Good day. Welcome to the Tele2 Q3 Interim Report 2017 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Erik Strandin Pers. Please go ahead.
Thank you, operator. Welcome everyone to Tele2's third quarter 2017 results call. I have with me our CEO, Allison Kirkby, and our CFO, Lars Nordmark. We'll do the usual routine management presentation and Q&A. You have the slides at our website, tele2.com. We have a slight time constraint this morning, so we'll try to finish the call in about 60 minutes. We'll try to be extra short and efficient this morning. Without further talking from my side, I leave the word over to you, Allison. Please go ahead.
Thank you, Erik. Good morning, everyone. Welcome to our third quarter results presentation. As you know, liberating a more connected life remains our ultimate priority. We saw this drive solid growth in the third quarter as customers really resonated with our fearless brands and our great value for money propositions. Mobile end-user service revenue as a result, grew 7% on a like-for-like basis despite the impact from Roam Like at Home with double-digit and sometimes very high double-digit growth in our Dutch, Baltics, and Kazakhstan businesses. Net sales amounted to SEK 7.5 billion, up 1% on a like-for-like basis, EBITDA was up by 12% to SEK 1.8 billion, mainly driven by the revenue growth in the aforementioned markets, but also contributing our Challenger Program and synergy benefits. Having agreed to sell Tele2 Austria in the quarter, all our financials now exclude the Austrian operations.
Exiting Austria is completely consistent with our strategy to focus more on the markets where we believe we will win over the long term and be a true champion of connectivity on our own infrastructure. It's within the context of this more focused strategy that we are continuing to see great momentum in our business. As a result, we are today raising our full-year guidance despite the divestment of Austria, and Lars will explain our guidance changes in a bit more detail towards the end of the presentation. Let's get into the key highlights of the quarter. Our positively fearless brands fueled strong progress both financially and towards our customers. Last quarter, we launched new commercial propositions in all of our key markets. These continue to be embraced by customers with strong uptake across the group and solid progress on brand preference and customer satisfaction metrics.
For example, here in Sweden, Comviq was awarded the strongest telecom brand by Evimetrix based on both customer satisfaction and brand awareness, evidence of the strength of our price fighter brand position in a fast-growing segment of the market. In the Netherlands, we were awarded best telecom retail chain and web shop. This was indeed the first quarter where we saw the full effect of Roam Like at Home. For the group, the impact on mobile end-user service revenue was as expected around two percentage points, and on EBITDA, again, in line with expectations, the impact was in the SEK 100 million-SEK 150 million range. Sweden, again as expected, was particularly affected by the new regulation. As a result, mobile end-user service revenue was down 1.5%, and EBITDA was down 6%.
We were less affected in the Baltics and continue to deliver great double-digit mobile service revenue growth and EBITDA growth of 12% and 18% respectively. Despite headwinds, our Baltic Sea Challenger businesses collectively achieved a 22% increase in operating cash flow on a rolling 12-month basis as our mobility for our strategy continues to serve us well with outstanding cash conversion. In our investment markets, we have great momentum on the back of increased brand awareness, improved satisfaction, and increased scale. In the Netherlands, mobile end-user service revenue growth was 27%, and data and voice onboarding continued to progress well. We now have 93% of data usage and 54% of voice usage on our own network, and this is contributing to a significantly improved financial profile for our Dutch business.
In Kazakhstan, we also delivered another strong increase in mobile end-user service revenue up 19%, resulting in an EBITDA margin for the quarter of 26%. Our Challenger cost structure was also again strengthened in the quarter, with group margin improving by two percentage points to 25%. A key contributor to this being the significant reduction in Dutch mobile losses, down by almost three-quarters versus this time last year. We had another strong quarter for the Challenger Program, which is well ahead of plan to reach the SEK 1 billion target in 2018, with an estimated level of benefits of at least SEK 850 million for this year. Moving on to our markets. Let's look at the Baltic Sea Challenger businesses first.
In line with recent quarters and putting Roam Like at Home aside, the Swedish market continues to be stable but competitive, particularly in the price fighter segment, while the main brands largely focused on adding additional value to their offering. As mentioned, our Swedish business was particularly impacted by Roam Like at Home and a decline in legacy fixed revenue. Excluding the Roam Like at Home headwind, mobile end-user service revenue was up by around 1%, with continued growth in the consumer segment, partly offset by expected declines in the business segment. Excluding Roam Like at Home, EBITDA was basically flat year-on-year as synergies realized in the TDC integration and Challenger Program benefits compensate for the declining fixed revenues.
