Good morning, everyone, and welcome to the presentation of Telenor Group's results for the third quarter. My name is Marianne Moe. I'm Head of Investor Relations, and I have the pleasure of guiding you through the session here today. As usual, the results will be presented by our Group CEO, Sigve Brekke, and Group CFO, Jørgen Rostrup. And I hope you all have the presentation material available. There will, as usual, be the Q&A session after the presentations, and after that, there will also be a separate media session for media present here today. That media session will take place in the Future Lounge at floor four. But without much further ado, I leave the floor to our CEO, Sigve Brekke, to take you through the highlights of the quarter.
Well, thanks, Marianne, and good morning to all of you. Actually, we have more people here now than we used to, so I'm pleased to welcome you all. The third quarter, it's a quarter that shows that we continue to execute on the strategy we laid out at the Capital Markets Day in 2017. It's also a quarter with some significant milestones. The first one being the end of the concession in Thailand. It was the spectrum strategy we laid out in 2015 already, when we decided not to participate in the auction back then. And now that time have come to an end. And with the broad spectrum portfolio we now have in Thailand, we have a solid platform for future growth.
Another milestone in the quarter was the completion of our sale of the Central Eastern Europe assets. The completion was in accordance with the plan, and it now allows us to put more focus on the business units and the markets where we think we can create the most value. The revenue development in the quarter is somewhat softer than expected. The main reason to that, it's a very tough competition in Myanmar, which I will come back to. However, I'm pleased to see the improved growth in Pakistan and in Bangladesh, also after a little bit slow start of the year. And I'm also very pleased to see that for the first time in three years, we have a net positive mobile subscriber growth in Norway. Our transformation and cost efficiency agenda continues.
So far this year, we have taken out NOK 1.3 billion in costs, and that represent around 4% of our OpEx base. So we are ahead of our progress. It's more to be done, and we still believe that becoming a leaner company, position ourselves for capturing future growth. And as usual, I'm going to go through some of the markets before I leave the stage to Jørgen. Starting with Norway. In Norway, coverage and the quality of our mobile networks is now really showing that it gives us a competitive advantage. And after several years of investment into our 4G network, I'm pleased, actually a bit proud, to see that we won the Ookla test as the fastest network in the world, not in Norway.
There are not that many markets that can show and demonstrate an average 72 Mbps speed in the network. This is now giving us a competitive advantage. In addition to that, in the quarter, we also launched a narrowband IoT network, and we put that on all our 4G base stations, so we have it nationwide. We will, in a couple of weeks, launch a pilot 5G in the city of Kongsberg. As I said, the mobile subscribers turned positive for the first time in three years. What an achievement for our Norwegian team! This is driven by our Fleksi product, which is becoming very popular in the market. As you may recall, the Fleksi product starts at NOK 449, and it's targeting the high-end consumer market.
We also continue to have success on the upsell of our existing customers into richer data packages. In the business segment, we now see that the position we are taking, taking on IoT products and services, and also security services, give us a very strong value proposition, and we now integrate those type of services into our offerings. Within our fixed business in Norway, we added 9,000 new fiber customers in the quarter. Now we're up to the speed that we need to be. Again, a little bit slow start of the year due to weather and also to get the machinery going, but now we see that we are capturing market share on fiber connections. Yesterday, we also announced a rebranding of our cable operator, Canal Digital, into Telenor.
That will enable us to use the Telenor brand across all our platforms and give a stronger and a more focused customer proposition. On the EBITDA side in Norway, the underlying EBITDA is stable, and the cost reductions in Norway, which we are continuing with in the efficiency agenda, is now able to offset the decline in the copper-based legacy business. Short comment on Denmark and Sweden. Both markets continue the transformation agenda. They have solid cost development. We took out 3% OpEx in Sweden and actually 9% OpEx in Denmark, and despite that, we are able to stay competitive in the market. Moving to Thailand. As I said, the third quarter was a very special quarter for us in Thailand.
It marked the end of all the uncertainties they have had the last 3, 4 years, and when it comes to the end of the concession. It has been painful after not participating in the 2015 auction, where we decided to stay out because of very, very high prices, and it has been painful to then execute on the strategy we laid out back then. But now we have acquired a solid spectrum portfolio, which is significantly cheaper than it otherwise could, we could have ended up with. As you know, we signed a lease deal with TOT to give us access to the 2,300 spectrum earlier this year. We have now focused on full speed on the rollout on this spectrum.
We have 6,000 sites installed already, and in the end of the year, we hope to have at least 10,000 sites rolled out, utilizing the 2.3 spectrum. Already, 30% of our 4G traffic is now carried by the 2.3 spectrum, and we see a significant improvement, both in quality and in data speed for customers using then the 2.3. Furthermore, as you know, we acquired 1,800 spectrum in August, and we have also announced that we will participate in the 900 auction that will happen in a couple of weeks. The prices are high, but with the conditions we now saw at the 1,800 auction, and we see at the coming 900 auction, we think that we can create value out of buying this spectrum.
We are also helped by being allowed to continue to use the concessionary 1800 and 850 spectrum in a transition period. In addition, we recently signed an lease agreement with CAT that gives us access to fiber and towers in the years to come. Despite significant challenges and uncertainties in the market due to the spectrum situation, I'm pleased with the financial result that dtac is delivering in the third quarter. They continue the strategy of migrating prepaid customers into postpaid, and with that, getting customers into data bundles. And that is continued to give us a higher ARPU growth when people start using data bundles. We are also continuing the digital transformation agenda, and I'm pleased to see that the cost control also in Thailand is in place.
