Good morning, and welcome to today's 3Q result presentation. My name is Meera Bhatia, and I will be guiding you through today's presentation. Our CEO, Jon Fredrik Baksaas, and CFO, Richard Olav, will present the financial update today. This will be followed by a Q&A session, first here from the audience, then from our online and phone participants. We will try to aim to end the session at about ten o'clock, and after that, media will have the opportunity to speak to our CEO. Fredrik, if I could ask you to come on stage?
Thank you, Meera, and good morning to all of you. It's the 3Q, 2014, and I'm pleased to report record high revenues this time and EBITDA as well for this quarter. We deliver another solid quarter in terms of subscriber growth, adding 3.4 million subscribers. We've added 13 million so far in 2014, and we're reaching close to 180 million customers in our 13 operations, now also that Myanmar is on stream. At the same time, reported revenue growth is close to 7%, and the, whereas the organic revenue growth improved to 3.5% this quarter.
It was 1.6% in Q2, and it's 2.2% for the year as a whole, or the three 1Qs. Internet For All is to the heart of our strategy. We're driving activities in all markets to enable, to stimulate, and to monetize data usage. The number of active data users in our base is now 29%, implying that there are significant growth opportunities left, growing that figure. In 3Q, we have an EBITDA of NOK 10.3 billion. This is the first time that we're above NOK 10 billion from the operating activities, and it's another record number for the group.
We have a stable EBITDA margin of 37%, and we deliver 4% organic EBITDA growth, which is slightly above the organic growth figure. As we have, as we have these kind of growth figures, we are still in need to continue to focus on profitable growth and cost efficiencies, in order to secure the solid returns also going forward. As well as looking at the operational efficiency on the group, there are also significant investments to be done, for the future here. And the successful launch of services in Myanmar is one example of this, where we are taking another long-term position.
Where we, towards the end of the quarter, reached the very exciting milestone of launching services in Myanmar, and I will get back to this a little bit later in the presentation. Moving then to Norway. In Norway, we have a very strong quarter. The growth is, as last quarter, driven by strong underlying data growth, combined with targeted upselling activities. 4G is really driving the growth in Norway now, and we are here showing growth figures on volumes, and how also the handset combination between 3G and 4G handsets is picking up. 69%, or 2.2 million of our subscribers, are now active data users. However, that means that there is still 1 million left.
We saw 64% year-over-year growth in the median data usage among our active data users. The usage growth is supported by a five percentage points increase in 4G-enabled handsets since previous quarter. And this figure is as strong as 25 percentage points compared to 3Q last year, so obviously, things are happening. 1.2 million of our subscribers now have 4G-enabled handsets versus only 415,000 a year ago. And we expect the number of 4G phones to surpass the 3G handsets by the end of the year. And what is driving this is good quality network, of course, combined with attractive handsets, but also in this attractive services, and video is now driving this.
But still, Norwegian marketplace is still only a third of what the Swedish market is on average figures, so we have still a good potential to catch. We invest to maintain our premium network position, and we have around 80% 4G population coverage as we speak. And this figure has also increased dramatically up through this year. The increased 4G network coverage also contributes to the increased data growth, of course, as people are consuming data everywhere, literally, while commuting, at summer houses, and wherever it is, and we are all part of it in particular, I guess, the people in the room.
It should also be mentioned that in fixed broadband, we also can note a customer growth. We have added 4,000 new fiber subscription this quarter, reaching a total fiber customer base of 104,000. And these growth figures, they also becomes visible in the financials from Telenor Norway. Within mobile, we saw a solid 10% growth in subscription and traffic revenues, and in the fixed segment, we are reporting stable revenues. But looking into the details, we see now that the 7% growth in internet and TV revenues is now more than offsetting the decline that we have in traditional fixed telephony. All in all, this gives us an organic growth of 6% in Telenor Norway this quarter.
This is done on the back of significant investments in high speed data networks, in particular in Norway and fiber rollout, with total CapEx estimated to above NOK 4 billion in Norway this year. For 2015, there are two elements to be aware of. Tele2 has recently terminated the national roaming agreement with Telenor Norway, and the agreement will expire first of April, 2015. The agreement has currently an annual revenue contribution of NOK 550 million. Number two, from the same date, first of April, 2015, the general termination rate will be halved to EUR 8 per minute, and it will become effective from first of April, and this is an industry decision.
To be able to continue investments to secure profitable data growth and adapt to the changes within the fixed business, we need to make sure that we still operate an efficient operation also going forward. We are working continuously on our cost efficiency agenda, both when it comes to the NOK 800 million gross cost savings ambitions for 2015, as well as the efficiency programs with medium to long-term effects. Telenor Sweden reports a quarter with 4% EBITDA growth and underlying margin improvement by one percentage point this year. Q3 was a relatively quiet quarter in terms of subscriber growth, but we saw solid pickup at the end of the quarter, fueled by the launch of the iPhone 6.
We have seen the underlying mobile service revenue growth in Telenor Sweden slowing somewhat after several strong quarters. But we believe that this will pick up again when iPhone 6 generation really plows into the customer stock. Sweden is a country with high data usage and very advanced users. We have a solid data network, which we will improve even more going forward, and we need to work hard to improve our data monetization in Sweden going forward. In Denmark, the positive subscriber momentum continues with 41,000 new customers in Q3, and we have added 100,000 mobile subscribers so far this year. This has, however, not been enough to stabilize subscription and traffic revenues, which is down minus 4% year-on-year, as the ARPU is still under pressure in a very competitive market.
