Good morning, welcome to our third quarter results. Here with me today, as usual, we have Erik Pers from IR. We have Lars Nordmark, our CFO, we also have Samuel Skott, our CEO for Tele2 Sweden, joining us this morning. As you'll have seen, this marks the final quarter before the closing of the merger with Com Hem in a year of major transformation for the whole Tele2 group. As you've seen this morning, we continue to deliver results ahead of our own expectations. In fact, it's our 13th consecutive quarter. This over-delivery is providing us with the confidence to upgrade our full-year EBITDA guidance again for Tele2 on a standalone basis, Lars will explain that in a bit more detail towards the end of our presentation.
Liberating a more connected life continues to be our ultimate priority, we saw yet another quarter of solid growth. Revenue amounted to 6.5 billion SEK, up by 4% on a like-for-like basis, driven by both strong data monetization, especially in our international markets, and from higher equipment sales in Sweden and the Baltics. We also saw solid mobile end-user service revenue growth of 5%, with excellent momentum in the Baltics, Croatia, and Kazakhstan. On the same basis, EBITDA was up by 9%, mainly driven by the top-line growth, which flowed through to a strong 14% increase in rolling 12 months operating cash flow, excluding the Netherlands, 19% if you include Netherlands, which, as you all know, is classified as discontinued due to the impending transaction with T-Mobile. Before getting into the details, I'd like to highlight some of the key successes in the quarter.
Starting with our Baltic Sea challenger markets, our Swedish business returned to growth with positive trends in both mobile end-user service revenue and adjusted EBITDA. All this despite it being a highly competitive market, proving both our agility and resilience in both our consumer and B2B businesses. As I said earlier, we're joined here today by Samuel, CEO of Tele2 Sweden, he will take you through the Swedish results in a bit more detail and also be available for Q&A afterwards. Moving to the Baltics, we continue to deliver solid revenue and EBITDA growth, up by 3% and 9% respectively in local currency. As a result, our Baltic Sea challenger businesses collectively achieved a 3% increase in operating cash flow on a rolling 12-month basis, amounting to 4.5 billion SEK.
In our investment markets, we continue to have excellent momentum thanks to 4G rollout, fearless commercial offerings, improved brand perception, of course, our customers' insatiable thirst for data. Kazakhstan delivered another outstanding quarter with mobile end-user service revenue up 22% in local currency on the back of higher ASPUs and a continually growing customer base. As a consequence, further repayments of the shareholder loan was received during the quarter, total repayments now amount to 750 million SEK. Croatia also delivered an excellent mobile end-user service revenue growth of 12%, which in combination with lower spectrum costs, trickled down to an underlying EBITDA growth of 20% if you exclude the reversal of a prior period provision. A core pillar of our strategy is to have the most engaging, fun, and positively fearless brand that our customers love.
A true testament to our dedication to this ambition was Comviq's second consecutive win in the Evimetrix Swedish Brand Award, which named Comviq the strongest telecom brand in Sweden based on an extensive consumer survey. The Svenskt Kvalitetsindex, EPSI study, published just this week, ranks Tele2 as the main consumer brand with the highest customer satisfaction levels, alongside Tele2 Business, making the largest improvement in customer satisfaction in the B2B segment. In the Baltics, our Lithuanian business, which is the most fearless and the most customer-centric, recorded an all-time low churn of mid-single digits in the postpaid consumer segment, and something for the whole of the Tele2 footprint to learn from. With respect to our upcoming mergers, as you know, a number of key milestones were achieved during the quarter.
Starting here in Sweden and the merger with Com Hem, the transaction has now been approved by both sets of shareholders and the European Commission, and the transaction will now officially close on November 5th. As for our Dutch merger, we continue to have a constructive dialogue with the European Commission during the phase 2 regulatory process. The commission has set the date for a final decision on November 30th. However, they do have the right to extend this timetable further if they feel it necessary. Let's get into the markets in more detail, and we'll start with our Baltic Sea challenger businesses, and taking them in order of size, I'll first hand over to Samuel, who will present the results for Sweden.
