Good morning, and welcome to the presentation of Telenor's results for the third quarter of 2012. Whether you are present here at Fornebu, listening on the phone, or watching this via internet or on the mobile phone. My name is Scott Engebrigtsen, and I have the pleasure of taking you through the presentation this morning. I hope that everyone has the material that we have made available. That would be our press release, the quarterly report, and a copy of the presentation, which will be used here any minute. You can find this material also on our website, Telenor.com. From this website, you can also find information on different alternatives to watch this presentation.
Before we start, I would like to apologize for the fact that we, by accident, published the results last night instead of this morning as planned. I guess you've had some plenty of time to update your spreadsheets this time. But it's important to state that this happened at approximately 6:30 P.M. last night, which is, that's Norwegian time, 6:30 P.M., and that's after the trading hours of Oslo Stock Exchange. As usual, we will have a Q&A session directly after the presentation, and we will start with the audience present here at Fornebu, then with the ones participating on the phone.
As we will try to end this session at around 10:00, we want to ask you to kindly limit yourself to one question per person, and one follow-up question if clarity is needed. Yes, and after the Q&A session, you will have the opportunity to do individual interviews for the ones present here. Without any further ado, to present our figures today, we have our CEO, Jon Fredrik Baksaas, and our CFO, Richard Aa. And first, I'll leave the floor to you, Mr. Baksaas.
Yeah. Thank you, Scott, and good morning to everyone. There is another quarter, and once again, I'm pleased to present the quarterly figures from Telenor. Which once again has both a solid margin level and the growth continues. Not necessarily at the same pace as before, but still important as you will see. The particularly strong markets this time is more or less Norway, Sweden, and also the Broadcast entity. There are some seasonality figures into this, but all three entities contribute both on the margin side and on the revenue side in a very good manner, which to a certain extent is also different from the previous quarters.
The 3% revenue growth quarter, this quarter, is impacted by the scale down, of course, in India, where we have reduced from 13 to 9 circles. And there, the competitive pressure that we saw in Bangladesh, in particular, continues, and the weak market conditions in Denmark has not also disappeared. On the contrary, it's still there. We are in a period where the data is the main growth driver, no doubt about that. And to cater for this growth going forward, we are continuing to invest strongly into the networks in all countries, but most primarily here in Norway, where we have launched the 4G.
On the back of the accumulated figures of the group in this quarter, we report a cash flow margin, cash flow, net cash flow of operating net cash flow of NOK 5.5 billion, which equals 22%, operating cash flow margin. And we consider this a strong level, at the same time as we are doing strongly on investments as well. So let's move to details, and let's start in the Norwegian market with the strong performance here in Norway. As a 2% revenue growth for Telenor Norway, all in all, and it is the growth in the data field, mobile data, that brings this growth to this figure.
And this, combined with, the bundled tariffs that we, introduced last year, which has given us a 7% mobile revenue growth alone. Last year, you may recall that we, made a significant initiative into, migrating, our customer base to bundled tariffs. And we had a weak period in 2011, and after we launched this, we've had a strong reception, in the market in general. So 58% of our, postpaid retail customers now, is based on bundled tariffs, so this is up from 52%, in last quarter. Norway is a competitive market on all aspects on mobile telephony, and there are initiatives from from competitors. We see that price comparisons also as is brought forward as strong differentiators.
However, the strong investments that we feed into our systems for the time being also gives us a superior coverage and network quality. And in short, we believe this gives better experiences to our customers. And hopefully, that is some of the the response that we are seeing in these days on the customer side. We have spent NOK 3 billion in investments in the Norwegian network so far this year. And when the year is over, after fourth quarter, we'll probably reach the figure of NOK 4 billion, which is almost at peak on annual investments in the network in Norway altogether. And what's being deployed here now is network coverage on 4G and its capacities in the other technologies.
As you remember, we launched the 3G, the 4G just a couple of weeks ago. To make a note on this here, this is not something we do every day in telecoms. In fact, we only do it once in a tenth year. So it is a significant mark in the next phase of telecom history. Tenth of October, we launched it in 11 cities and towns in Norway, and we are very satisfied with the initial launch, knowing that at this stage, it is only pads and PCs and routers with 4G functionalities that can use it. The handsets on 4G will probably be more available towards the end of the year.
But the whole industry is moving in that direction, and we will continue to invest into the 4G generation of networks, reaching out to 30% of the Norwegian population by the end of this year, and by 2015, we'll probably be close to 3G coverage around 90% plus in on this technology to the Norwegian population. And with 800 band coming up later on, this will extend further into the rural areas as a new efficient tool of bringing high high-speed broadband also in that to those areas of Norway. If we then take Broadcast on this presentation, Broadcast is contributing strongly and more and more so quarter by quarter.
