Earnings Call: Q4 2016

Jan 26, 2017

And welcome to the Tele2 Q4 Interim Report 2017 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Christopher Kaviskar, Head of IR. Please go ahead, sir. Thank you very much. Good morning, everyone, and a warm welcome to the presentation of Tele2's Q4 2016 results. Speaking is Christoph Kallika. And with me here today, I have our President and CEO, Alison Kurfi and our CFO, Lars Nordmark. Alison will start off by going through the highlights of the quarter and Lars will then follow and give you some more details on the financials. After this, we will have a Q and A session where we'll have the possibility to ask questions. So with this, I will hand over to Alison. Good morning, everybody, and welcome to our 4th quarter results. So if we kick off with the overall group financials, you will see now that we have completed the acquisition of TDC. The reported numbers include TDC from November 1. So absolute sales were $8,200,000,000 in the quarter, mobile engines of service revenue was $3,700,000,000 in the quarter and EBITDA just shy of $1,500,000,000 Monetization of data is continuing to be our key priority, and we didn't see just good growth on an absolute basis. We also saw good growth on a like for like basis with 6% mobile end user service revenue growth in the quarter, which to be clear includes Altell and TDC on a pro form a basis and also on a constant currency basis. Net sales, as I said, amounted to over $8,000,000,000 on a like for like basis. That's 2% up due to higher revenues in the Baltics and Kazakhstan, offset by lower revenues and fixed broadband. And EBITDA was back to growth again, up by around 4%, primarily related to Kazakhstan and Germany. So let me take you into some of the key highlights that make us particularly proud in the quarter. Breaking down the 6% growth, in Sweden, we saw momentum from earlier quarters build further to 4%, excluding TNC. In the Baltics, we continued our very strong data monetization with mobile engine as a service revenue up 12%. In the Netherlands, the positive customer growth trend continued into and throughout Q4, achieving a net intake of 55,000 and taking our customer base now above 1,000,000 customers, which is resulting in an overall strong 9% growth, but I'll explain that a bit later because the underlying is much more than 9%. In terms of technological development, our 4 gs position has strengthened throughout the footprint in the quarter with Swedish and Baltic geographic coverage now above 99%. And we're also seeing continued build out of our Dutch network, improving indoor coverage by 7 percentage points in the quarter to above 90 percent, which is now enabling good progress on data on loading now at 82% of our customers now using Tele2's fantastic network for data. On productivity, data monetization and good operating leverage is fueling strong cash contribution in Sweden and the Baltics, our established markets. And the integration of Altel in Kazakhstan is progressing well with cost and revenue synergies contributing to a strong EBITDA result in the quarter. And Challenger Program is developing ahead of expectations, well on track for the DKK 1,000,000,000 target in 2018 with an above DKK600 million run rate already achieved versus our 2014 baseline. On people, we welcomed 800 new TDC colleagues into our business, and we have, with great excitement, kicked off the integration of the TDC business, a merger that will enhance our growth and value creation strategy in our most important markets. Also in the quarter, we were recognized independently for elements of our responsible challenger strategy. We came 3rd in Sweden for the Allbroich Foundation Equality Award, and we were also top rated in the Global Child Forum's annual assessment Shista, a building that's been we moved into our new headquarters in Shista, a building that's been custom built for Tele2's collaborative, challenger open culture, aiming to liberate how our people work together to create the Tele2 of the future. So let's get into the markets now. First of all, Sweden. We saw strong mobile end user service revenue in the quarter, which increased year on year by 4%, excluding TDC and 7% if you include TDC. Both consumer postpaid and B2B large enterprise were up mid to high single digits, driven by strong customer growth in Convict postpaid and also in large enterprise. Excluding TDC, total revenue was flat as we expected with mobile end user service revenue offset by lower fixed telephony and wholesale revenues. EBITDA also ex TDC was also flattish expected due to the higher marketing spend that we put into the quarter and during the course of last year. But adding TDC, which also had a strong end the year, we delivered another quarter above DKK 1,000,000,000. Looking at the trends, they did continue to improve in the quarter. We're seeing further increased data monetization and strong customer growth, which has led to 7% consumer postpaid end user service revenue increase. Our value champion strategy is continuing to attract higher value customers to the Tele2 larger data buckets, and the average consumption now has grown from 3.5 gig per month in Q4 last year to 4.5 gig per month this quarter. This strategy, in addition to our increased network coverage, is driving our network experience and customer satisfaction on Tele2 to best in class levels and driving a positive ASPU development in the quarter. Our dual brand strategy continues to drive positive postpaid mobile end user service revenue. And in the Christmas period, we aired again our successful Commweek Christmas campaign, delivering the highest intake and therefore the highest sales ever for the Conveak brand. We also saw particularly strong revenue and EBITDA growth within the Large Enterprise segment and in fact seeing record profit levels at TDC in the quarter And proof that the early indications of the integration are going well, we also managed to retain as a combined new sales force some large enterprise customers such as Skonya, Skatevarquette and Volvo. So moving into the Baltics, and you saw another very strong quarter in the Baltics with the focus on commercialization and monetization of our 4 gs investments, really driving excellent top and bottom line growth. Net sales growth of 15% was very strong, thanks to the ever increasing