Earnings Call: Q3 2015

Oct 21, 2015

Morning, everyone, and welcome to Telenetu's 3rd Quarter 2015 Conference Call. Speaking is Luis Cheddar, and with me, I have our President and CEO, Alison Kirkby and our Interim CFO, James McLaren. As you know, we're also sending this presentation live over our web page, tele2.com. So welcome to you join us via the web. After the formal presentation, there will be a chance to ask questions either over the phone or via the web. Please be kind and keep it to 1 question each so that everyone has the possibility to get through. With that said, I hand over to you, Alison. Good morning, everyone, and thank you for all dialing in this morning. As I said in the press release, it's a great honor to have been appointed CEO of Tele2 and to lead the company in the next stage of its journey of data monetization enabled by innovation in technology, service, pricing and cost control. Today's results are a reflection of this focus with positive fundamentals in our key established markets and positive momentum in our investment markets. So moving to Page 2. Key highlights the quarter are as follows. 1st, customers continue to be attracted to our network, our products and our services with strong net intake of 333,000 and end user service revenue up 5 percent across the group. Data hungry customers are also showing willing to trade up as evidenced by our continued customers that we love, with Netherlands and Baltics now at 90% population coverage and Sweden on track towards the 90% geographic coverage that we're aiming for. Our Challenger Spirit that is driving more efficiency and more productivity across the group is very much on track. And Kazakhstan is a great example of when customer momentum comes, we have a scalable and profitable business. And finally, as I said, I'm very proud to be Tele2's 5th CEO. I'm happy that in the last months, we've made significant changes to our ways of working within the company to realize more customer focus in our operating companies and to enable successful execution of the Challenger program. Moving on to Page 3, our manifest continues to be data monetization. Top line development remains strong at 5%. Although with data growth at 70%, it would be good to see a stronger pass through to the bottom line. Obviously, we have some headwinds at the moment with the investment we are putting into the Netherlands, and we also had a one off in Lithuania this time last year. If you exclude both of those two impacts, underlying mobile EBITDA was actually up almost 5% and bang in line with our end user service revenue growth. So Page 4 is just shows it is another mixingledigit growth quarter despite a tough comparison and very much in line with our guidance. We're very much delivering not only in line with our guidance, but in line with our own expectations from a top line perspective. So how does that look across the different markets? Well, in our established mobile markets of Sweden and Baltic, we are seeing a positive development. Sweden at 1% is obviously slower than the same period last year when it was growing at over 5%. But as I'll show you later, the fundamentals in Sweden remain strong. Baltics are growing between 5 percent to 8% and showing very good momentum. And Croatia is still showing positive progress despite us still being in the midst of the network swap that will only start to benefit us in 2016. And in terms of our investment markets of Kazakhstan and Netherlands, that is where we are seeing stronger underlying momentum and we are very well positioned for further growth. Data usage continues to grow exponentially across all our markets, and this also provides a platform for further monetization. So let's get into each market. 1st and importantly, Sweden. You see the headlines here are fairly flattish in net sales and in EBITDA on the quarter. But underlying this, there is good positive fundamentals. And year to date, we should not forget that the Swedish business is up 6% year over year. So in terms of the detail, it's been a positive mobile quarter despite the strong comps that we had last year, with mobile delivering its best EBITDA and highest ever mobile end user service revenue. Mobile margin also hit 34%. Combi continued to grow as Tele2 Residential, and it was only B2B that was down, mainly due to increased competition in the SME segment. However, large enterprise continued to show positive momentum with a long list of big names signing up. And from an M2M perspective, although admittedly this is not Swedish, this is a global signing, we have just signed a wide frame agreement with Vassentral Group, the 3rd biggest utility company in Europe for all of their Internet of Things solutions in all of their subsidiaries. As Rami, our Head of M2M, likes to remind me, we connect everything from electricity meters to wind power stations. So let's just look at the