Good morning, and welcome to Telenor's third quarter results presentation, whether you're present here at Fornebu, listening on the phone, or watching this by webcast. My name is Meera Bhatia. I have the pleasure of guiding you through the presentation this morning. I hope all of you have a copy of the material made available this morning, including the press release and the presentations.
As usual, there will be a Q&A session directly after the presentations, first from here from the audience, and then from our phone participants. We aim to end the session at 10:00 A.M., and please limit yourself to one question, and allow for one follow-up question if clarification is needed. After the Q&A, there will be also an opportunity to do individual interviews, as usual, for those present here at Fornebu. To present the update today, we have our CEO, Jon Fredrik Baksaas, and CFO, Rikard O. Without further ado, Fredrik, I leave the floor to you.
Thank you, and, good morning to, you all, also from me. This third quarter coming from Telenor in 2013 is a, very strong financially reported quarter. There is a continued, organic growth in our group of 1%, which is a part of, what we've seen before, and this is again driven by primarily Asia. It's a solid, operational performance, with margins improving in most business units. Total revenues, total revenue growth, though, is impacted by reduced interconnection revenues and lower-than-expected handset sales in several markets. Although I'm pleased to see that the, underlying growth in subscriptions and traffic revenues are, fairly stable, we had expected a somewhat higher growth figure, for this third quarter.
I'm so eagerly to get going here today that I even forgot the clicker. Okay, there are several reasons for this, revenue being somewhat shorter this quarter than what we had expected. The handset sales have generally been somewhat weaker than expected, and that is primarily caused by the fairly late iPhone launch. This is almost, among, amongst others, most visible in DTAC, but also in the figures coming out of Sweden. In Pakistan, the third quarter showed stable growth rates at 5%, but we had hoped that this would have come out a little bit stronger.
Norway, we have not been able to build the revenue stream in the same way as the data growth in this quarter, but we have been able to defend the mobile subscription base in this quarter. I'll come back to these details a little bit later. EBITDA is an all-time high this quarter, NOK 9.6 billion, which is 11% higher than the third quarter 2012. And this is a, as I said, an all-time high EBITDA figure from the Telenor Group. I'm also pleased to see that the margins are improving, improving in most of our operations in this quarter. On the subscription side, we see continued solid momentum with 4.4 million new subscribers added organically, most coming from Grameenphone and Uninor in India.
But including global, that is also part of this reporting package, there are now 161 million subscribers in our 12 operations. Coming back to the growth dimension of what we have reported this quarter, we have captured growth from the growth in the mobile data. This remains our top priority, and I'm pleased to see that the underlying growth trends for the group remains intact. We, if we look at core mobile revenues, defined as, when you excluding termination rates and handset sales, we see that the group, excluding India, the growth trends are relatively stable. Growth will fluctuate market by market, but on group level, we see a robust underlying growth of 4%-6% over the past two years.
This quarter, at 4%, including India, we have an underlying growth of close to 5%. In Asia, this is supported by solid underlying trends in DTAC and Digi, and improved growth in Grameenphone. Sweden, our fourth largest mobile operation by revenues, displays impressive performance and is a good example of how we can monetize data also in a mature market. In Norway, we see growth, we see the growth rates declining after a solid development in 2012, when the growth was driven by the migration to bundles. The graph clearly shows that improving the monetization of mobile data in Norway remains a top priority for us going forward. But it also demonstrates the benefits of having operations in several markets with varying market conditions.
It also shows that the growth doesn't happen in a long, straight line, but mainly depends also on many factors, market by market. In our two most mature Asian markets, Thailand and Malaysia, we see growth trends intact with the data driving the revenue growth, although the voice market remains under pressure. In both markets, we see a strong growth in data revenues as more and more people are given access to data services through modern networks and affordable smartphones. In Malaysia, Digi now reports a smartphone penetration of 34%, which is up from 25% last year, and around 60% of their subscribers use mobile internet. Digi has completed their network swap and has a 3G coverage of about 75%. The company is ready to continue to drive growth from mobile internet.
Also in DTAC, we see solid demand for mobile data, and data is steadily growing in importance. Smartphone penetration in Thailand is increasing rapidly, driven by DTAC's push for affordable, TriNet branded phones. Now, 29% of subscriber base has smartphones in DTAC. 38% of the subscriber base are now active data users, which is 1 million new data subscribers added last quarter. The performance in Digi and DTAC shows the massive growth potential of mobile data in Asia, and we aim to capture this through our Internet for All strategy going forward. Another element in Thailand is the transition to the new license regime. Taking a closer look at DTAC, our biggest mobile operations by revenues, we see 10% growth in the subscription and traffic revenues, despite stiff competition and somewhat weaker macro environment.