demand for data, a move to more premium handsets, but also positively affected by currency movements. Mobile end user service revenue was similarly very strong at 12%. Again, currency movements helped, but it was very much driven by data consumption, pre- to postpaid migration and growth in mobile broadband, a segment which is a key target area for us to grow in because our market share there is actually lower than our average market share. EBITDA growth was up 3% with Latvia up 7% and Estonia up a very strong 12%. The excellent top line growth and a best in class challenger cost structure is enabling data monetization to successfully flow through to the bottom line, whilst at the same time enabling to us to invest in the mobile broadband segment in Lithuania to step change our growth in that segment, which will really help us drive higher ARPUs over the long term. Looking a little bit further into the Baltics, As I said, we saw strong data monetization, very much driven from prepaid to postpaid transition, smartphone penetration building further and a great job on data analytics driving excellent customer base management down to best in class levels in terms of churn in Lithuania. This and our mobile broadband, where end user service revenue more than doubled year on year in Lithuania, is growing consumer postpaid and all the contributors delivered a 7% ASPU growth. 4 gs coverage is now at 99% in the region and continuous improvements in speed with maximum download speeds far above our competitors. We have some speeds in some of our markets that are up to 3 50 megabits per second. It's really driving a great customer experience and therefore great data usage, including the possibility for increased top up data buckets. So then moving into our investment markets. First of all, the Netherlands. This quarter marks our 1 year anniversary since the launch last November of our world first 4 gs only network. Mobile end user service revenue was up 9%. But if you exclude the VAT benefit that we had this time last year was DKK 90,000,000, underlying growth in Netherlands mobile was 40% up year on year. As we saw an increased mobile customer base, up 24% and solid ASPU development throughout the year. Net sales were up 5%, with the same impact with the increase in mobile offset by last year's VAT benefit and the declines that we've continued to see in fixed broadband and telephony, which obviously continue to be a challenge for us in that market. EBITDA was impacted by our continued investments in the market during Q4. However, if you adjust for last year's BAT benefit, we actually saw underlying improvement year on year, and we expect that to continue into 20 17. During the Q4, our main focus has been to continue the positive growth trend that we build up since March, as well as to focus on increasing ASPU, rolling out a high quality VoLTE service and improving the overall customer experience. We continue to build and invest behind our fun Revo brand platform, which is supporting awareness and consideration levels to remain at high levels. On the network side, as I said, we continue to expand our LTE Advanced 4 gs network, which has now reached above 99% outdoor and above 90% indoor. And we expect our rollout to now be completed by mid-twenty 18. 4 gs on loading has now reached 80 2% by the end of the quarter, a metric that will continue to improve as we now have more than doubled our 4 gs customer base in the last year, with now 800,000 4 gs subscribers, 650,000 of those have been provisioned on Voalte and 170,000 already active on Voalte. So as we continue to build on these components for growth, you can expect that we will see some headwinds from competition putting some pressure on us. We've already seen that since December. However, we fundamentally and continue to believe that we're the only mobile focused brand with the right to take a challenger customer champion position in the Dutch market. In summary, we have confidence that our disciplined investment strategy will deliver as we further establish ourselves as the preeminent challenger in the market. And then in Kazakhstan, our next investment market, we saw strong underlying mobile end user service revenue growth of 16% from an increased customer base and higher ASPU. Net sales admittedly were flat year on year, but that was due to a heavy sales campaign in Q4 last year. EBITDA was significantly higher year on year and is now a material contributor to the group as we continue to reap the benefits of improved operating leverage and from JV integration synergies as well as mobile revenue growth. So as you can see, our disciplined approach in our investment markets are really enabling a much stronger and more sustainable platform for growth in the future. Just looking at that growth in a little bit more detail, it's very much been driven by continued customer base growth despite the competitive market environment with our competitors now starting to roll out 4 gs. But still despite that and despite unlimited promotional operations during the Q4, we saw ASPU increase by 8% year on year. The unlimited promotions have now ended in early January, and we're now actually seeing positive pricing developments back in the market again during the course of this month. In terms of the integration, the JV is progressing according to plan. About a third of our sites have now been merged, and we've also fully migrated customers onto 1 single billing platform. And a new AltTel campaign has been launched to promote our fantastic network speed and our top 4 gs coverage relative to others to really drive data usage and increase Altel brand consideration. So then moving on to the Challenger program. Challenger program is ahead of plan 16 and therefore, well on track for our 2018 target of $1,000,000,000 per annum benefit, which is enabling us very much to invest back in some areas to secure sustainable top and bottom line growth the business. Within simplification, we've reduced the complexity in our product portfolio by removing 9.50 products across the group. In discipline, we've significantly increased the share of spend strategically sourced or procured, allowing us to achieve scale benefits across the group and working capital improvements, especially in handsets and equipment. On consolidation, during Q4, we've onboarded the