Despite, however, our EBITDA being down year-on-year in the quarter, Sweden continued to perform very well in cash conversion, which reached 80% on a rolling 12-month basis, significantly ahead of all of our telco and cable peers in Sweden. Looking at the Swedish consumer business, mobile end-user service revenue showed an underlying trend, and solid growth of around 3% with Roam Like at Home impacting us by two percentage points. This was very much driven by strong growth in Comviq postpaid due to our continued and successful migration from prepaid and good ASPU development in Tele2. Our positively fearless brand strategy continues to retain and attract new customers. For example, a double data campaign launched to celebrate the five-year anniversary of Comviq postpaid resulted in increased sales of smaller data bundles and particularly targeting the youth population.
At the same time, demand for larger data buckets continued, and data consumption on the Tele2 brand grew by more than 50% to an average of 6.9 gig per month, leading to solid ASPU growth. Our focus on growth through customer satisfaction is maintaining satisfaction levels for both brands stable but at very high levels as measured both internally and recognized externally. I've already recognized that Comviq won the best telecom brand by Evimetrix, and we've continued to rank extremely well in the SKI quality index ranking. Moving on to B2B. As expected, the market continued to be price competitive, also within the mobile segment. We are, however, well ahead of expectations on the synergy realization plan, now just under SEK 140 million year to date from the terminated MVNO contract and headcount reductions.
We have not yet recovered from the weaker sales that we had in large enterprise segments in prior quarters, resulting in a decline in net sales of around 2% like-for-like. The combined product offering of Tele2 and TDC enables us to be a full service provider to our customers, and we remain excited about the potential of some of the new contracts that we signed in the quarter, including the University of Gothenburg and the extended and renewed contract with Attendo and the Swedish Transport Agency to name just a few. Looking towards Q4, while we expect B2B trends to continue, there will continue to be some impact from Roam Like at Home, we'll see similar dynamics in mobile end-user service revenue as we saw this quarter.
We do believe that we'll be in a better position to compensate for this at an EBITDA level in Q4. Moving on, slightly east and south to the Baltics. Commercialization and monetization of our 4G investments continue to drive really strong top and bottom-line momentum. Net sales growth of 11% was excellent, thanks to an ever-increasing demand for data and increased premium handsets in our customer base. Mobile end-user service revenue grew 12%, largely driven by the higher data consumption and growth in mobile broadband. EBITDA increased 18%, driven by profitable revenue growth and benefits from the Challenger Program as we continue to drive operational efficiency and consolidate certain tasks and skills into our shared operation organization. In the quarter, we saw again a very strong ASPU development of 11% as the transition from prepaid to postpaid subscriptions continued and customers traded up to larger data buckets.
Very much encouraged by the new propositions that we launched in anticipation of Roam Like at Home. Smartphone penetration continues to increase, which is supporting the uptake of the larger data bundles and is allowing plenty of room for further growth in the future. Additionally, the investments that we put into mobile broadband is fueling continued great revenue improvement of 37% and establishing Tele2 as a liberator of connectivity both in the home and in the go in parts of the Baltics, where broadband speeds lag that of our excellent 4G networks. In general, we continue to be very proud of our Baltic team and excited about the growth opportunities that we see ahead across our three Baltics business units. Looking into our investment markets. First, if we look at the Netherlands. First, some context.
This was the first quarter in which we had the entire quarter impacted by the new consumer credit regulation, Roam Like at Home, and of course, the first full quarter of our new disruptive propositions that we launched in May. Competition remains intensive, especially in the low-end segment, but we remain highly competitive within the market. Although net sales declined, mainly due to changes of accounting rules with respect to third-party handset sales and VTA, and of course, our lower fixed revenues. More importantly, mobile end-user service revenue was up 27%, with our mobile customer base increasing by 18% and our ASPU growing by 6%. Our mobile network economics just continue to improve, providing a virtuous circle of increasing offloading, higher volumes, higher ARPU, and improved operational efficiency. We're achieving this at lower subscriber acquisition costs than we expected, and at a faster pace than we'd previously expected.
In the absence of anything extraordinary, we now expect a small but positive EBITDA for Netherlands also in the fourth quarter this year. Disruptive fun rebel campaigns and propositions, an increased focus on customer satisfaction is definitely improving our brand awareness, our brand consideration, and NPS. We continue to take more than 20% of the switchers market. In fact, it was 23% in August. As you can see here, we're taking 30% of handset sales and now 18% of SIM-only sales. This is great progress on both counts. Net intake on mobile for the quarter was therefore up again to 57,000. Data onloading, as I said, reached 93%, we now have more than 550,000 VoLTE users who are active, so it took our data, our voice traffic, on our own network to 54% in the month of September.