Q3 total revenues are, however, as mentioned earlier, heavily impacted by the MTR reduction from first of July this year, which was as much as 55%. DTAC launched its new 3G network under the new license end of July, and we are very pleased to see that the important migration is running according to plan. DTAC is aiming for around 10 million subscribers on the new license by the end of 2013. And ended this quarter with 3.7 million subscribers are now on the new license network. As mentioned on our capital markets day in September, we expect significant cost savings and margin improvement from the transition to the license regime in the years to come. A year ago, Grameenphone's performance was a key concern in the group.
We are now seeing an impressive comeback, and Grameenphone reports 10% organic revenue growth and improving margins. Grameenphone's solid execution on their market comeback plan has resulted in 2.1 million new subscribers this quarter, more than offsetting the decline in ARPU, price regulations, and sluggish market economic in the country prior to the election, which is due early next year. We see a solid margin of 53%, and cash flow margin above 40% in Grameenphone this quarter. In September, Grameenphone also secured the 3G license and spectrum, 10 MHz on the 2.1 GHz band for the amount of $210 million. Grameenphone already launched the 3G services just 30 days after the auction.
Real mobile penetration is low in Bangladesh, relatively speaking, around 44%, but we already see demand for 3G services picking up, and we have added 1,000-1,200 3G subscribers daily. Telenor Pakistan reports 5% organic growth. This is stable from the second quarter. We had expected a higher growth rate this quarter, but we see continued pressure on taxes, regulations, and weak macroeconomic development. In addition, we also see continued fierce on-net competition, putting pressure on national interconnect revenues. Financial services is still an important growth element and contributes to 2.5 percentage points of the growth this quarter.
The EBITDA margin improvement of 2 percentage points year-on-year is partly supported by savings from the energy initiatives implemented by Telenor Pakistan, which comes both from better battery backups and the swap activities that we are now through in towards the end of this year. India. In India, we see improved customer intake, 1.5 million subscribers this quarter, and a 23% organic revenue growth figure for the quarter, compared to 7% previous quarter. ARPU is increasing for the fourth quarter in a row and reached INR 100. We have a positive development in churn, which is currently around 5% per month. The competitive environment seems to be improving with signs of price increases and some natural consolidation, leading to fewer operators in each circle.
Despite a positive development in revenues and gross profit, operating cash flow this quarter is flat compared to the second quarter. OpEx and CapEx was increased by the launch of 870 new sites during the quarter, which is reuse of existing equipments. In total, this had around NOK 40 million negative effects on cash flow in this quarter. The new sites will help us drive revenue growth in the coming quarters. The good growth momentum is continuing into the fourth quarter, combined with relentless efforts on the cost side. We are targeting cash flow breakeven by the end of 2013, as well as stay well within the peak funding for the operation, as informed previously. Telenor Sweden reported a very strong quarter in third quarter this year.
25,000 new mobile subscriber, 9% underlying mobile service revenue growth, and a solid margin uplift. EBITDA in local currency increased by 10% compared to third quarter last year and reached SEK 1 billion, which is all-time high. I congratulate Lars-Åke and his team for this. They have been really looking forward to crossing this milestone. The improvement is driven by both increased gross profit and several operational excellence initiatives. Although still early days, the implementation of data-centric offers in Sweden seems to be successful at this stage. Finding a better balance between capacity invested and revenues than presently is the case in Norway. Last year, it was the other way around. Denmark continues to be a very challenging market. Mobile ARPU is stabilizing, but we continue to lose in the market space.
Compared to the end of the same period last year, the subscription base is declined by 9%, and this trend can, of course, not continue. And we believe that we will see a more stable situation on this parameter in Q4. A new strategy focused on simplification throughout the value chain is now being developed and is critical in order to adapt to the tough market conditions in Denmark. The network cooperation with Telia Sonera works fine and serves both parties well. The implementation of this transformation program will be a key focus area for the Danish management in 2014. Coming back to Norway, in Norway, we saw another quarter with high market activities and continued subscriber growth. And we were also able to sustain the EBITDA margin in this quarter.