A 40% EBITDA margin, despite us now starting to pay the monthly fee for-- to TOT, utilizing the 2.3 spectrum band. With the regulatory uncertainties now behind us, I think dtac is very well positioned to take the fair share of the market growth going forward. Then to what we call the Emerging Asia cluster, starting with Bangladesh. When we met last time in the second quarter, we talked about a little bit disappointment for the first half of the year when it, when it came to growth. Now we see a much stronger performance in Bangladesh. 8% growth in subscriber traffic and an impressive 62% EBITDA margin in this market. The growth is driven both with voice and data usage.
We added 2.2 million new subscribers in Bangladesh in the quarter, and as we have talked about before, the penetration is not. It's yet to be fully penetrated in the market. We still estimate around 55%-60% mobile penetration, so there are still lots of customers out in the rural market that do not even have access to the basic services. In addition to that, we continue to focus on existing customers starting to utilize data. And in this quarter, we are now having around 50% of our customer base using data. Powered by the leading position we have on both 3G and 4G in this market, and with the growth in new subscribers and existing subscribers using data, we see that the growth in Bangladesh will continue in the coming quarters.
In Pakistan, also a slow start of the year when it comes, when it came to, to the growth. However, now we see the growth picking up. 10%s growth in subs and traffic and an underlying impressive 23% growth in EBITDA. Then Myanmar. The competition in Myanmar has become tougher than what we expected. We knew that the fourth entrant, which launched some few months back, were going to be aggressive, but, but it has been even tougher than, than what we planned for. The new entrant was allowed to price way below the price floor set by the regulator. However, the new entrant was allowed to do that only for the first 90 days. Now, everyone will have to comply with the price regulations.
However, the price floor is set a bit lower than it was in the past, and now all the operators are having taken their prices down to the price floor. But at least there is no difference now in regulations, and we all have to compete with the same conditions. Our strategy then is to continue to build a leading position on network, to continue to build a leading position on the widest distribution, and to be competitive in our product offers. Then I want to talk a little bit about our transformation agenda, and this time I will talk about what we do with our networks. Investing in future-proof networks, it's a very important priority for us because it improves customer experience, and it supports the data-driven growth, and it reduces our costs.
We are then, because of that, investing significantly into modernizing our network. What you see on the left-hand side of this slide is that that is also needed. The throughput or the year-on-year growth on average in our network, it's 63%. In the three emerging Asia assets we have, we are actually growing 92% data year-on-year. Of course, with that, from that huge data growth, we need to do something on our cost base, and we need to make sure that we are as efficient as possible. To do that, we are ensuring cost efficiency in everything we do. We are leveraging standardization to a much larger extent than we have done before. We are implementing new operating models, and we are utilizing our global scale.
Let me go a little bit more into detail on those, the three main points. Starting with leveraging the standardization. Again, as you see on the left-hand side of this slide, we are now taking the data traffic into hybrid cloud. And we have so far that 50% of data traffic is now on hybrid cloud. And that gives us a reduced total cost of ownership of 40%. This migration is happening faster than what we expected, and we now see that during 2019, we should be able to take that 50% up to 80% of all data traffic being managed by the hybrid cloud, and a significant cost reduction coming out of that.
Then, the one in the middle is talking about a new operating model, where we basically leverage on partner scale. We are outsourcing then, the management of our network to partners. That has been implemented in Myanmar, Malaysia, and Pakistan already, and there are more to follow. And when we do that, we see that we can improve the process efficiency with approximately 30%. But we also see that we can automate the networks such that we can increase functionality and flexibility. Last but not least, then to the right hand of this slide, we are leveraging now the global scale in centralized procurement. This, we set up a company in Singapore a while back to take a position on this.
Has led already to significant savings. In total, around NOK 3 billion, a savings in 2018 compared with 2017 on the overall procurement area. If you look at the network category, we see that we have realized prices in 2018, which are 25% lower than the 2017 prices. This is one of the reasons why you will hear Jørgen also talking about that the CapEx number on the group level is somewhat lower than what we expected when the year started. It's a result of what we do on this area. Then let me finish up with the operational priorities going forward. As you know, in 2017, at the Markets D ay, we talked about three operational strategies. One was growth, two was efficiency, and three was simplification.
We are very satisfied with what we have done on the simplification of the portfolio so far. We have executed on VEON, and we have executed on India. We have executed on online classified. We have also had some smaller other transactions. We are almost done on the simplification area, almost done. We're also pleased with the efficiency agenda. We said when 2017 started that our plan is to take out about 1%-3% OpEx year by year. It was a four-year program, and we are in midst of that program, midst of that four-year now. We are actually a little bit ahead of what our ambition was, but we'll continue. There is more to be done on this.
What we have done so far, of course, is to reduce costs on areas which has been, you can call it low-hanging fruits, but now we are also way into areas which are more structural. When it comes to the growth, we will continue to focus on growth and what we call the revenue renewal. And we see potential for doing that in all our markets. The main priority in the months to come is to return to growth in Thailand, is to monetize the continued, continued data growth we see in our emerging Asia assets, and is to strengthen our position on B2B, not only in Norway or in Scandinavia, but also throughout our portfolio and IoT. In addition, we focus on fiber rollout in Norway, and we see that that gives us a good profitability.
