Earnings Call: Q3 2016

Oct 20, 2016

Welcome to the Tele2 Q3 Interim Report 2016 Conference Call. This conference is being recorded. At this time, I would like to hand the conference over to Louise Cheddar. Please go ahead. Thank you very much. Good morning, everyone, and a warm welcome to Telstra's 3rd quarter 2016 results presentation. Speaking is Louise Cheddar. And with me, as usual, I have our CEO and President, Alison Kirkby and our CFO, Lars Nordmark. Alison will start by going through the highlights of this quarter and obviously followed by Lars, who will go through a little bit more in details on the Q3 financials. After this, we will have a Q and A session where you have the possibility to ask your questions. So with this, I will hand over to you, Alison. Good morning, everyone, and thank you for joining us this morning as we take you through our latest results. So let's start with the highlights from the quarter. As customer focused value champions, we saw group mobile end user service revenue return to our ambition of mid single digit growth, increasing by 6% in the quarter. That was the result of strong data monetization across all of our major markets. In Sweden, we saw the momentum from earlier quarters build further to 2%. And in the Netherlands, the positive customer growth trend continued into and throughout Q3, achieving a net intake of $59,000 and resulting in a strong 15% growth. In terms of technology, our 4 gs position has again strengthened throughout our footprint. Swedish geographic coverage has now reached 88%, and Baltic outdoor population coverage is now at 99%. And we're also seeing continued build out of our Dutch network, enabling good progress on data on loading with 77% of all data being consumed on our fantastic Tele2 network by the end of the quarter. In productivity, data monetization has successfully flowed through to the bottom line in Sweden, Baltics and Kazakhstan with improved margins. The integration of ALLTEL and Tele2 in Kazakhstan is progressing well with cost and revenue synergies contributing, and the Challenger program is developing in line with expectations, well on track for the DKK 1,000,000,000 target in 2018, with around DKK 400,000,000 of savings already achieved versus our 20 14 baseline. As on people, the integration of Altel is ahead of plan with more than half of the milestones already achieved, and it's this great excitement that we are now preparing for the integration of TDC Sweden's business and people, a merger that will enhance our growth and valuation strategy in our most important market. So in terms of the headline financials, as I said, monetization of data is our key priority, and we saw strong growth in the 3rd quarter with mobile end user service revenue up 6% on a like for like basis, which to be clear includes Altel pro form a and on a constant currency basis. Net sales in the quarter amounted to almost DKK 7,000,000,000 up 1% like for like due to higher revenues in Baltics and Netherlands, offset by lower revenues from fixed telephony and fixed broadband deployments. And EBITDA was down by around 1% as a result of the increased sales and marketing investment in the Netherlands, but these were almost fully funded in the quarter by positive EBITDA development in Sweden, Baltics, Kazakhstan and Germany. So moving on to our key markets. In Sweden, we saw record mobile end user service revenue in the quarter, which increased year on year by 2%. Both consumer postpaid and B2B large enterprise were up mid to high single digits, driven by seasonal ASPU increase in Tele2 Residential, further customer growth in Commvique and also in large enterprise fueled by high quality customers such as Yoteberistat and Criminal Zorden. Overall, total revenue was flat with mobile end user service revenue offset by lower fixed telephony and wholesale revenue. EBITDA was positively affected by seasonally strong data monetization, a strong summer of roaming and realized efficiencies from our Challenger Program initiative. We also had slightly lower marketing expansion costs during the summer months, but all in all, these impacts led to EBITDA growth of 5% year on year. Trends have therefore continued to improve this quarter. Our dual brand strategy continues to drive postpaid positive postpaid net intake and increased data consumption in Sweden and abroad led to a strong 7% consumer postpaid end user service revenue increase. Our value champion strategy continues to attract higher value customers to the larger data buckets. And this strategy, in addition to our increased network coverage, is driving our network experience and our customer satisfaction to best in class levels and also fueling a positive ASCO development. As you can see here, we are contained to invest in geographic coverage, now at 88% this quarter, to ensure we can provide our customers with a great connectivity experience no matter where they are in Sweden. In post quarter end, we launched a new campaign, Be Content With More, to reinforce our Tele2 brand and further strengthen our Geo brand strategy. We see immense opportunity for our customers to have more access to great connectivity by enabling even more of their devices to be connected. And this campaign will therefore be exploited heavily during the Q4. Let's move east now to the Baltics, where commercialization and monetization of our 4 gs investments are continuing to drive excellent top and bottom line growth. Net sales growth of 6% was strong, thanks to an ever increasing demand for data services and premium handsets. Mobile as a service revenue growth was also strong at 7%, largely driven by data consumption and higher value tariffs, encouraged by some great summer marketing campaigns. And our summer initiatives really helped offset the expected impacts we had from declining roaming revenues. EBITDA growth was up 9%, with Lithuania up 6%, Estonia up 10% and Latvia up a very strong 14%. This excellent top line growth and our best in class challenger cost structure is enabling data monetization to successfully flow through to our bottom line. So as I said, we saw strong data monetization in the quarter, and that's driven by transition from prepaid to postpaid, increased smartphone penetration, data analytics reducing churn and in our partnership with ViaPlay. All of these contributed to ASPU growth of 7%. 