When it comes to revenues, we are comparing with a very strong third quarter last year. However, we have to register that the revenue development this quarter was not according to expectations. Mobile service revenues declined by 3%, despite the growth in data volumes of between 40% and 60%. Increased roaming volumes did not compensate for lower prices. High market activities drove growth on the NOK 199 price point and caused some internal migration in the subscriber base, putting pressure on the domestic ARPU. We are continuing to invest heavily in our networks, and we have to make sure that we are able to have healthy return on these investments. This means that we have to increase our efforts in on optimizing our offers to stimulate demand and to secure the required revenue growth going along with it.
To differentiate both on speed and volumes, therefore, stand out as the key to monetize on the growth in the data space, both in respect to retail prices and wholesale prices. Finally, and before handing over to Rikard, we will push for the same priorities as we brought forward at the Capital Markets Day. The efficiency agenda stays firm. This is where we build up our fuel for future competitiveness. In the group, we now see great curiosity to learn and to leverage scale, to learn across business units and to utilize the scale for local competitiveness. Monetization stays central to all of this.
Data demand grows as the world goes digital, driven by the phenomenal impact that telecom has on everyone's daily life, as well as to the society, as a whole, in which we live. Internet for All stands out as the next wave of mobile communications, and the Telenor Group and the Telenor companies are there to make this happen. And then, Rikard, the floor is yours for the financials.
Thank you, Fredrik. I'll take you more into the details of the P&L, also go through the balance sheet, and finally, we will update you on our guiding for the rest of the year. So let's start with the P&L and the revenues. We are reporting 1% organic revenue growth this quarter, and you see total revenues stands now at NOK 26 billion. That is an increase around NOK 700 million , which is an increase of 3%. So the difference between the 3% of reported and organic of 1% is currency. So we're benefiting from the weak Norwegian kroner that the revenues from our foreign subsidiaries are more worth in the, in Norwegian kroner.
We also have to take into account that the revenue drops approximately two percentage points by reduced interconnect rates in Denmark and Thailand. So in a way, you can say that the reduced interconnect rates and the currency offset each other, and the kind of more normal growth is around 3%. And then we have lower handset sales, around 0.5%-1%. The little bit how we define handsets and hardware. And that reconciles really back to the graph that Fredrik shows you, that organic mobile subscription and traffic revenue growth, which really what we live off on long term, is around 4%. So those are the main explanations on the revenues.
So even if the revenues are lower than we expected, the underlying trends remains intact, but our ambitions were higher, and ambitions were higher, particularly on Norway, Denmark, and Pakistan. Then on the EBITDA, like Fredrik said, we have 11% growth in the EBITDA, up from NOK 8.8 billion - NOK 9.6 billion, year-on-year. There are two effects that are non-organic. That is the currency and the acquisition of Globul. Those two explain approximately 2 percentage points each. So organically, EBITDA grows with 6%, and then Globul and currency adds another 4%, plus takes it up to close to 11% year-on-year growth in EBITDA. So it's a very strong, strong growth, and you see it's the margin in addition to the top-line improvement.
We also have a margin expansion of 2 percentage points from 35 to 37. On the right-hand chart, you can see which units that contributes most to the EBITDA growth. We see India reduced losses close to NOK 250 million improvement from India. Then the turnaround in Grameenphone with NOK 172 million, and then the strong performance in Sweden with NOK 123 million as the three main contributors to the EBITDA growth this quarter. And then we have margin expansions in many other units summarized by the NOK 71 million, and then the inclusion of Globul. And Globul is developing according to the plans we had before the acquisition. This chart is a new one. It visualize how the EBITDA is expanding.
And to the left, you see how the margin in itself is expanding. This is the percentage points improvement. And there you see the Swedish improvement as an example of close to 4%. So, the margin in Sweden has expanded from 30% EBITDA margin to 34%, this quarter. Hungary 4 percentage point as well, due to, not due to tax savings. But you see in general, that the EBITDA margin is strengthening most of the operations, with exception of Telenor Norway, that has a slightly weaker margin in Q3 this year compared to last year. And then on the right-hand side, most importantly, how this will then drive improvement in the EBITDA in itself. So that comes both from the revenue growth and the margin change.
And you see, we have three units that have more than 10% growth in the EBITDA, Bangladesh, Pakistan, and Sweden, and four units that have between 5% and 10% growth in the EBITDA. So in general, a very strong momentum on the margin across the group in this quarter. We have two exceptions, that Norway, with then a weaker top line, both on fixed and mobile, and somewhat higher cost, taking down the EBITDA with 3.5 percentage points, and then the situation in Denmark, with the loss of customers and lower ARPU. Despite good effects from the network and good OpEx control, takes down the EBITDA significantly in Denmark. So, on the investment side, we are investing NOK 3.7 billion this quarter.
