailand.
We have received regulatory clearance from the Malaysian regulator and also the Securities Commission Malaysia approval for the proposed merger. We will now soon reach out to our shareholders for an EGM approval and aim for this transaction to close within this quarter, the fourth quarter. In Thailand, as I said, we just received the notification letter from the regulator. Initially, and as presented, some of the revenues needs more clarifications. We will therefore now seek to engage with the regulator to discuss the remedies and seek further clarity. Going to Bangladesh and Pakistan. Organically, we see a good development continue in Bangladesh with a 7% revenue growth from increased data usage and demand.
This is coming from existing customers because the SIM ban has not made it possible for us to take a fair share of the new customer growth in the previous month. However, we have now reached an agreement with the regulator such that we can start using recycled numbers to get back also with our SIM sale. In Pakistan, the flooding situation has impacted people's life and economy as well and continued increase in energy prices and high inflation. This is impacting our revenue growth and of course, also significantly increasing the OpEx. As I mentioned in our Q2 presentation, we have started a strategic review in Pakistan, and I expect more clarity on our structural alternatives in the coming month.
At our Capital Markets Day, we said that we want to focus on synergies and cash flow in Asia with a target of an accumulated free cash flow of NOK 12 billion in the period up to 2025. We will shortly start reporting on cash flow generation from our Asian businesses. Turning to infrastructure. When it comes to infrastructure, we are executing on the strategy we presented a month ago. The fiber deal in Norway support continued high fiber rollout while crystallizing some of the significant values we see in the infrastructure portfolio. Following several years of high investments in the Norwegian fiber market, the transaction demonstrate the value of Telenor Fiber and the infrastructure assets that we have.
The deal allows us to strengthen Telenor's competitive position in Norway as the transaction enables Telenor to accelerate our FTTH rollout and also the HFC replacement. We are bringing in strong investors with a long-term horizon. We have been able to attract new capital on a very compelling term and wider benefits of partnership with an experienced infrastructure investor. The cash proceeds will partly be used on fiber investments, partly distributed through a share buyback program, and partly to strengthen our balance sheet and our financial position. As you can see on this slide, the intention is to call for an EGM to initiate a share buyback program shortly after closing of this transaction. From October first, Jannicke Hilland is the new head of our infrastructure business area.
She will have a special attention to develop the organic development of the tower companies across the Nordics. This will also include the future structural tower opportunities that we see. In addition, she will continue the work on creating a data center strategy. The last fourth business area is on the adjacent business. As a part of the Telenor reset we presented at our Capital Markets Day, we launched this new business area headed by Ruza Sabanovic, which will focus on our adjacent businesses. We have decided to name this area Telenor Amp. This quarter, we delivered a double-digit revenue and double-digit EBITDA growth from the consolidated units, driven by strong development in Telenor Connexion, Telenor Linx and Telenor Maritime. We also got confirmation on our advanced position when it comes to IoT, as Telenor is ranked among the top three IoT players in Europe.
This makes us a clear IoT market leader here in the Nordics. Going forward, our focus will be on two areas. One, a strategic review of the portfolio that we have where we will look for partnerships, monetization, and possible exit. Two, continue to develop ourself into a leading non-Nordic positions when it comes to IoT and security. Let me end with this slide. This was a slide we also used a month ago at the Capital Markets Day, and this shows our financial priorities in the month and quarters and years to come. One, profitable growth, reducing CapEx intensity and continued modernization in the Nordics. Two, strengthen cash flow from Asia. Three, unlock value from our infrastructure. Four, a disciplined approach in our adjacent businesses. With that, let me welcome our CFO, Tone, on the stage.
Thank you, Sigve, and good morning, everyone. The strategy we presented at the CMD in September sets out a new direction for Telenor with profitable growth as one of the key elements. I'm therefore particularly pleased to see that in this quarter we are able to generate 4% growth in mobile service revenues in the Nordics. This is a key driver for the overall 2.5% organic growth in service revenue. Organic EBITA also increased by 2.5%, although with many items impacting the results both negatively and positively. As outlined on the CMD, we have seen increasing energy prices and, as Sigve said, especially in Norway, Denmark, and Pakistan. For the quarter, however, the energy increase was more than compensated by a reversal of an accrual in Pakistan related to SIM tax. This amounted to NOK 600 million.
