Earnings Call: Q3 2019

Oct 17, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Tele2 Q3 Interim Report 2019. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer I must advise you that this conference is being recorded today, Thursday 17th of October 2019. And I would now like to hand the conference over to your speaker today, Anders Nielsen. Please go ahead. Thank you very much, Serena, and good morning, everyone, and welcome to the Q3 report call for Tele2. With me here, I have Michael Larsen, CFO and Samuel Skoss, EVP, Sweden Consumer. Today, we will walk you through the results for the quarter, give you an update on our ongoing initiatives and then move over to Q and A, so we can address the topics that you are most interested in. Please turn to Slide 2 for a brief summary of the results for the quarter and of the 1st 9 months of the year. The Tele2 Group end user service revenue was flat in the quarter year to date. This is in line with our full year guidance of flat growth. Underlying EBITDA, excluding effects of IFRS 16, increased by 5% in the quarter and 4% year to date, driven by cost reduction as we continue progress on the synergies. This is also in line with our full year guidance of mid single digit growth. CapEx, excluding Spectrum and leases, amounted to SEK 0.5 billion in the quarter and SEK 1,700,000,000 year to date. Since the 5 gs rollout in Sweden will start later than anticipated, we have decided to lower the CapEx guidance for 2019 to SEK 2,300,000,000 to SEK 2,600,000,000, down from SEK 2,600,000,000 to SEK 2,900,000,000 previously. So the conclusion is that we are performing in line with our guidance for the year. Now let's look at our strategic initiatives on Slide 3. The Sweden Consumer segment continued to make progress on our FMC strategy with 141,000 customers now on FMC benefits. This represents a penetration of almost half of the addressable overlap between the mobile and fixed customer base after less than a year since the offers were launched. We took a major step by introducing mobile pricing as a new growth driver this quarter. Similar to what we have done on the fixed side for years, we believe that we can achieve sustainable growth by monetizing increased customer satisfaction through annual price adjustments. This is what we call the more for more strategy. As a part of this more for more strategy, we introduced a new family offer and new data buckets in the Tele2 brand. Samuel will give you more detail on the strategy in a few minutes. In the Sweden Business segment, we continue executing on our plan to turn into revenue growth and improve profitability. However, this is still work in progress at this point as price pressure in the large enterprise market persists and the strategic changes we have made are yet to have impact on revenue growth. In large enterprise, our focus is to take high margin contracts in the private sector while cutting costs. In SME, we aim to take market share and reduce churn by improving our mobile offering and using our fixed mobile convergence capabilities. One area where we do see sustainable growth is the Baltics, where end user service revenue grew by 10% and underlying EBITDA, excluding IFRS 16, grew by 6% in the quarter. We continue to execute on cost reduction, which had an impact of $150,000,000 in the quarter, adding up to $300,000,000 in the 1st 9 months of this year. We reached an annualized run rate of $650,000,000 already after 9 months and now raise our year end target to a run rate of SEK 750,000,000. Please move to Slide 4. We maintain our guidance for end user service revenue. Since we expect revenue benefits from the commercial strategy to gradually ramp up, we expect end user service revenue to be roughly flat in 2019 and thereafter grow by low single digits. We also maintain our guidance for EBITDA. We aim for mid single digit underlying EBITDA growth excluding IFRS 16 in 2019 and over the midterm, mainly driven by front loaded cost synergies in 2019 and a combination of revenue growth and cost reduction in the coming years. Like I mentioned, we now lower the midpoint of our guidance for CapEx, excluding spectrum and leases, by SEK 300,000,000 this year to SEK 2,300,000,000 to SEK 2,600,000,000 down from SEK 2,600,000,000 to SEK 2,900,000,000 to reflect a later rollout of 5 gs in Sweden. We maintain the CapEx guidance for the midterm at SEK 2,800,000,000 to SEK 3,300,000,000. This is the model by which we translate low revenue growth into slightly higher EBITDA growth through OpEx reduction. We then achieve even higher cash flow growth through disciplined CapEx spend. In addition, we used our balance sheet to lever up the growth in EBITDA within our target range of 2.5 to 3 times to grow the cash available for shareholders even more. This should lead to a very attractive shareholder remuneration profile over time. This year, we have distributed a total of roughly SEK 7,100,000,000 to shareholders through the ordinary dividend, which was paid out in tranches SEK 2.2 per share in May October and the extraordinary dividend of SEK 6, which was paid out in August to distribute the proceeds from the sales in Kazakhstan and the Netherlands. Now let's take a closer look at the segments starting with Sweden Consumer on Slide 6. The Swedish Consumer segment continued to deliver strong volumes with net intake at the highest level in several years. Our core services had a net intake of 35,000 RGUs and the legacy service decline slowed down further with an outflow of only 11,000 RGUs. It is great to see such momentum in our core services since this is the area where we can really extract value over time through both volume and price as we execute on the more for more strategy and drive FMC in the customer base. As you can see in the chart to the right, we are yet to execute on the second part of this strategy and monetize customer satisfaction through ASPU growth. As expected, the ASPU pressure continued this quarter as the effect of this year's smaller fixed line price increase remains. This slide paints a good picture of how we use customer satisfaction to drive growth. All of our commercial initiatives this year have been aimed at doing one thing and one thing only, improve customer satisfaction. So far, we have