4 gs coverage is now 99% in the region and continuous improvements in speed with maximum download speeds far above our competitors and most of the fixed line businesses that are in the Baltics are driving a great customer experience and therefore great data usage. So let's move back west again to the Netherlands, and our Q3 mobile momentum was again strong. Net sales were up 3%, driven by mobile momentum, offset by declines in fixed broadband and telephony, which continue to see challenging market conditions. However, mobile end user service revenue was up 15% as we saw an increased mobile customer base up almost 20% year on year. We hit 1,000,000 customers just last week, and net intake slightly ahead of Q2 of 59,000. This strong mobile end user service revenue filtered through to EBITDA in the quarter, driven by an increase in customer base. But also sequentially, we saw a seasonal boost from roaming, top ups and trade up to bigger bucket sizes. We also continue to invest in the market during Q3, albeit with less TV marketing in the summer months, as you would expect. However, as you'll have seen in our release and as part of our annual impairment review, we have reassessed the value of the Dutch asset base and a non cash goodwill impairment of DKK 2,500,000,000 was recognized in the quarter. So let me give you some more info on what we actually did during the Q3 to fuel the mobile momentum. Our main focus has been to continue the positive growth trend that we built up during Q2 as well as to focus on increasing ASPU, rolling out a high quality VoLTE service and improving the overall customer experience. This is the 2nd quarter in which we have all components for growth in place, and despite seasonally lower marketing investments and increased competitive pressure, our momentum increased in the quarter. Sequentially, higher mobile ASPUs were achieved through continuous brand positioning and product focus and increasing sales of larger buckets. We also increased our share of direct sales, having now reached 13 owned stores, creating a valuable brand presence on more Dutch high streets. And we continue to build up our fun Rebel brand platform with an innovative off and online roaming campaign, which have significant viral spread over the summer. On the network side, we continued to expand our LTE Advanced 4 gs network, which has now reached above 98% outdoor population coverage and indoor population coverage of over 83%. 4 gs on loading on our own network has now reached 7% by the end of the quarter, and rollout of VoLTE has started on a larger scale, particularly with Samsung subscribers, where we have over 50,000 subscribers now on VoLTE. So, yet another good quarter of continued momentum in mobile. Our disciplined investment strategy is delivering as we further establish ourselves as the preeminent Dutch challenger in the market. We will therefore continue to fuel this momentum in Q4 with a new campaign and increased sales and marketing investments versus Q3. Moving further east to Kazakhstan. We saw strong underlying mobile end user service revenue growth of 20% from an increased customer base and new pricing propositions. Net sales in the Q3 last year were affected by Altrail's hand effect campaign, which resulted in lower year on year net sales in this quarter. However, EBITDA developed significantly in the quarter from pricing, improved operating leverage and from JV integration synergies. As you can see, even in these early days, the JV is already enabling a much stronger and more sustainable platform for growth in the future. So what's driving the strong financial performance? Well, it's the higher customer base. It's a competitive advantage in 4 gs as our competitors are only now really starting to launch 4 gs commercially with limited coverage to date. It's also been driven by a comprehensive integration synergy plan that is being executed with discipline and well ahead of plans. All of that being said, we did have negative intake in the quarter, but we did expect that because we took significant pricing moves, both in Q2 and in the early part of Q3. And we're also monitoring recent moves by competition very closely. Finally, before I hand over to Lars on the Challenger program, it's developing in line with our expectations and well on track for the $1,000,000,000 target what we set out to achieve by 2018. Product simplification is progressing well with more than 900 products closed to date, an additional 750 to be closed in the year. We have seen lower customer service costs across the group, you saw that in the Sweden results, as a result of productivity interventions and relocation of resources, such as our Dutch B2B team to offshore locations, and were contained to source and optimize in several areas, such as in devices, network and support as well as increasingly using data analytics to improve customer base management. We also announced earlier this week an initiative to step change productivity in our Swedish operations with an expected reduction in our workforce of around 2 25 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 Es. So in summary, the Challenger program was launched to challenge the way we work and set ourselves up for the future. The latest move in our largest most important market that we are executing on what we promised. So Lars, over to you to take them through the financials. Thank you, Alison. Let's turn to the next page for an overview of the mobile end user service revenue developments. The reported year on year increase came in at 6% and was at the same level from a constant currency and pro form a perspective. On the right hand side, looking at the individual operations, we've seen good progress both in our established and investment markets. Sweden experienced a growth of SEK 39,000,000 versus Q3 last year, driven primarily by consumer postpaid growth in Comvik, good ASPU performance within the Selleci residential plant and solid data monetization. Excluding seasonal effect from roaming, Q3 mobile end user service