Earnings Call: Q3 2017

Oct 19, 2017

And 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 Strandenperth. Please go ahead. Thank you, operator. Welcome, everyone, to Tele2's Q3 2017 results call. I have with me our CEO, Alison Kurpi and our CFO, Lars Novak. We'll do the usual routine management presentation and Q and A. You have the slides at our website, pelleted.com. And we have a slight time constraint this morning, so we'll try to finish the call in about 50 minutes. So we'll try to be extra sharp and efficient this morning. So without further talking from my side, I leave the word over to you, Allison. Please go ahead. Thank you, Eric, and good morning, everyone, and welcome to our Q3 results presentation. As you know, liberating a more connected life remains our ultimate priority, and we saw this drive solid growth in the Q3 as customers really resonated with our fearless brands and our great value for money proposition. Mobile engine as a service revenue as a result grew 7% on a like for like basis despite the impact from Roam Like Home with double digit and sometimes very high double digit growth in our Dutch, Baltics and Kazakhstan businesses. Net sales amounted to DKK 7,500,000,000, up 1% on a like for like basis, and EBITDA was up by 12% to DKK 1,800,000,000, 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 excluded 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. And 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. So 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 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, Comvique was awarded the strongest telecom brand by Evometrics 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. And in the Netherlands, we were awarded best telecom retail chain and web shop. This was indeed the Q1 where we saw the full effect of Roam Like at Home. And for the group, the impact on mobile end user service revenue was as expected around 2 percentage points. And on EBITDA, again, in line with expectations, the impact was in the DKK100 1,000,000 to DKK150 1,000,000 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%. However, we were less affected in the Baltics and continued to deliver great double digit mobile service revenue growth and EBITDA growth of 12% 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 on loading 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. And 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 2 percentage points to 25%. A key contributor to this being the significant which is well ahead of plan to reach the DKK 1,000,000,000 target in 2018 with an estimated level of benefits of at least DKK 850,000,000 for this year. So moving on to our markets, let's look at the Baltic Sea Challenger businesses first. In line with recent quarters and putting Roam Like Home aside, the Swedish market continues to be stable but competitive, particularly in the PriceSider 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 Home and a decline in legacy fixed revenue. Excluding the Roam Like 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 Home, EBITDA was basically flat year on year and synergies realized in the TDC integration and Challenger program benefits compensate for the decline in 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 room at home impacting us by 2 percentage points. This is very much driven by strong growth in Combi postpaid due to our continued and successful migration from prepaid and good asset 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 5 year anniversary of Combi 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 TILAR-two 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 Combi won the best telecom brand by Evometrics, and we're continuing to rank extremely well in the SKI Quality Index ranking. Moving on to B2B, as expected, the market continues to be price competitive, also within the mobile segment. We are, however, well ahead of expectations on the synergy realization plan, now just under DKK140 1,000,000 year to date from the terminated MVNO contract and headcount reductions. However, we have not yet recovered from the weaker sales that we had in large enterprise segment in prior quarters, resulting in a decline in net sales of around 2% like for like. The combined product offering of Pillar 2 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 Atendo and the Swedish Transport Agency, to name just a few. Looking towards Q4, while we expect the B2B trends to continue and there will continue to be some impact from Roam Like Home, and so 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 and slightly east and south to the Baltics. Commercialization and monetization of our 4 gs 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. And 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 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 4 gs 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 3 Baltics business units. Now looking into our investment markets. And first, if we look at the Netherlands. And first, some context. This was the 1st quarter in which we had the entire quarter impacted by the new consumer credit regulation, Roam Like Home and, of course, the 1st 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 3rd party handset sales and VST 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 continued to improve, providing a virtuous circle of increasing offloading, higher volumes, higher ARPUs and improved operational