That is NOK 400 million up, compared to similar quarter last year. And you see from the pie chart that approximately 50% of the investment goes into, Norway and, Thailand. And this is, data-related investments in both countries. In Norway, both on 3G and 4G and Fiber. In Thailand, it's related to investments in the 2.1 GHz license network that was started rollout in the third quarter. We also see that approximately 20% of the CapEx is related to Digi and Pakistan, and that is, for the network swaps, taking those also into all IP networks, which are now finalized, this year. And we also started to roll out 3G services in Grameenphone, which you see in the gray, gray, pie there.
The CapEx in the other units are more or less as earlier trends. So that the EBITDA growth of close to NOK 800 million and increased CapEx with about NOK 400 million translate into a cash flow growth of approximately NOK 400 million. So we're glad to report a record high cash flow this quarter, NOK 5.9 billion. It's never been higher in Telenor, and a cash flow margin of around 23%. The rolling cash flow now stands at 21.5%, that's the 12-month rolling cash flow. Then to summarize the PNL, we've been through the revenues and the EBITDA. VimpelCom comes in with quite normal results this quarter. These are the second quarter results from VimpelCom, as they have not yet reported the third quarter, with approximately NOK 1.2 billion.
And then we have a currency loss of around NOK 500 million. These are mainly non-cash currency losses with no economic effect for Telenor. It's just the way that accounting has to be treated. We have had big currency movements on both the Pakistani rupee and Indian rupee this quarter that explains most of it. The earnings to the Telenor shareholders stands at NOK 3.9 billion this quarter, and earnings per share of NOK 2.59 . If you normalize the EPS for the currency effects, basically, you get back to a normalized EPS around NOK 3 per shares.
That is a 20% year-on-year growth on the EPS and an annualized speed of around NOK 12 per share in EPS, which is a strong improvement in earnings per share for the Telenor Group. Then on the balance sheet, the net debt-to-EBITDA factor, which is the key debt metrics for the group, is at 1.1 at the end of third quarter. That is as expected. We have had two big cash outlays in the quarter. That is the acquisition of Globul, which you see on the right hand here, with NOK 5.7 billion. That was closed in the third quarter. And we also have bought back shares for NOK 3.3 billion.
2.4 of that is to the Norwegian government for the share buyback program in 2012, where they sell pro rata down, similar to what we have bought in the market. So that was settled now in Q3, and it's about NOK 1 billion that we have bought back in the market in Q3. And the share buyback program is now finalized for this year. Other than that, it's more normal effects. The debt increased a little bit due to the weaker Norwegian kroner, as we have some debt in foreign currency. So net change is NOK 6 billion, and the debt now stands at NOK 38 billion and 1.1 ratio.
And remember, we have a ceiling, the debt ceiling is a ratio of 2.0, so we have a significant headroom up to the ceiling. Then, moving on to the outlook. We're now guiding organic revenue growth for the fourth quarter in the range of 1%-2%. Year-to-date, we are around 1%, so it's a fairly big range of 1%-2% when you just factor in the fourth quarter, when you do the mathematics on that one. And the reason for that is that we don't really know how much hardware and handsets we will sell in the fourth quarter. It will depend a lot on how the iPhone sales will develop.
However, we see on the mobile subscription and service revenue growth, we see the same trends as earlier, and we certainly aim for to turn the trend lines in in Norway in the fourth quarter, which may be the most important one. On the margin, we are at the 35% EBITDA margin year-to-date, and we're guiding 34% for the year. Of course, higher handset sales in the fourth quarter comes with low margin, so this will depend a little bit also where we end up on the organic revenue growth, because handset sales will have a big impact then on the margin.
Then you will have also campaign activities up against Christmas and also in Thailand, in conjunction with the migration to the new network. So we said earlier that we would certainly hope for a better margin than around 34%, and we have not given that up at all, but it will depend on the development in service revenue development in the fourth quarter, and how hard we'll push and sell handsets and hardware in the fourth quarter. CapEx to sales, I think, is more certain. We are 13.2%, year-to-date. We said at the end of Q3 that it will be in the range of 12%-14%, but probably in the higher range.
With now only two months left of the year, we pretty much know the CapEx going into the fourth quarter, so we narrowed the range then to 13%-14%. To sum up the quarter, it's been a strong quarter with strong margins and record high EBITDA and cash flow. The revenue growth was somewhat lower than we expected, but we continue to see a stable mobile service revenue growth around 4%-5%. This is really driven by the demand for data across our operations.