With intense market competition, Telenor Denmark will have to continue to work on re-reducing the cost base. Before leaving the Nordic region, I would also like to mention our broadcast division, which continues to deliver a stable and solid performance, adjusted for the disposal of Conax, which took place early this year. Now, moving to our Central and Eastern European operations. In Hungary, we are very pleased to see revenue growth plus 3% this quarter and an ARPU improving year-on-year. However, seeing the EBITDA margin still negatively impacted by the telecom tax as much as nine percentage points in this quarter. Telenor Hungary secured 800 MHz spectrum in the recent auction, and we are now in position to improve 4G coverage significantly on a country base in the coming years.
But the current spectrum fees and telecom tax regime still pose significant challenges to the industry, and since we are long-term investors, and we need a predictable and stable regulatory framework, and as such, we believe that the proposed new tax plans on internet consumption will impact both the industry and users negatively. We completed the acquisition of Globul, as you remember, in August 2013. So far, the performance of the operations have been according to plan. The network swap is progressing well with encouraging data traffic growth from the swapped sites. Around 40% of the swap is now completed, with expected completion of the project in the first half of 2015.
Total revenues are still declining, but this is largely due to lower handset sales and roaming, and we have seen a strong margin development in the operation in the period that we've kept going in Bulgaria. In Montenegro and Serbia, we still see revenues being under pressure and a seasonal improvement in subscriber figures. The highlight in Serbia this quarter was the launch of our first fully online bank, Telenor Banka. It will be interesting to follow how we can combine go-to-market from the telecom side as well as from the financial services side. Before moving to Asia, I want to touch briefly on VimpelCom. VimpelCom is seeing very tough times, in particular, seeing the depreciation of both the ruble and the hryvnia in these days.
VimpelCom reported some promising trends in operations in Russia, in particular, at the end of second quarter. And we very much want to see these continue into 3Q, and we'll have to wait for VimpelCom reports to get our hands around that issue. Moving to Asia, and I'm starting in Thailand. The economic and competitive environment in Thailand has been a key concern for us this year, and Dtac's Q3 result clearly shows the impact of the aggressive competition with a 4% decline in service revenues and a subscriber loss of 259,000. Dtac has been a key revenue growth driver for the group, but this quarter, Dtac was not able to offset the voice decline with growth in data revenues, and this is a development that we must change.
On the positive side, we see no slowdown in demand for mobile data and data service and the smartphone penetration is still growing by 10 percentage point year-over-year and has now reached around 40%. We still see a lower regulatory cost supporting a margin improvement year-over-year, although some of these benefits are, for the time being, offset by increased market spending. We are strong believers in the Thai telecom market longer term, but I also believe that there is room to improve our own execution in the current market environment. And the new management is working hard on this with both market activities and organizational changes towards a more cluster-based management model, similar to other operations in Asia, and in also improving our network position by stepping up the investments to reach a better quality network.
In Malaysia, Digi continues to deliver data-driven revenue growth in a competitive environment. Revenues increased 3% year-on-year, driven by stronger service revenues and smartphone sales. We still expect revenue growth to 4%-6% from Digi in 2014, while keeping the EBITDA margin stable at around 45% year-on-year. Digi has been running targeted mobile and internet campaigns and promoting affordable smartphones bundles, supporting a strong subscriber intake of above 440,000 new subscribers. The new subscribers will support Digi's performance into the 4Q, of course. Grameenphone added 1.1 million new subscribers in Q3 and passed the 50 million subscriber mark. This is an enormously big figure compared to what we were thinking about back in mid-1990s when we started in Bangladesh.
But the vision of getting the handset and the phone into the pockets of everyone stands as strong as before, and expressed through our Internet For All strategy. The organic service revenue growth was 3% in Q3, as the 9% growth in subscriber base was almost offset by a 7% ARPU decline. The ARPU decline follows continued intense competition, but also dilutive effects of subscriber growth in lower revenue generating segments. It also reduced the usage following extreme weather to a certain extent in parts of the country in this 3Q. Despite this, although the organic revenue growth declined, Grameenphone reported a solid EBITDA margin of 54%, which is a small improvement on one percentage point year-on-year.
Moving then to India, we continued to see solid growth also in 3Q, with 1.8 million new subscribers and 39% organic revenue growth for the quarter. Almost 20% of our subscriber base in India is now active data users. We're improving our market position quarter by quarter by taking significantly more than our fair share of the total subscriber growth in the circles where we are present. In our six operational circles, our subscriber market share is now 10.5%, and a revenue market share of 6.2%. We are continuing to improve population coverage within our circles by redeploying equipment from circles that we exited in 2012.
The redeployment program comprises around 5,000 sites, of which we took a big leap this quarter by launching 3,100 new sites in these three months only. This means that we have deployed 4,400 new sites so far this year, and by that, increasing the population coverage in our six circles from 42 to around 50.... Although, data consumption is already contributing to the ARPU growth and the site expansion increases our footprint to turn India into a profitable business, we really have to make sure, going forward, that we are even better at monetizing this growth potential and align revenue growth with network investments. The big excitement this quarter is the launch in Myanmar.