Baltics and Croatian network and IT organizations into shared operations. And together with the previously onboarded Swedish and Dutch network and IT organization, we're really just starting to leverage scale and scale there. This has allowed us to reduce resources throughout the group as well as shifting resources from high cost to low cost locations. In transformation, our back office and our general and administrative resources significantly. We now have roughly 3 50 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es within our Indian BPO. And when I visited them early in December, I'm seeing how they're already starting to use robotics to drive even further efficiencies moving forward. In addition, during Q4, we've made significant FTE reductions within both the Swedish organization as well as the Dutch organization. As you're aware, in late October, we announced a reduction of 2 25 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Es in Sweden. And in the last 10 days, we announced a further reduction in the Netherlands commercial organization of 75 FT feet feet feet feet feet feet feet feet feet feet feet Feet Es. In the Netherlands commercial organization of 75 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet Feet. And in the last 10 days, we announced a further reduction continues to be a top priority for us as we move into 2017 and into the future. So on that note, I'd like to pass over to Lars to give you a little bit more detail on the financials. Thank you, Alison. Let's turn to the next page, for an overview of the mobile end user service revenue development. Reported year on year increase came in at 14% and at 6% from a constant currency and pro form a perspective. On the right hand side, looking at the individual operations, we have seen positive trends across all our markets. Sweden experienced growth of $127,000,000 versus Q4 last year, out of which $56,000,000 came from the acquisition of TDCE Sweden. On an underlying basis, the business also grew, driven primarily by an increase in Comvik, consumer postpaid, strong data monetization from sale of large data buckets in Tele2 Residential as well as growth in our large enterprise segment. In the Baltics, successful data monetization led to $57,000,000 increase, resulting in an underlying growth of 7% at constant FX rates. Baltic's mobile momentum continues despite headwind from the new EU roaming regulation. Excluding the roaming effect, Q4 mobile end user service revenue growth was at 10%. In the Netherlands, we saw a healthy increase of SEK 35,000,000 as we continue to grow our mobile customer base and benefit from growth in data consumption. Adjusting for the SEK 90,000,000 positive impact of the VAT settlement that Alison referred to in Q4 2015, growth was at $125,000,000 driven by solid growth of 200,000 new customers as well as 8% mobile ASPU improvement. The biggest movement year on year came from the operation in Kazakhstan, which improved by SEK 217,000,000 as a result of continued growth in our customer base and monetization driving SP levels up. Moving on to EBITDA. Overall, we can see strong growth in mobile end user service revenue flowing through to EBITDA. Looking at the individual markets, in particular in Sweden, we saw growth of SEK 82,000,000, which is mainly attributed to the consolidation of TDC. Excluding the impact of TDC of SEK 87,000,000 EBITDA was flat due to intensified marketing spend compared to a seasonally low investment in Q4 last year. Looking at the Baltics, Estonia and Latvia both experienced strong underlying growth. In Lithuania, EBITDA was somewhat negatively impacted by higher expansion costs as we look to increase our mobile broadband customer base. As a result, Baltic's EBITDA was flat year on year. The Dutch operations were reported decline year on year of $58,000,000 However, adjusting for the $90,000,000 impact of the VAT benefit, the underlying growth was at 30 2,000,000. We also had strong performance in Kazakhstan with EBITDA growth of CHF 97,000,000 driven by good progress in improving our operating leverage as synergies continue to be materialized. Turning to CapEx. We saw a decline of 12% versus the same period last year, primarily due to the Netherlands and Croatia, where we saw high spend levels for rollout activities last year. Please also note that excluding TDC Sweden, CapEx amounted to SEK 1 0.03 billion. Turning to free cash flow. We saw another quarter of solid increase, driven primarily by a positive development in working capital due to sales of handset receivables, which we implemented in Sweden during Q1 2016. From a cash generation perspective, we see a high and consistent level of cash contribution in our established markets, which we define as Sweden and Baltics. This reflects our strategy of disciplined investments and focused technology choices where network sharing plays an integral part. Moving on to debt and leverage. Our economic debt to EBITDA decreased slightly compared to last quarter to 1.9. The leverage is based on full year EBITDA, excluding the 51% of share of Castaic Telecom as well as including CTC pro form a. The next page shows the debt maturity profile where we have refinanced SEK16 billion during 2016, extending maturities further out in time. This is consistent with our funding strategy to diversify our funding source, maintain a well managed maturity profile and a strong liquidity position. Now moving on to our guidance for 2017. Mobile end user service revenue is expected to remain at the mid single digit percent growth level. Guidance for net sales is in the range of SEK 31,000,000,000 to SEK 30 billion. Our CapEx guidance range is from SEK 3,800,000,000 to SEK 4,100,000,000. When it comes to EBITDA, the guidance is at SEK 5,900,000,000 to SEK 6,200,000,000, and this reflects the contribution of TDC Sweden, continued momentum across our footprint and growth investments in the Netherlands as well as headwinds from roaming and declines in our fixed business. As confirmed in our Q3 2016 results announcement, our declared annual dividend for the fiscal year 2016 will be SEK0.0523 per share. This represents an absolute dividend payout, which is 10% higher than the prior year dividend and marks the final year of the current 3 year dividend policy. Going forward, we will look to align our dividend policy in a manner which rewards our shareholders both in the short and the long term, but also maintains balance sheet strength and provides flexibility for continued disciplined investments, reflecting the evolving nature of the group. 