Thank you, Allison, and good morning, everyone. In Sweden, following an eventful first half of the year with new price plans launched in the price fighter segment and increased competitive activity, the third quarter was still vibrant with lots of campaigns, but no major movements in pricing. Our business remains resilient with mobile end-user service revenue returning to growth with the B2B segment and consumer postpaid driving the results. EBITDA was up by a healthy 6% with disciplined cost control, lower marketing spend, and strong network cost efficiency compensating for a continued decline in our legacy fixed business. Our rolling 12 months cash conversion continues to be on high levels at 79%, with an operating cash flow for the same period of roughly SEK 3.4 billion.
Looking closer at our consumer business, we continue to leverage our strong dual brand position and customer value propositions to successfully navigate the competitive environment. Mobile end-user service revenue remained resilient, flat in the quarter, despite sustained strong competition in the price fighter segment. This result is driven by solid growth in consumer postpaid, which is up 6% year-on-year, but offset by declines in prepaid and mobile broadband. Postpaid ARPU was up 1% in the quarter, mainly driven by Tele2, while Comviq postpaid ARPU remains stable. As Comviq has gone from strength to strength, it makes up an increasing part of our consumer business, naturally having an effect on the ARPU mix. At Tele2, we see a continued demand for unlimited as customers continue to embrace the benefits of the connected life, and in the process, consume more and more data.
Volumes per postpaid subscription increasing by 30% over the past 12 months. Successful retention activities kept Tele2 stable in the quarter, despite the effect from the marketing movements in Q1 and Q2. Sweden's ambition, our ambition, is to achieve the strongest growth through the most satisfied customer, therefore, I'm very pleased to see that Comviq, for the second year in a row, won the title of the strongest brand in the market in Evimetrix annual ranking, which is based on a combination of customer satisfaction and brand recognition scores. Moving into B2B, as we saw in previous quarters, the B2B market continued to be price competitive as players continue to challenge the incumbent's premium pricing position. Revenue growth was up 1% as high equipment sales and return to growth for mobile more than compensates the continued price competition.
Service revenue was down 3%, with headwinds from price erosion of legacy fixed business being partly offset by growth in mobile end-user service revenue of 3%, as we now start to reap the benefits of the consistent customer wins over the past year. Our B2B sales organization is becoming more effective and confident as each month passes. We again had a very successful quarter when it comes to winning new and retaining existing customers. A few new names in our customer portfolio includes the municipalities of Kävlinge, Alvesta, Markaryd, and Älmhult, as well as Göteborg Energi and Axfood. It all starts and ends with the customer, we are very proud to see that our efforts to be the most customer-centric B2B operator are paying off.
As the Svenskt Kvalitetsindex show that Tele2 made the largest improvement in the B2B market, where we are now a strong challenger to the incumbent and closing in on the number 1 spot. All of this with customer satisfaction and continued growth and wins of new customers is giving us the confidence that we're on the right track to growth. As we now see the first evidence of this in the quarter, the growth in our customer base should enable the continued recovery of revenue trends going forward for B2B. With that, I'd like to hand back to Allison, who will provide you with the results from the other markets.
Thank you, Samuel. Moving east to the Baltics, it was another solid quarter for data monetization despite tougher year-on-year comps and the impact from customer compensation following a significant roaming outage in early August. This outage shaved two percentage points off of the reported mobile end-user service revenue growth for the quarter. Underlying, we remain with our mid-single-digit ambition of 5% growth. This underlying growth was driven by continued solid momentum in both Lithuania and Latvia. As expected, this was partly offset by declines in Estonia, where we're still suffering from aggressive price competition in prior quarters and the loss of a mobile broadband MVNO arrangement with Starman.
For the region as a whole, EBITDA increased by 9%, driven by the top-line growth and continued excellent cost control, filtering through to a strong increase in cash flow, with rolling 12 months operating cash flow up 12% and an excellent cash conversion similar to our Tele2 Sweden business of almost 80%. In the quarter, we saw ARPU growth of 1%, and obviously higher than that in Lithuania and Latvia, as the transition from prepaid to postpaid subscriptions continued and customers traded up to larger data buckets. As in previous quarters, smartphone and mobile broadband penetration continues to increase, which supports the uptake of the larger data bundle. Our Lithuanian business continues to be a shining light for the mobile industry with a record low churn rate of mid-single digits in consumer postpaid. Great testament to the Lithuanian team's obsession to grow customer loyalty and customer lifetime value.
