Hi, welcome to Telenor Group. We're a Norwegian company.
Actually, we are Malaysian.
Bulgarian. Myanmar! Hungarian. Danish.
Thai.
Serbian.
India. Pakistan. Bangladesh. Okay, okay. We're in telecommunications. Well, mobile banking.
Farming.
That's my phone! I recycled it. Thanks. But we've got a fast network, right?
Super fast. Better for when you are watching movies.
Downloading apps.
Creating and sharing music. So we're not just about conversations. We're about inspiration.
We're about inspiration.
Education! Education. Exploration. Collaboration. So what's at the center of everything we do? Customers. Closer communities. Healthier populations. Stronger economies. Empowered societies for all. Internet for all. So, as I was saying...
Welcome to Telenor Group!
Good morning, and welcome to Telenor's third quarter result presentation. My name is Meera Bhatia, and will be guiding you through today's presentation. Our CEO, Sigve Brekke, and Acting CFO, Morten Karlsen Sørby, will present the results today. There will be a Q&A as usual, here from the audience first, and then from our conference call participants. There will also be the opportunity for media present to speak to Sigve and Morten after the presentation. Sigve?
Well, good morning to all of you, and also those of you that are following us on the video streaming. Oh, despite that tough competition still remains in some of the Asian markets, and also effect of lower roaming in the Nordics. And I'm especially happy for the data monetization that we now see start yielding some results in the Asian markets. On the EBITDA level, we have an all-time high EBITDA of NOK 12.5 billion. That's a 5%... that we have done with the 38%, taking this also up one percentage point, compared with third quarter in 2015. When the year started, I said that efficiency and the cost is going to be one of the main focuses.
I think I communicated then that we are going to initiate long-term structural initiatives. Those have not come true yet in terms of numbers, but what you see here is the cost focus that we have had throughout the first three quarters of the year. As you also know, we made a decision of exiting VimpelCom in September 2015, and in this quarter, we took the first step in that direction. I have two slides on Norway, knowing that Norway is our main market. The Roam Like Home that we introduced in May, I think it was, I would say, has been a success. We have had a data increase of 300%, 100,000 customers into two packages, which include then free roaming in the EU area.
That 500,000 is about one-third of the overall postpaid base. I think the ambition, and these packages, most of the customers are coming in on price points around 349 and 399. And if you compare that with the average ARPU, you will see that there is quite significant ARPU increase when you move into these packages. And even though that this has given us a negative effect in the third quarter, we see that this will be a driver for the ARPU growth in the months to come. The domestic ARPU, as you see on this graph, has increased 10 NOK year by year. Whereby the negative effect of the Roam Like Home is -13 NOK.
So when you then take this going forward, I see a room here for increasing the ARPU in the months and quarters to come. We have also now a good growth on the high-speed fixed side, mostly from fiber, and we have increased 10,000 new customers on the in fiber in this quarter, and a 13% growth. Overall, there is a decline of 1% of the total revenues. This is coming from the fixed telephony, continue to follow the same declining trend as we have seen before, and also wholesale. And of course, the main element here, it's the effect of the Roam Like Home. It's around NOK 133 million down this quarter from that.
But despite that, we have a better now trend on revenues than we have seen before, and the -1% is actually better than what we have seen in previous quarters. What I think I really want to credit the Norwegian team on is that despite challenges on the top line, they have been able to keep a stable EBITDA margin of 45%, and the cost control in Norway is quite impressive. Year by year, there's a 6% reduction in OpEx, and this lower OpEx come from personnel reductions, so reduction in personnel costs, lower sales and marketing costs, with moving some of the distribution from external channel into internal channel, and with that, lower commission, and also a successful introduction of a new handset or device swap program.
In addition to that, Norway is also working with structure, structural initiatives, on the IT transformation, on network efficiency, but also on trying to engage customer digitally, and with that, reduce costs on, on the customer engagement. Sweden, solid subscriber growth in Sweden, plus 35,000 customers, consumer and business customers. And we also say that Sweden has had a positive sales mix now with including new tariffs that also have the European roaming, free roaming, included. More or less, well, as more or less zero revenue growth or minus 1%, that's coming from the roaming effect also in Sweden, and also on continuous price pressure on the business segment. On the fixed side, we are now turning into profitability in Sweden.
After many quarters with a minus fixed revenue development, we now have 1.4% revenue growth, and this despite the legacy product continue to go down. This come from the investments we are making in fiber, and also from some price adjustments we have done on new high-speed broadband customers, most of them on fiber. In total, we have now 650,000 high-speed broadband customers in Sweden, whereby 511,000 is on high speed. As we have said before, we are continuing to ramp up our SDU connection rollout, and that will also be a prioritized focus in the year to come. Telenor Pakistan and Grameenphone is really the growth stars of this quarter.
On the revenue side, Grameenphone growing 14%, and Pakistan growing 11%. But even more impressive is to take this down to the EBITDA level, with a 57% margin in Grameenphone and a 44% margin in Pakistan. And of course, this comes from now, data monetization. It's around 60% of the handset in these two markets that now are internet-enabled. However, most of them are still on feature phones, and there is only 20%-25% smartphones. And what we see, it's that the smartphone penetration is really now also driving the data, uptake, so it's a long way to go here. A little bit more specific on the two companies.