efficiency. And we're achieving this at lower subscriber acquisition costs than we expected and at a faster pace than we previously expected. In the absence of anything extraordinary, we now expect a small but positive EBITDA for Netherlands also in the Q4 this year. Disruptive fun rebel campaigns and propositions and 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 switches market. In fact, it was 23% in August. And as you can see here, we're taking 30 percent 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 on loading, as I said, reached 90 3%, and we now have more than 550,000 VoLTE users who are active and took our data, our voice traffic on our own network to 54% in the month of September. Finally, our unique omnichannel 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 Retail Chain of the Year and WebShop Award, evidence of us building a uniquely digital challenger presence in the Dutch market. And 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 reap the benefits of these higher ASPU levels, improved scale and integration synergies. And if we look into these results in a bit more detail, you'll see our customer base grew by 7% to reach more than 6,800,000 customers, driven by an expanding distribution network and our successful Geo brand strategy. ASPU was up 13%, driven by a higher margin product mix, including 2 new speed differentiated unlimited offerings for mobile broadband launched in the quarter. Finally, with just over 1700 sites merged, our network integration was completed in the quarter, which will now enable us to focus on further expansion in the months ahead, and 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. And with that, I'd like to now hand over to Lars, who will take you through the financials. Thank you, Alison, and 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 of our 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 have seen positive trends across all our markets. Sweden's increase of SEK54 1,000,000 was driven mostly by the TDC acquisition, offset by the effects of Groningen, resulting in a like for like decrease in mobile revenues of SEK 29 1,000,000. This was in line with our expectations. The Baltics contributed SEK 61,000,000, 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 SEK112 1,000,000,000 as a result of a combination of strong growth in both customer growth and ASPU. Kazakhstan was up an impressive SEK80 1,000,000, a growth of 19% versus Q3 last year. Moving on to EBITDA. We note that this quarter, we have a rather key EBITDA without any significant extraordinary items. As compared to Q3 last year, though, we have a contribution from TDCs, so behind a 21% reported increase is a like for like growth of 12%. As is the case for mobile revenues, the biggest contribution came from the Netherlands with more than $100,000,000 improvement year on year. This is the result of strong mobile revenue growth, better network economics and efficient investments into expansion costs. CapExxon delivered a growth of $90,000,000 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 $532,000,000 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 park its spillover into the next year. Thirdly, we are also in the phase of digital transformation for 5 gs. Both of these things take time. And in the case of 5 gs preparations, the equipment and systems are not always developed to a 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. So 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. Discussed, the strong increase in EBITDA, together with lower CapEx, were the main contributor to the improvement. The only significant negative item was net working capital. However, please note that we 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. So 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 SEK4.2 billion, 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. And I'd like to highlight Sweden here, which has produced 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 Benevolence, Kazakhstan and Croatia. These geographies combined actually reported 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 the investment markets in the last 12 months was just a little more than SEK600 1,000,000. 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 percent and overall, the balance sheet we have is quite healthy. Moreover, depending on the closing of the sale of Tele2 Austria during the Q4, 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. Are well on track to reaching at least $850,000,000 of full year benefits that we announced last quarter. And we are also confident that our run rate will be at $1,000,000,000 at the end of the year to reach the target for the program. Finally, I would like to touch on our updated guidance on Page 24. Having now seen 3 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 SEK30 1,000,000,000 to SEK31 1,000,000,000 to reflect the sale of Austria. We raised our EBITDA guidance to SEK6.4 billion to SEK6.6 billion, reflecting over performance in the Netherlands, Kazakhstan and the Baltics. This is an increase from the previous guidance, which was at €6,000,000 to €6,300,000,000 if we exclude an annual contribution approximately $200,000,000 from the Austrian operation. Finally, on CapEx, which has been very low this year. We do not expect to catch up with the previous guidance with only 3 months left of the year, and we are therefore adjusting the guidance downwards to $2,900,000,000 to 3 point $2,000,000,000 With this EBITDA and CapEx development, cash flow has been strong, and year to date, we have had free cash flow of 2,300,000,000 dollars which obviously puts us in a good position to reach dividend cover earlier than expected. And with that, I'd like to hand back to you, Alison. Thank you, Lars. So as Lars touched on, as you all know, we had previously assumed dividend cover would only happen in 2019. But 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 DKK4 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 Q4 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. So 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. 