It's an all-time high on the EBITDA margin for B roadcast this quarter, and the business unit is performing really well. This has been driven by both hardware margins and content, and reduced content cost, as well as general well-executed cost management in all parts of the value chains here. There are some weaknesses on the Conax side in this specific quarter because of delays in card orders from some markets, but we have good reasons to believe that this will be coming up in later quarters again. A CapEx increase is the CapEx increase this year in Conax is related to the DAB investments in the Norwegian network. If we then move on to Europe, here we have a mixed picture.
It's Sweden and Serbia that drives on the positive side, and this comes from again being able to monetize on the data side. Serbia continues to deliver a solid growth pattern, and it's based on the same, more or less, strategy that we've had in Scandinavia previously, namely that of taking prepaid over to postpaid customer relationships. In Sweden, I have to congratulate our team in Sweden reaching a record EBITDA margin at 30% this quarter. I think they deserve a well deserved attention for that performance this quarter. If we take a look at Denmark and Hungary, the picture is not as positive.
Hungary is still suffering from the economic times in Europe in general. This industry in particular is taking its share of that problem by the double taxation system that Telenor Hungary and the rest of the industry suffers in this specific second half of 2012. In Denmark, Denmark is having a meager economic outlook for the time being, and we can reflect that into customer consumption.
So our figures in Denmark, though they are being, for the last time, I believe, impacted by the loss of the iPhone contract a year ago, still on a reducing trend on the top line. So here there is a lot of things to do, both on the market side as well as on the cost side. In VimpelCom, the operating side of VimpelCom is pointing in the right directions. These are figures from second quarter as they report later compared to Telenor. It's very good to see that the initiative seems to be back in the hands of VimpelCom management in Russia.
However, there is a lot to go on that specific performance by itself, because there is a growth environment for telco services in general. And that should pave the way and show a possible growth of VimpelCom in Russia. When it comes to the court case, which was scheduled 17th of October, this one was postponed until 27th of November, and we have the same position as we have stated previously. Telenor already has an approval to own where we are in VimpelCom for the time being, namely between 25 and 50 percentage points. And we are therefore of the opinion that the case has no basis and no merit.
And as we know now, the hearing will be in 27th of November. And as you all have noted, there has been great changes on the ownership side of VimpelCom this quarter, where Altimo has bought out the incoming shareholder after the Wind transaction on the common shares. So that Altimo have now 42% of voting stock, and Telenor has 43, but including the 6% Bertofan shares, for all practical purposes Altimo now controls the company. Moving then to Asia, the growth side of of Telenor for many quarters, and also this quarter, but with some new elements in. Asia is still driving the the growth profile of Telenor, no doubt about that.
But the lower growth side, growth rate this quarter is 6% compared to 14% last quarter. This is, of course, something that is to our concern, but there are also explanations to it, and I want to dive into them. In Thailand, in particular, we see a similar good quarter as we've seen before. DTAC is working hard on their network swap. There has been challenges on that on previous occasions, but it seems to fly better this quarter. This will secure network quality, and it will prepare us for the 3G services. And we are, of course, pleased to see that DTAC won spectrum along with the other two players in the marketplace just recently. The licenses will be awarded in mid-January.
In Grameenphone, I think we can say that this is below expectations. Grameenphone has been the very strong market leader for many years, and competition intensified over the last half year has really beefed up and given Grameenphone a good fight. We see that in the figures of Grameenphone. The same weaknesses as we saw in Q2 are still here with us in Q3, despite the fact that we keep adding customers, but we were not able to grow the revenues at par with market growth. The top line was impacted by intense competition as a consequence. Of course, we have to add that there are regulatory changes as well, because of the negative effect that comes from the ten-second pulse billing structure, which was introduced in this period.
This is, in a way, something that a market leader, an incumbent-like operation like Grameenphone, will need to see and will need to respond to. It has happened in all other markets, and here we have to do the same as we've done in other markets, namely focus on competition and what's required from the market side, from the customer side. It might take some time to restore this, and we will, of course, work strongly with Grameenphone management to do that. Also in DiGi, but with other explanations, there is a lower growth figure than what we're used to. This has more to do with some technical problems in the swap period for DiGi.
So we believe that the fourth quarter will pick up more to normal standards. And if we then conclude with Pakistan, the growth this quarter was impacted by a forced shutdown of the network on two occasions. And it gave some low. And that reduced traffic volumes, as well as lower customer adds than previous quarters. But Telenor Pakistan keeps its strong position in the market in general, and we anticipate that also this one will recover for the coming periods. India, there is an exciting period in India for the time being. A lot of work and preparation for the final decision to go or no-go on the auction which is upcoming.