revenue growth in Sweden was at 1.5%. In the Baltics, data monetization and strong prepaid summer campaigns led to a SEK33 1,000,000 increase, resulting in a 6% increase year on year despite headwind from the new EU roaming regulation. Excluding the roaming effect, Q3 mobile end user service revenue growth was at 10%. Our business in Kazakhstan improved by SEK 78,000,000 driven by a step change in price positioning during Q2 and Q3 combined with customer base growth. In the Netherlands, we saw a healthy increase of SEK55 1,000,000 mainly as a result of growth in our mobile customer base. Moving on to EBITDA. Overall EBITDA was positively affected by the strong mobile end user service revenue growth. Let's look at the individual markets. In Sweden, we saw a growth of SEK 54,000,000 mainly due to good top line development, lower marketing activity compared to last year as well as reduced customer service costs as a result of benefits coming through from our Challenger program. Solid performance in the Baltics, delivered a growth of SEK 24,000,000 as a result of good top line development, trickling through to the bottom line, also aided by excellent cost containment and churn management. The Dutch operations were declined year on year of $124,000,000 due to investments into the mobile segment as well as a decline in the fixed segment. Profitability in the mobile segment has also been positively impacted by good development on optimizing acquisition costs as well as retention activities. In Kazakhstan, EBITDA growth of SEK 29,000,000 was driven by higher revenue contributions and good progress on improving our operating leverage as of the ongoing integration work. We also saw a strong contribution from Germany, which resolved a legal dispute giving a positive impact of SEK 50,000,000 in the quarter. The negative impact of SEK 32,000,000 in other operations was driven by our investments into IoT and slightly higher headquarter related costs. On the CapEx side, we saw a decline of 16% versus the same period last year, primarily due to lower investments levels in Netherlands and Croatia. Turning to the page of free cash flow. We saw a significant increase during Q3, primarily driven by a positive development in working capital due to sales of handset receivables, which we implemented in Sweden during Q1 of this year. Moving on to debt and leverage. Our economic debt to EBITDA decreased slightly compared to last quarter to 2.13. As previously communicated, we will be above our target range of 1.5 to 2 during the investment phase in The Netherlands. The definition of economic debt is net debt excluding liabilities from CapEx Telecom and liabilities guaranteed by CapEx Telecom. This reflects the fact that we will not be required to provide funding to the Catsec business in the foreseeable future. As you recall, in summer, we were very excited to communicate the acquisition of CVC Sweden. This is an acquisition which will strengthen our B2B position in our home market. In conjunction and in order to maintain the financial strength of our balance sheet, we also announced the intention to raise equity through a rights issue with the EGM will now be held on October 20 7. Telotube's largest shareholder, Schindelig, has committed to subscribe for its rights, and we also have a standby underwriting commitment from Nordea for the remaining portion. On guidance, we confirm our guidance for 2016, where we expect to be at the upper end of the range for net sales and EBITDA. This excludes any impact from the TVC acquisition. Please also note that the mobile end user service revenue is based on constant foreign exchange rates and pro form a. And with that, I'll hand back to Alison. Thank you, Lars. So just to summarize, our key priorities remain the same. 1st and foremost, maximizing our dual brand strategy in Sweden to sustain momentum in our core market monetizing 4 gs in the Netherlands, Baltics and Croatia to establish ourselves as the preeminent challenger, especially in the Netherlands integrating our JV in Kazakhstan, driving both cost and revenue synergies continuing to execute on the Challenger program And with the regulatory clearance now received, we're now preparing for our proposed rights issue and the closing of the acquisition of TDC, a merger that, as I said before, will step change our growth strategy in our most important market. So in summary, I'm pleased with the underlying momentum that we've seen across the group in the quarter, and we remain focused on further data monetization across our businesses and delivering long term shareholder value. So thank you. That completes our presentation, and I'll hand back to Louise to manage us through the Q and A. Thank That concludes our formal presentation regarding the results for the Q3. And yes, we will now open up for questions. So operator, could we please start with the first question? Thank We'll now take our first question from Nick Lyall from SocGen. Please go ahead. Yeah, good morning. It's Nick at SocGen. Can I ask one on Sweden, please, and one on the Netherlands? Just on Sweden first, could you give us an idea on the extra marketing you might need into the Q4? And also an idea of what Challenger contributed this quarter and what might be the step up into Q4, please? And then the second one on the Netherlands, obvious one. On the write down, is it possible to give us some idea of the main changes and the assumptions you've made? And what you mean by that phrase about future cash flow generation being a reassessment of future cash flow generation, please? Yes, of course. Thank you, Nick. So the first question on Sweden, to give an idea on the marketing in Q4 and also elaborate on the Challenger contribution in the quarter and the next for Lars. Okay. Fine. So thank you, Nick. So in terms of Sweden, extra marketing in the quarter, I think we should really look at year on year. Q4 last year did not have as much going on as we are going to have going on this quarter. So for example, iPhone 6 wasn't as successful as the iPhone 7, and the demand for iPhone 7 is significant. In fact, we've got a lot of customers still waiting for Apple to deliver their phones. And we've got the