4, for the fiscal year 2017, we expect to propose a dividend of SEK 4 per share. By financial year 2019, our expectation is for the equity free cash flow generated by the group to progress and fully cover our 2020 dividend payout with an intention to deliver dividend per share growth thereafter. In the interim, owing to continued investments in our Dutch business and the TDC integration, our dividend will exceed equity free cash flow. Reflecting on our current capital structure and the dividend policy outline, we have also refined our leverage target to a net debt to EBITDA range of 2 to 2.5, which is in line with the industry and is consistent with our intention to remain investment grade and to maintain balance sheet flexibility. And with that, I'll hand back to Alison. Thank you, Lars. So in summary, we believe it was a very strong quarter driven by a set of very focused and disciplined choices that remain very much place our priority and focus going forward. Growth from continued data monetization is being fueled by Tilly2 being single mindedly focused on providing our customers with excellent connectivity at a great price. We continue to maximize our dual brand strategies in both the Sweden and Baltics to sustain the momentum and the cash generation in our established markets. We're obviously now heavily focusing on integrating TDC into Sweden to create a strong modern challenger in the B2B space in our most important market. We will continue to further leverage our challenger strategy in our investment markets of Netherlands and Kazakhstan to take significant market share, but in a disciplined and sensible manner. And we will continue to execute on our Challenger program and on our synergy programs to ensure we continue to improve our operating leverage, our EBITDA and our cash generation going forward. So basically, our guidance and our revised dividend policy reflects all of this. But most importantly, it reflects the confidence that we have in our focus on data monetization and the belief that we have that, that will deliver long term value for our shareholders, our customers and our employees. So that brings us to the end of the presentation, and we will now be very happy to take questions. Thank And we will take our first question from Nick Lyall from SocGen. Please go ahead. Good morning, Lars. Good morning, Lars. It's Nick at SocGen. Can I just ask on the Challenger program first in Sweden? Is it possible to give us some details on the contribution of Challenger in the Q4 and in the second half? And also any comments on the outlook for gross savings for 'seventeen would be interesting as well, if you could. Just in Sweden, please. And the second thing was on the Netherlands. Any comment on the impact of T Mobile yet and these new pricing packs? I mean, the ads seemed a little bit weak in the 4th quarter. Maybe that's a bit unfair. But was it a weaker market? Or was it a T Mobile impact? Or was it maybe 3 gs churn that hit your ads? Could you maybe give us a little bit of a breakdown of the ads for the quarter, please? Thanks. Hi, Nick Lars here. Thanks for those questions. On the Challenger, we don't break it down externally per market. When it comes to the outlook for next year, as we mentioned, we're about SEK600 1,000,000, which is ahead of our plan. As you know, we targeted 40% achievement of the SEK1 1,000,000,000 this year, and we are still on plan to achieve 75% by next year. And that's what we are shooting for. As far as the touch question, I think The touch question, so yes, December became more competitive again, Mick, because of T Mobile's mad month, which they had in September and then they kicked in, in December. December is always a fairly slow month in the Netherlands anyway. And January has so far been slow, but I'd say less because of the T Mobile move, but more of some of the regulatory changes that have happened in the market, there's new legislation around financial credit and it means all of us as mobile operators that are selling handsets are having to change the procedures, so that you're not seem to be pushing credit in a purely transparent way. So yes, T Mobile had a little bit of an impact possibly in December, but it's a slow month anyway. And we've got what's quite exciting about what T Mobile are doing is that they are trying to drive ARPUs up from their levels. So they average ARPUs of around 22 and have launched some interesting buckets in the €20 all the way up to €35 range. That's a great opportunity for us because our ARPUs are closer to 15 than €20. So if the market starts to move into larger data buckets, which is what we've been very much encouraging so far, then that gives us a lot of ARPU development. Also, as we move closer to having our network fully rolled out and we now have 80% more than 80% of our customer base on 4 gs handsets and we've got VoLTE coming along. It's going to allow us to be braver on what we do with SIM only propositions looking forward as well. So it's not a bad thing, but yes, it's a competitive market. I mean presumably that means that your churn pool is more difficult now. I mean do you have to bring forward those changes to your SIM only plans faster, do you think, if it's if T Mobile is that bit more aggressive? No. T Mobile are pushing mobile only, which is great for us. So the churn pool gets bigger when mobile only stimulates the market. So that is that could be good news. And we always we had a plan. As you know, we've been quite cautious on SIM only because we've been nervous about the leakage into 3 gs handset. We have now made it very clear that our SIM only is for 4 gs now because we want our customers to get the most modern experience, whether it be data or voice. So we're brave enough now to be very much targeting 4 gs only SIMs. And that will allow us to be braver going forward on what we can do with the campaigns that we have planned for February and then again in April. That's great. Thank you. And we will take our next question from Sam Dillon from Exane. Please go ahead. Hi, guys. Just a question on the forward looking free cash flow guidance. It