With that, I will hand over to Jørgen to go through the financials. Thanks.
Thank you, Sigve. Just let me have some water for... Okay. Let's start on revenues. We see stable subscription and traffic revenues in the quarter, and we see a year-to-date increase of half percentage points. During the quarter, we have seen, as we said, we expected at second quarter, positive development both in Pakistan as well as in Bangladesh, compared to what we saw the first half of 2018. The group's growth rate in total is, as Sigve was alluding to, somewhat hampered by tougher than anticipated competition environment in Myanmar. And then, as Sigve said, we have learned that the fourth operator was granted, should we call it an asymmetric price regulation for the first 90 days of operation.
From beginning of September, we should all be on equal terms versus the regulator on this one. Then, from a good and stable quarter on the main elements for Norway, we still see that fixed revenue growth in Norway is being a little bit under pressure from continued loss of legacy revenues. We see growth somewhat lower this year, partly due to also annualization of a price increase for broadband that we implemented last year. dtac, as Sigve said, been through a tremendously important transition this quarter from concession to license arrangement. Leading up to this, obviously, the organization, the business, and the revenue line has been under somewhat pressure. And now there is more clarity.
We believe there is a solid foundation to take part in the mid-digit growth the market in Thailand is experiencing. If we adjust gross profit for the approximate NOK 300 million payment in spectrum lease to TOT in Thailand, that we have talked about before in the quarter, and also the loss of wholesale revenues and special numbers in Norway, we see gross profit follows the slight growth in subs and traffic revenues. Efficiency improvements high on our priority list. We have managed to reduce the cost base year to date, NOK 1.3 billion, or 4%. And if I may, this in spite of meeting the tougher, much tougher comparables that we saw since we had significant reduction from second quarter 2017 onwards.
So we are building on top of the effort that we did last year. If you look at one-time items this year as well as last year, they are more or less offsetting each other, and we have close to zero currency effects. So the reported OpEx that we show here gives a good picture of the development. We are delivering more on the structural OpEx reductions. The low-hanging fruits that Sigve was referring to were not low-hanging last year. They were coupled with a cultural change toward more efficiency, but obviously, they were different in nature than the more structural OpEx reductions that we now are having. Reduced call center volumes and a leaner, more efficient organization is visible now to lower personnel costs. Regulatory cost reduction is, as before, driven by Thailand.
And then the structural initiatives by nature takes longer time to realize, and we are starting then to see them also in operation and maintenance, which is, of course, a very important category for us to succeed in. Two effects that Sigve talked about is contributing to this, the new operating model for network and IT, and the hybrid cloud solution. And then, on the other side, site rental and energy related to network expansion, 50/50 percentage on those two elements related to the Asian business and network expansion there. So we are talking about a 6% increase in EBITDA in the quarter.
If we take a little bit closer look at this and adjust for one, for a few one-time items, both last year as well as this year, if we also adjust for the TOT payment and the Phonero wholesale and 3-5 digit regulation in Norway, we have an underlying growth of 4% in EBITDA this quarter, similar also to the underlying growth for the year in total. This is then cost improvement, efficiency improvement of NOK 0.3 billion, and half and half split between interconnect gross profit, and slight growth in subs and traffic on the last NOK 0.1 billion. CapEx was NOK 4.2 billion in the quarter, around 15% of sales.
In particular, the increased speed on the 2300 MHz rollout in Thailand is lifting CapEx for the group, and obviously for developed Asia. Norway continues to be below our ambition level in the fixed side, on the fiber side. Year to date, CapEx is still somewhat lower than planned for, and that is why we have chosen to revise our guidance to NOK 16 billion-NOK 17 billion for the year, from previously communicated NOK 17 billion-NOK 18 billion. Let's have a brief look at the P&L. Net income ended at NOK 5.8 billion for the quarter, equivalent to NOK 3.96 per share. As you can see, we have a NOK 262 million charge on other items, preliminary, related to workforce reduction.
The precision increase on NOK 600 million year-on-year, fifty percent of that is explained by higher amortization of concession assets before the end of concession in Thailand, as we have talked about before. That will come significantly, significantly down in fourth quarter. Net financial income and expenses this quarter is negative NOK 359 million. Financial expenses in that is in line with trend, so the, the, the, the difference is, financial revenues was impacted by VEON dividend of NOK 253 million. Other than that, it is, not much to mention on the P&L statement. Maybe I should just comment on the, on the right-hand side with the IFRS 15. We continue to see marginal P&L impact for Telenor with this implementation. Free cash flow in the quarter was twenty-six point five billion.
However, then NOK 22 billion of that is result of the sale of Central Eastern Europe assets, and the remaining EUR 400 million of the total proceeds or considerations of that sale will be down payments over the next couple of years. If you exclude M&A activity, the free cash flows was 4.7 billion in the quarter, a decrease of 1.3 billion compared to last year. So on one side, we had improved EBITDA, and we had somewhat lower CapEx, but this did not fully compensate for prepayments to CAT, the agreement that Sigve talked about, and for license deposit for the 1800 MHz spectrum acquisition that we did, NOK 0.6 billion in Thailand. There are also some higher minority dividends in the quarter.