Our Latvian network also received positive recognition in the quarter as it was named by the regulator as offering the highest mobile internet speeds in the country, now even faster than prior quarters, with speeds above 40 megabits per second. On a less positive note, Estonia has yet to turn around. However, our new CEO has a solid plan underway and is continuing to readjust the commercial model towards a higher quality proposition. In the quarter, we saw positive progress on both NPS and margin development, giving us confidence that we will see the revenue and EBITDA trends improve during 2019. Now moving even further east to our investment markets and Kazakhstan. Where despite continuous competitive pressures, mobile end-user service revenue was up 22% in local currency, driven by very strong monetization of increasingly larger data buckets, as well as continued growth of the customer base.
EBITDA was up by more than 60% in local currency, and we continue to sustain an excellent margin of 34%, thanks to the benefits of higher ASPUs, increased scale, and cost discipline. As a result of this excellent momentum, Tele2 Kazakhstan's ability to generate cash continues to improve. Now at 68% cash conversion on a rolling 12-month basis. Further repayments against the shareholder loan of KZT 6 billion, approximately SEK 150 million, were made in the quarter, and as I said earlier, accumulated repayments now amount to approximately SEK 750 million, with an outstanding balance as of end September at SEK 2.3 billion.
Looking at the Kazakh results in a bit more detail, our customer base grew by 4% year-on-year, and ASPU was up by 17% year-on-year, driven by our 4G advantage, our improved network quality perception, and our dual-brand strategy with new tariffs launched on both brands during the quarter. As you can see, net promoter scores are improving also for both brands, paving the way for further growth. The stellar results coming out of our Kazakh team reflects the hard work and efforts of that local team. So much so that our JV integration project has laid the foundation for the current momentum, and it has been shortlisted at the Capacity Global Carrier Awards for the best Asian project in recent years.
With that, I'm now going to hand over to Lars, who will go through the financials.
Thank you, Allison. I'll start by making a few comments on the P&L this quarter. We saw strong revenue growth of 7%, which was mainly driven by the continuing mobile end-user service revenue momentum in the Baltics and our investment markets, as well as continued strong equipment sales. At the EBITDA level, we had great contributions from across our footprint, driven primarily by revenue growth, but also supported by excellent cost discipline, as mentioned by both Allison and Samuel. Looking at reported revenue and EBITDA, both were helped in the quarter by an FX tailwind of approximately 3%, which is explained by the weaker SEK compared to the EUR, Croatian kuna, and Kazakh tenge. Moving further down the P&L, we have some items affecting comparability below EBITDA, which relate to acquisition costs for Com Hem, as well as integration costs for Com Hem and TDC.
On the line other financial items, we report changes to the valuation of the earn-out obligation for Kazakhstan every quarter. This quarter, the value increased again to just north of SEK 700 million on the back of continued splendid performance by our Kazakh business. Accordingly, we recognized a SEK 165 million non-cash cost in our P&L as the value of our liability increased. As for P&L taxes, these were actually a bit lower in Q3 2017, as we recognized a deferred tax asset in Germany of SEK 62 million, which resulted in a positive impact of the tax in that quarter. In addition, we now have a tax cost in Kazakhstan. If we then move on to the next slide, you can see the changes in the cash flow as compared to the same quarter last year.
Do bear in mind that the cash flow statement is on a total operations basis and therefore includes discontinued operations. Here, we'll make a few short comments. Adjusted EBITDA for discontinued operations is higher than Q3 last year, reflecting mainly results from the Dutch business. Lower tax payments this quarter are mostly related to the timing difference in Sweden. At the CapEx line, the main difference versus the balance sheet CapEx is, of course, that the cash flow statement is on a total operations basis, so the Dutch CapEx is included here. At the bottom of the table, we split the free cash flow in continued operations and discontinued operations. As for the cash flow from discontinued operations, the year-on-year difference is mainly related to working capital movements in the Netherlands. Moving on to the next slide. This is a familiar picture by now.