Free cash flow came in at NOK 5 billion or NOK 4 billion excluding M&A, in line with our expectations. Let us start with taking a closer look at revenues. As you can see, we show growth across the Nordics, including Mobile and fixed future in Norway. This is driven by increased usage and partly price increases implemented during the year. Norway delivers 3% growth on non-legacy and a mobile ARPU growth of also 3%. We also saw solid development in Bangladesh, delivering growth of 7% despite the SIM ban. The reported growth for Pakistan, as reported, is supported by the SIM tax reversal. Excluding this effect, the growth is -3%. Looking at the other segment, we see double-digit growth in Telenor Connexion, our IoT company.
On the negative side, we still see copper headwinds, which will gradually taper off now as we enter 2023. Thailand and Malaysia shown also negative growth, and this is reflecting the prevailing macro and competitive sentiments in these markets. Moving to OpEx. This quarter, we see a 6% increase or NOK 500 million up from the third quarter 2021. This mainly reflects around NOK 200 million higher energy cost. It is a little over NOK 100 million in increased sales and marketing spend, as we've talked about throughout the year, particularly then in Bangladesh and Sweden. We still have around NOK 100 million related to strategic projects which we then will expect gradually to be reduced going forward.
Apart from these items, we see only modest cost increases, and this goes to show that the structural initiatives we are running currently have the ability to mitigate the inflationary pressures we have seen so far. Moving to energy. At the CMD, we highlighted that the sharp increase in energy prices increased the uncertainty around our EBITA guidance. As we all experience, the situation remains very volatile, and even though we see spot prices have come somewhat down in the very, very near term, we base our estimates on forward prices and the other estimates we can have in the markets. Based on this, we still see the second half outlook in line with what we presented a year ago at the CMD of NOK 2.5 billion of cost in the second half of the year.
Based on the mid-October forward price that we see it, we estimate the EBITA headwind for the full year coming from energy to be around 3 percentage points for the full year. As shown on this graph, the main drivers for the increase are Norway, Pakistan, and Denmark, as we have talked about this year. As Sigve also said, the 10-year PPA agreements that will come into effect late 2023 or early 2024 in Norway, and late 2024 in Denmark have prices which are much more in line with the historical averages we've seen for energy prices. Moving to EBITA. We report a 2.5% EBITA growth for the quarter. As I said, it includes both negative special items and the significant reversal of the SIM tax accrual in Pakistan.
This reversal of the previous provisions are done line by line on the same accounting lines as when we did the accruals. Looking at the performance in the Nordics, we see strong growth in EBITDA in Sweden. There is also a solid reported number for Finland, and this is, as you remember, based on the negative one-off in the same quarter last year. The decrease in Denmark is fully explained by increased energy cost, while in Norway, as Sigve also talked about, it is a combination of the copper headwind and energy cost, which is resulting in a material decrease of 9%.
I would also just make you aware and draw your attention to that there is a change in periodization this quarter between Telenor Infra, which is in the other segment, and Telenor Norway, which is removing a time lag of booking of energy cost between the two entities of two months. The result this quarter is an increase in revenue of Infra of around NOK 100 million, and a similar increase in Norway of COGS of around NOK 100. There is no major impact on the group figures for this internal periodization. In Asia, we see solid growth in revenues in Bangladesh, which follows through to EBITDA. In Pakistan, however, the underlying EBITDA decreased by 22%, which is driven by the energy cost, the FX headwinds, and we also see some negative impact from the flooding on the top line.
During this year, we have talked about these three special items impacting us negatively throughout the year, and you see here in this figure to the right here, that they impact in total around 6 percentage points on EBITDA this quarter. On the other hand, the reversal of the accruals had a positive impact of 4.8% for the quarter. The net income to equity holders of Telenor ended at NOK 1.5 billion. The reduction from last year is primarily a result of FX effects, which comes from strengthening of the U.S. dollar and Singapore dollar versus the Norwegian kroner. These effects are, as you know, they are unrealized and non-cash items. In total, FX has a negative contribution of NOK 2.4 billion. Lower profit before tax this year also results in a NOK 400 million lower tax expense in the quarter.