We have registered, as you've seen, for participation, and the final decisions on this is coming up closer to the auction startup in November. The restructuring process has continued. We have scaled down in four circles, and that process went smoother than we had anticipated. We saw revenue decline in this quarter as a consequence of this turbulent period, and we reenergized for towards the end of the quarter and into October. I'm happy to say that on the customer side, we have recovered traction from what we saw compared to what we saw when we started this quarter. So in both in September and the pickup in October has continued in those circles that we now focus delivery of services.
We have also settled with Unitech Limited, and an application for participation is there, as you know. I have to repeat, the final decision on this will be taken very close up to the auction date. To close in, I just want to repeat some of our statements from our Capital Markets Day. We will focus strongly on the customer side and everything that comes from market demand and the competitive behavior. We want to take part in also, and position Telenor in the IP field when IP services becomes more and more important in the hands of consumers. This is why we have taken the initiative of establishing our own section in Telenor called Digital Services. The strategy will also focus on operational efficiencies.
As before, it will become even more important to handle both the technology development and use whatever kind of efficiency means that are available to us, as both technology, market, and regulation develops. So our efforts here will be very much focused on bringing forward scale and industrialized concept to all our OpCos, and thereby be able to both improve the market position in every market, as well as also focusing on improving the operating cash flow benchmark in the group to reach for between NOK 28 billion and NOK 30 billion in 2015. We will see a Telenor, we target a Telenor that basically has a growth factor above peers, and we hope that we also will be able to deliver a steady progress on the efficiency agenda.
And with these words, I hand over to Richard Aa. I want to thank Kristin Skogen Lund for her participation in Telenor and wish her good luck on her next position. Digital Services is well positioned in Telenor, and I hope we have firepower in the service space of the internet in the future that you can look back to as smart way of working when in the period you had with Telenor. Good luck. Thank you.
Okay, I will do three things this morning. I'll go through the P&L, I'll go through the debt and the capital allocation this quarter, and finally, the guiding, both the short-term guiding and the more longer-term guiding. Let's start with the revenues. We have revenue growth this quarter of 3.4%. Revenue stands now at NOK 25.2 billion. The revenue growth is 622 million NOK this quarter. But I want you to pay attention to the bar chart at the right-hand side there. And we can see that Denmark contributes negatively with NOK 383 million. So excluding Denmark, the revenue growth in the rest of the group is more than NOK 1 billion this quarter. And the reduction in Denmark actually equals 1.5% decline on the revenue.
So excluding Denmark, the revenue growth is around 5%. The situation in Denmark is, by all means, very serious. Hungary, the reduction in revenue there is due to interconnect rates. Again, regulation in Hungary is an issue. Sweden, we have a revenue growth close to NOK 300 million on the backdrop of the data growth, as Fredrik went through. Same with DTAC. DiGi could have been higher hadn't it been for the network issues. And in the other, we have both continued problems in Bangladesh, but also the solid growth in the Norwegian mobile business, and that's add up to NOK 620 million revenue growth. Here's a new slide that you haven't seen in this presentation before. It's the gross margin.
With the increased handset sales coming in from iPhones and Android phones in our system, that puts some pressure on the gross margin as they have lower margins than telecom services. And we have price pressure that also put pressure on the gross margin. But I'm pleased to say that if you look at the trend, the last six quarters, we have been able to maintain a stable gross margin, also due to lower interconnect rates and shift from voice to data that is on a different regulatory regime than the interconnect we see on voice. EBITDA, strong quarter. EBITDA close to NOK 8.8 billion. And there is a good carryover from the revenue growth.
As you recall, we had a revenue growth of close to NOK 600 million, and that is carried over to EBITDA growth of NOK 500 million. It's a record high EBITDA level all in all in the third quarter. The breakdown on the right-hand chart there, you see, there are some major effects here. You have the strong results in Norway contributing NOK 273 million, and the good growth in the data in Sweden, combined with a flat OpEx level in Sweden, contributes NOK 141 million. Denmark, as you recall, there are reduced revenues, so NOK 383 million. We have about 45% carrying over into the results, NOK 172 million loss, as some of it's interconnect and low-margin business. Then Hungary, this is due to the double taxation, NOK 127 million.
That is a concern now that we see regulatory costs are increasing in many of our markets. We're making good progress on the efficiency programs, but we are hampered by regulatory costs going the other way. The efficiency programs are more important than ever. The major factor on the improved EBITDA this quarter is India, with the reduced losses contributing for more than NOK 400 million. On the CapEx side, we have spent NOK 3.3 billion in CapEx this quarter, which is up NOK 600 million from same quarter last year. There are continued high investments in the fixed and mobile networks in Norway, which are contributing to close to one third of the CapEx.