This is a very important event for us as we launched services in Mandalay, 27th September, offering both 2G and 3G services. After just four days of service in one city, we had almost 300,000 subscribers, which indicates an enormous pent-up demand for affordable mobile services in this country. Later on, we have launched services in Naypyidaw and Yangon, and last Sunday, we passed more than one million subscribers. We passed the one million subscriber mark, and even growing beyond that. As we speak, we have close to 2 million new subscribers over this very short period of time. After the launch in Yangon, we now have around 16,000 points of sales and more than 500 network sites up and running. The service launch in the three major cities has gone according to plan.
However, we have also had experience on capacity issues in peak hours driven by this enormous interest of this new service offering. However, access to land and site permissions remains an issue for the network rollout speed, and this was also flagged when we entered the country, and it has really proved also to be a reality. And I have to give great recognition to the team and our colleagues and partners in Myanmar, to realize this launch in the way that they have done. The side effect of this is that they have probably also have a lot of fun during the launch phase. When it comes to the financial targets, we continue to expect EBITDA breakeven within the three years, and then accumulated losses of $1 billion, including the license fee, before breakeven.
Now, to conclude, the 3Q presentation. This time, we have delivered a quarter with strong operating performance, with record high revenues, EBITDA, and operating cash flows. Telenor Group's strategic direction is focused on profitable data growth. To capture this growth and to monetize on it, we have to continue our efforts on stimulating demand, while also making sure that we have relevant offerings with healthy price structures, as well as making the necessary investments in data-enabled networks. As Richard will come back to in his presentation, the cash flow ambition of NOK 28-30 billion in 2015 comes out to be too ambitious due to timing issues, headwinds in some markets, and opportunities to invest in profitable growth. To conclude, the 3Q results demonstrates the Telenor Group's ability to move forward.
We're in good shape, and we expect healthy underlying trends to continue. With that, I deliver to Richard to continue on the financials. Thank you.
Thank you, Fredrik, and good morning from me as well. I will then dive right into the revenues. We have record revenues this quarter, NOK 1.7 billion improved revenues from 3Q last year. That is a revenue growth of 6.7% reported. We are helped by the currencies. Norwegian kroner has weakened against particularly the Asian currencies, so that explains approximately 2.2 percentage points of the 6.7. And then we have done some good acquisitions in Bulgaria, and also the fixed network from Tele2 in Sweden. And those acquisitions explains approximately 1% when you net out the effect of the sale of Conax. So excluding currency and acquisitions and divestitures, we're back to an organic growth of 3.5%.
As you see from this slide, on the right side, it's a breakdown of the 3.5%. And most importantly, our mobile service revenues continue to grow 2%, driven mainly from Norway and India, this quarter. We see device sales are also picking up year-on-year, see strong device sales at the end of the quarter, also with the new iPhones. Fixed is showing positive growth of 0.2%, driven by the investments in Sweden and strong internet and TV consumption in Norway. For other units, we see a strong growth of 0.4% that comes from our machine-to-machine business, our international carrier business, TGS, and also the maritime communication business is behind that growth.
As Fredrik mentioned, we're reporting now 3.5% organic revenue growth, which is well above what we delivered in the first and second quarter. But the main explanation why we're reporting a higher growth is that we don't have a negative, significant negative interconnect effect from Thailand this quarter. That was around 1.5% in second quarter, and that explains the main difference between second and 3Q when it comes to growth. As you see here, it's only negative 0.1. So but all in all, good growth trends continuing, Norway growing really well, while we're struggling on the growth side in Thailand as the two main headlines. And this is then resulting in also a solid growth in EBITDA. Telenor, over the years now, have had good operating leverage.
We have been able, due to good and systematic cost programs, to grow EBITDA faster than we're growing the top line, and that's also the case in this quarter, 3.5% organic revenue growth, resulting in 4% organic growth in EBITDA. We're reporting now NOK 10.3 billion in EBITDA, which is up from NOK 9.6 billion similar quarter last year. You see the main units behind this growth is Norway and Dtac. Dtac, clearly lower revenues, but a lot of savings on the regulatory cost side by moving from a concession to a license regime. Solid performance in most of the other units, contributing NOK 280 million, mainly due to good execution on the cost program, on the back of a small, small growth also in other units.
While the two new units, Globul and Myanmar, they net each other out on EBITDA. EBITDA growth, a little bit stronger from Globul than expected, and EBITDA losses from Myanmar, more or less as expected. Then to the CapEx. CapEx this quarter is slightly above from similar quarter last year, but still at around 14% of sales. And the breakdown you see at the right, about 25% of the CapEx is going into Norwegian network on LTE deployment and fiber, which we are now monetizing quite successfully this quarter. And then you see Asia now with Dtac, Digi, and Pakistan, investing in internet capacity to connect unconnected customers and give more capacity to the on the back of the strong data demand.
Those are the main drivers behind the CapEx this quarter. So, based on the strong development in the EBITDA and a rather stable CapEx, we see an operating cash flow of NOK 6.3 billion, which is close to NOK 0.5 billion up from the similar period last year. And you also see the main drivers here on the right-hand side. Here, it's not taken by unit, but it's taken by the various accounts in our P&L. And you see the main driver is, of course, the gross profit, meaning that it's revenue growth and good control of the cost of goods sold. And also here we have some currency effects, in all fairness, but that contributes close to NOK 800 million. OpEx is increasing NOK 146 million.
That's mainly related to new sites in India, the 3,000 sites Fredrik talked about. Those comes in with rent cost and energy cost before we can fill them up with revenues. CapEx side, excluding Globul and Myanmar, is actually a small reduction of NOK 152 million. I mentioned CapEx was slightly up, but that's due to CapEx now in Globul on the network swap and Myanmar. We invested approximately NOK 250 million in Myanmar this quarter on OpEx and CapEx, in line with the plans. So this combined picture, even though we have two new units that now consume CapEx, still the underlying cash flow is up by NOK 0.5 billion.