However, in Norway, the revenue development, the last two, three quarters have been weaker than expected, and this trend needs to be turned, and we need to optimize offers and market activities to ensure a healthy return on the large investments we're doing in Norway in these days. And finally, since it's not so long ago since we had the capital markets day, we're reiterating our target of operating cash flow of NOK 28 billion-NOK 30 billion in 2015. All right.
Thank you, Rikard. We are now ready to take your questions, so I invite Fredrik back to the podium. We will start with the audience, and then from the ones on the phone. Once again, please limit yourself to one question and wait for a microphone to be passed to you. Are there any questions from the audience? None at all? Then we'll open the line to the phone line, please.
If you would like to ask a question, please press star one. We'll take the first question from Ulrich Rathe from Jefferies.
Yeah, thanks very much. I was just wondering on the reduced outlook for the year, which obviously represents a slight disappointment versus your own internal plans. Could you quantify how much the handset sales sort of shortfall, partially because of the late iPhone introduction, how much that contributed? Sort of just order of magnitude-wise, I mean, you nudged it down midpoint, I think, sort of by 1.5 percentage points. How much of that is actually handset sales? Thank you.
I don't think we will quantify that breakdown, but there are an effect of handset sales, but we don't shy away from the fact that we have lower revenues than expected, both in Norway, Denmark and Pakistan. So it's a mix of those two effects.
Next question, please.
If I don't get a question on that, maybe I'm allowed another one. I know it's a limited one, but could you comment at all on the progress in Myanmar in terms of, you know, when you expect sort of the next news potentially to come through? Thank you.
We are in the midst of receiving the formally translated telecom law with the attached regulations that comes with it. So we are in the midst of that phase, and when that is on the table, then there is a 30-60 day kind of timeline before the final license is on the table. So we anticipate that this will happen before the end of the year. We are in preparations for putting things together. We're not making financial commitments extensively, but we are preparing for an immediate step up in that once the license is on the table. So, the way we see things now is that the administrative part of the license process is concluded by the end of the year, hopefully, and that we are at full speed early next year with building up and rolling out the network for a launch mid-next year sometime.
Thanks so much.
The next question comes from Thomas Heath from Handelsbanken. Mr. Heath, please go ahead. Your line is open.
Thomas Heath here with Handelsbanken. Thank you. Question on Norway, if I may. Firstly, you mentioned some internal churn in Q3. How much would you say you were impacted by the very generous campaigning by NetCom, and that was then copied by everyone else? Then secondly, on Norway, you mentioned that you hope to change things a little bit in Q4. What is it that you're seeing improving then in Norway in Q4? Is it something in the market, or is it planned initiatives on your part? Thank you.
Well, that our competitor has a 20-year anniversary should probably be, in a way, anticipated that that there would be some offers coming out of that event. So, but you, you're true to... It's true to say that that event in itself spurred some extra activity in the market when it comes to sort of the activity and competition for SIMs and customers as that. And that actually also happened, and we have to say that we were probably an overly active to that dimension of what we're doing, and less focused on the effects on the pricing side. We have efficient bundles out there from a customer perspective for the time being.
Customers are increasing their utilization, and the good quality networks of Telenor really delivers that the way we see it. And of course, in the longer run, when consumption matures, there is an idea here that later on, our customer will migrate up the ladders in both speed and volumes over time. But this is things that goes in waves, and what we experienced last year was that we had a very good approach on how we were introducing the bundles in the Norwegian market. This year, we have struggled to find that balance, and we need to rectify that. And hopefully, we had a better combination in that in fourth quarter.
Thank you.
The next question comes from Peter Nielsen from Kepler Cheuvreux.
Thank you. Fredrik, if I can just stay with your comments there. I mean, you've had an exceptionally positive development in Sweden, and as you say yourself, credit part of this for the new bundles and the move towards these by customers. It hasn't been quite as positive in Norway, as you said, and you did mention about some migration towards the lower-end packages. I appreciate this can fluctuate from quarter, but is there any change in behavior or your pricing in these two markets, which should be fairly similar, frankly, the way you've introduced them, which you want to highlight here, that could explain the divergent trends in this quarter? Thank you.
I think the whole industry basically is struggling to find the balance on these things. The U.S. operators have found their way of moving into the data space. They had challenges when this one started, but where they stand for the time being, they are able to monetize the data growth in the mobile systems quite neatly. And Sweden is the number one market in Europe that has this important balance in the more correct way than what has been the case previously. Remember that only last year the Swedish market was in a way out of balance, and Norway was the better balancing on this.