fundamentals in Sweden now. As I said earlier, that despite a slowing of the top line growth from last year, the fundamentals do remain strong and are providing a good platform for further growth. I'm confident for these three reasons. First, our dual brand strategy is playing out well with increasing customers on both brands and net intake very strong, up 84,000 in the quarter. Secondly, we continue to see increasing ASPU on Tele2, up 5% and in line with the mid single digit development that we explained to all of you when we announced Big Buckets. And 3rd, we are seeing strong prepaid to postpaid transition on Comvik, which is absolutely fundamental to ensure that as prepaid goes into decline, that we transition those customers into higher to customers in postpaid. Additionally, on top of those three fundamentals, we are seeing top ups in line with last year, and we are seeing trade ups in Tele2 consumer continue to be in line with our plans. So in summary, the data monetization journey in Sweden is on track for both Tele2 and Comvigram, especially in the consumer segments. Moving on to the Baltics. We are seeing good consumer reaction to our network and the data bundles that we launched earlier this year. So you see here strong end user service revenues and equipment sales are driving a 7% growth. And if you exclude the one off from last year, it's actually 9%. And this is even before we start to commercialize and advertise our 4 gs and value champion services. After a number of tough years in the Baltics, I'm very proud of the momentum that we are now seeing across all three of these markets and their challenger attitude, especially when it comes to cost control, and it's something that we're certainly ensuring is leveraged within our challenger program. Sweden and the Baltics, just as a reminder, throws off just under $3,000,000,000 of cash to us as a group and has done so over a number of years. And in fact, it's these businesses that have enabled us to invest significantly in our growth and investment markets of Netherlands and Kazakhstan and still allow us to continue to pay a progressive dividend. And that's why it's so important that the fundamentals in these business remain strong and that they still have platforms for future growth, which hopefully you can see that you will see in these results. So moving on to our investment markets. First one, Netherlands. As you know, our strategy is to move away from aggressive SIM only deals and focus on higher value 4 gs ready customers, and that strategy is starting to pay off with good mobile end user service revenue of 13% and good ASPU development. Mobile margins are obviously impacted by MVNO costs and MNO rollouts, but it's been the challenges in the fixed business that have continued to impact our results as consumers demand greater speeds and we do not currently have the ability to offer them that. The important thing is that we have secured the platform from which to grow in the form of ZULA. This will allow us to offer a much faster service to a much greater number of customers, and we expect to see the first result of this during 2016. But the most positive news is that having now reached a population coverage of 90% and given the strong recent performance results of independent tests, we have decided to launch ahead of plan, and we will now launch before Christmas. Thanks to some tremendous work by the Tele2 team, both in Netherlands and at group, our network is ready. We are handset ready. We have more than 50% of our customers on 4 gs handsets, with almost half of these already VoLTE enabled. And we are customer ready as we are proving that higher ASPU customers are starting to be attracted to our network. So as I said, we will bring forward our launch into Q4 and will launch before Christmas. Our first retail store will open in December, and we plan to put considerable investment into marketing and distribution to relaunch the Tele2 brand to the Dutch consumer. This will require incremental investments not previously within our guidance of between SEK 100,000,000 to 200,000,000 dollars and we expect this level of incremental investment to continue in each quarter in 2016. Finally, moving on to our other investment market, Kazakhstan. Demand for data and Tele2 continues to be very strong with customer net intake up 166,000 in the quarter and data usage up more than 200% and increased incoming traffic. This top line momentum is finally driving some scale benefits, leading to a SEK 50,000,000 EBITDA and a 10% margin in the quarter. We're really proud of our local Kazakh team for pulling this off in what is a very tough environment. Kazakhstan Kazakhstan is one of the lowest priced markets on the planet at $0.25 per gig, 12 times less than Russia and 40 times less than Sweden. So as I look at it, there is lots of opportunity for data monetization in that market. So we are