Finally, our unique omni-channel position, where we have less than 20 retail stores complemented by a fast-growing online presence, was awarded the best among all Dutch telecoms by the ABN AMRO Retailer of the Year and Webshop Award. Evidence that is building a uniquely digital challenger presence in the Dutch market. Now let's move further east to our other investment market of Kazakhstan, where market competition in the quarter was largely focused around time-limited promotions of extra data. For our part, net sales were up 14% year-on-year as we continued our strong momentum in mobile end- user service revenue growing by 19%. This momentum was built as a result of strong customer growth and increasingly large data buckets. EBITDA more than doubled year-on-year as we reaped the benefits of these higher ASP levels, improved scale, and integration synergies.
If we look into these results in a bit more detail, you'll see our customer base grew by 7% to reach more than 6.8 million customers, driven by an expanding distribution network and our successful dual brand strategy. ASP was up 13%, driven by a higher margin product mix, including two new speed differentiated unlimited offerings for mobile broadband launched in the quarter. Finally, with just over 1,700 sites merged, our network integration was completed in the quarter, which will now enable us to focus on further expansion in the months ahead. We'll obviously get margin expansion from that and CapEx efficiency as a result. We can now focus on network rollout going forward so that we can tap into further untapped customer demand. With that, I'd like to now hand over to Lars, who'll take you through the financials.
Thank you, Allison. Good morning. Let's turn to the next page for an overview of the mobile end-user service revenue development. The reported year-on-year increase came in at 9%. FX effects were insignificant this quarter, but as you know, some mobile revenues came in with TDC, and the like-for-like growth was at 7%. On the right-hand side, looking at the individual operations, we are seeing positive trends across all our markets. Sweden's increase of SEK 54 million was driven mostly by the TDC acquisition, offset by the effects of Roam Like at Home , resulting in a like-for-like decrease in mobile revenues of SEK 29 million. This was in line with our expectations. The Baltics contributed SEK 61 million, representing a growth of 12%, despite the roaming impact.
The biggest contribution this quarter came from the Netherlands, which increased top line by 27% or SEK 112 million as a result of a combination of strong growth in both customer growth and ASP. Kazakhstan was up an impressive SEK 80 million, a growth of 19% versus Q3 last year. Moving on to EBITDA. We note that this quarter we have a rather clean EBITDA without any significant extraordinary items. As compared to Q3 last year, though, we had a contribution from TDC, so behind the 21% reported increase is a like-to-like growth of 12%. As is the case for mobile revenues, the biggest contribution came from the Netherlands with more than SEK 100 million improvement year-on-year. This is the result of strong mobile revenue growth, better network economics, and efficient investments into expansion costs.
Kazakhstan delivered a growth of SEK 90 million, to a large extent driven by the increased scale of the business. Turning to CapEx, we saw a decline of 31% versus the same period last year to a level of SEK 532 million in the quarter. There are several reasons for this modest level, where the decline is spread across our geographies. Firstly, it has to do with lower sales within B2B in Sweden and the Netherlands, leading to lower customer-driven CapEx. Secondly, we have not had the need to invest as much in capacity this year as we had initially assumed. We expect this will partly spill over into the next year. Thirdly, we're also in a phase of digital transformation and preparation for 5G.
Both of these things take time, and in the case of 5G preparations, the equipment and systems are not always developed to the level we want it to be before we want to pursue investment. Lastly, we have also improved our financial discipline when it comes to CapEx investments. All in all, there are different reasons for this year being a year of low investments. However, I think it is important to stress that we are not holding back on anything that we think is accretive from an ROI perspective or makes good business sense. Looking at free cash flow on the next slide, we saw an increase by more than 50% versus the same quarter last year. As discussed, the strong increase in EBITDA, together with lower CapEx, were the main contributors to the improvement. The only significant negative item was net working capital.