So I think this will move from sort of period to period, where we will see new kickers or utilization of data that will bring the consumption up, and consequently, also, investments follow that consumption growth, and consequently, also the prices needs to go in the same direction over time. And in third quarter this year, we have been too much focused on per SIM competition, and we need to rebalance that in a better way, both in fourth quarter and quarters to come next year.
Okay, thank you.
Next question comes from Jakob Bluestone from Credit Suisse.
Hi there. Good morning. You mentioned in an answer to an earlier question that you were hoping to see customers in Norwegian Mobile start migrating up the ladder and taking bigger bundles of data. Are there any data points you can share with us at this point that is already starting to work, or is that more of a longer-term ambition that customers will spin up?
Well, when we adjusted the bundles this year, earlier this year, there is a kind of an immediate effect on more downloads. So I think the response in the market, both for increased buckets as such, as well as for higher speed, is part of this equation going forward. So I think there is, I think we see immediate responses by the market at large when these things happen. And remember here, it's the good quality networks and all the fascinating services that we enable that basically brings this into the hands of everyone, 24 hours a day, seven days a week, 365 days a year. It's that phenomenal enabling effect that empowers the markets to grow, which in a way takes the whole telecommunication space into a new layer, in as we speak, basically, when the world goes digital in the way we all experience.
If I can just ask a follow-up, I mean, if I remember correctly, when you revamped your plans earlier this year, you actually increased the bundles, which presumably would have led to a reduction in data overage revenue as essentially a negative impact on ARPU. As customer usage is growing, I guess what I'm sort of looking for is any signs that people are actually moving up to bigger bundles and paying more at the same time. Is this something that's positive for ARPU?
In the short term, you're absolutely right. When you do a move like that, you will get a short-term hit. But the longer term effect of it, if the Norwegian market follows the Swedish market by consumption by customers, one could anticipate that the step up in packages would come as sort of the next wave. And remember, this happens in a country where there is a real disposable positive income in everyone's pocket. And the dependency and the enabling effect of the handsets is as strong as it's ever been. So, there is a kind of service which are in need, which everyone is in need of, and here, we need to find the recipe for monetizing what we invest. It needs to be reflected in the revenue curves longer term.
Thank you.
I could maybe add to that, Fredrik, that we see actually in the third quarter, that the mobile data growth is higher than before. So, these kind of bigger bundles have actually led to consumers consuming even data at higher growth rates than earlier. And that's what the same we saw in Sweden in the early days. The packages was criticized to be on the large side, but it really stimulated the demand in a big way. And also we see now video coming in on the mobile in a big way, which really drives data. The key thing now is to work more on the upsell logic, both when the customer move up the ladder in volume and speed, and also bundle with services to utilize this big growth momentum that has been created the last couple of years in the Norwegian market.
T he speed factor when-
Very useful color.
The speed factor, when the video becomes a bigger portion of what people consume, will become a more important differentiator going forward.
Thank you.
The next question comes from Stefan Gauffin from Nordea Bank.
Yes, I have a couple of questions. First one is a follow-up on all the questions on Norway. I just want to hear if the weakness is related to the consumer side or if it's also related to the corporate side. Secondly, in Pakistan, there's a shift in terms of subscriber intake, and I just wonder if this is more seasonal related or if it's a change in competition in that market? Thank you.
Yeah, no, I think what we have seen in the third quarter is that the main weakness is on the consumer, on the domestic side. But you also have to remember, on the consumer, we're comparing with a very strong third quarter last year. On the business side, we mainly see it on the roaming. We also see from the chart Fredrik showed that we have a drop in roaming rates, and we see business drop in the roaming ARPU on the business consumer. In Pakistan, yes, there is this lower subscriber intake, but we also have done some cleanup of the customer base of inactive SIMs. We have to factor that one in when you look at the data.
But in Pakistan, also, you could say that the Pakistani market is in a state where the on-net feature is one of the highest competitive features for the time being. And we've been through that kind of phase in many other operations as well. And that put pressure then on interconnect revenues as such.
Okay, thank you.
Next question comes from Barry Zeitoune from Berenberg.
Hi, thanks for the question. I'd just like to ask a big-picture question, really, which is that, you know, when we look at the growth in 3G that we're seeing in Bangladesh, and, you know, the potential growth that you're going to see in 3G in Pakistan, how does it make you feel about not having 3G in India? And, you know, if we think, you know, longer term here, is your position in India sustainable, not being pan-Indian, so you know, just being in fixed circles, and also, not having a 3G license? Thank you.