Year to date, this gives us a cash flow of totally NOK 32 billion, or NOK 11 billion if you exclude the M&A activity. Net debt this quarter is positively impacted then by the proceeds from the sales of operations in Central and Eastern Europe, which results in a net debt to EBITDA ratio of 0.5. But if we then take a few things into considerations, we have in October paid out special dividends related to the disposal of the CE assets. We have almost completed the market part of the buyback program, and we will shortly, as a third element, pay the second tranche of the ordinary dividend.
So in total, this means that we will return, approximately some 23 billion to shareholders in 2018, which is, a record high, and adjusted for these, payouts, the net debt to EBIT ratio is around 0.9. Our priorities, for capital allocation, remain unchanged. We want to maintain a strong balance sheet. We are very committed to year-on-year growth in the ordinary dividend, and we will from time to time, take a look at inorganic opportunities within our core businesses and core geographies, and I can assure you, with a value-driven, approach to it. We are approaching year-end, and we are fine-tuning the outlooks a little bit. So far this year, subscription and traffic revenue growth is, as I said earlier, 0.5%, and we therefore now expect the full year growth to be in that range.
We are guiding on 0%-1% growth for the year on subs and traffic. The main change from second quarter is the intensified competition in Myanmar. On the other hand, we are then increasing the outlook slightly for EBITDA growth from previously 2%-3% to now 3%-4%. There are two elements to that. It is primarily on the back of an increased visibility and, if I may say, good execution in Thailand, and also the positive one-offs in the third quarter. Regarding CapEx, we have very good traction on our planned investments in the markets, and then the CapEx spend so far is a little bit lower than anticipated, also supported by the CapEx efficiency achieved that Sigve talked about.
We now expect total CapEx will end up slightly lower at around NOK 16 billion-NOK 17 billion. To summarize, we believe we are delivering according to plan and according to how we have delivered over the last few quarters, stable and good and consistent performance. Our, in a quarter, by the way, with a lot of milestones, and, our focus remain the same on value creation, on efficiency growth, and, simplification. Marianne, should we check if there are Q&As?
Thank you, Jørgen. Yes, we will now, as usual, have a Q&A session, and we will start with the audience present here at Fornebu before we open up for the conference call participant. Are there any questions in the audience today? I think the first one is coming from Frank Maaø from DNB Markets .
Yes, good morning. I have two questions, if I may. The first is to the CFO, and the second one is to the CEO. So you said that operational efficiencies is, are high on your priority list. But when you think about financial efficiencies, we know that, you know, cost of, cost of equity is far higher than cost of debt. And with that in mind, you know, and your, you know, very low financial leverage for a long time now, have the administration and board quantified and discussed, you know, what, how much this, the current capital structure is actually costing shareholders? I mean, in terms of nominal figures, billions per years, and so on, by means of a higher capital charge. That's the first question, if there's any processes around that. The second one is related to ESG, actually.
ESG is an important topic for a growing number of investors. And while Telenor is arguably, you know, having perhaps an ethical dilemma in Myanmar, you're also looking at a country like the Philippines and evaluating if that could be an interesting option. And given the moral and financial corruption of the regime in the Philippines, including credible reports of death squads and so on, killings and journalists, you know, why is this country not pre-excluded on an ESG basis from relevant geographies of that Telenor should look at? So that's my question. Thank you.
Should I go first?
Yeah, you take the difficult one.
Frank, I don't think I should go into the details of the board and administration discussions, but I can assure you that my clear experience is that the board and the administration are discussing all issues thoroughly, also on the financial arena. So yes, we are discussing efficiency, development of values and value creation, balance sheet, and all other issues. I would, however, like to say and we are focused on the total set of good conduct in the financial area. But we are also working in a systematic way, the way we kind of made a contract with you guys in January 2017.
We are working along those elements that we have talked about the whole time, and we are ahead of that program. We are ahead on all elements, and we are also ahead on the shareholder remuneration part of that program. With the three elements, two buyback programs and one extraordinary dividend. That is where we are going to continue. We are maintaining the priorities of a strong balance sheet. We have agreed before, we can always discuss what a strong balance sheet is, and we have a very strong balance sheet now. But we also have things to do going forward. We have a payment for spectrum in Thailand. We have an IFRS 16 implementation that will change the ratios a little bit.
That goes for the whole industry, but we want to come through that and see how that is playing out. We will make sure we are continuing also with extraordinary remuneration to shareholders when and if the board concludes that that is a good time for it. Our prime objective is to stay very predictable on this and to be very competitive in the business that we are operating.
To your second question, yes, this is very high on the our agenda. And as you know, we have learned some lessons on this. I think the VimpelCom and VEON history was a lesson that we have taken with us. So when we entered Myanmar, for example, this was the main discussion in the management and in the board, will we be able to operate in such a country? And that's why we chose in Myanmar to go alone without any partner. And what we have learned over the years is that if you want to operate with our standards in these type of markets, you have to be in operational control. That's why in the Philippines, we are looking at the condition for the upcoming license award.
However, we have made it very, very clear that this is a market we cannot operate if we are not in control. Currently, the foreign ownership rules doesn't allow that. So we have said that if those rules are not changed, and if we are not allowed to be the majority vote shareholder and in full control, we will not enter a market like that.
Next question, please?
Henriette Trondsen from Arctic, in Norway. First, congrats with the positive net adds on mobile, first time in three years, and that's impressive also considering Telia's negative net adds, last Friday. But, revenues on fixed, they were quite weak this quarter. Can you give any color on this and what we can expect there going forward? And the second question, if I may, on Bangladesh, the new voice tariffs, might be more visible in Q4, but, how much of the ROE growth in Bangladesh is-- do you think is driven by these new tariffs? Thank you.