therefore monitoring the pricing environment very carefully. So on that point, I'm going to pass over to James now who will take you over the financials. Good morning. Thank you, Alison. I'm the new Interim CFO as of 1 October. I'll take you through the financials now. There's been continuing FX volatility in some of our markets. So on an FX adjusted basis on Slide 13, net sales were 2% growth quarter on quarter and minus 6% against the minus 5% on the chart. So FX continues to be a concern for us. EBITDA growth is tracking behind revenue growth, particularly in the Netherlands, where our fixed business is declining, as Alison just said. And we're expanding considerable investment in our 4 gs launch. So that is one of the key elements to our minus 6 percent EBITDA growth profile. Slide 14. On this slide, mobile end user service revenue growth continues to be driven by Kazakhstan, which at 28% is fairly stellar, Holland at 10% and Sweden at 1.2% on an FX adjusted basis. In Sweden, market driven prepaid decline continues with strong development of postpaid stock, which we expect will translate into improving usage growth in the Convec segment. ASPU uplifts are quite strong. Sorry. ASPU uplifts were strong across all segments and with the exception of the enterprise segment where the SME sector, in particular, was a bit hit by price competition. On a quarter on quarter basis, ASPUs in Netherlands are showing a healthy increase, in fact, of 10%. So that's Q2 to Q3 as opposed to year on year, which was driven by improving penetration, in particular, VoLTE penetration, as Alison has mentioned. Over the page, Slide 15. Year on year EBITDA decline in the quarter, as you can see, is driven by activities in Holland, mainly concerning launch preparedness. Expansion costs, subscriber acquisition costs, in particular spend has been ramped up a bit over the past few quarters. And despite so despite heavy pricing pressures in Kazakhstan due to Kcell, particularly from Q2 onwards, our EBITDA margin not quite tracking revenue growth, but nevertheless a strong performance on profitability growth in that across all markets is quite strong. Obviously, Holland, where you can see the 3 20 reduction in EBITDA is driven by declining fixed business and higher expansion costs, especially but also network OpEx related to the 4 gs launch. Excellent year to date EBITDA growth in Sweden, driven by the revenue growth that previously mentioned as consumers trade up on data. And the trade up in COMVIC is starting to happen, but we're still at the sort of pre to post conversion stage and the evolution of that brand. Slide 17, CapEx. We've got 8% CapEx growth, which is actually on a quarterly basis. So the year on year comparison is actually Rest of World, which is mainly Croatia, and that's the network swap from one legacy supplier to a new supplier. So that's all part of our readiness in terms of getting our network up to speed in Croatia. Slide 18, cash flow. And as you can see, there's a big chunk of working capital movement. That's a delta between deltas essentially. So it's the change in working capital across the quarters year on year, which is actually mainly driven by the settlement of the historic dispute in Holland. But also there's the impact of the decoupling of our debt position remains in a healthy position with us tracking during the year well below 2x. The outlook in terms of 2016, we're planning to hold to that 2x with the possible spike in Q2 around the time of when we pay the dividend. So our plan is to remain firmly in investment grade territory during the course of 2016. So moving on to the Challenger program, Slide 22, it's good progress to be reported there. I think we're developing traction internally in the business. And what we're planning on doing is driving ever deeper line by line so that no stone will remain unturned. I think the Challenger program is all about process reengineering and simplification and also systems rationalization. The shared service outsourcing activity is sort of facilitated by this simplification process, which will drive costs down. And Slide 23, we're on track to hit our €1,000,000,000 savings targets by 2018. And our investment reflecting our activity is in line with expectations during the course of 2015. So the message on the Challenger program is that we're driving deeper. We've announced our new operating model, and we expect to hit our savings target by 2018. So that covers our slides all the way through to 25 now. So on to Slide 26. The updated financial guidance is basically unchanged with the exception of EBITDA. So all KPIs from financial guidance are the same, but EBITDA is down to 5.6 to 5.8 range, which reflects the pulling forward of our Dutch launch. So we're expecting to launch in the next 2 months in Holland and this change simply reflects that. And as Allison said earlier, we'd expect to be