appears based on the new dividend policy that the cash outlay for dividends will be around SEK2 billion, therefore, for you to achieve that level of free cash by 2019 with a pretty predictable CapEx tax working capital and interest balance, it would seem to me you've been quite bearish on the outlook for your EBITDA growth for the next few years, especially when you have $1,000,000,000 of mobile losses in the Netherlands, synergies to be derived from the TDC acquisition and the Challenger program? And what are the puts and that make you think that you can't cover free cash flow any earlier? Thanks. So we obviously want to set expectations out there that we don't disappoint against. And so we set guidance that very much allows you to have a more predictable set of expectations going forward. If you look over the course of the next few years, our guidance basically reflects that for 2017, we're going to move total Netherlands closer towards EBITDA breakeven. So that's Total Netherlands will get to EBITDA breakeven. We will be getting operating leverage from Challenger. We'll start to see synergies materializing in Sweden and Kazakhstan, and we expect continued strong mobile momentum in Sweden and Baltics, as you've seen recently. We also need to factor in that we still get some investments and some headwinds over the next 2 years as well. We still got to complete our network rollout in the Netherlands. As I said, that will be completed by mid-twenty 18. We have $750,000,000 of integration costs related to TDC that are very much from costs related to TDC that are very much from almost half of that is in 2017 and the majority of the balance is in 2018. And we've got a couple of headwinds to think about as well from Roam Like Home and from declines in our legacy fixed business. So all of that says that we will be making very good momentum on our EBITDA over the period. We've got some investments into TDC integration. We've now got the CapEx to take on board from TDC as well over that period. But definitely by 2019, our equity free cash flow will have grown and our dividend will be fully covered. Okay. Thanks. And just a quick follow-up on the Netherlands. I know for the 2016 year, you provided mobile EBITDA loss guidance. Is that something you can do for 2017? No. We've decided based on our track record, it was a bit all over the place last year by quarter. So we've run our business over a longer period. And I think our guidance for the Netherlands this year and it's very much the ambition of the local team is to get to breakeven for the total business. The mobile losses will be down year on year, but they will be offset by fixed. Fair enough. Thank you very much, guys. Thank you. And our next question comes from Roman Arbazar from UBS. Please go ahead. Thank you very much for taking the questions. Just following up on the previous one on the dividend. At your Capital Markets Day in December, you were talking about potentially tying your dividend to equity free cash flow. So thinking about 2019 when your dividend is meant to be covered by equity free cash flow, is there a particular percentage that you had in mind that you could potentially be paying out? So that's question 1. And then secondly, just on CapEx, just trying to better understand your CapEx dynamics and perhaps why isn't it declining a bit more than what you're guiding for. So has anything changed on your CapEx thinking just recently, For example, Netherlands Mobile or would you expect to invest perhaps a bit more in Netherlands fixed? Yes, so some additional color on the CapEx guidance, that would be very helpful. Thank you. Yes. In terms of so let me take the dividend question, Roman, and then I'll hand over to Lars on CapEx. Absolutely, our dividend policy is to be able to fully cover our dividend from a growing equity free cash flow in the business, and it will be fully covered by 2019. In terms of percentage payout, we are not setting a percentage at this point in time, but we will be aiming to pay out the majority of our equity free cash flow in line with the industry. And as far as the CapEx, Roman, I think what we need to remember is that the TDC integration coming in, so we have about $150,000,000 to $200,000,000 of integration CapEx in the guidance that we have given you. As far as the other countries are concerned, we don't see any major movements in the established markets. And when it comes to Holland, I think you should look at Holland that the mobile kind of rollout will be at the lower level compared to 2016 in 2017. And on the fixed piece, we talked about this in the previous calls that we're looking at the fixed investments from a return investment perspective, and we're reviewing them in detail. And it's very important to us that the cash contribution and the fixed fees in Holland is improving. And don't forget, you've also got full year of TDC CapEx and full year of Altel CapEx on the numbers this year as well. Right, right. Like for like is down year on year, Roman. I see. Okay. Thank you. Can I just quickly follow-up on the dividend? So can I just check, I've been assuming, but can I just check that you expect your dividend in absolute terms to be going up, right, over the 20 17 over to 2019 period? We won't the policy is for it to be fully covered by equity free cash flow in 2019, and we will communicate an annual dividend each year between now and then. Right. Got you. Thank you very much. And our next question is from Maurice Patrick from Barclays. Please go ahead. Yes, Maurice from Barclays. A couple of quick questions. First of all, on the CapEx side, just checking, I mean, you've been very helpful there sort of fleshing out where your CapEx is being spent. But is there any need to increase investment in enterprise CapEx in Sweden as part of the TC acquisition looking to bulk up in additional functionality there? And then just second question, did I hear correctly it was 4.5 gigabytes was your average usage the Netherlands. So I think KPN is running at 1.5, I think. And is that a big differentiator for you, this idea of much bigger buckets and therefore you're attracting those kind of customers? Thank you. No, the 4.5 gig was in Sweden, Maurice. Okay. My bad. The Netherlands is still around 1, just above the one. And in terms of CapEx, the investment in Swedish enterprise, both