Grameenphone Bangladesh added 1 million new data users in the quarter, and if you compare that as a percentage of our total customer base, it's 42% of our customers are now active data users, and that's up from 27% a year ago. So again, it's a long way to go. We have now rolled out a 3G network, and it's covering around 90% of the population in Bangladesh with data network. Quite successfully, they are also introducing new type of digital or internet-based services, like health, to use one example, which now have more than 1 million customers on a health initiative that the company has launched. In Pakistan, subscriber growth of 15% added 600,000 new data users in the third quarter.
Again, taking that up from 33% over the total customer base a year ago to now 36% using data. So again, a long way to go to bring more people on the data platform or internet platform. In the quarter, they continued to expand on the 3G rollout, and they have also launched now 4G in the three big cities. That based on the 850 spectrum that we acquired in the second quarter. And again, focusing on data services, including also financial services. Thailand and Malaysia, competition remains being very tough in these two markets, especially on the prepaid segment. Both companies, both dtac and Digi, has chosen not to participate in the most aggressive price promotions or price aggressions on the prepaid segment, and not on the subsidies of handsets for that prepaid segment either.
The reason for that is that this segment has a very, very high churn. Instead, both companies have now started to build a strategic position on postpaid, and we now see that starting to yield some results. In Thailand, a postpaid customer gives you about 3x the ARPU of a prepaid customer, and when you migrate a prepaid customer into postpaid, you get a 20% ARPU uplift. And 44% now of the total revenues for dtac is coming from postpaid. Same in Malaysia, a prepaid customer yields—no, sorry, a postpaid customer yields 2x the ARPU of a postpaid customer—of a prepaid customer. And postpaid is now also becoming a bigger and bigger proportion of the total revenue, 31% now in Malaysia.
The strategic position both companies now are trying to build is to build out the postpaid distribution and the service points, strengthen the service offering on postpaid, and continue to build the data network. In dtac, we added 3,600 new base stations on 4G in the quarter, and in Malaysia, we now have a 78% 4G coverage, and are probably the leading operator in Malaysia on 4G coverage. On top of that, both companies are trying to engage with customers digitally, knowing the big digital segment we have in both countries. Both companies are also now focusing on profitability, and I'm quite satisfied with also the margin development in especially Thailand, but also that Malaysia, despite competition, keeps its relatively high EBITDA margin.
Myanmar, we see tough competition and have seen that for the last three quarters. We see very aggressive promotions on net traffic, but we also see that on data pricing. However, the third quarter is also affected by the rainy season, and as we saw also the third quarter last year. And rainy season means more fiber cuts, means more power outages, so the network is down. And we see now going into fourth quarter, we will see a growth Q-on-Q. The Telenor Myanmar focus is to build a market-leading position. We do so with continuing to add subscribers, added 900,000 new subscribers in this quarter, bringing the subscriber market share up to roughly 38% or 18 million subscribers.
We are continuing to build out the distribution, have now passed 100,000 points of sale, and not least, we are continuing to build a leading position on network. Have added another 700 sites this quarter and increased the population coverage from 65% to 82%. We have also launched 4G in Myanmar. We have 4G now on 108 sites in Naypyidaw, the capital. And we are eagerly waiting for more spectrum, 1800 spectrum, to come out to the market such that we can increase our 4G position. On top of that, very focusing also on building the brand in the market, and measured by NPS or Net Promoter Score, we are already a clear number one in the market, and this is important for us to build that leading market position.
On the profitability side, 43% stable EBITDA margin, and if you bring it further down, you also see that we continue to be positive on free cash flow. This is the third quarter in a row that we have positive free cash flow development in the company. And we see that despite now adding almost a million customers in a quarter, we have a scalable cost model going forward. India, good operations in the quarter, despite the launch of Jio has affected the whole market, including ourselves. But despite that, the company has grown 10% in revenue, added 9% on subscribers and an EBITDA margin of also 9%. And it has reached breakeven on cash flow.
However, spectrum remains a challenge, and as you know, we decided not to participate in the October spectrum auction, and the challenge remain. We do not have spectrum for a long-term solution, and that's why we say, as the headline of this slide, we continue to evaluate our options. As you have seen in the third quarter report, we have reassessed the value of our Indian business, and we have, because of that, taken a decision to impair with the NOK 4.1 billion. VimpelCom, as I said, the strategic decision was made last year to exit our shareholding in VimpelCom, and that exit we started to execute in the third quarter.
We sold 164 million shares through a public offer, and that reduced our shareholding from 33% to 23.7%, and the net proceeds of that was NOK 4.6 billion. We also issued a three-year bond of $1 billion, which will then be exchangeable into VimpelCom shares. We will not comment on further steps or next steps, other than saying that the intention to fully exit VimpelCom remains. Before heading over to Morten, I wanna give you a little bit, what should I call it? Appetite on what we are going to talk about when we meet in February for the Capital Markets Day. And that's about our main focus and priorities going forward.
The first one, to the left here, it's to monetize data demand. We see a massive data demand across all our business units. It's up now year-on-year, about 70%, and as a result of that, we are continuing to invest in the data networks. To capitalize on that, in the Nordics, we do that with the upsell to packages, which includes more data, as you have seen that we successfully have done in Norway, and we are also doing in Sweden. We continue to roll out fiber. In Malaysia and Thailand, it's the pre to post-paid migration, as I talked about, and also to take positions within digital services or internet-based services.