So that is the main, with Fredrik's, very comprehensive walk-through of the various performance in the various units, and this, underlying financial, description, is the main explanation on the consolidated units. But I also want this quarter to take you through the associated companies, because there are some important, things to go through there. And we have a negative contribution from associated, with NOK 300 million, this quarter. And there are three main investments in the associate, line, that's VimpelCom, it's the online classified, we have with, Schibsted, the joint venture, and, Amedia, the, media house that we own together with the Central Labor, Organization in Norway.
VimpelCom, like Frederick said, is facing tough time, especially now with the depreciation of the Russian ruble and the Ukrainian hryvnia, and tough competition in Russia. So you're only getting NOK 200 million in from VimpelCom this quarter. That is actually the second quarter results from VimpelCom, because they're lagging one quarter. On the online classified, that is, going as planned, somewhat better, I would say, when we look at the KPIs, in key markets, together with Schibsted, and spending more or less as we had planned for. But, it's significant. It's NOK 238 million, largely in marketing expenditures that we're investing on our part into the, into the joint venture, this quarter.
And finally, Amedia, the media house, is facing tough times, especially on advertising revenues, and they have impaired some of their book values, and that goes straight into our results as well. So that's the storyline on our consolidated entities and associated entities. So, I don't now intend to go through the details of the net income, but just point to depreciation and amortization. As you see, that one is up by approximately NOK 500 million, and that's due to that we're writing off the old network in Globul, and we're now swapping into a new network. There is nothing particular in net financials, taxes, or minorities this quarter, so we end up with a net income to Telenor of NOK 2.6 billion for this quarter. Then moving over to the balance sheet.
We have a very strong balance sheet, probably one of the strongest in the telecom industry. And this quarter, we can continue to say we have that statement. We have reduced our debt by approximately NOK 4 billion this quarter, from NOK 44 billion to NOK 40 billion. And the net EBITDA ratio is stable at 1x. We have a run rate now on EBITDA around NOK 40 billion. You saw the EBITDA level of 10.3 in the 3Q and a debt around 40. So we have the same debt level as we have in EBITDA.
There's either no need to go through the detailed reconciliation of the net debt change from second quarter to 3Q, but just point out that we have paid NOK 1 billion to the Norwegian government to buy back shares from them, based on the share program that was executed in 2013. So the Norwegian state is keeping their shareholding stable in Telenor. Other than that, it's quite a normal trends on the debt and also good progress on some working capital items that improves the net debt. Then moving on to the outlook for 2014 and the trends we see into 2015. Let's start with the outlook for this year.
We maintain our outlook, based on the results now in the 3Q and what we see of trends into the 4Q. Let me take them one by one. Organic revenue growth, the guiding is low single digit. Year to date, we are at 2.2%, and we don't have the interconnect effect from Thailand also in the 4Q, so we should be in good shape to come in on low single digit organic revenue growth. EBITDA margin, we're guiding above 2013 level. Year to date, we are at 36.3, while we ended fiscal year 2013 at 34.5. So we're almost two percentage points ahead year to date.
Bear in mind, 4Q is always weaker because we have a lot of handset sales, and now, particularly with iPhone 6 coming in, will dilute the margin in the 4Q. So it will in all likelihood be lower than 36.3, but it will be significantly better than 34.5 last year. So I think we guide above 2013 level with good confidence. On the CapEx to sales, we are now year to date at 13.5. Last year ended at 14.1, and we're guiding 14-15, and typically we have quite higher CapEx levels also in the 4Q, so I think that's a prudent range. So we see no need to change the guidance for 2014.
Then moving into the trends for 2015. Let me first start with what we can control the best, and that is our cost. We have laid out a cost target for 2013, 2014, and 2015 to save NOK 5 billion gross. We're doing well on that target, and we have good optimism that we should realize that target within 2015. The two biggest mobile units we have listed there, also Norway being fixed and illustrated their kind of path to contributing to the NOK 5 billion. Norway, we had a cost program of NOK 2 billion, and we executed very well in 2013, and we are on the way to closing also the ambition for 2014.
And then we have an ambition of NOK 800 million next year, and we're filling up the pipeline there day by day, and we are almost half filling up that pipeline, and this is quite normal for this time of the year. So we have a clear ambition to close this and deliver on the cost program in Norway. Then on Thailand, yes, we have headwinds on the top line due to macro and tough competition, but we are delivering ahead of the regulatory cost savings curve that we laid out when we shifted from concession to license. And as we visualize here, we are now down to 22% regulatory cost as percentage of service revenues, which is down 10 percentage points. So that's going very well in Thailand.
Also the other units could mention Digi and Sweden as two prime examples, but across the group, we are delivering quite well on our cost agenda on NOK 5 billion. Then moving on to 2015. We, at the Capital Markets Day in 2012, we set out an ambition to deliver an operating cash flow of NOK 28 billion-NOK 30 billion. And as you see from the curves, the good trends on EBITDA, top line growth, good cost control resulting in EBITDA growth, we expect that to continue. However, when we now look into 2015, we see that the NOK 28 billion-NOK 30 billion target is too ambitious. And there are three reasons that I will take you through that mainly explains this.