new campaign that's just gone out in Sweden. So sequentially, year on year, there will be more marketing investment in the 4th quarter. And therefore, there will be limited EBITDA development in Sweden year on year because of those increased investments. In terms of challenger contributions, I think if you just look at the underlying margin development in the quarter versus last year, There's probably around $20,000,000 is slightly lower sales and marketing expense, but the rest of the margin development has been driven by Challengers Benefits. And that's how you should look at that going forward. In terms of Netherlands, I'll kick off, and then I'll pass over to Lars to give a little bit more detail. I guess the big change in the assumptions going forward is we've seen the fixed consumer business and B2B business be very challenged for a number of years, and that has continued again into this year. And you've seen the consequences of that in our EBITDA and our cash flows. And then the big news is the continued consolidation of that market with the recent approval of the Vodafone ZIGO merger. So it's when we look at that and add all of the fixed implications alongside the good momentum in our mobile, then and we project that forward, it gives a different outlook than when we looked at it this time last year. And Lars, I don't know whether you want to build on that. Yes. If you look at EBITDA minus CapEx for the fixed business year to date last year, we were above €100,000,000 And you look at it for the year to date same period this year, we're significantly in the red. Now we obviously want to improve that position and we are working on optimizing cash. But the fact is that it has significantly changed and that has deteriorated. And that's what we have taken into account in the future cash flow projection. Okay. That's great. Thank you. We'll now take the next question from Roman Abramovassov from UBS. Thank you very much for taking the question. My question is on the group profitability, which was very strong across the board and you've already commented on Sweden. So perhaps you could comment in a bit more color in terms of Netherlands, Kazakhstan and Baltics. And just generally outline how sustainable do you think the development this quarter is and whether there were any particular one offs to bear in mind despite sort of on top of what you've already clearly disclosed in terms of the one off? That would be very helpful. And also secondly, on Sweden top line and a 2% to 3% target for mobile end user service revenue growth, given that you will be facing easier comps in Q4, driven by the B2B segments, do you think it's potentially possible that you will exceed this range? And if you could just comment on the drag, please, that you're still seeing from on the B2B side as of this quarter, that will be very helpful. Okay. Thank you, Roman. So Alison will answer your first question on improved profitability and elaborate more on Netherlands, Kazakhstan and Baltics and also how sustainable this is and if there were any one offs in the quarter? Okay. Thank you, Robin. As always, you get many questions into one question. So the improved profitability across the group, the one consistency across the board was data monetization. We have seen in Sweden, in Baltics, in Netherlands, in Kazakhstan, great usage on our networks, people trading up, roaming domestically and internationally has been very positive during the summer months. And seasonally, Q3 is always strong. It was particularly strong this Q3, and that's given us a great opportunity to filter that down to the bottom line. How sustainable is it? Well, Q3 is always an outlier versus all of our other quarters. I think the only things that were slight outliers this quarter were a little bit less sales and marketing in Sweden to the tune of maybe 20,000,000 dollars versus the same period last year. A little bit less in above the line marketing in Netherlands than the other quarters because we don't do TV advertising in the summer months, and we were waiting for our new campaign to kick in at the end of the quarter. And the one offs have all been explained already, so and in the report. So I don't need to get into those. So it really was good data monetization, and you're starting to see challenger benefits coming through and synergies kicking in, in Kazakhstan. In terms of Sweden top line development, yes, we're moving into an easier comp period. And yes, things have improved in the B2BSME segment, but it's still very competitive. And Q3 was a quiet quarter. So we are we want to ensure our momentum continues by investing behind our our momentum continues by investing behind our new brand campaign in Sweden, by exploiting the iPhone 7, which has been very, very successful launch so far. As I said, we've got people waiting for the phone. And in terms of B2B, large enterprise still mid single digits. SME still a slight decline year on year, but it's getting better. Thank you very much. Can I just follow-up very quickly on the Netherlands? The equipment sales was relatively low in the quarter. So is it fair to assume that maybe perhaps once that normalizes, then you'll be spending a little bit more on subsidies going forward or that's not the case? Yes, correct. The summer months are not a heavy period for equipment sales. Our one of our key competitors had a very aggressive marketing and pricing campaign during the summer, and we decided not to overreact to that, and I'm glad we didn't because we still got good momentum. Our intake didn't suffer. Our market share development didn't suffer. And we have been waiting to really ramp up investment behind the iPhone 7 and the new campaign. So yes, Q4 will go back to the higher levels of investment that you saw in previous quarters, but still within the range that was guided previously. Thank you so much. Thank you, Roman. We'll now take our next question from Lena Osterberg from Carnegie. Yes. Congratulations on the very good quarter. First of all, you guided earlier on some impact, negative impact from roaming regulation this year. And it seems you've had a very positive contribution from roaming in this quarter. So I was wondering