Whereby in the more emerging Asia, Pakistan, Bangladesh, India, and, and Myanmar, it's to continue to build out the data networks and continue to push for smartphone penetration in these markets, plus then including basic data services. And what we now see coming through in this quarter from Bangladesh and from Pakistan, we hope will then continue in the coming quarters, that we can demonstrate monetization. The next one is on efficiency, and even though we have an all-time high EBITDA this quarter, I'm not satisfied. There is more to be done here. And we have initiated now some structural transformative projects, especially within the IT domain, basing our IT solutions on more standardized, cloud-based solutions.
In the network domain within increasing the efficiency, and not least, taking advantage out of digitalizing customer journeys, and also digitalizing distribution. And you will see that is both giving us a better engagement with the customers, but it's also bringing down the costs quite significantly. The third one is on the customer journeys. Our aim is to be number one in the NPS score in all our markets. Our aim is also to build analytic competencies within the companies to more efficiently do contextual marketing, and again, take advantage of digitalization of the customer journey. And lastly, take position on relevant digital verticals. And as you know, we are focusing on building up financial services in our emerging markets. We are focusing on the online classified position we have.
We have a position now on digital marketing through the acquisition we did of Tapad and IoT. But this is what we are going to go through more in depth when we invite you to the Capital Markets Day in February here at Fornebu. And the agenda will be then to present our future strategic priorities and also our financial and capital allocation priorities. It will also be to show you more in detail what those structural initiatives, the content of that I talked about to improve efficiency. We will show you more about what we mean by digitalizing our core business, and also the selective bets we take on digital verticals.
Not least, we will bring in some key business units to show you how this is done in practice in the businesses. With that, Morten, I invite you on the stage.
Thank you, Sigve. Before I go into the details on the third quarter, let me quickly summarize the highlights. The third quarter is described by continued revenue growth and good cost control, supported by seasonality, and this result in an all-time high EBITDA and improved margin, despite competitive pressure in some of our key markets. The organic growth was 2% in the quarter, the same as the organic growth in subs and traffic revenues. We delivered a record high EBITDA of NOK 12.5 billion, which is 5% higher than last year, and this is both on an organic basis and as well as on a reported basis.
We have some significant one-time items this quarter related to VimpelCom and India, which Sigve mentioned, and I will come back later in my presentation to the accounting effects and the details in the accounts of that. Adjusted for these items, the net income to equity holders of Telenor ASA for the third quarter is NOK 4.7 billion. Free cash flow is very strong at NOK 9.1 billion, of which 4.7, sorry, NOK 4.6 billion is explained by the proceeds of the sales in VimpelCom. Let me move into the more details of the quarter, starting with the revenues. Reported revenues for the quarter was NOK 32.8 billion, which is an increase of 3% compared to the third quarter last year.
We see less currency effects compared to recent quarters in this quarter. Of the NOK 1 billion revenue increase in the reported revenues, currency explains approximately NOK 300 million. The total organic growth was 1.8%, and year to date, we are at 1.3% in that respect. Looking at the revenue breakdown, we see that the growth is driven by a subscription and traffic revenue growth, primarily from our Asian emerging businesses, which is Bangladesh, Pakistan, Myanmar, and India. Offsetting some of the growth is the decline in the outbound roaming revenues in our European operations, and this accounts for close to NOK 200 million on revenue level, and the continued decline in the fixed legacy revenue in Telenor Norway.
The increase in other revenues is primarily explained in the growth in the global wholesale division of Telenor. Few words on the OpEx development. As usual, OpEx is seasonally somewhat lower in the third quarter than in the other quarters. Still, I'm very pleased to see that reported OpEx is almost flat, and that OpEx to sales decreased by 1% point compared to the third quarter last year, and despite OpEx increases from Myanmar and new business. The development is driven by efficiency initiatives in several operations, of which the most notable cost reductions are seen in Norway and in Thailand.
The improved gross profit and controlled CapEx, or controlled OpEx translate, as I said, into an all-time high EBITDA of NOK 12.5 billion, and a solid 38% EBITDA margin. The EBITDA growth is 5% this quarter, both on the reported and organic basis. Looking at the sources of the improved EBITDA by market, we see that all our Asian operations are reporting improved EBITDA this quarter, and again, I would like to highlight the very encouraging trends in Bangladesh. There are significant one-time effects. The significant non-cash item related to, and in the third quarter last year. In Q3 last year, our decision to exit VimpelCom triggered a change in valuation method from the equity method to the market value, which resulted in an impairment of NOK 5.1 billion in the third quarter last year.
The negative one-time effects related to VimpelCom this quarter amounts to NOK 5.2 billion, and is impacted by the disposal of 164 million VimpelCom shares, and the issuance of a exchangeable bond with the potential settlement in VimpelCom shares. As a consequence of the disposal of parts of the shareholding in VimpelCom, a proportionate share of currency effects earlier recognized in other comprehensive income, these losses was reclassified from OCI to the profit and loss. This has a negative effect of NOK 3.2 billion, as we have earlier announced this quarter in the profit and loss, but there is no impact on the total equity of the Telenor Group.