tracking higher spend on Holland, especially on expansion costs over the next couple of quarters. So the main message on this one is that we're ready to launch and it will take place shortly. At that juncture, actually one other comment on guidance, which is, as mentioned on leverage, we will be holding, as I said, to less than 2 with possible spike in Q2. So that's the only other thing that we should mention on guidance. And at that juncture, I'll pass back to Alison to conclude. Thank you, James. So in summary, our priorities were clear this quarter, and they are very clear going forward. We are focused on driving data monetization across all our markets. We are focused on driving cost and process reengineering via the Challenger program, and we are very excited about the prospect of launching the first 4 gs only MNO in the world in the Netherlands before Christmas. And finally, despite the accelerated investments in the Netherlands, we remain committed to our dividend policy and the further creation of shareholder value as we absolutely remain confident in our ability to successfully execute on our way to win strategy. So on that note, I am going to hand over to Louise for Q1. Yes. So this concludes our formal presentation for the 3rd quarter results. And we now open up for questions. Operator, can we have the first question, please? Thank Okay. There appear to be no questions. I'll return the conference to you. Yes. So for any questions, there seems to be some kind of complication here. So if you could ask your questions via the web instead. Hello, operator? Sorry, yes, there are still no audio questions on the line at the moment. Okay. So we're going to do the Q and A session via the web or via SMS. All analysts, do have both mine and also Louise' phone. So please send questions through SMS or to either me or Louise or by the webtele2.com, and we will ask the questions to James and Alison. Yes. We will start with the first question now. Could you please be more specific on what you expect to be the net effect from higher launch costs and craft synergies in the Netherlands next year? Please adding SEK 100,000,000 to SEK 200,000,000 to the current run rate of SEK 90,000,000 of losses. Q overestimating the loss, which would be around EUR 800,000,000 to EUR 1,100,000,000. Okay. So the EUR 100,000,000 to EUR 200,000,000 per quarter is very much focused on year on year additional expansion costs to support the marketing, distribution and handset subsidy implications of launching in the Netherlands. At the same time, our underlying OpEx base will, of course, also be increasing because the business is growing. And so you will see in 2016 also increased MVNO costs and increased fixed production costs because our network is still being rolled out. Yes. Next question is how much of the EBITDA improvement in the quarter in Kazakhstan is related to an increase in incoming coal? Is this sustainable? The increase in incoming calls is a good chunk of the year on year progress. But as I said on the call, we are also getting good scale benefits from the increased momentum on the top line. Okay. The next question comes from Johan Alquist at SEB, and I think it's a question that I guess everyone is wondering about today is when the Dutch operations from Netherlands will be breakeven after this early launch that we're having in Q4. What do you say on that, Allison? We've always said breakeven would be within the next 2 to 3 years. So it certainly won't be in 2016, but we'll be moving towards breakeven during the course of 2017. Do we have any further questions, Annalise? Yes. For the Netherlands, you report around 30% voter penetration. How much of this group of customers can actually use VoLTE? Today, nobody can use VoLTE because VoLTE has not been switched on in our network. We are aiming for the network to be VoLTE ready during the Q1 of 2016, but not right at the beginning of the quarter. Okay. Very good. And the next question comes from Erik Pesch at Danske Bank. He is wondering about working capital movement within 2015 2016. I don't know, Jason, if you'd like to have a stab even though you did in your 100 days of work. Yes. So I'm assuming you're talking about the big block shown on the chart, which as I said is mainly to do with the settlement of a very historic dispute, which was around power with another operator in the Netherlands. That was settled in Q2, Q3. So it's just driven a substantial shift in working capital movement. So the working capital movement number is a delta on a delta. It's basically showing the change in the change in working capital. But there's also some movements coming out of Sweden as well around handset financing in particular. So hopefully that answers your question. Yes. Thank you, James. It's hard with follow ups on the questions. But Erik, if you would like to please send me yet another SMS, and I would ask a