But the main factor behind the increased CapEx, because we also had high CapEx in Norway third quarter last year, is that we have good traction now on the 3G rollout on 850 MHz in Thailand, and the swap in Thailand. So DTAC alone is NOK 500 million higher this quarter than the same quarter last year. And of course, we're very happy that DTAC won the 2.1 GHz spectrum in Thailand, and can continue to roll out data services in the country. On the cash flow, despite the high CapEx, we report a cash flow of NOK 5.5 billion, which is very close to the NOK 5.6 billion, which we had third quarter last year, which was record high.
So the increased CapEx of NOK 600 million is offset by improved EBITDA of about the same amount. And if you take a look at the operating cash flow for quarter rolling, you see now on a 12-month basis, we're up close to NOK 1 billion and approaching now NOK 20 billion rolling cash flow, including India. The net income is a quite clean quarter. So I would say the earnings per share and net income to Telenor is fairly normal without any normalization. But let's start from the top. Revenues and EBITDA we have been through. Other items we still have costs related to workforce reductions in Norway and Sweden, and the Norwegian part is a lot of early retirement, which is expensive.
We have the operating losses and exit costs related to the scale down of four circles in India of NOK 126 million. We have lower depreciation amortization, as we have come to an end of the accelerated depreciation, especially in the Nordics, even though we have higher depreciation in Pakistan and DTAC and DiGi due to the swaps. So the EBIT is up by close to NOK 600 million. Associated companies, main contributor there is VimpelCom. A better result in VimpelCom is contributing, but also that we own 37%, close to, compared to 32% of the economic stake in VimpelCom in this quarter, compared to the third quarter last year. Net financials, pluses and minuses, but generally a higher debt level in Q3 this year than Q3 last year.
Taxes, nothing special in this quarter, same with minorities. So again, net income at NOK 3.6 billion to the Telenor shareholders represent a fairly normalized income and resulting in an earnings per share of NOK 2.34 . Then, further on the capital allocation and the debt, the share buyback program. We have two buyback programs that have been running this quarter. First, we have the buyback program that was launched in 2011. We bought back 22 million shares in the market in the fall of 2011. And then after the general meeting in May this year, it was approved, or in the meeting, it was approved, that we should also purchase from the Norwegian state the pro rata share, so the state ownership remained the same.
So that totals 48 million shares, and all those shares were now canceled in the third quarter, 25th of July. So that program is now fully complete. Then we have the program which we launched this year, in the second after the second quarter results. And we have now bought back approximately 10 million shares in the market, about 21 million that are to be purchased. So we are 45% complete as we speak. And then the same drill will follow next spring, the AGM will be asked to approve that we buy back the pro rata share from the Norwegian state, so the state ownership remains the same. That takes me over to the debt, and the buyback is explaining quite much of the debt side.
The net debt has increased this quarter from 28.6 to 29.5, NOK 1 billion up, and there are reasons for that. You can see the reconciliation here on the right-hand side. Strong EBITDA, nothing abnormal on interest and taxes this quarter. CapEx are higher than normal, both due to the DTAC rollout, but also installment on the license in Grameenphone. Then we have the share buyback, which I went through, equal total NOK 2.9 billion this quarter, with the buyback of the shares from Norwegian state and also what we have done in the market. Dividend to minorities, that is dividend to minorities in the three listed Asian business units, DTAC, Grameenphone, and DiGi. Evenly spread, about NOK 400 million on each, NOK 1.2 billion going out.
And then we have bought the remaining pref shares from Weather of a total of 0.7. So these three items contributes close to NOK 5 billion increase in the debt level. Then we have some pluses and minuses on working capital, currency, and the revenue share in DTAC. But, it's really the three items in the or the four items in the middle here, with the license in Grameenphone, the share buyback, minorities, and purchase of Weather shares, that the main explanations why we have a rather stable debt level, a small increase. If you look at net debt to EBITDA, that stands at 0.95. That's still a very comfortable level in our industry, and well below the cap of 2.0. Then, moving on to the final part of the presentation, the guiding.
We guide on three parameters on the short end. The organic revenue growth, we guide now for the full year, 4%. We stand at 3.8% year to date. We know that the situation in Grameenphone will take time to turn around, and also the situation in Denmark is severe. So we have ended to guide approximately where we are on the revenue growth year to date. EBITDA margin, we guide 35%-36%. We are at 36% year to date, but we know in the fourth quarter there will be higher handsets revenues, sale of iPhone, of iPhone 4, and so on, which make us that we, we may see the margin between 35%-36%.