I will take them one by one, and one of them is more of a shift, another one is clearly performance driven and bad news, and the third one, actually, I would claim, is good news. Let's start with the satellite launch. We had planned to launch Thor 7 4Q this year. That will be postponed into 1Q next year. That's a CapEx shift of NOK 1.5 billion from 2014 to 2015. Secondly, which is more performance related, is that we now see a revenue decline in Thailand in 2014 and limited visibility on when this will turn in the future. We still have good long-term growth prospect for our subsidiary in DTAC.
But when we were on a path in DTAC, growing our revenues in 2012 and 2013, around 10% service revenues, and this year we will have negative service revenues for our largest mobile operation and the key growth engine of the group the last couple of years. When that shifts as abruptly as it done in 2014, that has an impact that I'm not going to quantify in detail for you now, but it's clearly bigger than the satellite impact into 2015, unless the trends turns remarkably quick. And of course, we also expected Denmark to stabilize and do better in 2015. But based on the market trends there now, on the ARPU, it's very hard to see that 2015 should be a remarkable up-tick in operating cash flow also from Denmark.
Of these, Thailand is, of course, the main, the main one. So to turn the trends in Thailand and Denmark is our outpost performance to continue to grow our cash flow longer term. The third one, which I would claim is actually good news, is what Fredrik also alluded to, is that we are now in the beginning of the S-curve of picking up the data customers in Asia. Only 29% of the Telenor customer base have access to internet, and that growth is happening now. We are in the beginning of the S-curve. And what is driving the growth? Yes, there are tremendous new services that the people would like to connect to in Asia. The device prices have more or less collapsed. You can buy a very good smartphone now below $50 in Asia.
And thirdly, spectrum has become available to drive data services in many of our markets going forward, and we expect more to come. It would not be prudent of us not to catch up on that opportunity that we now see, particularly in Asia. Having said that, that does not mean that we'll go on an investment frenzy next year. We will apply all the tools we have in the Telenor toolbox, working granular on the investments, phasing the investments based on pickup and profitability, using new operating models on sharing and how we work with partners more intelligently to make this investment utmost profitable. And we see a big opportunity longer term to take part in this growth.
However, we are in the middle of this process now with our business unit to lay out in detail what we're going to invest and how we're going to invest it. That's a process we will end by the end of this year. We'll discuss it with our board and anchor it with our board, and we'll come back to the capital markets and present a guiding for 2015 cash flow in February. Then I want to end, going back to the quarter and just sum up the quarter, before we take the Q&A. We have all-time high revenues, EBITDA, and operating cash flow based on the solid performance. Norway, really a good example, to follow, on how to monetize increased data usage. 10% mobile service revenue growth is sticking out.
Our weak spot is, of course, Thailand, due to macro and intensified competition, negative service revenue growth. We have to turn that around with the measures that Fredrik mentioned. And of course, our big pride this quarter is that we have successfully launched in Myanmar, and that is really something that we are proud of as a group.
Thank you, Richard. Could I ask Fredrik, please, back on stage? We will open up for a Q&A session now, first from the audience, and then from our phone participants. Any questions from the audience? There in the back row, please.
Yeah, hi, Chris Roth from DNB. Congratulations on the good numbers. A few questions with respect to Asia. On Thailand, you said there was room to improve your own execution. I was wondering if you could elaborate on that, please. Second, once the migration of subscribers across the operator universe is migrated to the license-based network, do you expect that price competition will ease off, and what extent do you expect that the 7 percentage points in terms of further regulatory cost savings can be translated into further EBITDA margin increases? And for India, I was wondering whether the increase in growth and data usage requires additional CapEx with respect to deployment of more advanced data services? Thank you.
Well, that was important questions to the core of it, really. In Thailand, I think we have to recognize that we were a bit too optimistic last year when we started the migration to the license regime. And it proved that our network was not solid enough on the parameter of being seamless when we started on 2014. And the quality network that we had in 2014 did not meet the customer requirements sufficiently well in the first—we saw that towards the end of the 1Q. And in the second quarter, we saw it even more clearly.
And we took actions on that in order to improve and get rid of the pockets that we had on the network in Bangkok in particular. And that has been done more or less now in the 3Q, but will continue also slightly into 4Q. And then we will take that, those effort gradually into the other cities of of Thailand as well, and pledging to our customers in in the Thai market, that we will have a a best-performing data network back in shape within March next year. So that is a kind of recognition that we were too optimistic on what was happening in the license or the migrations from the concession regime to license regime last year. The second question was on.
On the regulatory cost savings in Thailand.
Yeah, then you can take that one.
Okay. Thank you. Yeah, no, we see good progress on migrating customers from the concession to the license regime, and we see no reason why that should not continue longer term. The more worrying trend is the really tough competition and almost unhealthy competition, I would say, both on voice and data in the Thai market. That puts more a question mark on the margin development in the short to medium term.
If you reflect back to what happens in all the Scandinavian countries when we've taken this, the change to data, we've seen a bit of some fluctuations on how this transition has taken on. I think Thailand, given the intensity on competition coming from the change from concession to license, basically, will have a period of actions from the players that the players cumulatively need to learn sort of the transition mechanism to data pricing. Because clearly these markets are going to go through the data, the change from voice to SMS and become data-centric. The third question was about India and CapEx. Under the present spectrum situation, we don't expect new investments at existing spectrum with existing services.