It shows our operating cash flow defined as EBITDA less CapEx on a rolling 12-month basis. Our Baltic Sea challenger businesses and our smaller business units continued its trend by producing a solid cash flow of well over SEK 4 billion. The remaining investment markets, Kazakhstan and Croatia, together generated over SEK 700 million of positive operating cash flow over the past 12 months. This is a significant turnaround from having produced a similar size operating cash flow loss less than three years ago. Together, we are now at an operating cash flow contribution from continuing operations of SEK 4.9 billion, while the Netherlands is still consuming cash. Moving on to the balance sheet on the next slide. Our economic net debt went up temporarily in Q2 as we paid out a dividend of SEK 2 billion.
During the third quarter, we have taken down our debt from SEK 11.4 billion to SEK 10.2 billion through our positive cash flow generation, meaning that we closed the quarter with a healthy leverage of 1.5. Looking back 12 months, we have generated free cash flow of SEK 2 billion, received the cash contribution from the sale of Tele2 Austria, and against this, we paid a dividend of SEK 2 billion. Altogether, this still leaves us with a stronger balance sheet than a year ago. Let's turn to my final slide, which covers financial guidance. First of all, I want to make it clear that the financial guidance provided on this slide is for Tele2 on a standalone basis. This means that no contribution from Com Hem is included, as we want to be consistent with guidance provided earlier this year.
As for the guidance, we are on the back of the continued strong delivery in our markets, upgrading our adjusted EBITDA guidance for the full year to between SEK 7.0 billion to SEK 7.2 billion. At the same time, we are taking down the full year guidance for CapEx to between SEK 1.9 billion to SEK 2.2 billion to reflect the investment rate seen to date. Guidance for mobile and user service revenue remains unchanged at mid-single digit growth. With that, I'd like to hand it back to Allison for some concluding remarks.
Thank you, Lars. Let me end with our priorities as we hand over to the next Tele2 leadership team. First, with the closing of the merger with Com Hem only a few weeks away and the regulatory process in the Netherlands moving forward, our focus is now on preparing for day one of our two transformational mergers. Both transactions will allow Tele2 to take its customer-focused strategy to an even higher at scale level. However, whilst integration ramps up, we cannot and will not take our eye off the ball on the basics, and we will ensure that the great progress we've made financially and operationally over the last few years will be sustained.
Thirdly, we'll continue to drive growth through the monetization of data across our footprint, which will enable us to continue our industry-leading momentum in the Baltics, Croatia, and Kazakhstan, and further momentum in Sweden now that we're back to growth again. All of this is done in the pursuit of our purpose to fearlessly liberate people to live a more connected life. As this will be my last quarterly report as CEO of Tele2, I'm extremely proud to hand over a business with a well-defined roadmap to create a leading connectivity provider around the Baltic Sea with optionality in our investment markets. Throughout my tenure, we have driven returns through disciplined capital allocation and focused our efforts on the markets where we can win while never losing focus on our customers.
I would therefore like to express my huge thanks to the whole Tele2 team who have been part of my Tele2 journey over the past 4-plus years. Their vibrant, challenger-oriented spirit is the energy that drives Tele2 forward to ever stronger achievements. Some people think telcos are boring. Well, let me tell you, Tele2 and the Tele2 team are never boring, and I wish all of them to remain not boring, but wish them every success as their mission continues to liberate people to live a more connected life. With that, Lars, Samuel, and I would like to take your questions.
Operator, we're now ready to take some questions.
Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask question. We will pause just a moment to allow everyone an opportunity to signal for questions. We will now take our first question from Lena Österberg, Carnegie. Your line is open. Please go ahead.
Good morning. Yes, thank you, Allison. Sad to see you go. Questions now, I think on B2B Sweden, for Samuel. I was wondering, are you sort of indicating that we could see year-over-year growth as of the fourth quarter? A question also on the Dutch mobile operations, which you now had at a breakeven in the quarter. Should we expect the mobile OpEx base to stay around this level? I think you're up EUR 400 million now, or is it something that would drive it higher going forward into next year? Also on the merger with Com Hem, just trying to understand the PPA in your merger document. I was wondering if you could give some kind of indication of the size of the intangible amortization and the tangible depreciation, going forward post the merger. Thank you.