CapEx to sales, we are year to date at 11.8, but we know that DTAC has good traction on their rollout, which is very good, and that we are also investing heavily in Norway, which is also a wanted investment. I think we are spending the CapEx quite wisely these days. To get it around 12% is okay. Then closing in the last slide is a recap from the Capital Markets Day, little longer term guiding. As you recall, we had a strong focus on operational efficiency on the Capital Markets Day. We are making progress towards our targets, and the targets are clear for next year to reach 35% OpEx to sales and 10% CapEx to sales.
I would say, and I commented on that earlier, on the OpEx to sales, we are making good progress, but regulatory cost is really pulling in the other directions. So I think it's more important than ever to make good progress on this. We see on the OpEx to sales, we are now at 36.8, and only the revenue share in DTAC pulls in the other direction of 0.7. So without that, we had been on 36.1, and we have the regulatory side in Hungary, DiGi in GP and other op costs are pulling in the other direction. On the CapEx to sales, we are investing heavily now in DTAC, in DiGi, in Norway, and also the swap in Pakistan is coming in.
As we said on the Capital Markets Day, it may be that investments in Norway, in the fixed line and the 4G will take us about 10%, but we are looking at ways of offsetting that by being even more efficient, so the cash flow should be okay. On the longer term, we launched the efficiency gain program of NOK 5 billion at the Capital Markets Day, and that takes us also into the 2013 numbers, but also then beyond, especially working on partnership models, new operating models with the learnings we now see, especially from Sweden and India, where we maybe have the best traction on new operating models. By that, I end the presentation open for Q&A.
Thank you, Richard. We are now ready to take your questions. We'll start with the audience present, and I invite Mr. Baksaas back on the podium. Please wait for a microphone, and please state your name before asking any questions. We have a question over here, please.
Hi, it's Espen Torgersen at Carnegie. Could you comment on the trends on the ARPU in India? I think it's down some 16% year-on-year, and especially given the fact that you had voluntary churn in the regions or the circles you've exited. And also, will this have any bearing on your business case assumptions and the way you look ahead of the potential auction?
Yes, thank you, Espen. I can take that one. Yes, the ARPU decline in India is a significant factor this quarter. We have seen further increased competition in India. We also see that usage has gone down in some of the circles we're in, and we have made new adjustments to our offerings in the market to bring usage back and ARPUs up. The price level in a competitive market is not that much we can do about. But the usage plans or the stimulation of usage have been changed now in end of third quarter and into the fourth quarter, and we see a good pickup in usage again.
We have a question here, please. Can you please pass on the microphone? Thank you.
Harald Øyen, SEB Enskilda. I'm trying to figure out the margin in Norway at 46%. If you guys strip out seasonality and stuff like that, can you explain the dynamics of the OpEx side? I'm trying to figure out the so to say underlying improvement here.
Remember, if you go back to 2011, that specific third quarter was not our best quarter. So if that is what we call seasonality, then you can probably put 2-3 percentage points of the present margin to that seasonality factor. But it's also a true fact that the response on the bundled tariffs has been positive. We have managed to establish a price structure with our mobile internet users in such a way that it becomes attractive to move up the ladder. And in that sense, the philosophy behind the introduction of that was positive.
And this is needed basically in order to also be able to meet the very strong investments that we are putting into the networks in these days. And of course, this is driven as all other retail activities in this country for the time being, because it's the strongest retail market in Europe with economic growth and unemployment and a good purchasing power, which is improving year by year. So we are in that fortunate position as a telecom provider as well.
Maybe just add to that, that if you remember, last two quarters in 2011, the margins in Norway were quite on the decline, and that was heavy investments in sales and marketing to get consumers over on the new price plans, and we considered those as investments. So, that's the way this will work. I mean, some quarters, you will have a heavy investment in sales and marketing costs that will be treated as OpEx, and then you get a return on that in other quarters, and that's what we see now. And there may be a period where we have to make strong investments in the Norwegian market again, where you have lower margins, and then you will have quarters later on where you then hopefully recover your investments.
So what we are seeing now is a return on the investments that we have made, but that came with a high cost in 2011.
Any further questions from the audience here? If not, I think we will turn our attention to the ones participating on the phone.
Question from?
Andrew Lee, Goldman Sachs.
Go ahead.
Andrew Lee, Goldman Sachs. Good morning, everyone. Just two questions, if possible. The first is, you are talking quite confidently about a recovery in Malaysia and Pakistan. Obviously, this is due to network issues, whereas Bangladesh has been more due to competitive issues. But I wonder what's driving that confidence in the recovery in Malaysia and Pakistan, and are you seeing, in terms of run rate of performance, that recovery already coming through into the fourth quarter? And if possible, a second question, just given the handset sale impact on Nordic margins into Q4, do you think you can keep full year margins in the top end of your guided range? Thank you.