Investments, as we are right now, is to grow the footprint of our existing network with existing technologies. The long-term question, though, is highly relevant, and that is the future spectrum situation in India is under constant pressure from all industry players because the Indian government has not made available all commercial spectrum, which is there. And in the upcoming auction next year, TRAI is now coming up with new suggestions and proposals also to include new spectrum amounts, and we clearly wish that very welcome, as do other industry players in India, for that matter.
Thank you. Any further questions from the audience? No questions from the audience. I will take one online question just coming in from Renaissance Capital, on VimpelCom. Do you plan to convert your preferred shares in VimpelCom as the price of the stock is now in its low level?
Well, that question has been there for quite a while. We still have a good period of making a decision on the pref shares, so I have no further comments to that right now. I think the most important thing is that VimpelCom basically concentrate on operational parameters, concentrate on closing the announced deal in Algeria, and take the benefit that comes from the financial restructuring that VimpelCom has done this year, including the effects of the deal from Algeria.
Thank you. I will take one more online question-
Mm-hmm.
From Jadara Capital. The question is: "Based on what you have seen in Thailand and Malaysia in terms of data, how do the ARPU and profitability per data subscriber compare to a voice-only subscriber?
I doubt I'm capable of take the details on that, but. And it goes back to the previous questions that we had, namely, how the industry managed to capture the monetization side of of the data phase in this industry. and there are good industry industry examples, and there are weak industry examples, and there are not so good industry examples. Right now both United States and Scandinavia, for that matter, are showing very good prospects on how to monetize the data part of or the data face in this industry. And I I reckon that also other markets will test, learn, and develop.
And since there are so heavy investments needed to realize this good connectivity, then these investments needs to be associated also with the necessary profitability, else they won't happen. And this, this combination of good quality networks, handsets with good functionality and good user interface, associated with attractive services, that is the ecosystem at play. And clearly, the Norwegian market is the best market within the Telenor Group for the time being, how that is to be done.
Thank you, Fredrik. I will now open up to the conference call participants, if the operator will start the calls.
Thank you. To ask a question over the phone, please press star one on your telephone keypad. We have our first question from James Britton. Please go ahead.
Hi, thanks. Good morning. James Britton from I've got a few questions about the strong performance in Norway. Firstly, you mentioned median data usage in the slides. I just wondered if you could clarify what average data usage is, and also perhaps give some comments on why it's so much lower than the Swedish market. And then, could you just also say how many customers have moved across to the new pricing structure you introduced in the second quarter, and how important that new - that those pricing changes have been to accelerate the growth?
Finally, on profitability, could you just give us some explanations as to why there hasn't been more operating leverage impacts through to your margins, particularly when you've got some good efficiency initiatives going through in Norway as well? Thank you.
Why are Norwegian customers lower than Swedes? We don't like to be lower than Swedes in this country, so but I have an explanation, and that is that the Swedish market has always been more intensive on capacity pricing. And this is something that came from the fixed line deployment back ten years ago. So the competitive criterias between the players have been capacity oriented more than so in this country, where coverage have been more the issue. That's one explanation. And you can in a way add that also some interesting applications have also seen its light in daylight in Sweden, plowing into also global services. So that might be another.
But one thing is for sure, we in this country, we are technology savvy to the extent that we are curious on new technologies. And we see now an explosion in this usage as we record close to 70% change in or incremental in data usage over the mobile phone. Richard?
Yeah. Average usage in Norway is 1.2 GB per subscriber. Compare that to Sweden, that's, in Sweden, it's 3.6 GB. Why we're not so interested in following the average is really it's the median that will move our revenues. On the average, you have a lot of large screen users and heavy users that you probably need to migrate to other price plans over time. So it's really the median that is the key for us to track. When it comes to the OpEx, yes, correctly, James, that the margin in Norway could have been better. But we are also investing now on the OpEx side on long-term transformation program, in particular, the fixed value chain program we embarked upon with a partner.
That has OpEx cost in the beginning, but it's a very strategic program for Norway to deliver a much more efficient fixed value chain over time.
Thank you. Next question, please.
Um-
I'm sorry, we have to move on to the next caller.
Our next question comes from Ulrich Rathe. Please go ahead.
Yeah, thanks very much. I have three hopefully short questions. The first one ties into the last answer, which you said, you mentioned this transformation with Tata there. Again, could you just give a bit more color where this is aiming? What ultimately is the attempt there? The second question is, you made several references to better monetization of fiber in Norway. I was wondering, given that you don't sort of really report much on the fiber separately, whether you could underpin this with some KPIs or financial data. And my last question is, you made much of this scrapping of the NOK 28 billion-NOK 30 billion operating cash flow guidance.
Now with the consensus market expectations, at least from the sales side, is already significantly below that number. I think it's around sort of 24-25. So I was just wondering, when you talk about this so much and put so much emphasis on this in the presentation, is this now because... Really, you want to explain what's going on internally in the company and at that? Or have you actually looked at where the market is, and you felt that the market needs to think about this more carefully?
So in other words, is the emphasis that you're giving to this really related to what you are seeing in terms of market expectations, or is it more internally focused and with reference to your earlier plans, and then you feel the need to explain this? Thank you.
Yeah, thank you for your questions. As for the transformation issues in Norway, to the first part of it. The transformation here, we are sitting on a fixed value chain in Norway, which clearly have both legacy and very long history. And what we have embarked upon with Accenture as a partner in this space, Tata and Accenture, we have taken on the ambition of completely renewing how we're doing the customer handling, all the customer engagement processes and all the processes between the customer side and the network side, with the clear ambition of reducing the OpEx side longer term.