monetized that customer satisfaction through volume growth, as you can see on the chart to the left. When we look at these charts again next year, you should expect to see the effect of this strategy on the chart to the right as well as we monetize customer satisfaction through back book pricing. On Slide 7, you can see the financial effect of the strategy so far. Total end user service revenue saw the Q1 of growth since Q1 2018 with a slight growth of 0.4%. End user service revenue in our core services continued to grow, up 3%. As you saw on the previous slide, this was mainly driven by volume. We also see a lower drag from a decline in legacy services, driven by a great performance in mobile prepaid and slight improvements in DTT ASPU, which is an area where we actually did significant pricing this year. Continued execution on cost synergies resulted in a 4% growth in underlying EBITDA this quarter. Now Samuel will walk you through our More for More strategy in more detail. Thank you, Anders. Over the next few slides, I will talk about our new growth driver, mobile pricing, and how we execute the more for more strategy to build customer satisfaction, which we then can monetize through volume and price. I, however, want to make clear and hope that you all appreciate that we will never publicly comment details and exact timing for possible pricing moves before they are implemented. Pricing will always be dependent upon market environment and the more for more principle, I. E, increasing customer satisfaction. But let's start on Slide 8. We have a structured and continuously ongoing approach towards pricing with the foundation being our focus to create great value for our customer. That's where it all starts. Customer value is created through award winning network and products, great brands, which we position as leaders in the premium segment and clear more for more benefits. This then creates value for the customer that we can benefit from in different ways, pricing being 1. We have a yearly pricing cycle that includes both fixed and mobile products. Updated front book prices and proactive value given to our customers are then used for gradual back book repricing, the majority of which is done in the Q1. On Slide 9, you can see how we implement this strategy on the fixed side. In broadband MTV, this strategy has been in place for several years and after a relatively slower year of pricing in 2019, we have on the back of several product improvements and our FMC strategy increased the front book prices for broadband. In the Q4, we will now execute some smaller back book adjustments to optimize our approach as we do the major adjustments in Q1. Let's turn to Slide 10 to look at the mobile pricing plan. For our mobile business, pricing is a new growth driver that we're leveraging. However, the principle and the mechanics are the same as in fixed. In the Q3, we updated our Tele2 mobile portfolio as we increased front book pricing. At the same time, we launched an advantageous family plan where you can add members for only $1.99 per line and where everyone in the family gets their own data allowance. The family plan is simple and and beneficial to our customers and it will help us on our quest to win the full household. Just like on the fixed side, we will do some smaller back book adjustments in the 4th Each year, we build customer satisfaction by giving our customers tangible benefits that they value, and in turn, we will be able to translate that increased customer satisfaction into revenue growth through a mix of both volume and price. And with that, I would like to hand back to you, Anders. Thank you very much, Samuel. And please turn to Slide 11 for our Sweden Business segment. Within B2B, we see no fundamental changes in the market. The price pressure for government contract continues. This is having an impact on our performance, which will likely continue for some time. Our initiatives to turn this business into growth are yet to have an effect. And as a result, our performance is similar to previous quarters. The most important factor here is to turn mobile into growth. As you can see in these three charts, the 4% growth in mobile Our plan is to refocus the large enterprise segment towards the private sector where pricing is better and go after high margin contracts and cut costs to keep growing EBITDA. In SME, we have historically not put enough efforts to take our fair market share, and as a result, we are underrepresented in this segment. Our focus will be to take market share by improving our mobile portfolio, manage our existing customer base better and utilize our FMC capabilities. On Slide 12, you can see that we are cutting costs in this segment, which resulted in a 4% growth in underlying EBITDA, excluding IFRS 16, in spite of revenue decline. Please go to Slide 13 for an overview of Sweden as a whole. While we see end user service revenue inch its way up toward growth, we are still not there as the decline in the business segment offset the slight growth we saw in Consumer this quarter. However, underlying EBITDA excluding IFRS 16 grew by 4% despite the revenue decline, driven by continued execution on the cost synergies, partly offset by investments into growth initiatives. We continue to see strong cash conversion of 72% as CapEx spend is relatively low, now in between investment cycles. Before we move on to the Baltics, I would like to walk you through the conclusions of the Swedish network audit, which we started last quarter to investigate the recent network outages. So please move to Slide 14. We find the conclusions of the audit reassuring for a few reasons. The audit found that the quality of our radio access network is excellent. As further proof of this, we were actually named the best network in Sweden by the recent P3 benchmark test. As you may know, the radio access network is where the bulk of the network CapEx goes, which reassures us that we do not have an underinvested network. The area where we need to make improvements is the core network, and these improvements are mainly related to simplification of processes rather than financial investments. The good news here is that the recommendations of the audit are in line with our current core upgrade plans, which means that