our organic business and our new TDC business is very much built into the CapEx guidance. Okay. Thank you. It's a combination of either integration CapEx or CapEx that we were already planning to spend in our Swedish business. Great. Thank you. And our next question comes from Stefan Gelfin from Nordea Bank. Please go ahead. Yes, hello. I'm dwelling a little bit on the EBITDA guidance for this year. Just try to clarify some things. You said on the Challenger program that you're now running the run rate is around CHF 600,000,000 in cost savings. I believe that was up from CHF 400,000,000 in Q3. So just in terms of net savings, 2017 versus 2016, where are you aiming? Secondly, on TDC contribution, if I calculate on the Q4 contribution, I come up with that 2017, there will be a net contribution of around SEK 450,000,000. And then there should be lower losses in the Netherlands, and Kazakhstan is also on quite good momentum. So it seems like your EBITDA guidance is on the cautious side. So where am I wrong? Okay. So Stefan, let me take the first one on the Challenger program. So we're at SEK 600,000,000. We aim to be according to plan at 75%. So it's another 150,000,000 coming through. Net net year on year, positive development. And when it comes to the CDC contribution, I mean, we have about in that EBITDA run rate around 400, I would say, and then we have synergies coming through. But we don't have we haven't given that specifics exactly what will come through. We have said it's SEK 300,000,000 over 4 years, and that's still what we are shooting for. And then don't forget the headwinds that we've got going into the year. Stefan, we've got Room Like at Home, which we're assuming will be about $200,000,000 year on year impact. We have had some big one offs in Germany this year of around $150,000,000 dollars Germany will revert back to probably 2015 levels in 2017. And we've still got some fixed declines in Netherlands and in some of the legacy Swedish business as well. So we've given you a range that accounts for those headwinds, but also accounts for progressing Netherlands towards breakeven, operating leverage from Challenger program and synergies and good momentum in Sweden. We're aiming for around 2% on the top line in Sweden next year and continued mid single digits on Baltics. Can I just follow-up on the cost savings? I mean, the run rate of SEK 600,000,000 right now then so I mean that would be SEK 150,000,000 in cost saving Q4 2017 versus Q4 2016. So it's much more cost savings if you look at 2017 versus 2016, right? Okay. So Stefan, the SEK 600,000,000 is versus the baseline in SEK 14,000,000, which we have communicated before. And the SEK 150,000,000 is for the full year, SEK 17,000,000 versus SEK 16,000,000. Okay. Yes. Thank you. Our next question is from Henrik Herbst from Credit Suisse. Please go ahead. Yes, thanks very much. I had a couple of questions. The first one is on the Netherlands and your comments, Allison, that the competition is getting a little bit worse. But if we look at T Mobile's new price plans, I mean, they don't seem that aggressive. And if they do, it's on sort of the €30, €35 per month plans, which is quite expensive. I mean, is there anything else going on? Are they pushing more on SAC? Or is there any more to it than just the sort of price plans? And then the second In December, they did push more on Sac like they did in December because they did their mad month. It's 50% discount on certain handsets and subscriptions. So that was in December. That so far in January, it's been much more of a PR campaign around the unlimited at 30 €5 and more in the bundle for the 5 10 gig buckets. But as I said earlier to Nick, they're trying to take the 22 ARPU levels. We're coming from 15. So if they are promoting more data consumption in the market and higher buckets, that only helps us, but we can start to trade our customers up. And now that, as I said, we've got a stronger 4 gs network rollout position and we'll be hopefully rolling out VoLTE across all of our handsets in the first half of the year. That puts us in a strong position to start to really benefit from our network and reduce the reliance on the T Mobile NRA during the course of 2017. All right. So essentially, I mean, it sounds like it could be good for you instead of sort of pushing a 5 gig plan at €10 you can now push unlimited data bundle at 2025, you're still cheaper and you drive ARPA higher. Is that how I should think about it? That's something that we're certainly looking at for the future. Just as we were very brave in big buckets and driving consumption up in Sweden, Now that we've got more than 80% data on load in our network and we're getting close to being able to have voice VoLTE or voice over Wi Fi, then we'll find it easier to be confident to push some SIM only propositions that will be competitive to T Mobile and will be will make economic sense for us. Okay. And then just following up on the Netherlands. The can you just remind me how you sell the handsets in the Netherlands, if it's just on installment plans? And then because I guess your OpEx base or your EBITDA loss was a bit lower than I think we thought at least in Q4. Just wondering a little bit if you look if you compare it to the sort of EBITDA loss run rate in the early of the year part of the year, what has improved really? I guess your revenue base growing a bit, but is there anything on the OpEx base that improved as well? Yes. The way we sell handsets in the Netherlands is the same as the way we sell everywhere else. It's monthly installment plans and there we take the hit of the cost of the handset right upfront when the customer takes out the contract. Recall year on year, we already started our campaign at the end of November, early December last year. So we still we had some quite equipment costs and acquisition costs going through in December last year. So we had that already in our base. But as I said, December was a little bit slower because of the T Mobile campaign and December being a month where consumers don't generally in the Netherlands, from what I understand, don't go and buy handsets because they are focused on other things in the lead up to Christmas. All right. Then in terms of distribution channels, are you seeing more sort of coming through your own channels now than you said