1st and foremost, it all starts with our purpose, to feel as we liberate people to live a more connected life. And as a result, we will continue to monetize the data that the connected life consumes. And our 4 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 Roamak at Home, fuel industry leading momentum in the Baltics, Netherlands and Kazakhstan that you've been seeing these past few quarters and 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, but 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. And just touching on employees, I'd like 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. So that completes our presentation. And Lars and I and Eric would be very happy to take your questions now. We will now take our first question from Irina Idjesova from RBC Capital Markets. Please go ahead. Your line is open. Hi. Thanks for taking my question. So just on capital guidance for this year, could you please give us more color around how much of that is 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? Yes. So we're not going to give the guidance for next year. We'll come back on that on the 2nd February when we give the Q4 results. But I think there are some elements on it around capacity that I mentioned in my introduction that the portfolio needs to spillover into next year. And then also the customer driven CapEx around B2B, that obviously depends on the volume that we get through on the sales side. Our next question comes from Victor Huldum from SEB. Please go ahead. Your line is open. Our next question comes from Nick Lyall from SocGen. It's Nick at SocGen. Just a couple of questions, please. On the Enterprise business, Alison, those comments seem to be a little bit weaker than you've given before. So is this I think before you'd said your contracts were going to be slow to come through in terms of revenue, whereas now it seems a bit more pessimistic. So are you losing existing share or maybe just not gaining on tenders that are coming up or is price proving tougher? Could you give us a little bit more guidance given you've made that comment for 'eighteen? And also just on the dividend, can I just confirm, it's obviously, you're talking about an increase or an incremental payment being considered potentially for asset sales, but also looking at the underlying ordinary dividend policy as well with the Board? Okay. Thanks, Nick. No, I didn't intend for mytorrent to be more pessimistic than last quarter. We haven't seen anything to change our point of view. The price competition is still tough, and we're still suffering from a weak set of sales during the early integration of TDC. And as we said last quarter, the sales cycle, when you win a new account, it takes sometimes 3 quarters for you to actually benefit from that. So no change in our tone. It will be several quarters before we return our large enterprise business to growth, but very happy with the progress we made on new customer acquisitions and retention and extension of contracts in the quarter, but the new customers won't benefit us until into next year. In terms of the dividend, it's 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. And 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 4th quarter results. And as we hinted at in the release, they will look at both extraordinary dividend or potentially buybacks as we have the option to do up to 10% share buybacks. 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 2. One is, can you just remind us regarding evidence and the transferability of spectrum? Is that possibility in 2018? And do you foresee any combinations in that market to maybe give you existing business and scale? And just heading into Q4 in Sweden, EBITDA are now the decline 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 mentioned the drilling drag will be less, but enterprise still seems to be an issue. Do you think underlying if you exclude the impact TDC, you can grow EBITDA? Thank you. Okay. So on our transferability of spectrum, our license restrictions end in December. But 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. And so 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. And 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 Home impact was around DKK 75,000,000, which is pretty much the whole amount that we were down in quarter on quarter. We don't expect revenue trends to have improved in Q4 versus Q3 for both Roam Like Home and B2B reasons, but 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. Just a couple of questions. One very, very simple one, which is can you give us the mobile data volumes, gigabytes per sub in Netherlands and Sweden, please? I'm not sure you happen to hand, but that'd be helpful. And the second question, just on digital transformation, I mean, you do pick up on it and make