everything is already included in our CapEx guidance. We now have a pipeline of improvements, which have already started and will continue over the next few quarters, including consolidation of our network operating center into Sweden to improve our ability to properly service the complex mobile and fixed networks we have there. We will also improve the way we work with our suppliers so that we can be strategic long term partners and grow together. We look forward to implementing the recommendations of this audit and ensure that continue to have the best network in the country. Now let's look at the performance in the Baltics on Slide 16. We continue to see strong results both in terms of volume and ASPU this quarter. While Lithuania is the main driver, we are also happy to see that Estonia has maintained positive momentum in both volume and ASPU for a few quarters now. ASPU growth was particularly strong this quarter across all three markets. While we do see a great underlying trend, this quarter was somewhat boosted due to the easier comps in Q3 last year when we unfortunately had roaming outages. On Slide 17, you can see that we had continued strong growth in end user service revenue with solid growth in all three markets. It's worth noting that Estonia turned the corner and grew revenue for the first time since Q4 2017 and saw underlying EBITDA growth for the first time in 3 years. Underlying EBITDA, excluding IFRS 16, for the Baltics grew by 6%, somewhat lower growth than we are used to due to elevated equipment margins in Lithuania in Q3 last year. Continued EBITDA growth and low capital intensity led to strong cash flow generation, as you can see on the chart to the right. And with that, I'm happy to hand over to Mikael. Thank you, Anders, and good morning, everyone. Please go to Slide 19, group income statement for the Q3. Revenue reached SEK 6,850,000,000 in the quarter, with a record high underlying EBITDA margin of 41% or 36% if we exclude the positive effect from IFRS 16 in this year's numbers. In the quarter, we recorded costs related to the acquisition and integration of Com Hem of SEK 72,000,000, which are included in items affecting comparability. The major step up in depreciation and amortization versus last year is explained by additional amortization of surplus value from acquisitions of SEK 298,000,000 as well as depreciation of right of use assets under IFRS 16 of SEK 296 1,000,000. Net profit for the quarter almost doubled to about SEK 1,000,000,000, which is the result of the Com Hem merger and the transaction in the Netherlands. Let us move to the cash flow statement for the quarter on Slide 20. Equity free cash flow increased by 67% compared to the same quarter last year, reaching SEK 1,800,000,000 in this quarter. Explained by Com Hem being included in this year's numbers and also improved cash flow generation in the rest of the business. EBITDA increased by 70% for continuing operations when excluding effects from IFRS 16 in 2019 numbers. CapEx paid were some $200,000,000 lower in this quarter, mainly explained by the divestments of largely driven by introduction of Combiq Handset Financing arrangement. Please go to Slide 21, synergy update. In the quarter, we had a positive impact of approximately SEK 150,000,000 of OpEx savings in the books, leading to a total of $300,000,000 year to date. At the end of the Q3, the annualized run rate of realized OpEx synergies reached SEK 650,000,000, while we have upgraded the target for the end of this year to SEK 750,000,000, which is mainly explained by faster headcount reductions than we originally planned. The SEK 900,000,000 3 year target in total annual OpEx synergies remains unchanged. Also for the revenue synergies, realization goes as planned with now almost half of the overlapping customer base on FMC benefit packages. Let's move to Slide 22 for a summary of our financial guidance. And as Anders already mentioned, guidance end user service revenue and underlying EBITDA is unchanged, while the CapEx range has been lowered by SEK 300,000,000 for this year, explained by later than expected start of 5 gs investments. Midterm target range for CapEx is unchanged at SEK 2.8 billion to SEK 3,300,000,000 during the rollout phase of 5 gs and Remote PHY in the fixed network. Please go to Slide 23. Group leverage measured as economic net debt to underlying EBITDA of the leases was at 2.6% at the end of September, up SEK 0.2 in the quarter, explained by payout of extra dividend of SEK 4,100,000,000, partly offset against the strong equity cash flow of SEK 1,800,000,000. When including the second tranche of this year's ordinary dividend, total amounting to SEK 1,500,000,000, which was paid to shareholders in beginning of October, leverage would have been 2.75x end of September, I. E, in the middle of our target range, 2.5x to 3x. And this means that we have year to date distributed SEK 10.4 per share or a total of SEK 7,100,000,000 to shareholders. Huawei, at the same time, has slightly reduced leverage from SEK 2.8 beginning of the year down to 2.75 end of September. And with that, I would like to hand back to you, Anders. Thank you, Mikael. Now please turn to Slide 25 for our key priorities going forward. The key to achieve sustainable growth for Tele2 is to reignite growth in Sweden, especially in our largest segment, Sweden Consumer. We will do this by ramping up FMC penetration in the customer base to reduce churn and increase pricing power over the long term. This, along with a new profile and offering of the Tele2 brand, is how we will win the Swedish We look forward to executing on the next step of the More for More strategy and growth through pricing as well as volume going forward. In B2B, we have the ambition to turn into growth by focusing our efforts in large enterprise on the private sector and take high margin contracts while continuing to reduce costs. We also aim to take market share in the SME market by revamping our mobile portfolio, reducing churn and utilizing our capabilities. On the cost side, we will continue executing on the synergies and aim to reach a run rate of SEK 750,000,000 by the end of this year. In addition, we are investigating the potential for more structural change over time to turn Tele2 into a