Hi, Henriette . Which one do we have? You can choose first.
Go Norway. Can I go Norway?
You can go Norway, and then I can compare on Bangladesh.
First of all, for us, the performance in Norway on top line, on acquisition, and also on the cost and structural work, this quarter is good, solid, and follows the trends that we have anticipated that we are working on. And the mobile side on the revenue line is good. So you're right, the potential weak element in this total picture is the fixed revenue. The reason is, of course, the continued decrease in the legacy revenues on the fixed side and not fully compensated by the new fixed activities, including the fiber and the fiber rollout. We have a good rollout in the third quarter compared to the previous two quarters, but we haven't seen the revenue stream fully reflecting that.
Second, we also had a price adjustment a year ago, so we have benefiting from that price adjustment in the fixed side throughout a year now, but now we are on year-on-year comparables, and that is actually the whole picture of.
Just want to add one comment to Norway, because I think this is more than just being present out in the trade. It's also that we have been able to constantly innovate new services for our customers. The latest security service is an example of that, or the SMOK program that we came with is an example of that, or the Fleksi product is an example of that. So I think that is what is enabling us now to be net on the subscribers. We also see that the Norwegian customers still want to go to physical distribution points, so we also have expanded our presence in the third-party distribution. So I'm very pleased to see how that innovation drive is continuing in Norway.
To your Bangladeshi question, yes, it's correct that there has been a reduction of uniform call tariffs and VAT from 15% down to 5%, and we are benefiting out of that. I think that's what you are referring to. How much of the growth that is coming from that reduction, I don't have a number on that. However, the main growth here, it's our ability to add 2.2 million new subscribers, and also the ability then to drive ARPU through getting the people to start using data. And as I said, 50%, we are across now the 50% data percentage.
So, I expect the growth figures that you see from Bangladesh in this quarter, the 8%, to be in the range of what you will see also in the coming quarters.
On Pakistan, it might be that the tax element is coming back. We regard it as a temporary relief, but it remains to be seen what the authorities are going to do. However, the underlying business are developing continuously as we talked about also in the second quarter. So we see a positive development on the underlying business. But in this quarter, there is a significant element of the tax effect.
Just to supplement on the Bangladeshi question, we believe that the new price regulation has a positive impact of 3-4 percentage points this quarter. So, but that means that there is also an underlying improvement in the revenue trend. And, one other question, if I may. In Malaysia, with the new government, do you have any indications that this will impact the spectrum prices, also considering that the allocation of the 700 megahertz spectrum that was supposed to happen this spring was postponed?
Yeah, it's of course a little bit too early to say. But what we have heard so far, both from the minister, but also from the new regulator, they are both new, is that they want to continue the spectrum allocation processes that they have had in the past, including then the 700, the awards on the 700 spectrum. So there is no sign that that will be changed.
Thank you. Next question, please. If there are no more questions from the audience here at Fornebu, we are now ready to open up for questions from the conference call participants. Operator, please.
Thank you. As a reminder, if you would like to ask a question, please press star one. We will now take our next question from Mr. Peter Nielsen from ABG. Please go ahead, your line is open.
Thank you. Good morning. Just a question, I have two quick questions on Norway, please. You've enjoyed very strong momentum on the high-end customer side in Norway, for the last two quarters. There has also been a corresponding impact on the margins, I guess. And could you... Is this a strategy which we can expect you will continue to push?
For the coming quarters as well, i.e., we should perhaps also anticipate some margin pressures because of extra marketing spend? And can I just ask why the rebranding of Canal Digital now, after all, after all these years? Is it to do with an increased focus on your fiber TV business? And should we anticipate that there will be sort of material rebranding costs in Q4, as for instance, we saw earlier in the year in Sweden? Thank you very much.
Yeah, I think I can address that. Yes, you are right. We are using more third party distributions. So there are some commission costs related to the very successful sale, the know-how of the Fleksi product. But however, we are then very, very attractive in the high-end segment, NOK 449 and up. We will continue with that strategy. And we will then also continue to then spend some commission in getting those figures. However, I think that you will see that Telenor Norway is continuing to really have a focus on efficiency, trying to reduce cost elements in other parts of the business. So I do not expect any margin pressure because of that strategy.
When it comes to the rebranding, do not expect a huge rebranding cost. I don't have exactly the number. But, so it's different from Sweden. The reason why we do it is just to simplify the offers. And our customers, they know Telenor, and some of them are a little bit confused with what is Canal Digital. Now we want to make it simpler, and then use that simplicity, to, to also look at, at can we give, good bundled offers. We are not moving heavily into the fixed mobile conversion, but we do see that, for example, the family offerings that we have, is, is very popular.
Thank you for that. That's useful.
Next caller, please.
We will now take our next question from Maurice Patrick from Barclays. Please go ahead. Your line is open.
Yeah. Morning, guys. Maurice here from Barclays. So quick question on innovative new services. You made a point earlier, Sigve, around IoT and 5G, and in fact, Telia was indicating one of the reasons why you were likely doing better than they were in Norway was due to your more innovative approaches around services, and that's driving differentiation. So I guess, is it mainly Norway where you're seeing this, or can you see other markets where you can also see such innovative services like IoT being delivered? And just as a side point, you haven't really talked about it today, but convergence in Sweden, I believe you do have convergent products in Sweden, that I think are going pretty well in the marketplace.