a little bit, first of all, if you could specify a little bit more how much of that you see as sort of extraordinarily positive? And then also if you could give some indication into next year when we move to Roma's home, how much that will give you as an impact? And then also if you could say something about the costs on T Mobile. You migrated a lot of the traffic now. How much are they in the quarter? And what's the trend? And then also if you could guide a little bit on the P and L and cash flow tax? And then dividends, you mentioned that this is the last year of your progressive dividend policy. If you could give some sort of view on how you believe you view your distribution capacity going forward? Okay. Thank you, Lena. So the first question, Lars, if you can answer that, and that is regarding the Roma regulation impact and what we have guided for previously in terms of the SEK 100,000,000. If you could specify how much in the quarter was sort of extraordinary and how to view that going forward if we start there? Yes. So on the roaming first of all, thank you, Lina, for the question. On the roaming impact, we've seen a lower than expected impact for the quarter and also for year to date. So as you mentioned, we have guided about $100,000,000 impact. We believe that's going to be less. It's a combination of people using more within EU, so the positive volume impact and also good smart pricing positioning in our market and in particular the Baltic. And then we're also seeing a lot of excitement on visitors. And in addition to that, we've also have seen an increase in roaming outside EU. So if you net all that up, then we're looking at an impact that is lower. I mean, with the year, it's not over yet. So I'm a little bit careful to mention exactly where we're going to land, but it will definitely be lower than the $100,000,000 that is our current estimate. When it comes to the Roam, like, get home impact next year, I think we are currently looking at that, what the impact will be. But we would expect that impact to be definitely impact our roaming regulation and the impact that we have on the revenues coming through. And I think what we've seen from the initial analysis is that's going to be about the same impact or slightly more. I think on the dividend, we are sticking to the current dividend policy that we have, which basically says a 10% increase from a quantum perspective. So that's how you should look at that. And when it comes to a new dividend policy, that will be communicated when we give the guidance early in 20 17, and that's for our Board to decide, moving on that on that. And then we have a question on the T Mobile and RA costs, the level in the quarter and the trend going forward. Allison, if you could take that one. Yes. Similar to previous quarters. So despite an increased customer base and not yet volatility fully rolled out, we're holding it around the €15,000,000 per quarter. Going forward, we expect as we switch on VoLTE fully and our network enabled even more data usage as a result of densification, then it will go down over time, but that will happen during the course of 'seventeen and not in 'sixteen. And thank you, Lena, for recognizing the good quarter. Yes. Can you say something about the taxes, sorry, P and L and cash flow tax for the full year? Yes, sure. So the cash flow tax has increased because we've seen higher tax rates in the countries like Sweden and Luxembourg, which reduces the DTA. So that's primarily in fact for that. But for the full year, how much do you expect roughly? We don't want to give guidance on that for the full year. So we'll yes, we'll there's been a bit more noise on that one. We shouldn't see any major changes to what you see in the 4th 3 quarters. Okay. Thank you. We'll now take our next question from Thomas Heath from Danske Bank. Thank you. Thomas Heath here with Danske Bank. A few questions, if I may. Firstly, on Sweden here, a very strong quarter, of course. I understand that some of the benefits you sort of reinvest in Q4 and you mentioned the iPhone, but when we sit here in the conference call next Q3 in 2017, will you say that, well, Q3 2016 was extraordinary because we had very low handset sales? Or will the run rate cost, if you like, in Q3, is that more telling of 2017? And then you just happen to have a push in Q4. So I'm trying to understand if the run rate cost, which seems to have decreased, if this quarter is more telling for next year or not? And then the second question also on costs in the Netherlands. If I understand you correct, the lower cost you're seeing in the Netherlands is not related to lower roaming costs to T Mobile. And that makes me wonder sort of what are the biggest cost items that have decreased? I think you mentioned TV campaigning, but what other factors? Or is it less handset subsidies? So those are my 2 key questions. Thank you. Yes. Thanks, Thomas. So the only outlier in Q3 was slightly less sales and marketing investment of around €20,000,000 in Sweden. So Sweden, what really drove the healthy quarter was end user service revenue development driven by data monetization from top ups, trade ups and good growth in our underlying business. And so when we look into next year at the same period, I think the only outlier will depend on what we did in sales and marketing in the quarter. Sometimes the iPhone slips into Q3, and so that causes a bit of a phasing impact. But I think that would be the only outlier because the underlying cost base, these benefits future. In terms of the Netherlands, it's not really that we've got lower costs in the quarter, Thomas. It's the higher revenues that has driven the biggest impact. So if you look year on year, our network costs have gone up, our NRA costs are about the same, and our sales and marketing has gone up. We just didn't invest the same on TV in Q3 as we had done in Q2. So it's really a revenue development that has caused the improvement in the Netherlands in the quarter. That's very helpful. Thank you. If I can have one follow-up, just to clarify the answer on roaming. Was it correctly understood that your sort of first best guess preliminary assumption would be slightly higher than SEK 