true integrated challenger. We aim to get back to you with more details when we report our Q4 2019 results. Outside of Sweden, we will build on the momentum we have in the Baltics, and we look forward to closing the sale of Croatia later this year. With that, I hand over to our operator for Q and A. Thank you. Our first question comes from the line of Maurice Patrick from Barclays. Please ask your question. Your line is now open. Good morning, guys. This is Maurice here from Barclays. Question really on the timing of B2B recovery. You sort of talked about the time line for that recovery in the past. Now you're saying it's going to take some time. Looks like mobile FX is reasonably tough. I mean, what do we think about the time line for stabilization of B2B revenues? I mean, where do we see ARPU stabilizing? I know you talk about a mix of different segments there. Hi, Maurice. It's a very good question and a very tough one at that. It's very hard to answer it because we do not have a crystal ball here that looks into the future. But what I can tell you is that we are going to aim to make this happen sometime next year. Whether that is possible or not, it's too early to say, but that's what we aim. On the other hand, I mean, what we are solving for is to get into growth in Sweden. And there are 2 components, as you know. It's consumer and it's B2B. And consumer is by far the largest part. So the most important thing here is that consumer goes into growth, which we are now, where Sango delivered an 0.4% growth in Q3, small but still growth and a nice trajectory there. And we do believe that we will be able to grow Sweden and the company next year even if B2B does not go into growth. So that's what I can give you right now, Maurice. Thank you, Anders. Thank you. Your next question comes from the line of Roman Arbuzov from JPMorgan. Please ask your question. Your line is now open. Good morning. Thank you very much for taking my question. My question relates to the cost savings and is the interplay and potential substitution between the synergy related cost savings from the Com Hem and Tele2 merger and the structural cost initiatives that you talk about as a potential additional lever for cost saving opportunities going forward. So when you take the Com Hem synergies, right, you are now pretty much delivered on your $900,000,000 target. And it looks like you'll be almost done by the end of the year. A lot of those benefits will come through in 20 20, since that because you've achieved the run rate just now, they'll be coming through a little bit later. But then what about 2021? When you talk about mid single digit growth ambitions for EBITDA in that year as well, with your current guidance, it looks like you will have nothing left from the Com Hem merger for 2021. And I guess this is where the structural cost savings can come in quite handy. And ultimately, my question is, I had previously thought of the structural cost savings that you talked about as an additional lever that will come on top of the Com Hem, the savings. And that would mean that you could potentially exceed your mid single digit EBITDA growth. But the way the numbers are shaping up and the way your communication is, it looks like it will just be a lever that will allow you to maintain the current momentum, the mid single digit EBITDA growth and not necessarily something that will come on top of it. Any color here will be much appreciated, please. Yes. Thank you very much. I think that's an interesting line of thought to have there, Roman. So the way we look at it is that, I mean, if you look at the mid term guidance, obviously, since we don't have much of growth right now, all the EBITDA improvements more or less comes from the synergies we realized on the cost side. Over time, as growth comes into play, we will actually see EBITDA growth coming more and more from the revenue growth. And we can see a scenario whereby we can deliver mid single digit EBITDA growth only by the leverage we have from growing our top line. So I don't think savings is a necessity midterm to actually grow mid single digits. Revenue growth is however. So the way I look upon it is that the as the cost savings are phased out, if you will, revenue growth is phased in, and we still should deliver the EBITDA growth. The structural savings we are talking about, those, in my mind, are also addition to the plan we have and our guidance. What remains to be seen, however, is what kind of structural savings we can have, And that we are not in a position to talk about right now. We are looking into them. We are planning them and planning what to do. And it's something we plan to be able to discuss with you when we release our full year results in the beginning of next year. That's what I can give you at this point in time. No, that's great. Thank you so much. Thank you. Your next question comes from the line of Terence Tsui from Morgan Stanley. Please ask your question. Your line is now open. Thank you. Good morning, everyone. I just had a question around the pricing strategy in the Swedish mobile environment. You mentioned that Q3, you saw really strong volume growth. Just wondering whether you're seeing any signs that the competition are fighting back to protect their market share. And if not, do you think that when customers start to absorb the price increases that you are starting to put through, whether you'll see less churn than was the case when you started to increase prices in broadband and TV? Thank you. Hi, Terence. Samuel here. So I think on the strategy, I mean, the mobile market in Sweden is a competitive one and has been and we see, I mean, 3 different segments in this market. So it is highly competitive, but and will remain like that. However, our investments into the Tele2 brand, together with having a full product suite with Com Hem makes us a stronger player in the premium segment and therefore less sensitive, I would argue. And on the back of that, we can do pricing, but also, of course, we introduce the family plan at the same time so that we can continue to have a good balance of both volume and price going forward. So I think net net, this should be just a positive continued gradual positive move for our mobile business going into 2020. In my book, in