However, please note that they still made a positive contribution for the quarter, although lower than last year due to less handset financing activity in Sweden. As you know, we also like to look at the evolution of cash flow from a longer-term and more operational perspective. If we turn to slide 21, we have a rolling 12-month operating cash flow, which we define as EBITDA less CapEx. The picture shows the cash flow split into our Baltic Sea Challenger markets and our investment markets. Baltic Sea Challenger and other group units, including Germany and IoT, continue to grow its operating cash flow to a very strong 4.2 billion SEK, reflecting both higher EBITDA and lower investment levels. As a company, we always had a focus on cash conversion, which is EBITDA less CapEx divided by EBITDA.
I would like to highlight Sweden here, which has produced an 80% cash conversion on a rolling 12-month basis. This reflects a consistent improvement over the past year, as well as clearly outperforming our local peers. Looking further at the operating cash flow, a substantial positive development has been made in our investment markets, which we define as the Netherlands, Kazakhstan, and Croatia. These geographies combined actually report a positive operating cash flow this quarter, although driven partly by low investments. On a rolling 12-month basis, you can see that almost three-quarters of the negative operating cash flow we saw at the peak investment period a little more than a year ago has now been reduced as cash consumption from investment markets in the last 12 months was just a little more than 600 million SEK.
We do expect to increase investments in the coming quarters, especially in Kazakhstan, where we plan to expand the network. However, I think this slide makes it quite evident that we are in a much different position in our investment market today than we were a year ago. Moving on to debt and leverage. Our economic debt to EBITDA decreased compared to last quarter to 1.7, and overall, the balance sheet we have is quite healthy. Moreover, depending on the closing of the sale of Tele2 Austria during the fourth quarter, the possibility of returning these proceeds to our shareholders in an appropriate form will be assessed. On slide 23, we have a quick update of the Challenger Program, which has been a major contributor to our performance during 2017. We are well on track to reaching at least 850 million SEK of full-year benefits that we announced last quarter.
We are also confident that our run rate will be at SEK 1 billion at the end of the year to reach the target for the program. Finally, I would like to touch on our upgraded guidance on page 24. Having now seen three quarters of the year with 10%, 12%, and 7% growth, respectively, in mobile end-user service revenues, we are upgrading the guidance to high single digits. For total revenues, our new guidance is at SEK 30 billion-SEK 31 billion to reflect the sale of Tele2 Austria. We raised our EBITDA guidance to SEK 6.4 billion-SEK 6.6 billion, reflecting overperformance in the Netherlands, Kazakhstan, and the Baltics. This is an increase from the previous guidance, which was at SEK 6.0 billion-SEK 6.3 billion if we exclude an annual contribution of approximately SEK 200 million from the Tele2 Austria operations.
Finally, on CapEx, which has been very low this year, we do not expect to catch up with the previous guidance with only three months left of the year, we are therefore adjusting the guidance downwards to SEK 2.9 billion-SEK 3.2 billion. With this EBITDA and CapEx development, cash flow has been strong, and year-to-date, we have had free cash flow of SEK 2.3 billion, which obviously puts us in a good position to reach dividend cover earlier than expected. With that, I'd like to hand back to you, Allison.
Thank you, Lars. Yeah, as Lars touched on, as you all know, we had previously assumed dividend cover would only happen in 2019. On the back of this year's strong momentum and low CapEx, it's now looking highly likely that we'll cover our previously committed dividend of SEK 4 per share already this year. We were therefore pleased to announce this morning that our board will review our dividend policy for 2018 and beyond in connection with our full-year results in February. In addition, with the proceeds from Tele2 Austria due to be received during the fourth quarter and the strength of our balance sheet, they will also review at the same time means beyond our ordinary dividend to return these proceeds to our shareholders.
Let me finish with our priorities moving forward to ensure that we can continue to deliver the sustainable and growing shareholder value that we aspire to always have. First and foremost, it all starts with our purpose, to fearlessly liberate people to live a more connected life. As a result, we will continue to monetize the data that the connected life consumes. Our four key strategic pillars of positively fearless brands, connecting things our customers love, a digital-first customer experience, and a challenger cost structure are intended to first return Sweden to growth despite the headwinds from Roam Like at Home, fuel industry-leading momentum in the Baltics, Netherlands, and Kazakhstan that you've been seeing these past few quarters, drive excellence in financial discipline and operational execution in order that the top-line momentum continues to flow down to bottom-line momentum and excellent cash generation.
Our upgraded guidance reflects all of this. Most importantly, the confidence we have that our focus on monetization of connectivity will deliver long-term value for our shareholders, our customers, and our employees. Just touching on employees, I'd like to close on a big thank you to all of the Tele2 employees and colleagues for their challenger spirit and many contributions without which we would not have been able to deliver yet another set of winning results. That completes our presentation. Lars and I and Erik would be very happy to take your questions now.