Perhaps just your view in terms of how popular are your convergent tariffs, how's the momentum going, how are you seeing it? Just quite topical ahead of the impending Tele2 company merger. Thank you.
I do Norway, and you do Sweden? Norway. I think we are. I’m pleased with the innovation, both on the consumer segment, and I use some examples on that, but also on the business segment. And we are maintaining our 70% market share on business due to those innovative services. So what is happening is that in the business segment, we are able to move now from only price competition into more integrated solutions. And we have done that very successful. And I think that the size of Telenor and the innovation resources that we have in Telenor in Norway, we are able to do that very well in a competition.
Now, we will start to take some of those learnings also to our other markets, starting with Sweden, and then also go from Sweden to Denmark and also see if some of these services can be adopted into the Asian markets. We are, as I said in my introduction, we are now looking at can we build a B2B position also in Asia, where we mostly so far have focused on the consumer segment. And with that B2B, also then take some of these innovation approaches. Especially on the SME segment, and we are more looking at that outside Norway and Sweden, but also then into IoT.
So yes, the innovation that we are able to do in Norway, we will try to copy and paste into other markets. I think we have been the main areas we have in Norway on this; it's in smart buildings, it's in health, and it's in smart cities and smart municipalities. So, it's still early days. We are not spending a lot of money on this yet. We want to grow and to learn and to work a little bit at drive to build this business up.
Maurice, Sweden was convergent place, wasn't it?
Yes.
Thanks. So, you know, Sigve was pointing to the rebranding that we did in Norway. We also mentioned we had the same in the spring in Sweden. In Sweden, it is also definitely related to being able to play forcefully in the fixed mobile conversion area. We probably see Sweden ahead of Norway in this. We haven't seen anything close to it in Norway, and it's still probably in the beginning in Sweden. We launched... When we rebranded, we launched a more for more for same type of product. So we didn't do and we will hesitate to do discount plays, but we offered the more for same in Sweden.
... and that has been good. We also see that we have a good starting point in a way, because we have, to a certain degree, a low overlap in our two customer base on the fixed and mobile side. So, that gives us an opportunity to make the overlap bigger, should this develop and should this be the trend in the market. Obviously, Tele2, Com Hem, could allude to this, and they have - they have been vocal on it, and also Telia. But, it has been more talk than action so far. We are ready.
So what we-
That's very clear. Thanks.
Yeah, Maurice, what we did in Sweden was not to launch specific, convergence tariffs. We haven't done anything with the price points, but what we did in connection with the rebranding was that we offered, benefits for customers who take both fixed and mobile offerings. If you take both fixed and mobile, you can get either some more, mobile data, as Jørgen explained, or you can get higher speed on your broadband connection, but no changes to pricing. But we continue to see a good, uptake, and these offerings are popular among our customers.
That's great. Thanks, guys.
Next caller, please.
We will now take our next question from Henrik Kalberg of Credit Suisse. Please go ahead.
Hello. Thanks very much. I had, I just want to follow up on Norwegian fixed. You said you're gaining a little bit more traction with your fiber build. I was just wondering where you're actually building. I know you've been overbuilding your cable network, so how much of the new fiber footprint is in sort of your cable areas? And also, if you think about your legacy base, which continues to be a drag on your business, what can you sort of do to maybe improve the trends a little bit? And, I mean, Telia, for example, in Sweden, is now trying to resell challenge of fiber networks. Have you looked at that? Could you maybe build fixed wireless access in areas where you've been overbuilt by fiber and compete with that as products?
Maybe your thoughts on that. Also, maybe if you could clarify on your CapEx guidance. It sounds like a bit of a delay in terms of you were quite slow in starting building fiber in Norway beginning of the year, and then this, the high spectrum allocation, but you're also doing things more efficiently now. Maybe you can clarify how much of the reduction in CapEx guidance is just Telenor just doing things more efficient and how much is timing? Thanks very much.
Yeah. On fixed, I think the overall objective is trying to compensate for the reduction of the copper legacy business with fiber rollout. That's the overall ambition. We were not able to do that in the third quarter, but going forward, and we have got a larger speed on fiber rollout, that's the ambition. And the fiber rollout, it's mainly focusing on what I would call virgin areas, where there is no fiber. But we are also now starting to roll into areas where we have had cable or copper connection ourselves. Exactly, that split, I don't have a number on that.
And we see that there is a willingness to pay for fiber in Norway, and fiber is the future-proof access that our customers see. Of course, we want to sweat the legacy assets, fixed legacy assets we have as long as possible, but there is a real demand in the market for fiber. Then we will also experiment with fixed mobile solutions when we're starting to get really into more rural part of the segment. But we are not there yet. There is more than enough land grabbing on fiber before we have to start implementing also other type of solutions, but we are trying that out.
On the CapEx side, this is not a massive adjustment. It is on average, NOK 1 billion down, if you want. And I would at least say that we see strong traction now on the efficiency part in our portfolio. So we are able to invest more on networks for the same amount or and we have ample capacity for that. So that is a significant part of it. Then, as you said, Thailand is up compared to our original plans for good reasons, and we see good traction on that in the quarter, and Norway is slightly down on the fiber. It's not massive. Third quarter was a good quarter. We assume fourth quarter will be even stronger.