Well, let me start in Malaysia. Given the Malaysia, we believe that there is, there isn't any underlying long-term negative effect, market-wise, that should impact the fourth quarter, as an example. So in that sense, we believe that the market dynamic, so to speak, if we can handle the network issues efficiently in fourth quarter, we should be able to benefit from those market dynamics as we've done before with DiGi. Remember, DiGi has had a phenomenal development curve for all their activities over a very high number of quarters. In Pakistan, the shutdown, when you lose a whole day in one month, then it's visible in the statistics.
So in that sense, it's not anticipated that things of similar should happen in this quarter. Can happen, of course, but we don't foresee that. And the drive in Telenor Pakistan, compared to competition, we judge as standing very, very strongly. Richard?
Yeah, on your second question, I think we have to leave our guidance at that. We state that we aim to have it be between 35% and 36%. I don't want to go into exactly where in that bracket we will end. Thank you.
Okay, thank you very much.
Next?
Barry Zeitoune, Berenberg.
Go ahead, please.
Hi, good morning. Just a question on VimpelCom, that's right. I thought your statement about Altimo now controlling the company-
I'm sorry, we're having trouble hearing you. Could you please try to-
Sorry, can you hear me better now?
That's better. Thank you.
Yeah.
Okay, excellent. So I thought your statement regarding VimpelCom, in the sense that Altimo now controls the company, I thought that was a very interesting statement. And I was just wondering, given, you know, given the current market, given the current ownership stakes, how are you looking at your convertible preference shares? And would you be looking at converting those preference shares and the strategic value in converting those preference shares as being lower than how you may have viewed them when you originally bought those convertible preference shares? And also on VimpelCom, I was just wondering your view of, you know, Altimo or Altimo's parent, Alfa, is gonna be coming into a lot of money with the TNK-BP deal. Would you be open to offers from them, or is that not something you'd be interested in?
Yeah, questions of this type is, in particular, when it comes to the pref shares, which are not convertible until one year from now. And they have a conversion period of two and a half years. So in a way, we have three and a half years of a lead time to answer the question. So, unfortunately, and as a consequence of that, we don't have a sort of a strong opinion on what's going to happen to the pref shares. That will depend upon the circumstances further down the line.
Would you say those circumstances will be more financial rather than strategic? So I understand that if you feel the price is attractive, you may choose to convert. But what I'm getting at is the strategic value of maintaining those votes doesn't really hold if your view is that Altimo now controls the company.
Well, in, as I say, in the 3.5-year time perspective, a lot of things can happen. So, I don't want to speculate on what kind of scenario that might happen in, in that period. And given, whatever events that are there, this question is not sort of an applicable one, until at least, at the earliest, one year from now. On what happens, when, and if, there is a final and confirmed deal on the, on, the energy side, that's also speculations on how that will potentially impact other industry sectors. I think again, we will have to look at the events as they are unfolding.
Okay. Can I just ask one other question?
I'm sorry, we'll have to move on. I'm sorry. We'll have to limit ourselves to one question per person. Next question, please.
Andy Parnis , UBS.
Go ahead, please.
Yeah. Hi, guys. I've just got one question. On Bangladesh, I just wonder if you'd give a bit more detail and color on exactly how you plan to just sort of turn around the loss of share to the competition there. Is this gonna result in sort of more margin pressure as you attempt to go after some of the higher ARPU customers? And if so, what sort of timeline should we expect the revenue growth to return to the business? Thanks.
This is a very important question. In telcos, we have seen before that, when you are in a negative period, when your benchmarks develops negatively compared to peers, it takes some time to rebound. And we have seen these cases in Telenor, and we've seen these cases in VimpelCom. And in the Bangladeshi case, Grameenphone has had a period where they have not had a complete success on their go-to-market both efforts and means. And in that sense, that formula need to be rebalanced, and the price point of Grameenphone compared to the rest needs to have the right- be, stay in the right proportions.
So what I say here is that we cannot expect this to be a quick fix from one quarter to another, but we should see results on this, at the latest in first half of next year.
Okay. Thank you.
Next?
Peter Kurt Nielsen from Cheuvreux.
Go ahead, please.
Thank you very much. Just a question on India, please. Fredrik, you're saying that you're still evaluating whether to participate in the auction with a final decision expected later. Are there—you're indicating that you still need clarity over various factors, and I wonder what those are. Is it primarily your own calculations or the external factors here that you're waiting for to have better clarity over? And what might those be? Thank you.