If you'd like to ask a question, please press star one. We will now take our first question from Irina Idrisova from RBC Capital Markets. Please go ahead. Your line is open.
Hi. Thanks for taking my question. Just on CapEx guidance for this year, could you please give us more color around how much of that is kind of a sustainable lower run rate, so the improved financial discipline, and how much of that is more of a timing impact, and how much we should perhaps expect to come back in 2018 or later? Thank you.
Yeah. We're not going to give the guidance for next year. We'll come back on that on the 2nd of February when we give the Q4 results. I think there are some elements on around capacity, that I mentioned in my introduction, that there probably will be some spillover into next year. Then, also the customer-driven CapEx around B2B, that obviously depends on the volume that we get through on the sales side.
Great. Thank you.
Our next question comes from Viktor Högberg from SEB. Please go ahead. Your line is open.
Sorry. I also had a CapEx question. Thank you very much. It's the same. Already taken.
Our next question comes from Nick Lyall from Redburn. Please go ahead. Your line is open.
Morning all. It is Nick Lyall at Redburn. A couple of questions, please. On the enterprise business, Allison Kirkby, those comments seem to be a little bit weaker than you had given before. Is this before you had said the contracts were going to be slow to come through in terms of revenue, whereas now it seems a bit more pessimistic. Are you losing existing share or maybe just not gaining on tenders that are coming up? Is price proving tougher? Could you give us a little bit more guidance, given you have made that comment for 2018? Also just on the divvy, can I just confirm it is obviously, you are talking about an increase or an incremental payment being considered potentially for asset sales. Also looking at the underlying ordinary dividend policy as well with the board. Thanks.
Thanks, Nick. No, I did not intend for my tone to be more pessimistic than last quarter. We have not seen anything to change our point of view. The price competition is still tough. We are still suffering from a weak set of sales during the early integration of TDC. As we said last quarter, the sales cycle, when you win a new account, it takes sometimes three quarters for you to actually benefit from that. No change in our tone. It will be several quarters before we return our large enterprise business to growth. Very happy with the progress we made on new customer acquisitions and retention and extension of contracts in the quarter. The new customers will not benefit us until into next year.
In terms of the dividend, it is great that our operational momentum will now cover our ordinary dividend, already this year, which was the first ambition that we had when we reset our new dividend policy. As I said, the board will now reflect on that and our balance sheet strength, which is now below 1.7 leverage, and the proceeds coming in from Austria, which are expected during the Q4 when they review next year's dividend policy alongside our Q4 results. As we hinted at in the release, they will look at both extraordinary dividend or potentially buybacks because we have the option to do up to 10% share buybacks.
That is great. Thank you.
Thanks, Nick.
Our next question comes from Sunil Patel from Bank of America. Please go ahead. Your line is open.
Yes, hi. Thank you for taking my question. I just have two. One is, can you just remind us regarding Netherlands and the transferability of spectrum, is that a possibility in 2018, and do you foresee any combinations in that market to maybe give your existing business some scale? Just heading into Q4 in Sweden, EBITDA mildly declined in Sweden this quarter, which was a little bit lower than at least what I was expecting. What's your view as we head into Q4? I imagine the roaming drag will be less, but enterprise still seems to be an issue. Do you think underlying, if you exclude the impact of TDC, you can grow EBITDA? Thank you.
Okay. On our transferability of spectrum, our license restrictions end in December. As you can see, we have great momentum in our Dutch business at the moment. We are accelerating faster than we expected towards EBITDA breakeven. It's not our current intention to be transferring that spectrum to anybody, but to be using more of it for our Dutch customer base. That's what we're very much focused on at the moment, Sunil, is continuing to build a great position, a digital challenger presence in the market that is unique and taking more than 20% market share month after month. In Sweden, Q4, yes, EBITDA was down this quarter. The Roam Like at Home impact was around SEK 75 million, which is pretty much the whole amount that we were down quarter on quarter.
We don't expect revenue trends to have improved in Q4 versus Q3 for both Roam Like at Home and B2B reasons. We expect the EBITDA profile to be better than this quarter. Unlikely to be back to growth, but it's more likely to be stable year-on-year. Thank you.
Our next question comes from Maurice Patrick from Barclays. Please go ahead. Your line is open.
Good morning, guys. Maurice here.
Hi, Maurice.