CapEx for the quarter is in line with plan and primarily driven by the 5G rollout in the Nordics, the fiber investments in Norway, and the network investments in Thailand. Free cash flow improved in the third quarter and came in according to our expectations at NOK 5.2 billion, or NOK 4 billion excluding M&A. Year to date, the free cash flow stands at NOK 9.7 billion. During the quarter, we have seen a positive development of 0.1 on our leverage, which is driven by the cash flow generation, which is then on the other side partly offset by the currency impact on net debt of around NOK 3 billion Norwegian kroner. I will move to the outlook for the year. The service revenue growth is progressing according to our plan, and we maintain the expectation of low single-digit organic growth.
On our Capital Markets Day, we highlighted that the energy prices have increased significantly in second half of the year and created an additional headwind on the full year EBITDA compared to what we saw of 1.5%. However, as we talked about this quarter, we have a positive one-time effect in Pakistan, which compensate for the increasing energy cost. As a consequence, we maintain the outlook for 2022 organic EBITDA around last year's level. The CapEx to sales is still expected to be in the range of 16%-17%. Sigve, I believe we're ready for the Q&A.
Yeah, we are.
Operator, may we have the first question, please?
Sure. We will take the first question from line, Andrew Lee from Goldman Sachs. The line is open now. Please go ahead.
Yeah. Good morning. I had two questions. First one was just on your energy cost headwind visibility into 2023. Could you just talk a bit just about how much visibility you have on that headwind? You talked about your confidence in mitigating the headwinds for 2022, but how confident are you to mitigate for 2023? Then the second question was on your really interesting deal to sell 30% of your fiber asset as you laid out on one of the slides. Just wondered, is that the extent of your plans to sell that asset? Could you sell 49%, or do you ever give up your strategic control of that asset? Thank you.
Yes, I can start with energy. As you know, we have a long-term hedge in place for the Norwegian energy consumption, but that comes into effect towards the end of 2023. For 2023, until that comes into effect, we don't have a hedge in Norway. In Sweden, we have approximately 50% hedged for 2023 consumption. In Finland, the pricing mechanisms leave us to be around two-thirds of the consumption being hedged, as it is a three-year rolling pricing mechanism there. Denmark is also waiting for the long hedge of energy prices. We have the volatile situation on the energy in general, and we will continue to be exposed in those Nordic markets. In Asia, as you know, it's a different dynamics and it's difficult to hedge. It's based on diesel and other components.
The PPAs will start kicking in then in the fourth quarter next year for Norway.
Yeah
With a significant lower price. Well, on the second question, what we have said all along is that we wanna bring in a minority partner in our fiber infrastructure in Norway, and that's exactly what we have done. We're very happy with the valuation we got out of that. As I also talked about in presentation, we will now use some of the proceeds to continue to grab market share on fiber in Norway, and also some of it then to pay back to our shareholders. We are happy with the 30% minority position that they have. There is no plans above that.
Thank you. Can I just thank you. That's very helpful. Can I just follow up on the energy side? Obviously, your ARPU trends are pretty decent this quarter. How confident are you in your ability to mitigate or at least partially mitigate the energy headwinds in 2023, accepting that it's clearly a volatile situation?
Yeah. Your question is about if the pricing power that we have? Was that the question?
Exactly, yeah. The ability to mitigate the cost headwinds or pass through the cost headwinds onto your customers.
Yeah. We are not going to give any views on what we plan to do on that going forward. What we have done in the last few months is to do price increases in all our Nordic markets. We do that in various ways. We see that most of this is actually related to giving customers more, also more services. It's appreciated by our customers. That is what we have done, that is now starting to come true. Most of these increases we have done quite lately. It's first in the coming month we will see this coming true. I don't want to give any more views than that.
Okay. Thank you.
Thank you. We will take the next question from the line. Maurice Patrick from Barclays. The line is open now. Please go ahead.