the point about the investments that you've made. I guess, interestingly, 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? Yes. Thanks, Boris. So your first question, Sweden Pillar 2, average consumption was 6.9 gig in the quarter, which is up from 4.4 in this quarter last year Netherlands, 3.6 gig, up from 1.1 in the same period last year and Lithuania is 1.4, Latvia is 2.4 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, and we've still got a journey to go on from a transformation point of view. We are 1st and foremost thinking about digital transformation in the customer experience because that's where we 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. So 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. So first and foremost, we are focusing on the customer experience. And then, 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. So are we ahead of others? Possibly, but 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. So we really are building a unique digital presence there. We've always had a very unique digital presence with Combiq in Sweden because we didn't have stores from the beginning. And 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. So 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, Boris. Our next question comes from Henrik Herbst from Credit Suisse. Please go ahead. Your line is open. Yes. 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 they've sort of you've seen popularity increase since you've launched them? Then the second question is on Comvic, 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 Comvique, 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. So we've really used that to target the kids market and to target those consumers who were previously just using prepaid. So has it had a material impact on top ups in the quarter? Not really. I didn't spot that. Comvique just goes from strength to strength. So 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, I mean, can you give any more details on that in terms of numbers? So, our previous 60 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. And have you seen that share of uptake grow since you launched it? Or has it sort of been it jumped out pretty steady? It remains fairly steady, spiked a little bit in the summer when there was a lot of campaigns on it. We've got some poster campaigns again in Swedish streets and bus stops at the moment that's probably driving it again, but it's fairly stable. Okay. Thanks very much. Thank you. Our next question comes from Thomas Haight 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? And then 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? Yes. So on the profit contribution on Netherlands in the 4th quarter, it will be slightly positive for the total Dutch business, not yet Dutch mobile. It will be total Dutch business. But we're ahead of we expect it to be breakeven for the total company for the whole year, and we're definitely ahead of plan on that. And 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. And obviously, looking forward, the B2B turnaround from a sales point of view won't really start kicking in until into 2018. So I think, yes, Sweden flattish EBITDA for the next quarter, and we'll explain more about next year when we report in early February. Thank you. And 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 net net of assets, it's about 40%, Sweden. Okay. That's on mobile side, yes. Yes, a little bit less on mobile, yes. All right. Helpful. Thanks. Our next question comes from Ulrik Rat from Jefferies. Please go ahead. Your line is open. Yes. I think I have 2 questions. The first one is on Swedish mobile and specifically the consumer segment there. Excluding the Roam Like 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 sort of just see variability? And was this really something more meaningful in terms of trends? The second question is with regard to the guidance upgrade. Could you sort of 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 such so clear cut. But if you could just sort of explain a bit how much sort of comes because you think that certain investments that you had planned before aren't so reasonable anymore? Or there was really progress in the market and the revenues that made you raise the guidance quite so closely to the Q2. And if I may sort of add to that, what makes the visibility so low? If you decide to touch the guidance for the Q2, then you follow with this in the Q3? What sort of changed in that relatively short period of time? Okay. So first one is a Swedish question. Yes, excluding Room Like Home, we went down to 3%. We've previously been at 5%. We're coming up against tougher comps now, Oui. And we've always said 2% to 3% mobile end user service revenue is a fair objective for a highly competitive market such as Sweden. And certainly, we've still got a big prepaid business and that was down on the quarter. But 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. And 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 merely on CapEx. So Lars, do you want to give more color? Yes. I think on the kind of upgrade, you were talking about the EBITDA. Is that correct? There was a comment on the EBITDA specifically. Right. I mean, I think if you look at the main contributors, it was Kazakhstan, Baltics and the Dutch performance. And I mean, we are not holding back investments as far as expansion costs when they are accretive. So we're not