Okay. Thank you, Lena. Sorry to be moving on as well, but I'm sure we will keep in touch. Why don't I take Netherlands, I'll hand over to Lars on the Com Hem PPA, Samuel can finish with B2B Sweden. Yes, you will have seen Netherlands mobile be more positive in the quarter. As you know, we have an improved NRA agreement with Deutsche Telekom that kicked in during the quarter. You also see some seasonality in Q3. Beyond that, we'd prefer not to really comment on the Dutch business at this time. The dialogue with the EU continues to be very constructive, and we remain on track with the process that we expected. The phase two period comes to an end on November 30th. The Commission, however, can extend that further into December, as I said, a good constructive dialogue.
That's all I'd like to say in the Netherlands. Lars, you want to comment?
On the PPA for Com Hem, as you know, Lena, this is a preliminary one that we have done. If you look at the total consideration of about SEK 27.5 billion, we got about SEK 15.7 allocated to other intangibles, out of which approximately SEK 12.8 is to customer relations, the remaining SEK 2.3 is to brands. They will be depreciated over anywhere between five and 15 years, so the additional count of depreciation amortization that you would see is around SEK 770 million per year.
Going on to the B2B question. What we see is continued recovery on the back of great wins with a lot of customers in the recent year. We built the momentum within our customer and sales organization, we're continuing to see that momentum.
I'm not going to guide on a specific quarter, we're confident that we will see that recovery going forward.
Okay, thank you.
Thank you.
We will now take our next-
Yes, please.
We will now take our next question from Stefan Gauffin, DNB. Your line is open. Please go ahead.
Yes. Hello, Stefan here. First of all, I would just like to wish Allison, and also Lars later on, good luck in the future careers. Then I have a couple of questions just to clarify. Very strong performance on Sweden EBITDA. Can you give some more details here? First of all, relating to marketing spend, how much that was down year-over-year, especially on the mobile operation. And secondly, on other operations, in Q2, you reported an EBITDA of SEK 28 million. This quarter, SEK 100 million. And looking at 12-month rolling, it's around SEK 70 million per quarter. Is this a normal seasonality effect, or how should we think about that? Thank you.
Thank you, Stefan.
Okay. If we go into the marketing spend, yes, it was lower in the third quarter. Not going into details exactly how much, but it was lower in the quarter.
I think on other operations, Stefan, there's a couple of things going on there. One is the equipment net, so basically the contribution margin that we get from equipment sales. That was up both versus last quarter, also the quarter last year. Then there's also some seasonality on the cost side. If you look at year-to-date, we're pretty much about the same level as we were last year. That's probably from an underlying business performance, gives you a better indication, eliminating some of the seasonality impacts.
Okay, thank you.
We will now take our next question from Peter Nielsen, ABG. Your line is open. Please go ahead.
Thank you very much. Good morning, both of you. Congrats, Allison, on your new challenge in Denmark. Good luck to you both.
Thank you, Peter.
A couple of questions, please. Firstly, if I can just return to Swedish consumer mobile. Growth looks a bit weak in this quarter, considering we're now out of the Roam like at Home impact. Could you perhaps, Samuel, talk a bit about what impact you've seen from these pricing moves in Sweden in the first half of the year during spring, whether you feel that perhaps some of the increased data bundles, as you talked about, has limited the near-term upside potential to revenues and will continue to do so in the future? Any color you can give here would be appreciated. Thank you. If I can just ask on B2B, since the acquisition of TDC Swedish business, you seem to have improved your market position considerably in B2B. Can you talk a bit about what has been the driving factor? Is it ICT solutions?
What is the driving factor behind this improved competitiveness, please? Thirdly, if I can just ask Lars. Lars, what is the main driver of the lower CapEx guidance for the full year, please? Thank you very much.
Okay. Well, I'll start. If we go to the consumer mobile piece. We continue to see really good growth in the consumer postpaid segment. In this quarter, offset by declines in prepaid and mobile broadband. Of course, what happened in the first and the second quarters affected us a bit. I think the main thing here is that we remain a very stable business, and we definitely see opportunities for growing going forward. In terms of data bundles, we don't see any signs that the increase in data bundles has any effect on our ability to grow, as with campaigns, adding and giving customers a chance to try more data, we see that they use more data. There still is plenty of room to grow in the consumer usage of data. Going over to B2B, you're absolutely right.