100,000,000 for 2017? Thank you. Yes. We expect the Roam Lakatos have a bigger impact than the regulations that we're seeing this year. And as you know, the EU are still sorting out. So it's very uncertain, particularly dependent on where they end up with our fair usage policy. But it will definitely be higher than the guidance we originally had for this year. That's very clear. Thank you. Thanks. We'll now take our next question from Ulrik Horace from Jefferies. Thank you very much. I have two questions, please. The first one, again, on the Netherlands, I'm afraid. Let me maybe ask the question another way. You have set expectations in the market for a particular spending level in Netherlands. And I suppose in the strategic situation you are in Netherlands, it's discretionary how much you invest. So what has made you retain the upside that comes through the stronger revenues rather than spend to levels where essentially expectations were? And I know this is not this is obviously sort of a question on the quarter, but if you could comment on the thinking on the investment levels in the Netherlands also into 2017. Are you still in a position where you think it makes a lot of sense to really put serious money into the market to gain scale? Or do you think it might be time to rebalance maybe that a bit and then sort of look towards breakeven and these sorts of things? My second question is on the exposure to Rom Like Home. You mentioned earlier, sort of very indicative expectations. I think this was on revenues. But I was wondering, would you have some indication what the EBITDA impact might be? I understand there are lots of variables there. So maybe if you could just give us some sort of worst case scenario for the EBITDA impact, understanding then that from your point of view, that would be helpful. Thank you. On the EBITDA impact from your point of view, that would be helpful. Thank you. Thank you, Luis. So if we take the first question, Alison can answer that on the Netherlands and that we have been quite specific in our guidance in terms of mobile EBITDA losses of the SEK 300,000,000 if we could elaborate on that on the levels and how we view that in terms of scaling and rebalancing. So if we start there. Yes. Okay. Hi, Ulrich. So as I said on the answering the last question, the real benefit that we got in Q3 was not from reduced spending, but actually from much higher revenue development in the quarter as data monetization is flowing through in a healthier way. Why did we not spend more? Well, I've said all along that we are investing in a very disciplined manner so that we create the right level of shareholder return on this business. And Q3 is always a quarter where if you throw too much money at it, you might not actually get a good return because nobody is watching the television, nobody is buying as many handsets, and people are just waiting to buy new handsets in the Christmas period. We also saw one of our key competitors through their madness month, which became 6 weeks. And we chose not to escalate price promotion during that period, and I'm glad we didn't because we still took around 20% of the available switchers market, and we had net intake at the same levels or slightly ahead of Q2. So what does that mean for 2017? What we are looking at doing is looking forward is really reassessing the investment that we're putting into fix because as you've seen, as a result of the impairment, that business continues to be difficult for us, both from a B2B and a consumer point of view. So we are reassessing the investment we put there. But from a mobile point of view, 11 months into launch, we are consistently taking 20% of the available market. We are building a unique challenger presence in the market. We have grew our customer base year on year 20%. We're now over 1,000,000 customers. And we will continue to build to a level that gets what we believe the right return on our overall investment. And then on Room Like at Home, do you want to follow-up on that, Lars? Yes. I think we did have mentioned earlier an impact of up to 2 $50,000,000 But I think in BotoCare, there's been a lot of variable parts and moving particles around that number. So I think we would have more visibility when we give the guidance early next year to get a bit more granular on that figure. That's the figure that we've given today. Okay. Can I just confirm, EUR 250,000,000 up to EUR 250,000,000 with lots of uncertainties attached to it on EBITDA for the group? Is that correct? That's correct. Thank you. That's what we guided at the beginning of this year. As we said, it'd be $100,000,000 this year and then an incremental $150,000,000 the following year. So we're still sticking to that. Whilst we're waiting for the EU to resolve the fare usage policy, and we understand where wholesale rates are going to end up, but we don't have clarity on that yet. Understood. Thank you. We'll now take our next question from Andreas Jolson from DNB. Thank you. A couple of questions from my side. First of all, on the guidance and especially the sales guidance, if I take the full year upper end of the range and see where you could end up in Q4, it implies that the growth rates in Q4 should be clearly less than it was in, for instance, Q3, despite that you have easier comps. And as you say, you have good momentum or good interest in the iPhone 7. So I wonder what you base that assumption on. And also the same 2 questions. Thanks. Thanks, Andreas. So on the sales guidance, I think what you need to remember is last year Q4, we had Dutch VAT reimbursement, which really boosted our revenue by around DKK 90,000,000. So that obviously doesn't happen again in Q4. And then I think the only other thing you need to recognize, we always don't get the same roaming impacts in Q4 versus Q3. Of this Swedish momentum of the 2.1% growth in Sweden, I think 0.5% of that 2.1% was from roaming. And Lars mentioned the impact that we had in the Baltics as well. Without roaming, we'd have been at 10 rather than 7. So I think we expect the underlying momentum, ex roaming and ex that Dutch VAT adjustment to be similar to this quarter on the top line. And that's why we're now expanding to