addition, this is value for money. And we're actually providing much more value for money now than we have done historically with this new pricing plan. So that should go hand in hand in the premium segment, I think. Definitely. And even if we would lose some in kind of a single play mobile area, we are definitely winning more by being much stronger as a household player now. And that is our focus going forward. Thanks. That's really clear. Your next question comes from the line of Abhilashmorhappatra Berenberg. It's Abhilash from Berenberg. I've just got one on CapEx, please. You've obviously reiterated your midterm CapEx ambition. I guess you've seen some pressure from one of your peers today on CapEx guidance. Appreciate that, obviously, they're more sort of diversified than you and have more countries to think about. But just would be interesting to sort of hear your thoughts on your 5 gs plans and whether you think there's any risk that it ends up costing more than what's your guidance currently envisage? It's Mikael here. I will try to respond on your question. For us, how we look upon this and in our plans and projections we are having, it's the only thing that has changed since last quarter is that the 5 gs rollout will start a bit later. It will probably be completed a bit later than we originally planned. So it's just that we are pushing CapEx further into the future, the additional spending we will have for 5 gs. Except for that, there are no changes in what we the total envelope for building 5 gs, that is per our original estimate. And those numbers are better confirmed now than they were 1 year ago when we communicated the CapEx guidance. So it's just that we're pushing CapEx somewhat into the future. At the same time, we are building capacity in the existing network. So from a customer experience perspective, this it doesn't affect customer experience short term that we have this slight delay in 5 gs. I hope that answers your question. Yes, that's great. Thank you. Your next question comes from the line of Ulrik Rafi from Jefferies. Please ask your question. Your line is now open. Yes, thank you. I'd like to come back to this question of competition. I mean, you talk about volume growth in continuing in Consumer. You mentioned the sort of shift towards higher value, which you think makes it sort of less vulnerable to competition and also about outright share gains in SME. Now on the other hand, Telia has more or less sort of indicated today that part of the actions they're taking is actually there to relieve build budgets for commercial measures. So I'm not entirely sure why exactly you think that really taking share and increasing volumes in the higher end is some more less risky strategy, in particular, because the FMC capabilities that you now have are not unique to the market. They're new to Tele2, but they're not unique in the market. So could you just explain why in the higher end, you expect less of a sort of market share defense of the players who have share and that you're trying to attack? Thank you. So Samir here. Now I think we can be very open about that we don't see this as a big market share kind of a competition in the premium segment. For us, it's about gaining trust, satisfaction and loyalty with our own customer base so that we can grow there with additional products that creates volume, but also pricing as satisfaction grows. So for us, this is about positioning ourselves as premium and making sure that we give our existing customers even more value so that they buy more and stay longer with us. We don't see this as a big kind of market share war in this segment in Sweden. I would say actually on the opposite, what we've seen in the market the last year is the main brands, in general, providing more value to the customers. And that is something that is beneficial for the customers, but also for the market dynamics in general. And for SME, which you also talked about, I think we consider being our fair market share over time. And therefore, you get to a higher volume game when it comes to SME. So that's what we have for you on this one. I hope that explains our thinking at least. Thank you very much. Your next question comes from the line of Andrew Lee from Goldman Sachs. Please ask your question. Your line is now open. Thanks. Good morning, everyone. I had a question on the top line as well, but maybe just slightly more positive on the market growth outlook, including your ability to grow within that. So first question was on the Swedish end user revenue service revenues, which improved to just under 1% decline, I think, in Q3. You highlighted in the past that you spent a greater amount of marketing spend in Q2 and Q3, and presumably, the benefits from that are back end loaded. So do you think there's an opportunity for your improvement in Q4 to extend and therefore maybe since you get back to service revenue growth in Sweden as early as Q4? That's question 1. And then secondly, today we had Telia highlight greater scope for price rises and ARPU uplift in 2020 than 2019. Obviously, you can't be specific on what you're about to do, but is that something you can concur with? Thank you. Thank you very much, Andrew. So on timing, when we're going to go into growth, this is very hard to predict. So I'm going to refrain from doing that. What we do see is that we are in a position now and we have evidence and we see it happening and we have traction and momentum. So we see we're going in direction of going into growth. And that leads us to the conclusion that we today think that we will be able to grow this company at low single digits end user service revenue for next year. I don't want to be more specific than that because it's really, really hard to predict what's going to happen next month and so forth and when you're actually going to tip over. So you have to make do with that for now, at least, Andrew. I'm sorry about that. When it comes to pricing in the market, I think I mean, what we do and I think what the company you're referring to do to are doing as well is that we are loading up our customers with customer satisfaction, as Samuel talked about, and by various means. And therefore, we gain pricing power. And Telia has done this before. So they have a head