In addition, the difference between the market value of $388 per share at the beginning of the quarter, and the transaction price of $350, and market value on the remaining shares at the end of the quarter, triggers a net impairment loss of $2 billion this quarter. There are also some smaller effects on tax and net financial items, which are netting each other out. The one-time effects related to VimpelCom have, as I said, no cash impact. In the cash flow statement, the net cash contribution from the sale of VimpelCom shares is positive, with NOK 4.6 billion. When it comes to India, based on recent observation in the market, the fair value of our license have been assessed, resulting in the impairment loss of NOK 4 billion.
And in addition, immediate impairment of Q3 CapEx amounted to NOK 100 million, taking the total impairment to NOK 4.1 billion. After this impairment, we have a recoverable amount of NOK 300 million in our books related to the license and spectrum in India. In total, one-times effect relating to VimpelCom and India amounts to NOK 9.5 billion this quarter. If we then move into the adjusted net income and the translation into that, with the previous items relating to VimpelCom and India already explained on my previous slide, the rest of the income statement is pretty straightforward this quarter.
While the reported net income is negative NOK 4.8 billion, the adjusted net income is +NOK 4.7 billion, which is an improvement of around NOK 1.1 billion compared to the same quarter last year. Just to underline the underlying improvement is driven primarily by the growth in EBITDA. Few comments on our investments. CapEx for the group was NOK 5.2 billion in the third quarter, of which NOK 200 million was related to spectrum and license acquisitions, mainly in Montenegro. The CapEx-to-sales ratio for the group was 15% in the quarter, and is at 16% year-to-date. The key reasons for the decline compared to last year are lower investments in Bangladesh, Thailand, and Myanmar.
In Norway, which accounts for approximately 25% of the group's total CapEx, we have increased our investments compared to the third quarter last year, driven by the strong rollout of 4G and fiber. Although the CapEx to sales ratio has trended downwards in the recent quarters, we have historically had a higher CapEx level in the fourth quarter, and this is also reflected in the outlook for the full year. If we take a look into the cash flow development, we can note the following. On the net cash flow from operating activities this quarter, we have a cash net inflow of NOK 10.5 billion.
As the reported EBITDA of NOK 12.5 billion is partly offset by income taxes of NOK 1.1 billion, and net interest paid of NOK 300 million. The net cash flow from investing activities is positive, with NOK 760 million this quarter. And of course, this is impacted by the net proceeds from the sale of VimpelCom shares of NOK 4.6 billion, and which more than offsets the CapEx paid of NOK 4.1 billion. In addition to the cash flows from operating and investing activities shown on this slide, we have payouts of NOK 1.1 billion in dividends to non-controlling interest in dtac, Digi, and Grameenphone. And around NOK 1.2 billion in supply chain financing and payments for license obligations.
In total, this gives a free cash flow to equity holders of Telenor of NOK 9.1 billion this quarter, which again, is a strong result. We continue to have a solid financial position, as you can see from this slide. Our net debt, excluding license commissions, decreased by 11 billion NOK during the quarter, taking the net debt to EBITDA ratio down from 1.3 to 1.1. The sale of the VimpelCom shares. Currency effects are reducing net debt by NOK 2.1 billion this quarter, and consists of a translation effect on debt in foreign subsidiaries. That's minus 900 million NOK. Currency gain on debt in foreign currency, which is minus NOK 1.9 billion, partly offset by currency losses on the placement and cash.
The rest of the net debt reconciliation, which you can see on the slide, is fairly straightforward, and without significant deviations from previous periods. In addition to the net debt shown on this slide, we have license commitments of NOK 4.8 billion, which is a slight decrease from the previous quarter. The license commitments include commitments in India of NOK 2.4 billion, NOK 2.2 billion in Pakistan, and NOK 300 million in Myanmar. Dividends. In line with the proposed communicated statement in February this year, the board of directors has declared a final dividend for 2015 of NOK 3.50 per share.
This dividend comes in addition to the dividend of NOK 4 declared by the AGM in May, and takes the total dividend for 2015 to NOK 7.50 per share, and that's an increase of 2.7%, compared to 2014. The total dividend for 2015 is in line with our ambitions to deliver a year-over-year growth in dividend. The expected payment date for the final dividend is November tenth, with record date set at October thirty-first. Moving to the outlook and financial guidance. We have decided to keep the outlook unchanged after the third quarter.
That means that we are looking into a guidance for the full year, which is the same guidance as we gave after the second quarter, which is a 1%-2% organic revenue growth. EBITDA margin are around 35%, and CapEx to sales, excluding licenses, at around 17%. With an EBITDA margin of 36.3 year to date, and a CapEx to sales ratio of 16.1% so far this year, and only 1 quarter remaining, I understand that some of you might see our outlook as somewhat conservative.
Although we see scope for a full year EBITDA margin above 35%, the maintained guidance reflects the usual uncertainty regarding handset sales in the fourth quarter, and in particular, there is uncertainty regarding both demand and supply of the iPhone 7. We launched iPhone 7 in Norway and Sweden in September, and there are still people on the waiting list, and we have just launched sales of iPhone 7 in Malaysia and Thailand. So that gives some uncertainty on our efforts to increase CapEx efficiency with lower equipment prices, leveraging from over scale towards vendors. From strong demand management, both within IT and network, as well as from more efficient spectrum management.
At the same time, we know that CapEx tend to peak towards the end of the year, and this has made us keep up the CapEx to sales guidance for this year. All in all, a strong quarter with a record-high EBITDA. I will now conclude this presentation and invite Sigve back for Q&A. Thank you.