Good morning, guys. Thanks for taking the question. Just a question on the timing and phasing of the Norway EBITDA turnaround. I mean, you delivered -8.8%, I think, this quarter, and you talked about the 4 percentage points from energy and the wholesale drag. In the past, you know, you've communicated the sort of idea that the drag from the wholesale gradually decreases as we get into 2023. I think it kind of laps in the second half, and you've got the PPA coming in, as you say, in the fourth quarter. I think you said, Sigve, in the prepared remarks, you expect to grow Norway EBITDA in 2023. If you give us some sort of sense of the phasing of that'd be very helpful. Like, you know, is it for the full year? Will it just be in the fourth quarter? Will the first half likely be similar to what we've seen this quarter? That'd be helpful. Thank you.
You wanna start?
No, you can start.
Yeah. Okay. No, I think it is pretty much as you said. The headwind from the legacy decline will continue into the first two quarters of next year. At second half of next year, this will then on a year-by-year or year-on-year basis be more or less washed out. Then as I also said, we are now initiating new initiatives, efficiency initiatives, and modernization initiatives to bring down the cost of the rest of the business. That is going to impact our EBITDA for next year. I don't wanna give you any more guiding than what I did in my presentation and what I just said now.
That's great. Thank you very much indeed.
Thank you. We will take the next question from line. Andreas Joelsson from Danske Bank. The line is open now. Please go ahead.
Hey. Good morning, everyone. Just a follow-up to Andrew's question. As you said, you have done some price increases as of late. Just curious about your learnings from those increases, and also if you can see any changes in consumer behavior, given where we are in terms of macro.
Mm-hmm.
Maybe also on Thailand, if you could say anything about these proposed remedies, if they are as you expected, although I understand you need clarity on some of them. Is it fairly as you expected? Thanks.
Start with the price question. I think the customers are appreciating more for more. Many of these increased price increases is actually related to giving more for more. We don't see any major effect with our customers on that. In the price sensitive segments, which is around 30%, I think, of our Norwegian customer base, of course there we are more careful. For the more high-end customers, we see that the price increases has been accepted, if I can use that word. The same we see across the other Nordic markets. However, we don't know how this is going to develop, how competition is going to react to this. That's yet to be seen.
So far so good, I will say, on that question. On Thailand, some of the elements that we have seen in the notification we got is as expected. Some of them are unclear for us what it really means. And that's why we need to seek further clarifications what it really means in practice. It's the letter we got on several elements are actually quite unclear when it comes to how this will be operationalized. That's what why we need to go back to the regulator. As we have said all along, the regulator do not have the authority to say yes or no. They only have the mandate to look at remedies.
The notification shows us that we were right on that. The regulator, they do not say yes or no, but they look at remedies. At least that is. It had been a lot of discussion around that. Can the regulator actually say no? The notification letter confirms that our understanding has been right. I'm not able to answer more in detail than that. Now we will sit down and discuss this and seek that clarification.
Very good. Thanks.
Thank you. We will take the next question from the line, Peter Nielsen from ABG. The line is open now. Please go ahead.
Thank you very much. Yeah, I guess, Sigve, you've commented as much as you want to on the OpEx impact in the coming quarters in Norway. Just stick to Nordic Mobile revenues are obviously quite strong. As you mentioned, Sigve, you've raised prices. Could you discuss a bit what kind of support you're seeing from the launch of 5G? Is that a factor here in enabling you to increase prices, upselling, et cetera, or is it still too early? Are you seeing any more sort of concrete discussions and perhaps contracts with enterprises on 5G in, and I guess across the Nordic markets? Thank you.
Yeah. Some of this is related to upsell from 4G to 5G. We do that in Norway, and we do that in Finland, and there is still room to grow on that. Yes. We see that fixed wireless is now picking up based on our 5G network. We see now that that has actually increased quite a lot over the last few months. On your business segment, we see now that we have more and more dialogues with customers on building 5G networks. That we see both here, but also in Finland and also coming in Sweden. That's still a little bit too early to say how big that effect will be. There is more demand now than what we have seen in the past on those 5G-related private networks.
Yeah. Thank you. You commented earlier on sort of what you're seeing on the consumer market. Are you seeing any pullback of any kind on the enterprise side in relation to sort of the weakening macro outlook?
No.
That's probably also still too early.
No, we haven't seen that in the Nordics. No, not at all, I will say.
Okay. Thank you.
Thank you. As a reminder, if you would like to ask a question or make a contribution on today's call, please press star one on your telephone keypad. To withdraw your question, please press star two. Thank you. We will take the next question from line, Frank from DNB. The line is open now. Please go on.