And this was one of the weakest points that we had in our A.T. Kearney benchmarks, on the cost side as well, for several years, and we are really addressing that in these days, right now. As for metrics on fiber, the fiber calculations is, this, you need to understand a bit of the geography in this country, before you, sort of address the question. The country is long stretched. It has, people are living very scattered. The, what is then, commercially, feasible to fiber and to cable, has certain limitations.
We consider that the present situation is more so that out of 2.5 million households, maybe 1.5-1.7 million of them, of these households, will be capable of receiving commercially either cable or fiber. And it's within that group of, that segment of households that we're rolling fiber and have reached the status of 100,000+ connections right now. And here in this space, the electricity companies are the main competitor. Knowing also then that the cable market is roughly divided 50/50 between ourselves and Get. As to your last question there on cash flows.
When we established this three years ago, we really had, we, we really saw a development curve where CapEx could normalize, and really take also the, the cash flow figure up to the NOK 28 billion-NOK 30 billion level. However, the data phase comes more rapidly in all markets, and these investments needs to be done in order to catch the, the, growth of the S-curve. And you're right in the fact that market, evaluations of this has been lower than our own estimates, which is, which was an ambition three years ago when we made it.
We thought it's prudent to describe the changes that has come in, and then also pointing to the underlying strong growth parameters that we have had with us, both this quarters and previous quarters. It's clearly our ambition to grow on both top line, EBITDA and net cash flow. There are elements that later on will take this up when the satellite is done, and we can reach a more normalized situation in the data phase when it comes to investments.
Thank you. Next question, please.
May I follow up on...
Sorry, could I kindly ask you to limit yourself to one question so we get more callers? Thank you. Next question, please.
Our next question comes from Peter Nielsen. Please go ahead.
Thank you. I'll just have a question on Denmark, then, please. You still talk of the market as being challenging, but you still, frankly, seem to have sort of moderated your comments somewhat, and I think the numbers would indicate that perhaps you've turned a corner in Denmark. Is that the way you see it? And also, when you talk about reducing cost and the good momentum you have on the subscriber trends, will this make you perhaps reconsider your fairly aggressive handset subsidy strategy, which you've sort of carried out this year? And just thirdly, you've obviously won some major public contracts this year.
You haven't really talked about it, but are you prepared to tell us how much of a boost to revenues you expect from the contracts you won within the last three months? Thank you.
Well, these were questions related to Denmark asked by a person with a clearly Danish accent, so I'll try to be as precise as I can. Have we turned the corner? Well, it might be that we have been at the bottom at least, so let's hope that that is the case, and that we now are in a better shape when it comes to the go-to-market initiatives. We have a good quality network at the base of this, after we combined our networks in a network sharing agreement with Telia. So there should be no excuse on the network side.
It's then on the service side, it's how we package our services, and it's how, it's how we go to market that really is at stake here, and we're doing obviously a better 3Q than we've done for quite a period of time in Denmark. On the corporate customers, I don't think I will be detailed on those, but I'll say the following: Some of the corporate contracts in Denmark are extremely competitive in the structure, as they are in Norway, for that matter. And that means that we are winning some, and we are losing some, to the extent that our main competitor, TDC, is able to keep contracts when they are up for renewal.
But we are happy with the ones that we've taken, and it creates, of course, volumes to a good quality network already. So it's good contributions. I think was that covered it, I think? I think so.
Yeah.
Yeah.
Next question, please.
Coming up.
Our next question comes from Stefan Gauffin. Please go ahead.
Yes, hello. First of all, in the Swedish market, Telia is planning to launch convergence products. I would just like to hear your view on the need for convergence products, both in Sweden and also for Norway. Secondly, just regarding the increased amount of the dispute in Thailand, if you just could mention your view, your risk assessment relating to this, and if there are any provisions taken. Thank you.
The need for convergent products and services. There are – you could say that the way these markets mature and develop, one thing is for sure, the bundles that the customers can get from this industry are constantly becoming more rich. Despite the enormous growth of volumes that the market generally takes from our systems, when the economy basically goes digital, also create growth from us, but in the proportion of a much bigger growth factor from the consumer consumption compared to the price development. But seeing the combination of this in Norway right now, I think we are pretty well on a good trend.
Convergence, so if you're then thinking of sort of bringing entertainment products into this package as well as the next layer, then I think the industry needs to think about the complexity that happens on the IT side, and also the discount expectations that generally will come from the consumer side when that step is taken. So we're a little bit reluctant to sort of embrace the idea, but rather see a kind of evolution into growing the bundle, the quality, and the content of the bundle as such over time, more in an evolutionary way. Maybe you, Richard, can take the dispute in Thailand?
Yeah. No, it's increased now up to NOK 50 billion from TOT, and it's nothing new other than TOT has added three more years to the claim. We still are of the strong opinion that the claim is unmerited, and we have set no provision for it.
Thank you.
Thank you. Next question, please. Our next question comes from San Dhillon. Please go ahead.
Hi, guys. Just a question, in Thailand. How has the relationship been with the military government throughout the year, and has there been any change to the working conditions of DTAC? Thank you.
Working condition with, the new government, as we see it from the industry, is better. It's becoming better to the extent that also, knowledge, and competencies about, how this market operates is growing. So I think the, the dialogue is making, this, happen, and developing in the right, direction.
Next question, please.
Okay. Cheers, guys. Thanks.
Our next question comes from Thomas Heath. Please go ahead.