previously or more online? Yes, it's taking more more than 50% of our sales are through our own channels. And that is good progress through our stores, but also very good progress on our own online channel as well. And obviously, when we sell directly, we have higher ARPUs and we then don't have the commission costs that we have in 3rd party retail. Okay. All right. Thank you very much. Thank you, Henrik. Our next question comes from Victor Hoglund from SEB. Please go ahead. Your line is So just going back here to Hoglund again, I'm sorry for repeating here. But I was just wondering, previously you said that when indoor coverage goes above 90%, then you will have well, supposedly you could have a good kick on the gross margin. I understand that's, of course, very theoretic, but can you comment maybe on if it's 5%, 10% or how many percentage points gross margin improvement you've seen over 2016? Is it significant change from the beginning of the year to the latter parts? Or is it more or less unchanged? That's the first question. And then on Baltics, you say, you have very strong service revenue growth. Can you comment on if you think that those trends and the monetization that you now do, can that counterbalance the roaming on the full year EBITDA 2017 versus 2016? Or is the roaming effects too tough? And the last question on the Swedish customer intake. Can you sort of just comment on Tele2 brand development and Combiq postpaid versus Combiq prepaid? And if it's very much on prepaid, the negative effect, is that due to sort of summer subscription that now show us a churn, has to be inactive? Or what's the explanation? Thank you. Okay. I'll take the last two questions, then I'll hand back to Lars on the Netherlands margin. Sweden customer intake, negative was very much driven by prepaid, which is kind of very in fact slightly lower than what we were predicting because we are continuing to see very strong postpaid to prepaid transition in the Comvik brand in particular. We did lose some Tele2 Residential customers in the quarter, but they were at the low end ARPU level. And so we're really starting to see our dual brand strategy work in that pillar 2 is increasingly the higher buckets and the higher ARPU customers, which is enabling Tele2 Residential to have grown year on year, albeit with a lower customer base. And then Combi just goes from strength to strength in the prepaid to postpaid transition. In terms of Baltic's end user service revenue, we are seeing that 12% did include about 4% to 5% of currency tailwind. But it's certainly all of the action that we are taking is with the ambition to ensure that we are not as impacted by roaming as we would want to be, but we are being cautious on what the one of the reasons for the mobile broadband campaign. One of the reasons for the mobile broadband campaign. That business segment will not be hit by roaming. And it's a segment where we have a lower market share than our average market share. So that's why we chose to invest heavily in that segment in the Q4, so that that will try and offset some of the headwinds from roaming as we go through next year. And then Lars, the question on Netherlands margin, I'll hand over to you on that. Yes. So I think in absolute terms, we see a healthy increase on the margin. What we also see is obviously, we get customers that are using more data. So there's a little bit of an offset there as well, even though we have kept our NRA cost very much in check. So we're still actually slightly below the €15,000,000 for this quarter. So but overall, from an absolute perspective, it's about 7% to 9% year on year improvement in Q4 on the margin. And obviously, as we really roll out Volte now, we'll see a big impact on the NRA next year. Can you just on that last comment, I mean to make it very rough, typically an MVNO can maybe have 30%, 40% gross margins whereas if you own your network, you can have 70% to 85% in a broad range. Are you in the middle now or in the low end or in the high end? Or do you disagree with the very rough ranges I just said for Netherlands that is on mobile? Yes. I think we will probably I mean, at the moment, I think long term, that will be the ambition to get to those levels. But I mean, we still have a way to go on the mobile rollout. And we obviously increased the data consumption, so that we shall offset that a little bit. Those are the targets you get to once the network are fully it's fully rolled out. And 2017, there's still a dependency on T Mobile that dilutes those gross margins. It will be the second half of twenty eighteen when the network is fully rolled out. We've got VoLTE fully rolled out and we're just using an NRA for a bit of voice that gross margins will get to the levels you would expect of an MNO. Perfect. Thank you very much. And our next question is from Thomas Heath from Danske Bank. Please go ahead. Thank you. Thomas Heath here with Danske Bank. Two questions, if I may. Firstly, did I hear you correctly, Alison, when you said that the SEK 4 base is for 2017 and then you expect growth from that level after 2019. So is it reasonable to see flat dividend for a few years as you invest heavily and then growth from the SEK4 level? Is that a correct interpretation? And then secondly, on the quarter, just curious to hear there's some strong EBITDA both in other operations and in Netherlands DIX. Curious to hear what's going on there and whether that's sustainable going into 2017? Thanks. Okay. So on the dividend, so as I said, we are aiming for our equity free cash flow in our business to grow between now and 2019 and 2019 onwards. And therefore, 2019 dividend will be fully covered. Between now and then, the Board are only proposing an annual dividend at this point in time, which is DKK 4 per share. And we will review what the dividend should be for 2018 this time next year. But underlying, we want our equity free cash flow to be progressing throughout the period. And then on the Holland fixed, I think it's a reflection of 2 things. There's a little bit of an FX in there, but it's also very good progression on the addressing the cost base in the Dutch business. And on other, what you see there is, what we talked about in the Capital Markets Day, the IoT business, we are progressing further on growing that business and that has an impact in the