be at the upper end of our guidance range on both sales and EBITDA and be in line with that mid single digit mobile engine as a service revenue growth for the year. In terms of Netherlands, Q4, we'll be back within that €200,000,000 to €300,000,000 loss range for the Q4. We were close to the €200,000,000 this quarter because of seasonally high revenues and slightly less marketing, but we'll be back in the $200,000,000 to $300,000,000 range in Q4. Thank you very much. Thank you. We'll now take our next question from Johanna Algevist from SEB. Yes. Hello. Two questions, if I may. First one related to the Dutch business and the ARPU was strong in the quarter. And if you can say something about how this will sort of is this a lasting impact? You mentioned top ups, for instance. Is that a seasonal impact in Q3? And how much of the ARPU uptick will prevail going forward? And then secondly, if you can comment anything on the churn level in Holland? Thank you. Thank you. The ARPU level was sequentially up, so not year on year because obviously our ARPUs came down when we launched our new proposition. So we are happy that, that sequential ARPU development we have will be maintained into Q4. Yes, there's a little bit from roaming, but the more direct sales we have as we roll out our own stores and we've become even better at selling online, we also see we have higher ARPUs in our direct channels than our indirect channels, and that's something that the team are really focused on. And our campaigns have more and more been focused on the higher buckets like 4 gig, and that's what's really starting to drive higher sales in the bigger buckets, and that's what we want to sustain going forward. In terms of churn, churn has reduced sequentially as we're cleaning up some of the older customer base. And again, as the team focus more and more on improving the customer experience and more and more building better data analytics, we're getting much better customer base management. So, yes, turn it down too. Thank you. We'll now take our next question from Peter Nelson from ABG. Please go ahead. Thank you. Just a couple left, please. On Sweden, firstly, you talked about strong growth in the B2B Large Enterprise market segment and you also indicated, Alison, earlier some positive comments about the enterprise market improving in Sweden. Are you talking about the overall market? Or are you mainly talking about your own performance here? And what is driving Tele2's good performance in the large enterprise segment? And then just secondly on the Baltics, given that we now have had a few, actually several quarters with gradually improving performance in the Baltics. Could you elaborate a bit on what is driving this? Is sort of is it a macro driven increase in consumer spending? Or are there other factors that is driving the much improved performance in the Baltics? Thank you. Thank you, Peter. Yes, I was talking about our own performance in B2B and the enterprise segment in general. We haven't seen any of our competitors release their results yet, so it's difficult for me to comment. Although we have seen the SME segment be less price aggressive in the last quarter. And certainly, the investment that we put into that segment earlier on in the year to get momentum back has paid off for us and things have stabilized. So large enterprise, we are consistently growing in the mid single digit range and continuing to win good high quality customers, such as Gothenburg, the city and parts of the government and the defense sector. And so yes, it puts us in a strong position as we integrate the TDC business in the coming weeks months. In Baltics, well, macro wise, definitely the most Baltics has improved. But I'm also really proud of what we are doing in the Baltics. We've had a very strong business in Lithuania for a number of years. We're number 1 in the market. And the rollout of 4 gs, the new data centric pricing has really helped fuel momentum in Lithuania. Our Lithuanian team are also best in class at cost management. So we managed to flow top line growth down to the bottom line, and we're building up some really good analytical skills in Lithuania. And what we did as part of the operating model changes last year was have our Lithuanian CEO now oversee the whole of the Baltic region so that we can replicate what we're doing in Lithuania in the other markets. And that's really starting to pay off. And in Latvia, we took significant pricing moves at the end of Q2, beginning of Q3. And that's all part of the data monetization story. So yes, a good macro environment, but also a really strong Tele2 Challenger way to grow businesses in the mobile market. All right. That's useful. Thank you. Thank you. We'll now take our next question from Maurice Patrick from Barclays. Yes. Hi, guys. Maurice here. So I guess a quick question on the Challenger program. When you talked about the EUR 1,000,000,000 target, I think many of us questioned how much of that was gross or net. And it seems like some of that is now coming through on the net level, not just the growth side. So I guess thoughts about the remaining €600,000,000 Swedish that are coming through for the rest of the program, your conviction that will come through the net level rather than the growth level? Thanks. Thank you, Boris. So yes, we've always been confident that excluding the major sales and marketing investments and network rollout in we are now seeing that in Sweden. You're seeing it in Baltics, we are now seeing that in Sweden. You're seeing it in Baltics. It's difficult to see it in Netherlands and Kazakhstan because of the investments there. But Netherlands, it will start to come through in the fixed business in due course. And we have every intention that it will be we will deliver on the $1,000,000,000 by 2018. Hence, we've just announced a significant headcount reduction in our Swedish business. So we're not just doing the big operating model consolidation of rules in to central shared operations organization. We're now using our learnings to go after real productivity and efficiency gains to really review how we go to market in our individual markets now as well. Great. And just look, just a