Hi there. Just a couple of questions. One very simple one, which is, can you give us the mobile data volumes, gigabytes per sub in the Netherlands and Sweden, please? I'm not sure you happen to have, but it'd be quite helpful. The second question, just on digital transformation. You did pick up on it and made the point about the investments that you've made. I guess it's interesting that the incumbents are talking about digital transformation as a way to reduce their cost base, be more agile. You've been doing this for years. Do you think of that as an advantage as a challenger, that you already have made these steps towards simplifying your business, having that digital journey sorted, compared to incumbents in your key markets? Thanks.
Thanks, Maurice. Your first question, Sweden, Tele2, average consumption was 6.9 gig in the quarter, which is up from 4.4 in this quarter last year. The Netherlands, 3.6 gig, up from 1.1 in the same period last year. Lithuania is 1.4, Latvia is 2.4, and Estonia is 4. In terms of transformation in the digital journey, yes, we are a challenger, and so we've got less legacy than others, but we're still a telco that's been around for a number of years.
We are first and foremost thinking about digital transformation in the customer experience. Our customers are increasingly demanding for us to be present in all channels and for digital to be a simple and easy channel to interact with, but for all the channels to be able to talk to each other. It doesn't matter which channel the customer comes to, they'll get the same experience, and that channel will know who they are and what they want, and how we can help them. First and foremost, we are focusing on the customer experience. There obviously, our Challenger Program and all of the work we've done on back-end operational efficiency is embracing new digital tools to continue improved operational efficiency going forward. Are we ahead of others? Possibly. There's still a journey to go on.
We're making great progress in the Netherlands. Almost 50% of our sales are online now. We have less than 20 stores. We really are building a unique digital presence there. We've always had a very unique digital presence with Comviq in Sweden, because we didn't have stores from the beginning. We've just launched a digital-only product in Estonia called Snap, to see what we can learn from only making a product available digitally. Lots going on from a customer experience point of view, and lots going on to improve operational efficiency as a result as well.
Very clear. Thank you very much.
Thanks, Maurice.
Our next question comes from Henrik Herbst from Credit Suisse. Please go ahead. Your line is open.
Yeah. Thanks very much. I just wanted to ask about Swedish mobile and the unlimited plans, if you could share anything in terms of how popular they are and whether you've seen popularity increase since you've launched them. The second question is on Comviq, where I think as part of your anniversary promotion, you've offered double data, if that had any material impact on your top-up revenues at all. Thanks very much.
Thanks, Henrik. Tele2's unlimited campaign in Sweden is very attractive to a particular segment of the market. It's still a niche product, but it is certainly selling very well and is one of the key contributors to our ASPU growth developing and our underlying data growth going up to 6.9 gig per month. In terms of Comviq, the double the data campaign has had a fantastic impact on retention in the quarter and has really helped a very successful prepaid to postpaid migration, in a period, obviously, where prepaid continues to be under decline. We've really used that to target the kids market, and to target those consumers who were previously just using prepaid. Has it had a material impact on top-ups in the quarter? Not really. I didn't spot that. Comviq just goes from strength to strength.
If we did lose any top-up volume, we certainly compensated for that with underlying ASPU and great underlying customer growth.
Thanks. When you're saying that the unlimited plan is selling very well, can you give any more details on that in terms of numbers?
Our previous 50 gig, 100 gig, 200 gig buckets used to be about low single digits in monthly intake. Our unlimited plan basically absorbed all of those plans, and we get into double digits in terms of intake.
Okay. Have you seen that share of uptake grow since you launched it, or has it jumped up and been pretty steady?
It's remained fairly steady. It spiked a little bit in the summer when there was a lot of campaigns on it. We've got some poster campaigns again out in Swedish streets and bus stops at the moment. That's probably driving it again, it's fairly stable.
Okay. Thanks so much.
Thank you.
Our next question comes from Thomas Heath from Danske Bank. Please go ahead. Your line is open.
Thank you. Thomas here. Two questions, if I may. Firstly, just to clarify the comment there on profit contributions from Netherlands in Q4. Did you say that you should expect a positive contribution from Netherlands Mobile in Q4, or did I mishear that? Secondly, on Sweden and growth ahead. You're running into much tougher comparables on revenues, and perhaps it gets a little harder to grow EBITDA. Should we expect EBITDA relatively flattish for a few quarters in Sweden Mobile now, or do you expect to take out more challenger synergies or anything else to move EBITDA upwards if revenue growth is perhaps a little subdued ahead? Thanks.