Yes, hello and thank you for taking the question. My question is more on the cost development in Norway. It was a bit on the weak side of consensus expectations, and it's you have talked about the energy impact and so on. Is there any short-term cost measures you are pursuing in Norway, more in the short term to mitigate the cost headwinds from energy and also more in general, really?
Well, Frank.
That, that's my question, really.
Well, Frank, that depends what you mean by short term. As I said, we are investing now in taking this service position. As I said, 18% of the mobile revenues in Norway now are coming from those services on top of the data connectivity. So we are hiring people on that area, and we are investing into that. That's part of the answer. When it comes to then going forward, we have now embarked on a new program to look at this is coming out from now the copper decommissioning program ending. We have resources enough to look at what else can we modernize and make more efficient in Norway. Those initiatives, we plan then to take now with us into 2023.
As I said in my presentation, that will be a main driver to have the EBITDA development in Norway next year. Yes, if you mean short term is the next two, three quarters, yes, we have initiatives to address the rest of the cost base.
Thank you. A follow-up on the price responses that you've basically seen or not seen in the Nordics based on your recent price increases. We've seen Telia, for instance, increasing some fixed line prices in Norway. On the mobile side, have you seen anything here or in other markets that competitors have followed up?
Yeah. I just want to stay very careful on the pricing discussion when it comes to our competitors. I can say what we have done, and I can say how we have seen the development or the way our customers have taken this, but I don't wanna go into what the competitors are doing or thinking or will do.
Thank you.
Thank you. We will take the next question from the line Luis from Credit Suisse . The line is open now, please go ahead.
Hi, good morning. I have three questions, please. The first one is on Sweden and Finland. We have seen a pretty strong acceleration in terms of service revenues, and also on EBITDA. Can you give us some color on the drivers on both countries, please? How sustainable do you think this can be going forward? The second one would be around the Thailand remedies. You are saying that there are some remedies that need further clarification. It would be helpful if you can give us some color on which of the remedies are the ones that are causing a major concern on your end. The third one on wages renegotiations in 2023. We have heard some comments from your competitors on wages expectations into 2023. It would be helpful to understand how these negotiations are going, and any visibility you can give us by country would be helpful. Thanks.
You can pick which one you want to take.
Yeah, yeah. No, I start with Sweden and Finland. We are very pleased with the performance we see in Sweden now. We have for several quarters going back, we have talked about the turnaround we were working on. We were talking about how we were preparing ourselves through our systems and way of work, and we are very pleased now to see that we compete much better in the Swedish market, and this is really what you see in the results going forward. We have a solid top line growth in Sweden, and that is then, as you see, following through to the EBITDA.
In Finland, we continue to do the 5G upselling and we believe still that the Finnish market is a very healthy market when it comes to how the customers are embarking on higher price plans, building up on the improved data usage and the upgrade from 4G- 5G. We will continue to work on this. At the same time, as we of course continue to focus on taking out these cross-Nordic synergies that we will now have a focus on following the establishment of the Nordic unit, and we are looking across. That is both coming to support the top line over time, but also work on the efficiency in the cost base.
When it comes to wages for 2023, these are market by market agreements, as you know. We have been, in the past, able to mitigate the price increases, salary increases by efficiencies, as you see. You see it this quarter as well, that we have a very slight increase in the salaries and wages, and we will continue to focus on this going forward. Of course it remains how the overall macro and these agreements will play out in 2023. We have had good learnings, and we will continue to focus on this.
Yeah.
Yeah
If you look back last few years, Tone, I think we have taken down the number of employees in the range of 8%, 7%, 8%. I'm not saying that that's what we're going to do going forward, but that's the way we have been balancing the personnel costs.
Mm-hmm.
Now on Thailand, take two of the areas that we need to understand better. One, it's what they say about price adjustments or tariff adjustments. We need to understand that. Another one, it's what they say about creating capacity network to facilitate MVNOs. Those are two examples of things we need more clarity on. There are more in the document that we have received.
That's helpful. Thanks.
Thank you. We will take the next question from line Francesca from BNP Paribas. The line is open now, please go ahead.