quick follow-up on the Netherlands. Just so we don't extrapolate your sort of 56,000 net adds and EBITDA going towards 0 by end of 2017. Your ambition in the Dutch market is to grow much faster than the 56,000 net adds you've been doing in recent quarters. We should assume you'll pick that up significantly in the coming quarters. We are happy with taking around 20% of the available market at this point in time, and that's what we are doing consistently. Until we take around 30 Until our network is more rolled out, Until our network is more rolled out and we can guarantee more SIM only going into 4 gs handsets. We will keep at the 20% market share intake target. But in time, we might use the opportunity to do something more on SIM only, and that might take us higher. Great. Thank you. On Q4, On Q4, we'll focus on that average of around 20% available market share. Very clear. Thanks. We'll now take the next question from Robert Zlach from HSBC Banking. Good morning. I was just wondering on the cost side in the Dutch wireless business. It seems like every quarter you're paying the same amount to Deutsche no matter what happens to your business and how much of the data is on your own network. I was just wondering when could the costs actually start going down more materially for that cost item? And on the Dutch fixed business, what do you see? What are your alternatives there? I mean, you've been moving over to the Vula setup and it hasn't really helped or things have gone the other way. Maybe you could give us a few thoughts there. Thank you very much. Okay. Thank you, Robert. So the first question on the cost side of mobile and what we're paying to T Mobile and when you can expect the cost actually to go down, the MRA cost? Allison, if you can take that one. Yes. Hi, Robert. So we always expect that, that would go down more towards the end of 2017 and into 2018 because it does require us to have VoLTE fully rolled out. And part of that is subject to the handset manufacturers updating their software, some of which will not happen until early 'seventeen and until we've totally identified the network. So we did, in fact, expect it would go up during the course of 'sixteen. We've managed to hold it stable, and I expect it will kind of it will be stable until about when you start getting into 'seventeen, but it will be really end of 'seventeen into 'eighteen before it's materially beneficial to us and no longer the drag that it is. In terms of the Dutch fixed business, yes, we are relooking at how we can still offer a challenger fixed offer, but in a value accretive way for Tele2. And that's what we're now looking at. Okay. Thank you very much. We'll now take the next question from Max Hallum from New Street Research. Hi, there. My question is just about being covered, I think, on the Netherlands. But I was just going to check. So you reached 1,000,000 subscribers, you said, by last week. Should we imply that implies sort of 10,000 net adds in the 1st couple of weeks of Q4. Should we sort of assume that, that continues that rate of net adds for the rest of the quarter? And is that driven by the increased spend, whether that's a slight step up on the Q3? Well, I'm not getting into weekly guidance, Max. But as I said to Morris, we are aiming to consistently take around 20% of the available market. And now that we have the iPhone 7 and the new campaign and our competitors' mad month has stopped, then I'd expect to see momentum continue in Q4 as we've seen in Q3. Okay. Okay. Operator, do I have any more questions? We'll now take a follow-up question from Thomas Heath from Danske Bank. Please go ahead. Thank you. A few follow ups, if I may. You mentioned some recent price moves by competitors in Kazakhstan. Just to clarify sort of in which direction those are moving. Also you mentioned IoT, a little bit of a drag on group EBITDA. So what scope are we talking there? And any time line for when that might turn positive? And lastly, the share of 3 gs in your Netherlands mobile base? Thank you. Yes. Beeline have recently reintroduced some unlimited offers on 4 gs. So we are watching that very closely. We have reacted, got throttling in place so that it doesn't become hugely expensive to us. And so that was the reference I made to Kazakhstan. IoT, yes, we are we see that as a very attractive growth area, and we are investing in a low risk manner to take advantage of the growth that will be there in the future. In this over the long term, that's a business that will have similar margins, EBITDA margins to our mobile business, but higher cash margins because it won't have the same CapEx associated with it. And so that's why we are very interested which is which is what we've been doing and ramping up during the course of this year. And that's why you see the EBITDA loss well, the negative EBITDA increase. In terms of 3 gs in our Dutch base? It's around 30%. Around 30%, yes. But reducing all the time actually. Yes. And for IoT there, will do you expect to add more employees in this space next year? Or have you reached a level where you're happy? No, we're still adding employees. Okay. Very clear. Thank you. Thank you. Okay. Operator, before we conclude for today, we will take a question from the web and that reads, can you please provide a little more information about IoT, how growth looks and what is the goal when it comes to sales and margins? Lars, please. I think we touched on that already. Yes, that's an alluded to it. I think the other point I would add is that we are looking at the opportunity in a very disciplined asset light way. And we take it 1 step at a time. And we're focusing obviously initially on connectivity, but then also on value added services that could drive ARPU and also the margin. So that's how we look at IoT, very exciting opportunity for us when we look at the growth coming our way on connected devices in the future. Okay. Thank you, Lars, Alison. And this concludes our Q3 2016 results presentation. We will release our results for the Q4 26 January. Thank you all for participating today and all the good questions. Have a very nice day. Thank you. Thank you. That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now