So in the numbers, there is also a significant pickup on the fiber side in Norway. It's predominantly that we have gone, got the effects of the efficiency work and the procurement company in Singapore on the global price book and new negotiations. That is taking it down, and then it is a little bit Thailand and Norway, a little bit up against each other on the numbers.
Thanks very much.
In Thailand, sorry? Please go ahead.
No, no, no, sorry. I, I just want to follow up on the Norwegian fixed part. I mean, so you didn't follow up with a price increase this year. Does that... Should we read that as it's now becoming more difficult to raise pricing, or can you still sort of continue to put up pricing on fixed line? Thanks.
I don't think I want to comment on that. The price increase you are referring to, I think we executed quite well, and they were also willing just to pay for that. But going forward, I don't want to comment on what we do on the pricing. Our main focus now is to get the speed up, the rollout speed up, and I'm pleased now to see that after a slow start of the year, we are now into the territory where we want to be.
Next question, please.
We will now take our next question from Usman Ghazi from Berenberg. Please go ahead. Your line is open.
Hello, thank you for taking my question. I've just got two, please. Firstly, on Norway mobile and subscription traffic revenue trends. Obviously, you're doing very well on the volume side, but on the actual revenue for mobile, it was down 1.7%. I'm just trying to understand if you are in this stage where you are prioritizing volume over revenue growth for the time being, and how we should see this going forward? The second question was just on CapEx, but on a slightly different note. I mean, do you see any impact from these Trump kind of tariffs on Chinese equipment makers, in terms of read across for CapEx? Thank you.
Now, on the first question, no, we are not prioritizing volumes over revenue growth. We are trying to do both at the same time. That's why we are so focused on the Fleksi product, which is then bringing in more high-end customers. And you will see that in the very price-sensitive prepaid segment, we are continuing to lose customers. So our focus is definitely on the value creative customers or the high-end customers. The revenues you're referring to, if you look at the underlying revenues, you have to adjust for the three and the five-digit numbers effect. That's about NOK 50 million, isn't it, in the quarter, if I remember it right? And that effect will go away when we go into next year.
So if you adjust for that, you will see that the underlying ARPU is at flat, and also the underlying revenue development is very stable.
Yeah. On CapEx, no, we don't see any effect of discussions around the Chinese vendors. We have the Chinese vendors, which we work well with, and we also have other vendors, European vendors. And we have a global approach to all these, and we see no effects of that.
Maybe one more point on the vendors. We also did some price increases on the consumer segment, mobile consumer segment, a year ago, and now those effects are then annualized. It's one year after we did it. That's also something to take into account.
Thank you.
Next, next question, please.
We will now take our next question from Keval Khiroya , Deutsche Bank. Please go ahead. Your line is open.
Thank you. I've got some questions on Myanmar, please. We've now had symmetric price regulation in Myanmar since September. So can you talk a bit about how that's affected your trend since that's come into effect? And secondly, when you launched in Myanmar, you had an initial target of long-term operating cash flow margin of around 30%. Can you remind us of when you expect to reach that? Thank you.
Yeah, on the first question, yes, you are right. The price floor is now everyone need to comply with that. However, the price floor, as I said, it's lowered compared with what it was. So at least now there are the same rules in the market. Of course, we hope that we will be able then to stabilize the revenue drop we saw during those three months, where they were allowed to have very aggressive price offers. But it's yet to be seen, I will say, when this market will be stabilized. So I don't want to give any forecast or any views on that. But we will do our very best to stay competitive with both offers, the distribution and the network.
On the second question on-
Yeah, I think you answered it. We have a pressure now on the EBITDA margin compared to last year for two reasons. The main reason is, of course, the competition, and then you also have the currency. To do any prognosis on this, we won't do. It's been a very solid and good business. It came very quickly in cash flow positive. So it's been a tremendous value creation, and right now we are only focused on doing what we see today.
That's clear. Thank you.
I think we have time for 2-3 more questions. May we have the next caller, please?
We will now take our next question from Andrew Lee of Goldman Sachs. Please go ahead. Your line is open.
Good morning, everyone. Thanks for taking my questions. On, firstly, on cost cutting, your execution has been strong, and you noted you've done more than expected so far during the four-year program. Just wondered how you think about the sustainability of cost cutting outside of the four-year period now that you're kind of almost halfway through? And is there a change in the type of cost reduction as we get to the end of that four-year guided period? And then just secondly, a follow-up question on the questions on Norwegian mobile. Just wondered if you could give us any updates or color on the competitive landscape. Are you seeing greater competitive intensity from the kind of smaller players? Any color there will be very helpful. Thank you.
... Yeah, on the efficiency part, we are halfway through the program that we announced, and significantly ahead of that program. The program was flat, stabilizing in 2017, and then 1%-3% the next two years. And you know what we did last year, and we are doing a similar size this year, so well ahead. We are just concentrating where we are now, and we are concentrating on moving it more into, as I said, the structural part, and adapting on the marketing side in a good way, which we are really pleased with the development on the sales and marketing effort.
Not only the reduction of cost, but also the implication it has on how we work and how we high grade, and become more precise in our efforts. Now we see those effects also into operation and maintenance. We will continue to work through a more structural program, and we will probably revert during the winter, maybe fourth quarter, talking a little bit more about our thoughts for the next couple of years in that respect. Then later on, we'll come later on.