start, and they have seen the positive effects of that. And we come later and then hopefully, we will see the same and we anticipate to see the same. So we are quite bullish from where we sit now on being able to use price along with volume as the two measures in order to grow this company for next year and onwards. Yes. That's really helpful. Thank you. Thank you, Andrew. Your next question comes from the line of Nick Lyall from Societe General. It's Nick at SocGen. Could I just ask Anders, please, on the pricing? I'm just interested to see how far you think you can go. I mean, you mentioned on the network review that you thought you had best quality on network. And you're sitting at anything between a 15% 30% discount like for like on 2 year prices. So how far can you push that? How sustainable does the discount or how large does the discount have to be to have sort of growth in FMC and growth in Family Products? Could you talk a little bit about how much pricing you could think about putting through in time, please? Yes. I'm going to answer thank you very much, Nick. I'm going to answer in a slightly different way. What we are trying to do now is to put ourselves in a position so we can use price consistently over many years. So it's not about having a 1 year mega price increase, if you will. It's having smaller price increases every year that together with a small volume intake we're going to plan for is going to lead to low single digit end user service revenue growth. That's what we're solving for. So it's rather doing it for a long period of time, small magnitude than doing it in a short period of time with a high magnitude. And now we our adjustment today is that we are in that position for next year and onwards. We have built a lot of customer satisfaction. I mean, the pricing plan that Sam talked about, the family package, the FMC benefit packs where you get double data or higher speed tier or both actually if you're an FMC customers. We have more coming up next year in terms of benefits that really are meaningful for customers that we now have a super duper network quality and got that stamp from P3 will help us. And the rebranding of Tele2 is another thing. So I mean, I think we've built a lot of customer satisfaction that underpins the ability to take pricing in the premium segment over quite many years. And that's actually the aim. That's what we're trying to do. So and that's so far so good, I would say. We executed quite well, I would add. Sam has executed quite well on this. So that's how I would like to answer it, Nick. Great. Thank you. Thank you. Your next question comes from the line of Stefan Goughin from GMB Bank. Please ask A follow-up on the earlier CapEx question. First of all, you postponed the 5 gs CapEx spend. Can you just give an indication when you expect this to happen to start? Is it first half twenty twenty or second half? Secondly, Telenor has highlighted the need for a modernization or a network swap of the old or of the 2 gs and 4 gs equipment in Sweden. Is this already part of your medium term CapEx guidance? Or could that modernization or network swap come on top of that? Stefan, thank you very much. So I'll start with the second one. The modernization of 2 gs and 4 gs is included in our CapEx guidance going forward. So that's not in addition to anything. It's already included, and we'll do that when we do the 5 gs rollout. When it comes to the timing of 5 gs rollout, it's a bit unclear today. First of all, what needs to happen is that we need to have the spectrum, and there is a spectrum auction coming up, the high band auction maybe in Q1 next year. The data has not been set, so we need that one. That's one gating factor. The second thing we need to understand is the network security legislation, which is also due to happen both in Sweden and on an EU level. So when we know what they actually say, we are in a position to choose vendors. Before that, it's a bit risky to do so because we are making a lot of investments, obviously, that should last for a very long time and you don't want to end up in a situation where you have to change while already have invested. So those are the 2 gating factors, which are a bit out of our control, I have to say. So we'll have to watch by the sideline as you and once we get clarity, we can move in and actually start building. I hope that answers your question, Stefan. Yes, very clear. Thank you. Thank you. Your next question comes from the line of Steve Malcolm from Redburn. Yes, thanks. Good morning, guys. Two questions, please. One just on the wholesale contribution to Swedish B2B. It looks like you said that the EBITDA growth came from cost cutting, but what I can see at all and more comes from the wholesale revenue growth. I think there was $30,000,000 extra EBITDA contribution this quarter. There's $40,000,000 last. Can you just give us a bit more detail on where those wholesale revenues are coming from and how sustainable the growth that you're getting out of the wholesale business within B2B is? And secondly, on Lithuania, Telia gave a sort of muted warning on the ability their ability to offset inflation in Lithuania going forward. You don't seem to have the same concerns. Maybe just sort of outline why you're sort of relaxed that you can keep taking price against an inflationary cost backdrop in Lithuania. So I will deal with the Lithuania question to start with and then Mikael will take wholesale. So on Lithuania, I mean, we have different positions in Lithuania, Telia and ourselves. We are the market leaders. And if you know the story, I think 10, 15 years ago, when our current CEO became CEO, we were number 3 in the market. And since then, we have surpassed our competitors, BT and Telia. Now number 1. In my mind, Tele2 in Lithuania is an extremely well run super duper operator with a very, very strong brand and has outperformed the market consistently for quite many years. And I think we are in such a strong position that we will be able to continue this going forward. We do not see any of the pressures when it comes to cost and the like that others may see, and I think we will be able to continue the path we're on. When it comes to wholesale, Mikael? Yes, I will try to answer that question, although I can't