Great, thanks very much for taking the question. I've just got two please. On Bangladesh, you've obviously said that there's a partial resolution to reuse SIM cards. Do you have any update on how that's progressing and any expectation that you'll actually be able to reissue numbers? And then secondly, please, just on Norway fiber. So it looks like your fiber net adds slowing slightly. So earlier in the year you explained that net adds were expected to pick up in the second half of the year. Can you just please explain the trends that you're seeing and if this is still the case? Thank you.
Yeah, I can answer Bangladesh, and then you take the fiber.
Mm-hmm.
Yeah. Was your question on Bangladesh on the SIM ban? Was that the question?
Yeah, exactly.
Yeah.
Any update on that?
Yeah. Yeah, for several months now, we have not been able to sell new SIMs in the market. I must say it's quite impressive 7% growth, and not coming from new sales, but actually coming from growing the relation or ARPU with existing customers. I'm pleased to see that. Now we are allowed to use all the recycled numbers. Meaning that customers that churn out, we can take those numbers and we can start selling in the market again. Now we are back in the sales channels also. We also have a very good dialogue with the regulator in Bangladesh now ongoing, taking completely away the SIM ban, and I'm quite positive that that will happen relatively soon.
With the allowance of using recycled SIM cards, I don't see that we are really hindered now from participating in the new sales. Going forward, I'm not so worried about this.
Yes. On the fiber, we do see now that we are able to reposition ourselves following a more mature dynamic in the Norwegian market. There are changes in maybe the dynamics when it comes to churn, but these customers very often remain on our network as wholesale customers. The net adds we report are the net adds to Telenor, but in our network as such, we remain a large portion of these customers. It is an area with constant focus, of course. It's a more dynamic game now, and we believe we are constantly improving in how we position and play in that dynamic game. We also foresee, as we said from the new fiber agreement, that we will also invest going forward into this to capture new growth and also the opportunities as we see them.
Next caller, please.
Thanks. We will take the next question from line Titus from Bank of America. The line is open now. Please go ahead.
Hi, team. Good morning, and thanks a lot for taking my question. Just one wider one on your free cash flow and then a quick follow-up. Just on the free cash flow, could you maybe give us a little bit of color on the working capital trends and given that there have been a bit of a tension on this in the current environment on supply chains and how you know, would expect them to continue kind of to work out over the next couple of quarters. Related to that maybe on CapEx, given that there are a couple of headwinds on free cash flow for you at the moment, one option could be, of course, a more selective approach to capital investment going forward to preserve cash flows.
Your recent private deal already went into that direction, and you guide for lower CapEx intensity in the medium term. How would that look like for you in the short term? Do you think you could be more cautious on spending, and where would you prioritize? Then maybe a very, very quick follow-up just on the fiber deal. Could you give us any number, any quantification on what cash flow leakage we could expect from the minority stake sold?
When it comes to free cash flow and working capital, we saw that we had a somewhat of a headwind on the working capital in the first half of the year. We said we expected it to improve in the second half. We are neutral now, and we do expect a slight improvement in the working capital in the fourth quarter. We don't see any kind of structural trends, but we do see periodization between quarters relating to when the CapEx is paid. We see that as a particular element with the third quarter last year versus the third quarter this year.
As you might recall that, based on the accounting rules, third quarter last year, we also had the cash generated in Myanmar included in our cash flow. We don't see any large structural changes in it, but it's more a shifting between the quarters. When it comes to CapEx, we are continuously maneuvering in where to most efficiently apply the CapEx funds. We are in a situation now, as you also allude to, that we are investing in fiber and will continue to invest in fiber. We also have, as we talked about on the CMD, we have 5G rollout in four markets in the Nordics. It is of course important for us to be able to compete in those markets. In the midst of this, we are constantly looking at how to best deploy the funds we have. What was the question of fiber again?
Leakage. Yeah.
The leakage. Yeah, we have not been clear on that nominal amount. We will come back to that when we have the share buyback, and we believe that would be the mechanism for how to neutralize the leakage. Then we have said that approximately 30% of the proceeds that we get will be used for share buybacks.
Thank you. Very helpful.
Thank you. We will take the next question from line Usman from Berenberg. The line is open now. Please go ahead.