With the TDC acquisition, we have turned that into a much stronger combined market position. I think it is just the combination that makes us so strong. It's the Tele2 fantastic mobile network and some of the cloud and cloud PBX services combined with TDC's huge knowledge in large enterprise segment in integration services that makes us successful. We are seeing that on the back of the combined customer relationship, we're able to grow those relationships with new products and new services. I think that's the underlying thing driving our momentum.
Then on the CapEx guidance, I think that the two factors is one, an overall lower spend level across the board. Then in Kazakhstan, if you look at their spend level compared to last year, they're down significantly.
I think we've reached more benefits than we initially thought from the combination of the networks that we did last year. Then the team has also done some really good work on the transmission, which has saved us some of the CapEx. That CapEx will probably have an uptick in the Q4, but still a lower guidance for the full year.
Great, thank you. Again, thanks a lot for all your help and good luck to you both.
Thank you, Peter.
Thank you.
We will now take our next question from Maurice Patrick, Barclays. Your line is open. Please go ahead.
Yeah. Hi. It's Maurice here from Barclays. Again, from my side, congratulations and good luck to both of you going forwards. Couple of questions, please. I know you don't want to comment on the magnitude of the lower SAC marketing , but was it volume led or was it unit cost led? Is it by you being more efficient in how you allocate marketing spend or you just spent less? The second question relates to CapEx levels we haven't really spoken too much about today. I've always been amazed by how low the capital intensity is at Tele2. I know the JV return obviously helps. I believe you've booked the CapEx proportionally, but given such strong growth in data, how are you able to keep that CapEx level just so low in Sweden? Thanks.
Do you want to start on the second?
Yeah. On marketing spend, I would say it's a bit of both. We can see that we have been, and that was actually part of the Challenger Program, if you remember that, to work even more efficiently and data driven with marketing spend. We are becoming more efficient in the way we work with marketing. It's also a fact that the third quarter was a bit lower in terms of just spend, as we made the decision not to go forward in the third quarter on some of the campaigns. We're rather focusing on the most efficient ones. It's always seasonalities in marketing, and as you know, some quarters are lower and some quarters are higher. I think that's the basic explanation.
I think on the CapEx level in Sweden, as we have said a lot of times, Maurice, is that it has been at an unusually low level and we would expect it to pick up somewhat. I think the investments that we have made in our 4G network has been extremely efficient. We have a very good cooperation with Telenor on that side. The way we drive roll-outs and capacity expansions is done in a very efficient way. Eventually, we will have to do some modernization to that network, that is also clear. For now, we're seeing levels that have been very low, and it's not that we're holding back on investments, not at all. We are obviously monitoring the base station from thresholds, and we are upgrading them when we see them reach a certain point.
Okay, thank you, guys.
We will now take our next question from Terence Tsui, Morgan Stanley. Your line is open. Please go ahead.
Yeah. Thank you. I've got a couple of questions, please. Firstly, on Sweden, just following on from the discussion around B2B. I just wondered if you could give us a bit of color around the pricing dynamics in B2B, because I would have thought a lot of these large enterprises would have been very price sensitive. Are you seeing now that they are valuing much more the converged offer that you can give them now that you merged with TDC in Sweden? Secondly, I just had a couple of financial clarifications, please. Just on Kazakhstan, you mentioned the value of the put option. Is that including or excluding the accumulated repayments so far of SEK 750 million? Do you have a latest value on the equity value as well, please? Lastly, on the Com Hem merger.
Do you have any more updates on the different accounting policies between the two companies and how this could potentially impact EBITDA and cash flow from bringing the two businesses together? Thank you.
I'll start on the B2B side. I think, yes, it's a very competitive landscape. We see that also in terms of pricing. If you compare prices on a stand-alone SIM card or connection, it's going down over time. What we are seeing is, as you alluded to, converged services and the ability to be a full service supplier is extremely important almost in all segments of the B2B business. What we are able to do in a lot of our businesses is to expand the relationship we have with the existing customer base. Even if prices on a stand-alone service might be going down, we're able to offer more services now that in a lot of relationships actually more than compensates for the price erosion. Price erosion on stand-alone services is there.
It's very competitive, but our solution to that, if you will, is to grow our relationship with customers and take a larger part of their total spend in terms of communication and integration services.