Yeah. On the profit contribution on Netherlands in the fourth quarter, we'll be slightly positive for the total Dutch business. Not yet Dutch Mobile. It'll be total Dutch business. We expected to be breakeven for the total company for the whole year, and we're definitely ahead of plan on that. That's one of the key reasons for us adjusting our guidance upwards this morning. In terms of Sweden growth ahead, yes, you're right. We're now coming up against some tough comps. EBITDA was down this quarter. We expect it to be fairly flattish next quarter. Obviously, looking forward, the B2B turnaround from a sales point of view won't really start kicking in until into 2018. I think, yeah, Sweden, flattish EBITDA for the next quarter, and we'll explain more about next year when we report in early February.
Thank you. Can you say, just to get some sense of the relative size of the large enterprise business in Sweden Mobile?
It's about 40% of revenue, roughly, I think, but relatively less from an EBITDA point of view.
For the total business, Thomas, it's about 40%, Sweden.
Okay.
A little bit less on the mobile side. Yeah.
Yeah, a little bit less on mobile. Yes.
All right. Helpful. Thanks.
Our next question comes from Ulrich Rathe from Jefferies. Please go ahead. Your line is open.
Yeah, thank you. I have two questions. The first one is on Swedish Mobile and specifically the consumer segment there. Excluding the Roam Like at Home impact, it has slowed down a bit, if I read your commentary correctly, sort of around about 5% for the last two quarters at least to maybe 3%. How do you interpret that slowdown? Is that just variability, or is this really something more meaningful in terms of trends? The second question is with regard to the guidance upgrade. Could you just talk a bit more about what drove this in terms of, obviously, you can decide to invest less, or you could benefit from externalities which help you and therefore you upgrade.
I'm not sure it's always so clear cut, but if you could just explain a bit how much comes because you think that certain investments that you had planned before aren't so reasonable anymore, or whether it was really progress in the market and the revenues that made you raise the guidance quite so closely to the second quarter. If I may add to that, what makes the visibility so low? If you decide to touch the guidance for the second quarter, then you follow with this in the third quarter. What changed in that relatively short period of time? Thank you.
Okay. First one, your Swedish question. Yes, excluding Roam Like at Home, we went down to 3%. We'd previously been at 5. We're coming up against tougher comps now, we're. We've always said 2%-3% mobile end user service revenue is a fair objective for a highly competitive market such as Sweden. Certainly, we've still got a big prepaid business, and that was down on the quarter. When we get 3% growth on our mobile end user service revenue in Sweden, we generally flow a huge amount of that down to the bottom line. As we both touched on, our cash conversion in Sweden at 80% is just truly outstanding, despite it was a quarter of negative revenue development. In terms of the guidance upgrade, maybe I'll let Lars touch on that because I guess you were focusing really on CapEx.
Lars, you want to give some more color?
Yeah. I think on the guidance upgrade, you were talking about the EBITDA? Is that correct?
There was a comment on the EBITDA specifically.
Right. I think if you look at the main contributors, it was Kazakhstan, Baltics, and the Dutch performance. We're not holding back investments as far as expansion costs when they are accretive, so we're not slowing that one down. I think it's the Dutch business has obviously, from an expansion cost perspective, been impacted positively because of the stronger SIM-only share that we're seeing, so having less subsidy. I think Baltics is doing a fantastic job on data monetization, driving the top line, and we see good benefits coming through from the efficiency programs that we have in those three countries as well. Latvia EBITDA margin this quarter was at a very high level at 40%, as you've seen. The Kazakh business are just continuing to drive also profitable growth.
I think those are the three components that are driving the upward momentum in the guidance that we took in.
As Lars said, definitely not holding back on investment. We were cautious on Netherlands at the end of Q2 because we were yet to still see what was the sustained impact of the Wft regulation on handset subsidies in the market. We haven't seen an acceleration in this quarter. We don't expect it in the fourth quarter, but the market could shift back into handset subsidies. That's why we've been holding back on taking the Dutch guidance up. Certainly, for this year now, we have visibility all the way through to the end of the year. We're very comfortable that we have enough investment within our guidance to keep fueling the great momentum that we have across our footprint.
I think the last factor is also "Roam Like at Home," where when we came up with it Q2, we're in the middle of July, and now we have better visibility on what we're going to earn there.
Yeah. That's true.
That's helpful. Thank you.
Our next question comes from Johanna Ahlqvist from SEB. Please go ahead. Your line is open.