slowing that one down. So 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 I mean, less subsidy. I think Baltic 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. Latio's EBITDA margin this quarter was at a very high level at 40% as you've seen. And the cataract business are just continuing to drive also profitable growth. So I think those are the 3 components that are driving the upward momentum in the guidance that we took in. And 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 VFTA regulation on handset subsidies in the market. We haven't seen an acceleration in this quarter. We don't expect it in the Q4, but we need to keep the market could shift back into handset subsidies. And so 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 the year. And we're very comfortable that we have enough investment within our guidance to keep fueling the great momentum that we have in across our footprint. I think the last factor is also around like at home, where when we came up within Q2, we're in the middle of July, and now we have better visibility over the remainder. Our next question comes from Joanna Allevich from SEB. Please go ahead. Your line is open. Yes, hello. Two questions, if I may. First of all, on CapEx done, 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. And then just sort of a detailed question on the Netherlands. If you can give us any sort of view on I mean, you mentioned this same 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 auto level in the Netherlands? And then lastly, if I may, just a confirmation that as I interpret you right, that CapEx will increase 2018 from 2017 guided levels? Why don't I take Netherlands and then Lars will take Kazakhstan and CapEx. Netherlands, yes, the market is still disproportionately pushing SIM only more than hand handset subsidies at the moment. And as we look forward, we don't see that changing, although what we have seen in October is that the low tier price lighter brands, mainly MVNOs, are fighting back from a pricing point of view, and T Mobile have done, again, their mad months where they threw 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 to $60000 net intake per quarter, and we've been achieving that either under a SIM only strategy or a handset subsidy strategy. And R2 continues to develop very nicely. So 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. And so the question will be how quick we will be continue to trade up over time because their average consumption is still only 3.6 where we have Sweden at 6.9. But in the short term and what we're seeing at the moment, we've got no reason to believe that the continued momentum can continue further. And on Kazakhstan? Yes. On Kazakhstan, so the option value at the end of Q3 is about $390,000,000 Ioana. We took in another €170,000,000 there, which reflects the good performance of the business. The shareholder loan is currently at around €2,800,000,000 Obviously, that is a tangy base, as you know. So that's kind of where we are on the performance and the earn out implication to rotation net, which is 18%, obviously. Yes. So that $290,000,000 is equivalent to an 18% stake, and we have a fully diluted 31% stake. Yes. And refresh me again on the CapEx, Ioana. Just the CapEx question was basically, if I interpret you right, that CapEx 2018 should increase from the guided level in 2017? Yes. It will be an improvement or a slight increase in balance sheet CapEx, yes. Remember that the cash flow CapEx that we have at the end of Q3 is around $2,400,000,000 right? But yes, 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 markets. Over the 2 years, 'seventeen 'eighteen, the progress that we've made on operational efficiency, Challenger program, synergy benefits, means that over the 2 years, the CapEx will be lower than we previously expected. Operator, we will need to finish the call in a couple of minutes. So can we have one more question, please? Certainly. Our final question comes from Lena Ostrander from Carnegie. Yes. I also have a question on the Dutch business, of course. I'm trying to figure out your OpEx space. How much of the year over year lower OpEx is related to lower network costs? And how much is related to lower SAC? And then also on the Challenger program, how much do you have to extract out of the $100,000,000 for the full year into the Q4? Okay. Yes. We haven't mentioned in the quarter. But I can't tell the Challenger program, we're on track to get to the €850,000,000 So that was €600,000,000 So that's €250,000,000 So we're on track on getting to that level. And I would say it's fairly even over the quarters, especially coming as of Q2, Q3 onwards. And on the network cost in the Netherlands, Lena, this is a combination of us driving the roaming costs 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. So just look, I don't want to give you a wrong number here. Let me get back to you on that one. But I'd expect the vast majority is lower SAC because we've got significantly lower handset sales because that's we're getting the benefits from lower roaming, but we've got more sites now this year than we had last year. So one probably will set the other. So the vast majority will be lower sac Lena, but Lars will get back to you. Okay. Thank you. Thank you, operator. So we need to finish the call here. Thanks, everyone, for listening, and we will talk again in 3 months' time on the 2nd 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.