Moving on to Kazakhstan. We have a remaining outstanding balance of SEK 2.3 billion, and that is accruing at an interest rate of high single digits, because it's PIK interest. We've received SEK 750 already, and there's SEK 2.3 billion to go. That is just purely the shareholder loan and doesn't take account of any equity value that we believe is there in the business and as we continue to accrue against in our books. You will have seen because of the continued momentum in the quarter in the business, we have taken up the value of the earn-out yet again. That's equivalent to an 18% equity stake, and that's currently sitting at SEK 713 million.
If you think our diluted ownership of that business is 31%, so the equity value is almost double that based on how we are valuing the business at this point in time. The final question was on the Com Hem merger?
Yeah. On the accounting policies, I think the bigger one is probably the activation of sales commissions Terence, which we are taking in the P&L and they have activated, that will move into the P&L going forward to reduce their CapEx. That's the biggest one I would comment on. I think in general terms, IFRS 16 is still a work in progress on our side. Once we have more details on the implications for that, we will let you know.
That's great. Thank you.
We will now take our next question from Ulrich Rathe, Jefferies. Your line is open. Please go ahead.
Thanks very much. I was interested to discuss the cost question in Sweden a bit more. Maybe from a different angle, when you raised the guidance in Q2, presumably you had a budget in mind for the second half. Now by raising it seems mainly on cost development, not so much on revenue, as I understand it. Could you sort of describe what part of the cost across the group really have moved quite so much compared to the plans just three months ago? Thank you very much.
I think you're right on the kind of top-line. When we did the Q2 for the Swedish business, the top-line development is broadly in line with what we said back then. I think on the cost side, like Samuel said, we're a little bit lower on the expansion costs. That's not just marketing, but it's also including the store footprint and subsidies and commissions and so forth. I think the network cost we have talked a lot about. We see further efficiencies coming through. We also see some benefits in customer service. I think if you look at the bigger cost buckets within the Swedish business, expansion cost, network cost, G&A, including customer service, there's been a positive development pretty much in all aspects of that. Not one single item that kind of drives it, but Q3 was lower.
If you look at 2017, Q3 was also lower. We had an uptick in Q4 last year. You should expect an uptick in expansion cost in Q4, but we don't guide exactly on how much that will be.
The underlying cost efficiency has continued, and that is benefiting both our Swedish projections and our international projections going forward. Certainly, one of the key drivers of us taking guidance up, Ulrich, is the continued strength in our international footprint, and that's very much revenue driven.
Thank you. If I just may follow up. My particular angle here is what changed over the last three months. I understand the drivers to some extent, thank you for adding some color to that, but it's a relatively short period of time over the summer where sort of the guidance comes up quite a bit. I'm just wondering where that very significant delta compared to three months ago sort of comes from. Thank you.
Sweden has turned around slightly faster than we expected, certainly from an EBITDA development as the cost interventions that Samuel and the team started to put into place earlier in the year when the market got tougher starts to come through. We have continued to perform better versus a competitive situation in Kazakhstan than we were expecting as well. That's probably the two drivers.
Brilliant. Thank you very much, and good luck for the future. Thank you.
Thank you, Ulrich.
We will now take our next question from Nick Lyall, Societe Generale. Your line is open. Please go ahead.
Morning. It's Nick from Soc Gen. Allison and Lars, thanks again for the help. A couple from me, if that's okay. On the Swedish B2C first, it doesn't look like you're struggling in terms of churn pool at all or in terms of marketing. Is there any increase, do you think generally from Swedish consumers in convergence at the moment? Obviously for the other operators, not for yourself, but any reductions in the churn pool because of that? On the B2B side, do your comments suggest that like-for-like B2B pricing is getting more difficult? Obviously you're making gains via the TDC acquisition, but is basic market pricing for like-for-like products suffering? Thanks.
Okay. Starting at B2C and is kind of convergence affecting the churn pool? Well, talking about the mobile churn pool where we are in currently, we don't see any effect of that. We are seeing FMC starting to happen, but it's starting from extremely low levels. That will take time. In the mobile churn pool, we're seeing very limited effects of that. In terms of B2B pricing, no, I wouldn't say it's getting more difficult. It's part of the B2B business and especially in the LE segment. It has always been there, and I think it will continue to be there. The way for us to mitigate that is of course to win more customers as we see a potential in that, but also expand our relationship with the customers we have.