It's both things that relate to ourselves as well as to partners in the value chain, but also on governmental approvals. We have applied for a direct switchover from Unitech to a new separate company, which will be our bid base, and we need to have the proper approvals on that transfer that as one example. Then there are expectations also to see final decisions on incumbents on the structure of payments of a license fee on incumbents. There are speculations on what at what levels those payments will be, but the ultimate confirmations will probably be around before license start.
In that, you can also add the refarming issue on 900. On the private vendors, the-
That's very helpful. Thank you.
Next?
James Britton, Nomura.
Go ahead, please.
Good morning. I've got another one on India, please. Assuming you do manage to acquire licenses in India, when do you expect to have secured a new foreign partner in that market? And how will their equity investment in the new venture be deployed? Will you be accelerating the network side of things, or would you reduce your investor capital and take money out?
These are details that I cannot go into at this stage, as we are in the midst of putting these things together. So we will have to wait to comment on those, whether there is a solution or not.
Okay, thanks.
Next?
Maurice Patrick, Barclays.
Go ahead, please.
Oh, hi, guys. Yeah, Maurice here from Barclays. We've all been eagerly awaiting the OpEx reductions through network swaps that you've been making across the geographies. I'm just curious to get a sense of, specifically in Sweden and Norway, how much of the margin strength has come because of the network swaps, and how much of it is other? Thank you.
I don't think I can be specific on that. We are still exercising, what shall I say, adjustment activities in the network on the radio side. There are pockets in Norway that needs to be better adjusted than what is the present case. So I don't have a quantitative figure on that. But one thing is quite sure, the new radio network in Norway benefits already the energy side. That doesn't mean that much in Norway, one could say, because we're hydropowered and on the public network all the way through. But on the other side, from an energy perspective, energy perspective, we do consume less both here and in other areas.
I think the most important fact is really the energy side at this stage.
Okay, got it. Thank you.
Next?
Ulrich Rathe, Jefferies.
Go ahead, please.
Thanks very much. This is a question on, Sweden. I mean, 3 Qs, the 3 Q results usually are quite high, but this quarter, you see, you saw a very strong margin uptake. And the thing that I'm wondering about is that on the revenue mix, I do see that whatever growth acceleration you saw was very much driven by device sales, I think. The underlying sales revenue growth was essentially the same as in the second quarter. So I was just wondering, what do you attribute that very strong margin to? Are there any particular cost items which were unusually low and maybe not sustainably low, or is this really a reset of the old operating model that we are seeing the beginnings of here? Thank you.
I can answer that one. Sweden has done a very good job over the last few years, and, as you say, installed new operating models in many aspects of their value chain. Specifically on the third quarter results, we see that the growth come from data. And, when you compare the third quarter, this, in 2012 compared to 2011, you're comparing two different price systems in the market. We have introduced a new system, where we don't discount and subsidize the handset, but you get a subsidy, or a discount on your subscription, if you like.
Say you buy an iPhone, and then you get NOK 100 per month discount on your subscription. So if you do a very basic calculation, you just add that back, that discount back to your service revenue, and say that previously was taken as a handset subsidy, you get an underlying service revenue growth of around 3%. This is a too simplistic calculation because there are many other effects, but for very practical purposes, you can say half of the growth comes from the device and half come from the service revenue. So that explains basically the top line, and then they have good cost control. This quarter, OpEx is about the same as same quarter last year, and with a 6% top line growth, then you get a margin uplift.
In the second quarter, we had high customer service cost. We still have high customer service cost in the third quarter, but it's on the right trend. But again, like Fredrik said, Sweden's done a very good job this quarter.
Thank you very much.
Next?
Thomas Heath, Handelsbanken.
Go ahead, please.
Thank you. A question on Denmark, if I may. Telenor's cheaper brands in Denmark were pretty aggressive during autumn. And just wondering how you view this strategically. TDC has signaled maybe going a bit more premium in the market. Is that something you'd support by being less aggressive, or are you fighting for the last subscriber? Thanks.
The competitive situation in Denmark is as before. Consolidation would probably have been very helpful for the industry, as well as from the quality development of both network and services. But given where we are, competition is at a heated stage. And since the Danish economy is suffering from more a recession type rather than a growth profiled economy, I think consumption is feeling that heat. And with network capacities on four players, the result is a competitive marketplace. However, if there is so that prices has reached a bottom and needs to be revised, we will certainly look at that in the picture of the dynamic marketplace.
Okay, thank you.
Next?
Jakob Bluestone from Credit Suisse in London.
Go ahead, please.