go into that many details. This is a regular wholesale business where we are conducting in Sweden in the B2B sector. And both revenue and profit varies between quarters in its more volatile business than the rest of the business, I would say. Also, we have changed the accounting methodology somewhat due to the integration of Com Hem over the past year. You should look at the Q3 numbers now. They are more representative for how we manage this business today and in the coming quarters. I hope that answers the question. So is there a sort of one off ish boost from the accounting change in the EBITDA growth we can see from Wholesale and B2B? It can you have one offs in previous periods, yes, if that answers your question. Yes. Okay. Thank you. Your next question comes from the line of Peter Nielsen from ABG. Please ask your question. Your line is now open. Yes. I would just do one, please, if I may return to the B2B market. Last quarter, Anders, you talked about the intense pricing pressures in the large enterprise market, which, if I recall, might see you sort of consider stepping slightly back from this market. You're not talking about taking high margin contracts in the Large Enterprise segment, which sounds easier said than done. Are there any high margin contracts left in this segment to be taken? A very good question, Peter. So I mean there are 2 basically segments in the large enterprise market. You have the public markets, public customers, and they are all 1 under tender. And this is where you have where basically price is the only variable that you can put in. And therefore, you and the outcome of these and the price that won will become public as well in the end. So therefore, you have a tremendous pricing pressure on these contracts. Then you have the private sector, I. E, old companies not held by the states or municipalities. And there you have a negotiation and there are no tenders, which means that there you don't see the same pricing pressure at all, which you see in the public sector, and this is the difference. So we will then obviously continue going after the public sector, of which we have quite much in terms of customers and put more effort also into the private companies where we are underrepresented today. And I hope that answers your question. Okay. Cheers. Your next question comes from the line of Vetterberg from Nordea. Please ask your question. Your line is now open. Yes. Thank you and good morning. A follow-up question on the CapEx questions from before as it relates to the 5 gs rollout. So you talked about the uncertainties around vendor restrictions, etcetera. And previously, you talked about that it could lead to increases in costs for you that you would have to pass on to customers. Could you give us a sense of the magnitude if you would not be able to continue with your current vendor setup or if you see risk to the CapEx guidance at all? And the second one is also relating to the 5 gs introduction. How do you see device availability for Sweden going into a potential 5 gs launch? Is that a bottleneck? Or do you see that resolving during next year? Thank you. So thank you very much, Jurgen. So the I mean, regardless of which vendor you use, there will be obviously an uptick in CapEx when we build the network, and that's what we have been related to or what we meant when we talked about price increases or cost increases going forward. It was not related to a vendor as such, but the phenomena of investing into new technology. Then as Michael explained earlier, we now have much more visibility when it comes to the investments needed in order to do 5 gs from all the vendors than we did a year ago when we actually came out with the guidance. So we, at this point in time, feel fairly comfortable that this is under control, and we will be able to live according to our guidance going forward, regardless of who the vendor in the end will be. So that's what I can say on that one. When it comes to the devices, I'll hand over to Samuel. Yes. And I think I mean, we are seeing 5 gs devices around the world now and many handset manufacturers are investing heavily into producing newer and more. And I think especially given that we see a postponement of 5 gs currently in Sweden, there is no worry about having good 5 gs handsets whenever we launch. Okay. Thank you. Your next question comes from the line of Arden Poohrramli from HSBC. Please ask your question. Your line is now open. Thank you. It's Adam from HSBC. I wanted to ask a question about the Tele2 brand the any metric or evidence that you're tracking in terms of consideration or promoter score that you can share with us as to how that's going? And then secondly, just on the Com Hem synergies. Briefly, can you tell us what's left and how that what you're expecting there? Because you'll see you're guiding for that to take another 2 years to come out, if I understand things correctly. Adam, Sami here. So on the So on the question on the Tele2 brand, I mean, we've basically seen improvements across the board since we did this rebranding. It's one of the most light campaigns we've ever had. We've seen net intake profile of Tele2 brand improvement, both through more sales, but also lower churn. And we also see the NPS figures improving since launch. So overall, very positive. Of course, we need to continue this. It's about educating the market as well about our new position, but so far, very good, Damonte. And your second question is Michael here. The synergies, what remains and will remain for 2020 2021 is network and IT related synergies. We are told from the start that these will come in the later periods since it takes time to realize the synergies. It's about combining the 2 networks mainly and some IT systems. So those remain. Your next question comes from the line of Sihi He from Citigroup. I just have one, please. I want to circle back to your midterm top line and mid single digit growth targets. I mean, I understand it's a quite wide range, but if I think about you put 8% price increases in both of your fixed mobile front book and you're going to pass it to the back book and you'll have a strong message on your Baltic performance. So I was wondering whether you are now looking at a performance going forward. Would you be more