Yes, hello. Two questions, if I may. First of all, on Kazakhstan, if you can update or given the sort of strong performance on your view on the current sort of option value and the value of the shareholder loan plus interest. Just sort of a detailed question on the Netherlands. If you can give us any sort of view on, you mentioned this SIM-only focus right now and the handset subsidies are quite limited, but where do you see the sort of biggest uncertainty ahead? Is it the subscriber intake or is it the ARPU level in the Netherlands? Lastly, if I may, just a confirmation that, as I interpret it right, that CapEx will increase 2018 from 2017 guided levels. Thank you.
I'll take Netherlands and then Lars will take Kazakhstan CapEx. Netherlands, the market is still disproportionately pushing SIM-only more than handset subsidies at the moment. As we look forward, we don't see that changing, although what we have seen in October is that the low-tier price fighter brands, mainly MVNOs, are fighting back from a pricing point of view. T-Mobile have done again their mad months where they throw a bunch of subsidies in on a promotional level. Where do I see the risk going forward? It just really depends if the competitive situation were to suddenly shift. We seem to have done a very consistent job of taking around 20% of the available market, and we're consistently in that 55,000-60,000 net intake per quarter. We've been achieving that either under a SIM-only strategy or a handset subsidy strategy.
ARPU continues to develop very nicely. I guess the one that is the least difficult to predict is how ARPU will develop. The Dutch consumption is very much still a lot lower than you get in our Swedish and some of our Baltic markets. The question will be how quickly will they continue to trade up over time, because their average consumption is still only 3.6, where we have Sweden at 6.9. In the short term and what we're seeing at the moment, we've got no reason to believe that the continued momentum can't continue further. On Kazakhstan and CapEx Lars?
On Kazakhstan, the option value at the end of Q3 is around SEK 390 million, Johanna. We took in another SEK 170 million there, which reflects the good performance of the business. The shareholder loan is currently at around SEK 2.8 billion. Obviously, that is very (inaudible) , as you know. That's kind of where we are on the performance and the earn out implication to (inaudible) is 18%, obviously.
That SEK 390 is equivalent to an 18% stake, and we have a fully diluted 31% stake.
Yeah. Refresh me again on the CapEx, Joanna?
Just the CapEx question was basically, if I interpreted you right, that CapEx 2018 should increase from the guided level in 2017.
Yes.
Yeah. It will be an improvement or a slight increase in balance sheet CapEx. Yeah. Remember that the cash flow CapEx that we have at the end of Q3 is around SEK 2.4 billion. Right.
Yeah, we've had a particularly low CapEx year in Sweden this year, and I would expect that that will go up next year to support continued data growth and capacity growth in the market.
Thank you very much.
Over the two years, 2017 and 2018, the progress that we've made on operational efficiency, Challenger Program, synergy benefits means that over the two years, the CapEx will be lower than we'd previously expected.
Operator, we will need to finish the call in a couple of minutes. Can we have one more question, please?
Certainly. Our final question comes from Lena Österberg from Carnegie. Please go ahead. Your line is open.
Yes. I also have a question on the Dutch business, of course. I'm trying to figure out your OpEx base, how much of the year-over-year lower OpEx is related to lower network costs, and how much is related to lower SAC? Also on the Challenger Program, how much do you have to extract out of the SEK 100 million for the full year into the fourth quarter?
Okay.
Yeah, we haven't mentioned it a quarter. What I can say on the Challenger Program, we're on track to get to the SEK 850, that was SEK 600 million, that's SEK 250. We're on track on getting to that level. I would say it's fairly even over the quarters, especially coming as of Q2, Q3 onwards.
Okay.
On the network cost in the Netherlands, Lena, this is a combination of us driving the roaming cost down, which we don't disclose anymore separately, and an increase in basically the other kind of site rentals and so forth, which comes from an increase in network, in basically the rollout that we have in the country where we're now at 3,100 sites compared to last year. Let's look. I don't want to give you a wrong number here. Let me get back to you on that one.
I'd expect the vast majority is lower SAC because we've got significantly lower handset sales. Because we're getting the benefits from lower roaming, but we've got more sites now this year than we had last year, one probably offsets the other. The vast majority will be lower SAC, Lena, but Lars will get back to you.
Okay. Thank you.
Thanks, Lena.
Thank you, operator. We need to finish the call here. Thanks, everyone, for listening. We will talk again in three months' time, on the 2nd of February.
Thank you all. Have a good day.
Thank you. That will conclude today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.