Hi there. You've, during your presentation, highlighted Grameenphone and, and Denmark as the sort of main drags on the, the top line. And I guess the problems at Grameen are relatively recent, while Denmark has been struggling for a bit of a, for, for some time. I was wondering if you could maybe give us a little bit of a sense of when do you expect to see better revenue growth coming through in those segments? And do you, for example, expect that revenue growth in Denmark and, and Bangladesh will be better in 2013 than 2012?
In Grameenphone, I think we have to say that it's actually Grameenphone's ability to participate in the existing market growth that has been the challenge in this quarter. We saw these signs in the second quarter as well. Now it's more or less confirmed. And in that sense, Grameenphone needs to find its recipe on how to meet that kind of competition. And there are plenty of examples around in the industry of a more or less incumbent-like player, like Grameenphone, getting this kind of challenge. When can we expect result? I think we should definitely expect to see results of a different kind, at least in the first half of next year, as I said previously. In Denmark, I think it's a different question.
There, the economic growth rate is key to, as to whether consumption at retail level basically will spur or not. And I think we will have to expect a pretty tough marketplace for all players there. Us having the number two best margin level, seeing two other players with lower margin as ourselves. So in that sense, I think we have to expect that the competitive pressure in Denmark will continue, and that our adaptation to that kind of environment will be reflected likewise.
We will have.
Very helpful.
We'll have time for two more questions. Next question, please.
Next.
Alex Wisch, S&P Capital IQ.
Go ahead, please.
Hi, just a question on the regulatory regime. You mentioned that one of the things that you're monitoring because it's becoming, it's turning against you. And you've mentioned, of course, the situation in Hungary is widely known, but which countries and which areas of regulation are you thinking about when you're saying that it's getting tougher? Is it... I mean, which countries would help, and also which areas? Is it more taxation or, you know, which areas are you looking at?
I think this is a general feature in basically many countries. Governments which are looking at having difficulties with balancing their budgets in particularly in a recession-like type environment would probably easily detect that there is a telecom or an energy sector out there that can contribute to to fill in holes like that. And the visibility of the industry is, in that sense, also very easy to spot. In Hungary in particular, the crisis tax that we have had now for the third year, and to expire towards the end of the year, has been replaced by an excise tax, which basically comes on top of the crisis tax that we already have in this specific second half of 2012.
So, next year, the crisis tax in 2013 will not be there. Do we get other taxes, on the screen? Well, I don't shy away from the fact that these means are means that politicians are looking to in specific situations. And, it's enough to mention the 3G process in India and what it led to on 2G later on, and what kind of immense strain the industry has been through. Where also India has seen their telecom investments being halved, both in 2011 and in to 2012 compared to 2010.
So regulation plays an immensely important part as to whether authorities are striking the balance correctly between a license fee and seeing the industry's ability to really complete a network rollout and to build a marketplace around the technology afterwards. As an example, we have started on that journey here in Norway for 4G, and this 4G route will also be coming back in every country where we operate, as well as in other countries. The 4G dimension is not only the capacity side in the cities, it's also about the coverage side on rural areas. Generally speaking, in Norway, the frequencies have been available at the point of time which has been early in the industry.
Whereas on the 800 side, we are a latecomer compared to other markets. And with 800 in hand, we could have done a more speedier rollout on also getting coverage in the rural areas. So you will see these kind of initiatives all around the clock, and it is both each independent operator to voice this, as well as the industry organization, as GSMA, as an example.
Okay, thank you.
Last question, please.
Dominik Klarmann, HSBC.
Go ahead, please.
Yes, just a big picture question on the slowing revenue growth. I'm just wondering if it's now a time to look more actively for inorganic moves in high-growth areas. Is your appetite bigger than, say, a year or two years ago? Or do you see more opportunity to just prepare for growth to pick up again in your existing operations? Thank you.
The growth pattern that comes from new greenfields with no connectivity almost doesn't exist anymore. The growth dimension of this industry is that of wider usage and mobile internet in particular. And remember, on the mobile internet side, we have not yet even started the real growth journey in all those countries that are more fully depend-- or more, more fully and more only dependent on the mobile infrastructure for mobile internet services into the future. So I think there are lots of growth opportunity in the industry. Then we have to be good at operating, and if we are good at operating, then we should also have possibilities in looking to looking into new geographies if there is an opportunity.
But there are the number one priority in Telenor is to nurture and develop the existing operations, and from the capacity that we get from that, we might be able to also to look into other areas at a later stage. However, at this specific, specific point of stage, we are here to sort out the starting position is in India, and to find out whether there is a go or no-go on that one.
Thank you, Fredrik and Richard Aa. Remaining questions can be addressed to our investor relations department, and that concludes the session this morning. Thanks to all of you for participating. Thank you.