Thank you. Thomas Heath here with Handelsbanken. So a question on Norway, please, if you could tell us a little bit about the sub-segments. So how is the consumer doing relative to corporate and perhaps your sub-brands versus the main Telenor brand? And then, if we look a little further on into, to, Telenor Norway, do you expect similar trends in, particularly in the corporate or consumer segments, or should we expect a, a downtrading eventually in the corporate side? Thank you.
Well, these are questions of evaluations rather more than specifics. I think that Telenor Norway has a historically very strong relationship to the corporate side of the communication market in Norway. And the way the competition's parameters in Norway is quality, networks, coverage, and of course, also and capacities and pricing. And to strike that balance, I think we are reasonably well at striking that balance, actually, on how we compete in the corporate sector segment as well. But the price revisions that we did autumn 2013, changing the pricing structure, but also then at the end of 1Q this year, has clearly benefited the Telenor figures later this year.
As we have been able to create a better link with the growing demand of data downloads back into the pricing structures. And the combination then of good services, the new handsets that are now coming this autumn, as well as the good quality network, where we have reached 80% penetration of where people live when it comes to 4G coverage, really drives this. So we're where we are right now, we believe that we can develop upon this trend of higher usage from where we are right now as well.
Thank you. Next question, please.
Our next question comes from Jacob Bluestone. Please go ahead.
Hi there, Jacob Bluestone here. Question on Norwegian mobile as well. You obviously pointed to the strong growth coming through as a result of customers moving to LTE. Could you possibly comment on what is the typical ARPU uplift you get as customers move from 3G to 4G? Thanks.
Richard, do you have that on top of your head?
I don't... It's not the way we do the pricing in Norway. We don't price on technology. We price more on usage, on speed. And what's typically happen is that when a customer shifts his handset from 3G to 4G, he will need a higher data package, both on speed and volume. And then our systems will and people will recommend him to typically take a higher bundle than he had before. And what we see now, we're selling more than 50% of our new sales are in bundles NOK 299 and higher, and that's across all brands. So that's the main main driver. And you see see that compared to the normal consumer ARPU is better.
Thank you. Next question, please.
Yes, I guess I was thinking the-
Sorry. Next question, please.
Oh, I was just gonna... Oh, never mind.
Our next question comes from Maurice Patrick. Please go ahead.
Yeah, hi, it's yeah, Maurice from Barclays. So a quick question on the Indian operations. Obviously, we saw the free cash flow losses increasing as you redeployed the sites. Perhaps just some how are gross margins trending in the market, so we can get a sense of how you'll exit the year going into 2015 as we finish the network rollout, would be helpful. Thank you.
Thank you, Maurice. As you know, Q3 in India is typically a quarter with low, little bit low seasonality, while the 4Q is of high seasonality. So what is now happening in India on the pricing side in the 4Q and our consumer uptake in the 4Q to drive the gross margin into 2015 is, of course, very critical. We see good trends on the new sites that we have deployed. But the Indian market is very competitive, 100% prepaid short term. And how we're going to drive up ARPUs and gross margins in 4Q is a key question also for us, and we monitor this on a daily basis now.
Okay, thanks, guys.
Thank you. Next question, please.
Our next question comes from Eric Perez. Please go ahead.
Thank you. On Norway, on the topic of the nicely increasing ARPU there, has there been a corresponding increase in the subscriber acquisition cost over the past year? And could you tell us what the SAC and or what the subsidy is in absolute terms, and how it has changed over the year? And secondly, just continuing on India, I think that on operational free cash flow, you used to discuss sort of positive levels for next year, over a few NOK 100 million. I think now, when you're running at these EBITDA losses of more than NOK 100 million, that looks slightly optimistic, perhaps. Could you help us out a little bit with the cash flow assumptions for next year in India? And what is the incremental margin, EBITDA margin there as revenues grow, please? Thank you.
Well, starting with Norway, no, there is no big change on the subsidies. The SMC cost compared the total OpEx is going slightly down. So, we have not been fueling the market with more subsidies, and we have not increased prices either. I mean, the revenue growth is coming purely from increased need for data consumption from our customers. On the Indian side, like you said, we clearly have an ambition to turn India into profits next year. After the 3Q, we're very proud of being able to redeploy sites as fast as we could, and we see good revenue uptake on the sites. We also see an increased ARPU from data services, also on EDGE and 2G.
But we're really dependent upon that ARPU growth to continue also into 2015 to get the Indian operation into profitable territory.
Thank you. We have time for one more question from the phone call. Can we move on to that, please?
Our final question comes from Keval Khiroya. Please go ahead.
Thank you. Just got a question on Thailand. You highlighted that visibility on Thailand remains relatively low. Is there any color you could give us around how the competitive environment is shaping up, in Thailand so far in the 4Q? And also, the actions you've taken so far in terms of improving the trends there, should we expect them to have any impact for the 4Q, so should these have more of a material benefit as we look to next year?
In Thailand, we clearly expect our actions in this quarter and, and transferring into 4Q. We clearly expect them to stop the leakage on the customer side, and that the quality of the network comes up to what it needs to be. And that gives a better platform for us in 2015. And I'm pretty sure that Mr. Brekke and his team will manage to do that. So we have a very focused efforts on these things after we have sort of taken the tolls after what happened in the second quarter.
Thank you, Richard and Fredrik. This concludes our session today. Thank you for your participation. For media present, there will be the opportunity to speak to our CEO. Thank you.
Thank you.
Thank you.