Thank you.
We will now take our next question from Victor Höglund, SEB. Your line is open. Please go ahead.
Good morning, thanks for taking my questions. Again, good luck to both of you. Two main areas of questions here, if I may. First, going back to CapEx. Do you see any need to ramp up for 5G in 2019 or maybe in Sweden due to capacity needs or Kazakhstan, where you have now had a good benefit for a while and maybe that reverse in 2019 or anything you can comment on CapEx trends into 2019? Would be very helpful. Then on mobile service revenue growth in general here, first on Sweden, can you broadly indicate or just provide some color if possible on how mobile B2C service revenue growth would have been in Q3 or year-to-date, excluding negative impacts from prepaid and mobile broadband?
Then if you can just talk a bit about where you see the main drivers for mobile service revenue growth in 2019, that would be super. Thank you.
If we start by CapEx levels and the need for going forward, I think coming back to what Lars said, we're running a very efficient network currently and a very good cooperation with Telenor. Of course, our ambition and target is to keep on running a very efficient network. However, as well as Lars said, eventually we will move into modernization of that network and 5G rollout as well. That will mean an uptick. I think, you can rest assured that efficiency will be the name of the game for us going forward as well, and doing it as an evolution rather than a revolution. If we go into service revenue for Sweden, I think the key thing we disclosed already is that in consumer postpaid, we grew 6%. I think that gives some kind of good pointer for you.
In terms of a forward-looking statement, we're not giving guidance of that detailed level at this point.
I think on the CapEx spend level, as I said before, it's been unusually lower, we would say it was lower than expected. We would expect an uptick in 2019. The business is firing on all cylinders and growing tremendously. What that particular number will be, that's for Anders and Mika to come back on when they communicate the 2019 guidance with the Q4 figures.
Okay, great. Just one question then on the consumer postpaid mobile service revenue growth that you speak about, 6% here. Is the main contributor at the larger bundles or is it up trending on lower bundles or a mix of everything? Just some logics on the dynamics there would be super helpful. Thank you.
It's the same underlying dynamics that we've seen within our dual brand strategy, which is the growth of Comviq and customer base and the successful data monetization with unlimited within the Tele2 base.
Okay. Thank you very much. Again, good luck in new endeavors.
Thanks, Victor. Thank you.
We will now take our next question from Usman Ghazi, Berenberg. Your line is open. Please go ahead.
Hello. Thank you for taking my question. I just wanted to extend my well wishes to both Allison and Lars as well. I've got three questions, please. Firstly, I was wondering on the consumer mobile revenues again in Sweden. If I look at it excluding the Roam like at Home impact, we've gone from +3% growth in Q1 to plus percent in Q2 to flat now in Q3. I'm not asking for the specific direction going forward. Is there a risk that consumer mobile revenues go into a bit of a decline here, or do you expect them to stay flat to up over the next few quarters? The second question was just on whether you could comment on how big the legacy revenue exposure is in the B2B business.
My final question was just on the equity value that's implied by the earn-out calculation for Kazakh. When it comes to a potential exit, is there room for negotiation on that equity value, or is what you're providing in the accounts basically what's an agreed mechanism to calculate the value? Thank you.
If we start with the consumer piece, what we're seeing is our ability to be stable in a vibrant market. We're confident that it won't get worse, and we're definitely seeing opportunity to grow going forward. We have seen decline in the prepaid and mobile broadband business as well, which is a natural movement in the market. It's not only about what happened in the first half of the year. We're stable in a vibrant market, and we see opportunity to grow going forward. In terms of the division of revenues in the B2B area, that's not something that we disclose.
On the earn-out. We got a SEK 730 million on the 18%, that's a total equity value for that business above SEK 4 billion. As far as the room to negotiate, there's a clear way forward in the shareholders' agreement on the valuation mechanism, and that will be followed. One important element to note is however that we are valuing it in our books according to DCF in the valuation methodology and approach we will have with the other party. There are more elements to the valuation than just the DCF. There's also comparables and multiples and so forth of other transactions.