confident that top line growth rate could be more geared towards mid single digits rather than towards 0% in the mid term? Thank you. Hi, and thanks for your question. So this will ultimately be a tactical decision in the end. And I think if history is the guidance of future, I mean, look at what's done where we used this strategy before in the Com Hem brand for 7 years. And I think you ended up with like a 1% to 3% effective price rise every year. And that's probably somewhere in that range we're going to end up here as well, I would guess. But as I said, again, it's a tactical decision, and it's something which we then will have to combine with volume growth. So if we have stronger volume growth, we'll probably do less on pricing and vice versa. But I don't think we're going to outstretch ourselves to try to short term do very strong revenue growth because that will cost later on. We will need to have sustainable growth over multiple years. I think that is the key here. It's quite hard also to be very specific on the midterm, more specific than we are given that we are just starting this journey. And as we go along, I think we will be able to give you better guidance than, unfortunately, I can do right now. So that's what I have for you. Thank you very much. Thank you. Your next question comes from the line of Henrik Herbst from Credit Suisse. Please ask your question. Your line is now open. Yes, thanks very much. I just want to sort of follow-up on your pricing strategy and brand strategy, I guess, in Sweden. I think you have talked about a potential gap in the market you're seeing at the very low end. You've been convict more so mid end brand and potentially launching thing for that lower end. Have you any updates you can give on that? And then also in terms of your back book pricing, I think in fixed line, you've always had quite a big gap between back book and front book, which allowed you to raise back book pricing even if you didn't do book pricing in the year? I guess it's a little bit sort of more difficult to it's a bit more complex on mobile side, but any thoughts there in terms of how much room you have to raise back book pricing without sort of changing your front book prices? Is there a material gap? Thanks very much. Thank you very much, Henrik. So on the low end of the market, you're absolutely right. We have identified a segment where the low end of the market, where we are not present with the brand. Com Hem sits in the middle of the segment and Tele2 and Com Hem on the top. And we are investigating whether that makes sense to actually go into that segment or not. And this is something we're still looking at. We haven't made no decisions yet, but it's certainly something we're eyeing very close. Then for the second part, the back book potential. I mean, as you saw in the presentation, we see potential, but both Com Hem and Tele2 has diminished the kind of gap between or the historical bigger gap between back book and front book pricing. So I wouldn't say that that's an additional opportunity. The opportunity we have is to continue the journey now gradually with increasing value and thereby also being able to use pricing as a growth driver. Great. Thanks so much. Thank you. Your next question comes from the line of Lina Osterberg. Please ask your question. Your line is now open. Lina Osterberg from Carnegie. Hello. Sorry to come back to CapEx again. I was wondering if you maybe could say something about when you expect to peak your 5 gs rollout, if that has also been pushed out in time or if you still expect 2021 to be the peak year? And also if you could say something about price expectations on the Swedish high band licenses compared to the 700 megahertz? Hi, Lena. It's Mikael here. I will try to answer the first one. The peak what we definitely can say is that 2020 will not be a peak year. If it's still too early, say, if the peak year is 2021, 2022 or 2023, we don't have that detailed visibility based given the factors Anders just mentioned, the uncertainty around licenses and the political situation. So that's it will be later than 2020. That's the only thing we can say. But also, this is as we have said before, we expect this to be rather be somewhat higher CapEx, but it will also continue over several years. So you shouldn't expect any sharp increases in any single year. And then when it comes to the spectrum auction, I think it's this is obviously highly sensitive and for competitors to discuss. So I think I'm going to refrain from that, Lena. I think what you probably should do is that you should look at the rules for this auction and compare it to the rules of previous auctions. Maybe you can find something there, which will lead you to a conclusion. That would indicate that you will have to pay lower prices this time around. So I was just wondering if you also think so. We'll have to wait and see. Okay. Could you maybe say something on the cost of swapping your network, if it would come to that, that you feel that you have to change vendors, if you think that, that would significantly increase your CapEx or if you think that, that would still you could keep within the range? Our estimate is that when we go to 5 gs, we can keep it within the range we have provided the market with. Irrespective of if you have to swap vendors? Yes. When we go to 5 gs, we expect us to be able to be in that range. And there are several ways of getting to 5 gs. What you're explaining is 1. And then there are other ones as well. And some cost more and some cost less, but our estimate is that we will be able to go to 5 gs regardless of the method within the guidance. That's what we and we base that on what we know today. Okay. Thank you. Thank you. Devan, no further question at this time. Please continue. Okay. So thank you very much for all the questions and your interest in Tele2. Much appreciated. And if there's anything after this meeting, you know where to find us, and we're more than happy to discuss whatever with you. And if not, hope to see you in the near future and by the latest when we release the full year report back on this telco again. So thank you very much, and have a great day. This does conclude our conference for today. Thank you for participating. You may all disconnect.