Thank you. As usual, we start with the Q&A here from the audience. There's already questions here in the middle. Could you please state your name and company as well, please?
Thanks. Fredrik Thoresen with SEB. So, first on your capital structure, now you've improved your net debt ratio significantly to about a half of your previously at least guided cap. Have you done any considerations with regards to any potential one-time payout to shareholders and and/or how this may be impact future ordinary dividend growth? And, secondly, in light of the ongoing discussions now in the EU, with regards to the wholesale price caps, can you shed some light on the development in your wholesale prices as you're now including EU roaming in more and more of your price plans? Thank you.
Yeah. On your first comment, we don't have a history of special dividends in Telenor. I think we have stated that the proceeds from VimpelCom in this transaction will be used for general corporate purposes, including paying dividends in next month. We have a firm dividend policy, which is delivering growth year over year. The board will discuss the dividends for 2016 in their regular practice later this year, and announce at the fourth quarter. When it comes to the second question on roaming, I would say, unfortunately, on that part, regulation is not following the market. So we actually now achieve lower prices for terminating roaming in Europe than the officially stated prices.
Of course, it's very important for us to be able to reduce the cost of roaming, as we have introduced much more favorable roaming principles to our customers. So far, what we have experienced is that the market price, which we can achieve negotiating with operators, are lower than the regulated prices.
Thank you, Morten. Any further question? There, from the middle, please.
Hi, good morning. Kristoff from DNB. Just quickly, in terms of India, could you explain to us why you continue to evaluate options there? I think you mentioned earlier this year that you would make a strategic conclusion after the spectrum auction, which has now happened. If anything, could you enlighten us in terms of how you're thinking, what needs to come into place to stay in India at this level? And secondly, if you look on like-for-like basis, Norway ARPU this quarter, if we eliminate the Roam Like Home effects and just look at the increased ARPU effects from the new take-up of subscription plans, what would that effect be in posted terms? And is that the same effect we can expect year on year?
As I said many times, we will only look at options, which is value creation options. We are not in India for any strategic reasons. We are there to create value for our shareholders, and all options will be seen in the light of that. The auction has just concluded just a few weeks ago, so I cannot comment on what type of options we are looking at or what type of options or alternatives that may emerge. The only thing I can say that we would—our spectrum position is not sustainable. We have said that several times. Despite that, we are able to grow in the current market, but it's—we need to find a long-term solution. But I don't want to go more into what those solutions may be.
On the ARPU question, as I said, I'm very satisfied that Norway actually have been able to increase their ARPU with 10 NOK. And then the roaming effect is 13 NOK. So that's why you see that there's a slight decline. You also need to take into account here that Norway have implemented a new swap program on handsets. And when you previously had subsidized handsets and you had a binding for 12 months, you paid actually 4 NOK, if I recall remember right, per month.
... for that binding, a kind of binding fee. So you also need to take that into account when you look at the 10%, also 10 NOK increase. So if you take all this into account, you will actually see that there is a flattish ARPU development in Norway, which is really, really impressive knowing that the roaming effect is -13 NOK. And we now see that most of the new customers, or not the new customers, but the customers that we are migrating into the new packages, are coming on, in on price points of 349 and 399. I think you can calculate yourself what that could mean going forward in terms of ARPU increase.
Of course, we estimate here that the new price points, which will give a very, very positive, a healthy ARPU development going forward.
Thank you, Sigve. Any further questions from the audience? No, then we'll open up for the Q&A on the conference call, please.
We'll take our first question from Peter Nielsen from ABG.
Thank you very much. I'd like to stay with Norway, please, and the new handset model as you've discussed. You discussed the impact on ARPU. How about the cost side? We talk a bit about the impact on EBITDA from the new model. It may be negligible in the third quarter, but if you could give us any light on this, please. And secondly, could you just discuss and talk a bit about what is driving the strong uptake and demand you are seeing for high-speed broadband in Norway and also in Sweden, where you're doing very well, please? Thank you.
You can take the swap, and then I can take your second question was about what, what is driving the demand for fiber? Was that the question?
Yes, yes.
Yeah, yeah.
Yeah.
No, I think the—
Yes
... what is driving the demand is that the household, both in Norway and Sweden, think that fiber is for the future. And we have got the kind of roll-out machine really to work, and that's why we have a very, very, especially fiber in this quarter. And I think when this roll-out machine now is continuing in the coming quarter, our aim is now to take market share on the fiber rollout in Norway. In Sweden, it's the same. The business model in Sweden is a little bit different because the households are paying upfront some of the investments. So, and that's why we have said in Sweden, that we really wanna be aggressive on the single unit, also the villas, and to connect them to fiber.
So, I think it's demand is there, and I think our ability to deliver on demand is also there. It has taken a little bit time to get that rollout instrument to work as we planned for. But now I will say that there is full force, both in Norway and Sweden.
Morten?
On your first question, which was on the new handset program in Norway, the swap program. Just to clarify, it's a 24-month device installment program with some additional attributes like glass insurance and trade-in options. It was introduced in June. And what's different this time is that it's available through our own distribution channels, including through the web channels. So, we are distributing this through our own channels, and I think that is giving more benefits, and it's also driving of course down commissions and subsidies through the traditional third-party distribution.