Where we are today, and in this phase, 2G is more than sufficient right now. The handset side for 3G is not at all at the level where the market could, in a way, suffice on 3G. And remember also that the investments into 3G has been fairly limited compared to the vast geography of the country. So then you can ask for how long will that last? And it's at least beyond the medium-term kind of time perspective that you could put to this. And also, the fact that the mobile internet access factor in penetration in India is very low, so there is a whole journey to take out on 2G as such.
Remember also here that, the 2G part, the data part of 2G, is also serving very well, the initial users on internet access. In this space, Telenor in India, Uninor, has this position, which, in a way, would be an aggressive one compared to others, with the price point in the market, because we have the low-cost base, so we're able to sustain affordable price levels the way we have proved so far. In the very long term, of course, then this kind of question will at one point in time need to be addressed. But that is, in a way, outside the medium-term kind of horizon.
Okay, thank you.
Next question comes from Andreas Joelsson, from SEB.
Good morning. Back to Norway. You have a relatively large national roaming agreement with one of your competitors, and I was just wondering if defending those volumes is more important now, when you see the overall trends in the Norwegian market? Or how do you balance the renegotiation of that deal, having the volumes versus not giving the competitor enough room to maneuver on prices?
The wholesale price is a very important price point in the overall structure between the players, no doubt about that. We will not compete for that wholesale agreement for any kind of price level that might be out there. We have a good quality network in Telenor. We believe that is an asset which the user of that network also displays daily in his advertising. So it is a strong network that we believe is an asset. The negotiations on this one will come when they come. And that is probably the last thing I have to say on that item.
Very clear. Thank you.
Next question comes from Sasu Ristimäki from Merrill Lynch.
Thanks. I was hoping I'd touch two quick questions on, on Asia, these are short ones. Firstly, on DTAC, do you think your 10 million 3G subscriber target is fully reachable, given that you need to add more than 6 million in the fourth quarter? And then in India, all of your kind of top-line KPIs seem to be moving in the right direction, but the EBITDA level looks somewhat light compared to market expectations. So are you seeing a kind of exceptionally high cost level, or what is happening between the top line and cost there?
You were hacking there with some noise in the background, so you were a little bit difficult to catch. But I believe that your first question was: Will it be possible to migrate from NOK 3.7 billion - NOK 10 billion towards the end of this year? We believe, yes, that is possible. We will handle that. Number two, India: was the EBITDA a little bit too negative in this quarter in order to be able to reach breakeven?
The reason for the EBITDA stance at this level in this quarter was, as I said during the presentation, the introduction of 870 new base stations, which put pressure on the OpEx in the launch period. But over time, they will start to generate both revenues and EBITDA. Towards the end of the year, from an operating point of view, we target the EBITDA breakeven. That doesn't mean that fourth quarter will be zero over EBITDA, but it means that the last month will be better than the beginning months of that quarter.
Next question, please.
I think it disappeared.
The next question comes from Aliasgar Shakir, from Elara Capital.
Yeah, hi, thanks for giving the opportunity. I would just like to harp a little more on the India business, and this is more strategic. I just wanted to understand, you know, we were a pan-India player a couple of years back, and, you know, after the Supreme Court verdict, we got contracted to six circles. Now with the government coming out with unified auction, and there are a lot of inorganic opportunities also coming, as you mentioned in your, you know, earlier remarks, that consolidation is happening. So just want to understand if we are looking for any inorganic growth or, you know, trying, or are we also, you know, planning to, you know, look at the auctions to again, you know, expand our services to other geographies?
The underlying organic growth factor in Uninor in this quarter is 23%. And this happens in six circles where we have spectrum. In some of these spectrums, there might be a good thing to add, to add a small slice of spectrum in order to cater for volume for the, the market position in that circle. We have not been specific on that, and it depends also very much on how the auction eventually will play out and what will be the reserve prices, et cetera. So, I think that's the, the closest I can get to an answer to your question.
All right. Thank you.
Next question comes from Margarita Alonso from Oddo Securities. Please go ahead.
Good morning. I was just wondering, in the picture of the Nordics, how would you explain the weaker performance of Denmark and what's in store for the next quarter? Thank you.