Just to add to what Jørgen is saying, coming from 10 years or 20 years history of growth, this is also about mindset. And I think we when this cost program started, we also used that opportunity to kind of change the mindset, a mindset that is not only looking on number of subscribers and top line, it's looking at actually the cash flow generation. And fortunately, the digitalization opportunity also came along. So now we are trying to both use digitalization of our core business to improve cost and also customer satisfaction, but also get the entire machinery to have a mindset that lean is good and that efficiency is good because it prepares yourself for the future growth.
So, a lot of this has actually also been to work with our leaders, work with our organization, and change the way we historically have been working. On the second question, the Norwegian market has been competitive, and it's, there is a real competition among the three network providers, but we also have several MVNOs or service providers, both in the consumer segment and also in the business segment. And I don't see any change to that competition. You have to be awake, you have to be out there and fight for every customers, and that's what we do. And I'm very, just repeating myself for the third time, very happy with the innovation driver.
This is not only about price and not only about fueling distribution, it's about also focusing on new type of services to our customers.
Thank you.
Next question, please.
We will take our next question from Ulrich Rathe from Jefferies. Please go ahead, your line is open.
Yes, thank you very much. I realize you usually don't guide for 2019, so, so I'm not asking for you to guide. But I'm just wondering, when, when you sort of build scenarios for 2019, and given what's now going on with the cost in Thailand, also the potential sort of situation in Myanmar going forward, is there even a possibility of EBITDA growth in 2019? Or is this really something that sort of has to be debated very closely, given trends in those two countries? The second question I have is just a clarification. I apologize, because I had trouble getting on the call, so you might have answered it, and then please ignore the question.
But the other line item in the EBITDA mix was strongly positive this quarter, and I think that was the first quarter since 2014 where it had a positive contribution. And I realize there was a one-off in there, so take the one-off out, but even then, it is materially positive. Is there any particular explanation for this, or is this underlying cost cutting in the group overhead? Thank you.
Well, first on the EBITDA growth, no, no, you're right. We, we are not guiding on that, and, and we will, of course, give you our view at fourth quarter. It's more natural to take it, then. But, but, but as we have tried to, to leave as a message today, first of all, we have come through a, a fairly turbulent period in, in Thailand, which we long prepared for and have worked, worked on and prepared for, for several years, and, and discussed a lot with you, with you guys. And we believe that we have come through that in a very advantageous way, including how much money we have spent, how we have spent it, and how we have handled operation in that period.
And there is an underlying growth in the Thai market, and hopefully we will take our share, as Sigve said, of that development going forward. By the way, if you have followed what we have said and what dtac has said about this year, we are very much in line with the guiding that they have set out all the way. So then Myanmar, right now there is low visibility, and we will just have to come back to that. But we are taking that fight every day in the streets and building on our strong position. Then we will give you the guidance for 2019 when we get to fourth quarter.
When it comes to other and the development there, first of all, you will see quite large effects on the cost changes under the other segments. This is also real cost reduction, valuable cost reduction, and significant efficiency and simplification work taking place, both on group level and also in a portfolio of important and good companies and side activities which are supporting the total telco effort of Telenor. There is an element more that we have talked about before, mentioned before. We are now charging out more of the overhead costs of the group than ever before. It makes sense because the services are reflecting that and voting for that. It is also, you know, prudent to do from a tax point of view and so on.
So the reduction in costs that you see in the BUs are actually also it is a net number after they have taken a significant higher charge from the group. From a CFO point of view, it's also good because it creates a good balance between the business line and the group when it comes to activity levels and these cost and service qualities and so on. So this is a change in the strategy on the digital side. It is higher charges of group cost out in the business units, and it's also efficiency and leaner activities, so high grading the activities of businesses and corporate staffs and service organizations in that cluster.
Very valuable for the group, right, both now in terms of money and on the longer perspective in terms of being agile and taking new development on board.
That's great. Thank you very much.
I understand there are still many waiting to ask the questions, so I suggest that we take two more questions. Next question, please.
We will now take our next question from Roman Arbuzov from JP Morgan. Please go ahead.
Yeah. Actually, all my questions have been answered, so thank you so much.
Thank you, Roman.
Okay, then to the final question, please.
We will now take our next question from Terence Tsui of Morgan Stanley, London. Please go ahead. Your line is open.
Thank you. I just had a quick follow-up on Myanmar. You mentioned throughout that the price competition has been a bit more aggressive than you expected. But just on the regulated price, you mentioned it's come down. Can you just tell us how much it's come down by, and whether you think that if all operators continue to operate at this new lower regulated price floor, this is really sustainable in the longer term? Thank you.
Terence, you know, before the new entrant came in, there has, for a year or so, been a price floor, price floor regulation. There is a fixed price per minute and, megabytes and so on. And then the regulation said that operators could go max 40% below, below this floor in promotions. After a period of asymmetric regulation between the three existing players and the new player, we are now back to symmetric regulation, that the absolute price floor on, on, per minute price and megabytes is the same as before. The new thing now is that operators can go max 55% below in promotions. And you know, the way the, this, this market works is that operators are constantly running promotions, so de facto, we are down more or less at this, 55% promotion level.
To your second question, is it sustainable? It's impossible to answer that question, but so far, so good. After 90 days, the fourth entrant, it's also been complying so far with the new price regulations. And all of us, the three existing players, of course, would like those regulations to stand.
Okay, thanks for that.
That completes the presentation and the Q&A.
That concludes today's call. You may now disconnect.