If I may add, it's also very customer friendly, because you are not now into a 12-month contract, and you are free to upgrade your phone. And because of that, we see that the churn for these customers are coming down. And so I think also from a churn perspective, this, this is a very good program.
Thank you both.
In, in, in-
Sorry, we have to move on in order to get more calls in.
In terms of-
I'm moving on to the next one, please. Thank you.
We'll now take our next question from Stefan Gauffin from Nordea Bank.
Yes, a couple of questions. We can start in Norway. First of all, the CapEx spend in Norway is 10% above the level seen last year, if you look at year to date. Can you provide some split on CapEx between fiber build and 4G rollout? And what can we expect for CapEx spend in Norway for the years to come, and when are you done with 4G rollout? And then, on India, can you say what has changed with regards to the value in India? Is this a reflection of a lower value when or if you sell, or higher contractual obligations, which may not be able to be passed on to a new owner? Thank you.
I think on India, I don't want to comment more than what me and Morten already have said. It's a reassessment of the value for our business in India, and of course, that reassessment is also taking into account what market developments that we have seen lately. So other than that, I don't want to go into details. On the first question, we are now having full speed on the 4G rollout in Norway. And as you have said before, the aim here is that within next year, we will have 4G on all our 2G base stations, 7,500 base stations, if I recall it right. And we will then be significant better on 4G than our competitors are.
So, that's why you have on the mobile side, still quite high investments on 4G. But of course, when we then have finished this rollout, that part of it will come down. And then we are also now, as I said, focusing on addressing, I will say, the market share loss we have had on fiber development over the last few years. And we are therefore very happy now with what we see over the development of last quarter. The split here, I don't know if you can comment on, Morten?
The split is approximately 50/50 in the third quarter. So, I think that gives an answer. And just to underline, we anticipate to be ready with the 4G rollout by the end of next year.
Okay. Thank you, Sigve and Morten. The next caller, please.
We'll now take the next question from Roman Arbuzov from UBS.
Hello, and thank you for taking the questions. Two, please. One is on group CapEx. The group CapEx has been developing favorably, i.e., coming down throughout the year. You're saying that it may come up again in 4Q, and for good reasons. But as we look to the medium term, given that CapEx intensity has been coming down, do you still see yourself as investing quite heavily currently? And therefore, do you see scope for potentially further CapEx reductions in the medium term? So that would be very helpful. And then secondly, just on Myanmar, you've mentioned both seasonality and competition affecting the performance this quarter. Could you perhaps just give us a little bit more color on that?
What do you think it was more seasonality, given that you expect the return to sequential growth already from Q4? And perhaps as part of that answer, you could also give us an update in terms of the fourth entrance. Thank you.
I can take Myanmar, and then you can take CapEx.
Yes.
On Myanmar, yes, we expect growth to increase in the fourth quarter. And the seasonality in the third quarter is more or less as expected, because the rainy season in Myanmar is really rainy season. The country is basically under water. So there was a lot of technical, also network outages and fiber problems in that quarter. So that's as we expected, and we already see now, going into the fourth quarter, that we will see a better growth in the fourth quarter. On the competition side, we see quite aggressive now on the pricing, as I mentioned, and we also see very aggressive data pricing. However, we see that we stay competitive here.
And of course, we added almost 1 million new subscribers in the third quarter itself, and that is going to yield some revenues going forward. And also, the network presence we have now with more than 80% of the country being covered. So, you will not see the same fantastic growth figures in Myanmar as we have seen the last few quarters. And I think I have said that every quarter, that sooner or later this also will be leveling itself out a little bit. But, I would not say that the growth is over in this country. It's not matured yet. So fourth quarter, hopefully we will see some better growth coming back.
Thank you. Morten, any?
On the CapEx, I think I will just reflect on the development this year. We started the year on CapEx guiding at around 17%, after the second quarter, so we will definitely see a trend in that. But, for the midterm guiding, I'll leave that for the capital market to give, capital market state, to give you more flavor into.
I just give a little bit credit to the finance department and to Morten. I think we are getting better and better in what we call the dynamic capital allocation or the CapEx allocation. Which means that the group finance is sitting very tightly integrated in discussions with the BUs on how do we make sure that we get return on the CapEx. And I think that model is now really paying off, such that we are able to control the investments very much aligned to where the growth is coming. Just one more point on Myanmar also. I think the price reductions that we saw came, I think, in the second quarter, not in the third quarter. I haven't seen-
Thank you both. We'll move on to the next question, please.
We now take the next question from Ulrich Rathe from Jefferies.
Yeah, thank you. I have only one question, really. In the past, you sort of have quite proudly put on each, in each presentation a chart showing your mobile service revenue, organic mobile service revenue growth for the group. And obviously, this has been just 2%. I understand there's a roaming impact. I calculate this around or less than 1 percentage point. So organically, MSR is now sort of down to maybe 3%, which would still be at the very bottom end, if not the lowest, in 10 quarters. So question really is, Sigve, is the asset portfolio that you currently have to work with in Telenor, is that sufficient to produce a re-acceleration of growth? I think in the past, you've talked about growth being in the DNA of Telenor.
So do you have the right asset portfolio with increased investments, growth can come back, or is there really something more structurally needed, beyond India, obviously? And in this context, can I also sort of just sneak in one element to that question, on the asset portfolio? There has been some marginal press reports in Asia about foreign ownership issues sort of boiling up again. Is this anything serious, in either Malaysia or Thailand at this point, or do you think there is something sort of coming up again? Thank you.