The Danish operation and the Danish marketplace in general has been one of the most challenging one for us. If you compare to European countries in general, I think that's where you get it. So the competition is tough. We are in the midst of that, and we have had a period where we have not been sufficiently successful to handle the market correctly. We are to a certain extent limited in flexibility through an old-fashioned stack of IT systems. That is a meager excuse, in fact. However, it's a reality that our flexibility is not as good as it as the others are in the marketplace.
We are putting up an extensive re-architecture of the IT stack in such a way that we come out with a much simpler and much more efficient stack going forward. But this takes well into 2014 until we get good results from that. In the meantime, we have to be more precise on our market activities. We believe we have actions in place that gives reasonably good signs on that towards the end of this third quarter, and that we will see a stabilization of the customer position, the market position by customers in Denmark towards the end of this year. And from there, we need to build upwards. We have seen phases where some of our operators have been in sort of negative development compared to peers.
But we've also seen that, seen that, when this happened, we have managed to come back and get back into the game and take momentum in the marketplace. And this is, I guess, this is what competition is about. To keep and maintain your momentum and to watch your position up against your peers. If we go back to 2011, we had a similar situation here in Norway, where we were not able to, at a sufficient speed, reposition our pricing structures.
When we did that in 2012, early 2012, we saw a very positive period when we introduced the bundles. Now we are in a phase where we need to reposition this again. So in a way, this is daily work in a telecom company with twelve operations in as many countries. And there is always a lot of work to do in order to get these things right. Denmark is by far the most challenging market in Europe in that sense.
Okay, thank you very much for the answer.
As a reminder to ask a question, please press star one. We'll now take a follow-up question from Thomas Heath from Handelsbanken.
Thank you. A follow-up on Denmark, if I may. You mentioned that you expect subscriber numbers to stabilize. Does that mean you're willing to compete, fiercely on price? For previously, the CBB brand was quite aggressive, but, has been, quite modest, marketing and limited campaigning for a while now. So, are you willing to be more aggressive on price to regain market share there? Thanks.
Well, I don't think we should use this opportunity to sort of move into those kind of details. I think that we will have to leave that to the Danish operation. But the general comment to that in Denmark is that the price competition game has, in a way, moved far enough. So in a way, if we're going to move back into decent profitability figures in order to cover up investments, which we, by the way, do very efficiently through the network operations with TeliaSonera being more or less in the same spot as we should give us a better position going forward.
We do sort of notice and register, and also have to admit that we are a little bit frustrated that we are a bit slow in getting these things right in Denmark right now.
Okay, thank you.
We'll now take the next follow-up question from Peter Nielsen from Kepler Cheuvreux.
Fredrik has just answered my question on Denmark, so I'm fine. Thank you.
Thank you. We'll now take our next follow-up question from Aliasgar Shakir from Elara Capital.
Yeah, thank you for giving me the opportunity. Yeah, just want to follow up on, you know, your comments earlier on the India business. You did mention about the auction. I just wanted to also check on the inorganic growth options that would be available to us and if we are, you know, looking to, you know, make any, you know, actions there.
If your question goes about consolidation, does it?
Correct.
I have no comments to that right now. Consolidation happens when it happens. And what we see now is that, there are some, sort of, circle-by-circle consolidation in the, essence, that, some operators are sort of closing down operations. And in that sense, Uninor has a position to take, as the, best on basic service, supplier in the local marketplace and best in distribution. And when we have the lowest cost level, we should also be able to sustain, the best price level. That is the competitive formula that, Uninor, utilizes for all it's worth in, its nine circles.
I just also add to the question that the Indian telecom sector still does not have any M&A rules in place. And it's also very uncertain what the spectrum values are, and the whole spectrum will be priced going forward. So kind of other than day-to-day consolidation about people pulling out those circles, we don't really understand what can happen given that the framework is not in place.
This is actually the last question we had time for. Rikard or Fredrik, would you like to have any concluding remarks?
Yeah, thank you for all your questions. We understand solidly that this is about how to get things into a better balance in Norway, in particular, when it comes to pricing. Norway is a very important part of the Telenor Group. However, it accounts for roughly 25%-27%. So it's not the whole of the group. And there is a very strong underlying growth in utilization of our services. It's up to us to monetize on that. And this quarter happens to be the best financially reported quarter by the Telenor Group ever. So in a way, all-time high on EBITDA and margins with margins attached to it.
So it is a strong market, but we have also a lot of work to do, in particular in Norway, when it gets to rebalancing on, on prices up against the phenomenal volume growth that we experience. So Internet for All , that's our strategy. Thank you.
Thank you, Fredrik and Rikard. This concludes our session today. We will now have the opportunity for interviews. I'm taking the list.