other mobile segment. That's very helpful. Thank you. Thanks. And our next question is from Ulrik Rat from Jefferies. Please go ahead. Your line is open. Thank you. I think most I have 3 questions and all of them are sort of hardback to stuff we have discussed before. I just like to get a bit more clarity. First of all, to Lars on the CapEx budget. I mean 2016 is sort of slightly over SEK 3,800,000,000. The guide is for SEK 3,800,000,000 to SEK 4,100,000,000. And last, when you were asked sort of whether that leaves a bit of room, you said, well, don't forget the integration CapEx, which then, however, you said is only SEK 150,000,000 to SEK 200,000,000 and the Dutch CapEx comes down. So still sort of I think the question still stands why the CapEx budget really has the last year's level as the lower bound, why the midpoint of that guidance isn't sort of lower. I'm still not quite clear where that increment would come from. 2nd question is on the sort of level of the investments you're putting into the Dutch business. And obviously, there's always a trade off between trying to milk the asset, trying to get it towards a return on investment and sort of trying to build scale. So I'm wondering, have you changed your priorities on that? We saw in the second half of twenty sixteen the investments going down, which I think was observed by some other people asking questions on that. Is this simply that you're so happy with the progress and you're sort of seeing yourself on track towards a 20% share target and everything's fine and costs are coming down, therefore this is okay to have lower EBITDA losses. What does it reflect as sort of an effort to constrain the sort of a profit leakage in the operation and maybe also a degree of maybe scaling back ambition? And my last question is, in Sweden, you have restated the mix, the product mix ever so slightly, but it was restated. And you sort of mentioned sort of the trigger of that. I still don't fully understand why the consolidation of TDC would sort of make it reasonable to restate historical sort of product mix for the for the Swedish business? Thank you. Okay. Let me start with Netherlands, Ulrich, and then Lars will take you through CapEx and Sweden restatements. Netherlands, we have always said that we will invest in a disciplined way. And as we look at the Netherlands, we want to ensure that as we look forward, any additional investments we put into the market, we will see a return on that from gathering scale and making impacts in the market. So it is a balancing act, but still aiming to get above moving towards the 20% market share, admittedly in a market that shrunk because of the large amount of consolidation that's happened around us. So it's all about balance. What we are doing though is we're really reassessing the investment we put into fixed, Because whereas in mobile, we do believe we have a right to win because we've got a different brand proposition from the rest. We've got a uniquely modern network that can offer the best in data and voice quality once everybody's on VoLTE handsets. And that will give us a very unique low cost operating leverage that nobody else will have in the market. Fixed, we need to really assess the amount of investment we put in there because we've got less of a right to win in that segment over the long term because we're up against some very large fixed players and we're increasingly just becoming a reseller of the KPN, our product VULA product. So it's all about striking the balance, keep fueling where we've got a right to win, but in a way that we believe we'll get a return back. And then dialing back on investment, particularly CapEx investment in fixed to ensure that, that business will also get a return on, but recognizing that we don't have we're becoming increasingly a reseller. And on the other two questions, Ullish, on the CapEx, please remember that we do have the 10 months of the run rate TDC CapEx investments, and they were running at approximately SEK 300,000,000. So you need to add that as well. And then in Kazakhstan, we are doing the merger of the 2 networks, which started around mid this year. So there's a little bit of an elevated level in Kazakhstan also during 2017. When it comes to the restatement, as you know, TDC are having quite a different portfolio in the large enterprise services portfolio that they offer their customers, so communication as a service and other IP VPN services. We had shown them in the mobile and the fixed segment. And in order to be very transparent, we wanted to reflect that also retroactively. So that's why we did the restatement. Operator, could we please have the final question on the phone, please? Thank you. Yes. Our next question is from Peter from ABG. Please go ahead. Thank you. Just one follow-up, so a short one please. Alison, did you say earlier that you expected 2% top line growth in Sweden in 2017? And is that for mobile only, please? Thank you. Yes, that's mobile only. Service revenue. Yes, mobile end user service revenue in that 2% to 3% range is what we're aiming for Sweden and then mid single digits on the bottom line. Okay. Thank you. Thank you. We'll take a question from the web as well. I'll read it out here to Alison. It's from Sunil at Bank of America. And he asked, do you think there is scope for the Dutch mobile market to consolidate down to 3 players? Or when do you think Netherlands will be cash flow breakeven? As you know, we are big believers in end market consolidation. So we would be fans of that happening. And obviously, our license restrictions end at the end of 2017. So then it would very much be would there be regulatory support to that happening. But we are big fans of consolidation because it can create great value for shareholders as we are seeing with our Calvac JV. And when do you think now is free cash flow breakeven? Part of the journey towards 2019 is to get Netherlands cash flow breakeven. And that's why we have the confidence in a growing dividend policy going forward fully covered by equity free cash flow. Thank you, Alison, and thank you, Lars. And this concludes our Q4 2016 results presentation. We will release results for the Q1 of 2017 on April 24. Thank you, everyone, for participating and for the good questions. Have a nice day. Thank you for participating. Ladies and gentlemen, you may