Hello. Thank you. Just two questions, please. The first question was on the fiber co. Can you indicate what, you know, what kind of leverage you anticipate will be put on the fiber co, please? And also, you know, what is the kind of EBITDA growth rate that you're seeing at the fiber co at the moment? That was the first question. The second question was for Sigve. Sigve, among the remedies that you've highlighted you needed more clarification on, I'm surprised that, you know, you didn't mention. I mean, in the notification it says that the number of cell sites that the merged entity has cannot be reduced going forward. I was just wondering, I mean, you know, does that have any impact on your ability to, you know, consolidate the network or decommission sites, which obviously will be a big portion of the synergy extraction? Thank you.
Yeah. I can start with the second, and then you can think about the first.
Yeah.
Yeah. I mentioned two examples, but there are more issues here that we need clarification on, and you are mentioning now one of those. In the notification, it also says that we have no obligation when it comes to population coverage.
Of course, that is natural that the regulator have a view on that. That is what we are going to focus on. I think we are almost there when we are merging these two entities with the 5G presence that our future partner True has in Thailand already. That is the main objective, I guess, that the regulator want to make sure that we are giving the people of Thailand a good 5G coverage. The area you mentioned, in my view, yeah, that's something we need to clarify because it doesn't really make sense that you have parallel networks. It's just an example of unclarity in the notification.
Yes.
Thank you.
On the FiberCo, it's as we said, they are valuing the company on an EV basis of NOK 36 billion. The minority investor will pay NOK 10.8 billion for that. The company as such will be a consolidated part of Telenor. That will be part of our normal leverage, so to speak. We will get the funds in, and then we will continue to invest. It's not the traditional structure, or it's not a separate structure as such. It's part of us. We get paid for the EV, and then there is, of course, a leverage on the top co level for the investor. That will not impact the FiberCo in as it is included in Telenor.
Mm-hmm.
Just on the EBITDA growth that you're seeing at the FiberCo at the moment.
Yeah. We have not communicated on that. We are in a growth phase where we are rolling out more and where we are fighting in the market. But we have not given any growth rates or indication on that.
Thank you.
Thank you. We will take the next question from the line, Adam from HSBC. The line is open now. Please go ahead.
Thank you very much. I have two, please. Firstly, on Pakistan and the impact of the floods. I think maybe it's somewhat out of our minds because it's out of the press. If you could give us an update on exactly the impact that you've seen in Q3, kind of how much that's ongoing into Q4 and any impact that you're anticipating further out in terms of both OpEx and maybe CapEx to sort the network out to the degree that it needed. Then secondly, there's a couple of mentions within the release of your operating activity stepping up. I think in your prepared comments, you mentioned Sweden and Bangladesh as you had before.
I guess I wonder how you feel about the kind of run rate of those businesses at the minute, and whether or not you think there's kind of a further uptick to go, whether it's just very dependent on how you compete in those markets going forward or whether you're, you know, all else equal operating, kind of as you would like to in those on that OpEx line. Thank you.
Yes. When it comes to the flooding in Pakistan, that is of course detrimental to the people of Pakistan. It is also impacting us when a high number of sites are down. We believe that this is partly or it is partly reflected in the numbers we see this quarter. It's a bit too early to give any kind of clear indication for the longer term impacts on this. In the quarter as such, the main reason for the OpEx increases continue to be energy and FX. We don't see a material impact this quarter. It's of course something where we are constantly maneuvering our local team in Pakistan and alongside a very demanding energy environment in general.
It's a maneuvering that is going on, but it's not to the same extent impacting our numbers this quarter. When it comes to investments in the markets in Bangladesh and Sweden, in Bangladesh we show, as you see, a 7% growth. It is with this growth level, you continue to invest and it's profitable. We have the 5% EBITDA. In Sweden, we are continuing to evaluate our approach in the market. We also are working on how to best compete in the market, and that is evaluated going forward. So far, as you see and as we have said, we see the growth is coming through to the EBITDA, and that will be the ambition when we deploy and allocate sales and marketing funds also going forward.
These have been the two markets where we have said we have special attention, and we see in the financial that is coming through to EBITDA.
Okay. Thank you very much.
Thank you. We will take the next question from line, Ondrej from UBS. The line is open now. Please go ahead.