On the second question, I haven't seen this issue being more visible now than it has been in the past. In Malaysia, as you know, we are 49% ownership, so we are in full compliance with the foreign ownership laws, including also the Bumiputra laws, that a certain percentage of your public shareholding need to be held by Bumiputra shareholders. In Thailand, I haven't seen this issue emerging more than what we had in the past either. So, I don't see any development on this one. However, in all these markets, we need to be relevant. So in the end of the day, we are a foreigner. That's why we are focusing so much on also being seen as a relevant part or actually growing the societies.
And that's why, actually, the vision of Telenor is empower societies. And so we need to be seen through our services that we are bringing something good to the country. And maybe the best example of that is Myanmar, where we are changing the work, health, and security standards in the countries. Where we have no corruption policies, where the way we work is different from the standard in the country. So... And this is something that we really spend time on explaining to the various stakeholders in this, in these countries. To the first question-... Yes, you are right. The growth this year has not been as we have seen previously. However, you see now that the data monetization is starting to come through in Asian markets.
14% growth in Bangladesh, 10%, 11% in Pakistan, growth in Myanmar. And what is really in Asia now hampering the growth, it's the very rough competition we have seen in Thailand and Malaysia. However, we hope that these two markets are coming back to a little bit more, what should I call it? Normalized competition. And there should be growth potential both in Malaysia and in Thailand, when you see the digital or the data appetite among a growing digital segment. And of course, in Norway, I'm quite positive that when we are through the roaming effect here, and when we continue to upsell our packages, there is a room to charge a little bit more for the data growth we see among the customers in Norway.
Still, Norway, on a medium level, is consuming less data per customer than we see in Sweden. So I don't think there should be a reason why Norway also should come back with a very positive growth element. If you combine all this together and then going into the future, I don't want to give any guidance on that. But this is also an element we will try to go a little bit more in-depth on the Capital Markets Day.
So, if I may just add, from a CFO point of view, of course, revenue growth and the continued revenue growth is important. But I also think, what we are trying to do here is to pinpoint that, value creation happens through the cash generation. And I think, what we have been able to evidence, over the last quarters is an improving, EBITDA, which is translating into cash flow. And to me, this has been very important, through the year to monitor the fact that, yes, growth is important, and we are not moving away from that, but even more important is our ability to generate, cash as such. And I'm very happy with the third quarter in that respect.
Thank you to you both. Next question, please.
We'll now take the next question from Andrew Lee from Goldman Sachs.
Yeah, good morning. First of all, I just had a question on fiber demand in Norway. You said that it's. You're going at full force now, but obviously, you'll be able to deliver faster speeds much sooner with a Vplus or G.fast technology. So just wondering how you're progressing with trials on this, and particularly with your discussions with the regulator to allow you to commercialize it without giving three years warning to your competitors and all wholesale customers. And then secondly, just to follow up on Ulrich's , but particularly on Norwegian mobile growth, as you described, Ice. net is fully up and running, Get has launched. What are your thoughts on a realistic, sustainable level of mobile service revenue growth into 2017? And can the market and your position support mid-single digit growth again in that market?
Thank you.
I can take the second one, and you can take the first one.
Good.
On the second one, yes, the competition is definitely present in Norway. We see that Ice and also Telia. It's quite aggressive. But that aggression is especially in what I will call the price-sensitive markets. It's in the prepaid segment. And overall, I see that we are not losing any shares at all in the more premium segment, and the revenue market share for ourselves, it's stable. And I think that and that's why also we have a fighting brand, Talkmore, which is down there trying to secure our fair share of that market. So having also said that, I want to give a little bit credit to our main competitor, Telia.
I don't see any different focus from them than ourselves. They are also focusing on profitability. And I also see that Ice takes steps as expected, as being a mature operator. I don't think that the competition should be an excuse for not the Norwegian market growing, and that's why I'm a little bit bullish on we are going back to revenue growth for Telenor in the Norwegian market when we are through this EU effect, the roaming effect.
Morten?
When it comes to your question on G.fast, et cetera, et cetera, which is upgrading of the ADSL, VDSL networks, there are some regulatory hurdles in Norway, which I will not go into detail on. I will say that regulation has made this very, very difficult, and I will just ask you to discuss this further with the IR. I think what we are concentrating on, with those hurdles now seen, we are very much focusing on our fiber rollout and the upgrades on the cable network. So that's the main purpose for the time being.
Thank you, Morten Sørby. Next caller, please.
We'll now take the next question from Maurice Patrick from Barclays.
Yeah, hi, guys. Yes, Maurice here from Barclays. So a couple of very quick questions. Number one, on 5G, there's been lots of noise and hype around potential launch timings for 5G. It seems a fairly consistent message from many of the operators. However, there's a lot of 4G in the 5G evolution. And just secondly, could you quantify from the handset leasing change in the quarter, and if that's likely to increase for the coming quarters? Thank you.
On your second question, if that question was about Norway, I think we had a positive EBITDA effect in Telenor Norway of approximately NOK 45 million in Q3 from the revised handset program. When it comes to 5G, I think you are right. We are still concentrating a lot on 4G and then moving people into 4G. We are started looking now into 5G, but I wouldn't expect trials in the near term future. And the commercial effects from 5G, I wouldn't expect until around 2020. That doesn't say that we are negative, we just see that the efficiencies we will be given through 5G launch is still some way into the future. But we are monitoring the development carefully.