Hi. Thank you for the presentation. I had two questions, maybe both follow-ups. One on Thailand. So the question is, to what extent is the 2025 free cash flow dividend cover target relying on synergy from Thailand? I.e., if you had, you know, three years of restrictions in terms of, for example, network merger between the two companies, does that actually hinder that target? Or is that a small part of the overall growth from here in 2025? Because I believe if I look at the slides in the Capital Markets Day, the majority is still coming from the Nordics. What kind of problems towards the dividend cover would that be in 2025? Going back to energy, if you take everything that you know today.
All the kind of moving pieces, you've got some positive ones such as the corporate shutdown, some negative ones, of course, going into 2023. If we look at the NOK 2.5 billion amount that you're expecting in the second half of 2022, is that you think that the kind of run rate roughly is that the peak on a semi-annual basis before some of the PPAs kick in, as you say, towards the end of 2023? Thank you.
Yes. What we said when it comes to Thailand and the synergies, we are reporting a significant NPV number of the synergies, but it is, of course, a long-term value creation plan. As we said, we believe that the first years will also be years where you invest and adjust, so there will not be a material impact on the cash flow from the Thailand merger in the early part of the next three-year period. It will not over time, over the three years, we don't see a material impact if there is a delay or adjustment to this. It will not materially impact the overall plan.
When it comes to energy for 2023, what we see is, and particularly of course looking at the Norwegian market where the main exposure is, as you know, we see still a forecast of increasing energy prices into 2023. Really what will be the effect in 2023 will depend on the prices in the market, as we enter 2023. As we see now in Norway, there is a small dip in the pricing, but the forecast still remain fairly high. It is difficult to say, and I don't wanna guide into 2023 until I have to, and until we will make that overall assessment.
There is still a view that the winter will require higher energy, that the energy prices will be higher during the winter in Europe in general as we see it.
Thank you very much.
Thank you. We will take the next question from line Sarah Wong from J.P. Morgan. The line is open.
Hi, thank you. I had two questions, please. You said before that you're a bit more careful on the lower end of the market with price increases. Just curious to know what is your approach there, or what is the thinking around there? Like, are you maybe giving more discounts because you're more cautious of the cost of living crisis, or is it just not putting in price increases as much? And the second question is there any scope for, you know, governmental intervention in the energy markets for corporates in any of your countries? Is that any potential upside to the energy cost expectations? Yeah. Thank you.
No, I think on the first question, I just said that of course the 30% of the mobile market in Norway, it's what we define as a more price-sensitive segment. That segment, we are addressing differently than we do with the 70% of the more so the rest of the mobile market. We are doing a price adjustment also in that segment. I don't think I wanna go more into details on what we do. Yeah, that's the way we look at it.
Yes. On your question on energy, as we talked about before in Asia, several of the markets we are in Asia have regulated prices. There is some kind of intervention already in those markets. That is why of course you only see the large increase in Pakistan because there are other pricing dynamics in the other countries in Asia. In the Nordics, of course we follow the general debate, and we are acting as we cover our consumption based on the mechanism as we have. We say in Sweden we are hedging.
Finland, we have the rolling, the kind of the yearly rolling, and then we have the exposure to the market as you allude to in Norway and Denmark until the PPAs come into place.
I think we have one caller left, Tone.
It appears so.
Yeah.
maybe not.
Is there one more?
Thank you. We will take the next question.
Mm.
Sure. We'll take one final question from the line, Frank from DNB. The line is open now. Please go ahead.
Yes. Hi. Just a follow-up question, if I may, on then the Thailand process going forward with regards to the discussions with the regulator there on these clarification items you have. You know, can you give us some idea or if you have one on what the formal and, you know, at least the formal process is, if not the informal one, but at least the formal process on, you know, how these discussions are likely to go, the time span you expect and so on. That would be great. Thank you.
Yeah. Thanks for the question, Frank. I actually don't know the answer to that question. We received this notification letter just a couple of days ago, and we are going through it now, and to understand it. The next steps and how this is going to seek out for clarifications, I don't know how long time and exactly how that process is going to play out.
Okay. Thanks.
Okay.
Thank you. There's no further question.
Thank you everyone for listening in and asking questions, and have a nice day.
Thank you.
Thank you.