But for all commercial purposes over the next 3-4 years, I wouldn't anticipate any efficiency gains from 5G rollouts. And just to add on that, I don't think we have any different position on this than our European peers. We are testing it out in our own network, and we are looking for the right time to commercially launch it, so... And we are all talking to the vendors on it.
Thank you. Next question, please.
We'll now take the next question from Terence Tsui from Morgan Stanley.
Hi, good morning, everyone. I've just got one question on spectrum in Thailand. We're getting some details about the quantity of spectrum and the possible reserve prices that could come into effect in 2018. I just wondered what your thoughts on those proposals are, and also give us an update on the timeline. Thank you.
Yeah. It seems like the government has decided to do an auction on the 1800 spectrum in 2018. That's at least what they are communicating. And, as you know, there will be our current spectrum of 25 MHz, plus a 25 MHz unused spectrum, meaning 50 MHz coming in and out. We don't know anything about the pricing other than the realized price in the auction. When was that? A year ago, which was around THB 45 billion, if I recall that right. So I assume that realized price will probably be the spot starting price. But, and how much they wanna add to that, that I don't know.
So it's a significant lower than the what the realized price on 900 was, which was more NOK 75 billion. So it's almost half. Then the government seems also to to want to do something on the 2.3 and the 2.6 spectrum. And there is talk that there will be some sort of beauty contest on that in in the start of next year. And of course, we will also be an interested party in looking into the the possibility to to or to consider that, if that comes out. On top of that is the 850 spectrum. There's 10 MHz, also 850, that that we are currently using, and the concession on that is also expiring in 2018.
It's a little bit unclear if the government want to put that out in an auction, or if they want to use at least part of that for the transnational railway that comes through Thailand from China. So I think that on the overall spectrum situation, it seems like it's the government wanna follow the schedule or the timeline as we have expected. And yeah, I think that's about it.
Thank you, Sigve. Moving on to the next question, please.
The next question comes from San Dhillon from Exane.
What is more of a priority for Telenor? Is it to grow revenues or to expand margins?
It's both. And let me be a little bit more-
Receive details.
Yeah, I'm coming to that. I think that we definitely have cost challenges, and I think I've said that, and I've said that several times. And that's why we are so focused on bringing down our operational costs. And we have said many times already that EBITDA should grow faster than revenues. So profitability and value creation is definitely the main focus area we have, or the main aim that we are going after. And this is also why we have now put in place several structural initiatives to yield a much more efficient use of our assets. But at the same time, we are also in markets where we think we can participate in revenue growth. And our mindset is not that the growth is over.
In Asia, we definitely see that that is a long way before data model or in Norway. We see that they should be able to create growth. So it's both. But when we meet our, or when me and Morten meet our business unit CEOs, we are talking to them about both areas. But, of course, it's easier to control the cost development, because that's something we have control over ourself. But at the same time, we are not letting forgo the revenue opportunities there.
Thank you again, Sigve. We will have time for two more callers. Could I please ask you to limit yourself to one question each? Thank you.
We'll now take our next question from Nick Lyall from Société Générale.
Hi there, it's Nick from Soc Gen. Can I just ask, on the just two very quick ones, apologies. On Denmark, your ARPU slipped again by 10% now, I think, this quarter. You said you were gonna try and make progress by end of the year. Are you having to resort to, to discuss this? I mean, the subs are down. It looks like costs are down. Have you pulled back on all marketing costs and everything else as you wind the business down? Have you, have you changed things this quarter? Thank you.
... If I start with India, I think we are, as in all operations, monitoring OpEx, and that is the case in India as well. And surprisingly, because we have claimed ourselves that India is one of the best OpEx efficient operations, they have been able to find more OpEx to cut. So that's a correct observation. I would say we have been slightly less aggressive on customer acquisition, putting more value to the high ARPU customers in India. So that that's the explanation to your question. When it comes to Denmark, we have had, as earlier stated, some issues with the business support system implementation, and we still experience some issues with that which we aim to solve during this quarter.
Of course, in addition, there are price pressure, and we have discussed that for several years now for Denmark, and you also, in Denmark, see some roaming effects. But, I don't see a major change in the Danish marketplace through the quarter.
Thank you, Morten. Final question of the day, please.
We'll now take our last question from Sunil Patel from Bank of America.
Yes, thank you for taking the question. Just on the revenues within Norway, the trend earlier this year was negative. You, I think, managed to reach parity in the quarter versus Q3 of last year. Is this a trajectory which you think will continue into Q4 and into early next year, and should be expecting low- to mid-single-digit revenue growth to come back to effectively your internet and TV business? Thank you.
I had some problems really catching the question. So,
The revenues, were we also from TV, also the bundling of TV into our packages, will that continue?
I think what we have seen in the third quarter, as we had discussed earlier, is a good uptake on fiber. We made some price changes during the spring and the summer, which will have positive impacts going forward. We also see more fiber customers taking the TV packages which we are offering. So in that respect, I think if you look into the figures, you will see a positive trend during the third quarter, and that should continue going forward.
Thank you very much for, to you both. This-
I am eagerly waiting, actually, to see you back in what? Our more strategic questions, and that's the aim we have for that day.
Thank you very much.
Thank you.