follow-up question to James on that one. The next one comes from Fonig Rater and from Jefferies. And he is asking that Swiss mobile service revenue acceleration to 1.3% is, of course, welcomed, but still below historical momentum and also below what actually one of our competitors, Telesmere, posted, which was higher than that 5%. What is our view on that growth rate in Sweden? Is this the new normal rate? Or we will see a movement going forward in any direction when it comes to service revenue growth in the Swedish business? What do you say about that, Alison? Thanks for the question, Ulrik. So I believe Telia posted around 2% for Swedish mobile, but they include operator revenues in their figure. If you include operator revenues in our figure, we were at 2.2 percent in the quarter. That being said, we focus much more because of high roaming. Obviously, Sweden had a lot of visitors during the Q3 that both we and Telia benefited from. Underlying mobile end user service revenue is what we focus on, and I agree. And as I said, we would obviously like to see higher growth than 1% in Sweden. And that's why we are focused very much on the fundamentals to provide a platform for growth in the future. And the fundamentals are strong. Net intake is positive. Net intake was not positive throughout last year. Net intake is positive this year. We are seeing continued mid single digit ASPU development in Tele2. We are seeing good prepaid to postpaid transition in Comvik, and we are seeing continued growth in Comvik. So our objective is to get Sweden end user service revenue momentum back up to more like a 3% range rather than 1% range that it's at today. But we're still very happy that the fundamentals for that growth are there. But unlikely to see it turning from 1% until we're into next year, and we are comping a period where Combi pricing had already moved down to take advantage of our dual brand strategy. Our additional question on the web. Sweden mobile margins expanded year on year by 90 basis points. Considering the tough Q3 twenty fourteen, was there any deferred spend in Q3 20 15? No, there was no deferred spend. The big driver of the underlying progress in mobile was the removal of subsidies from Tele2, which was worth around SEK 40,000,000 in the quarter and which is what we've been benefiting from throughout this year. Some of that was invested back into marketing in the quarter. As you recall, last year, we had a very low spend in Q3. Very good. Thank you, Alison. We have a couple of further questions here coming in via SMS and also through the web. Just to remind you, as our Telco conference is not working properly, you can SMS either me or Louise Schieter on the phone or post questions on telco.com. My phone number, if anyone has forgotten that one, is plus 46702734879, plus 4670 2 734-879. But the next one comes as a follow-up from Johanna Walqvist at SEB, and that is around the losses in the Dutch operations and how that will be distributed over the course of 2016. We have indicated similar investment costs as we're going to have in Q4 2015 to be the same over the course of 2016. But still, is this front loaded or back end loaded? Or is it a linear consequence throughout 20 would you say, Allison? We don't give we've not given 2016 guidance yet, and we're certainly not giving guidance by quarter. It will very much depend on how quickly customers become attracted to our offer and in the ramp up of our distribution. But at this stage, I would be assuming it's fairly spread equally throughout the year so that we build momentum throughout the year. Yes. And just as a follow-up question on that one is then the spread that we are talking about when it comes to cost, is that dependent on the success of the business, so to speak, if it's going to be upper end or lower end of the business? So how should the analyst community view that? In terms of the sorry Investment cost that we have indicated, that's cost for the Q4 that will continue and remain during 2016. The range that we are discussing, is that something that will be dependent on the success of how successful we are in the Dutch business? Yes. No, it will also depend on as we start seeing what different levers are having the biggest impact acquisition, it will very much be we will be playing around with those levers throughout the year. Sometimes the investment will be very much focused on the brand marketing. Some of it will be driving commissions in the indirect channels. Some of it will be very focused on handset subsidies. So I wouldn't say it will be determined on whether we're successful or not. We're just giving you a wide range because we want to have as much flexibility as possible to invest against all of the levers. Thanks very much, Alison. Operator, even though we have issues with our telco call, could you please repeat the instructions for asking questions over the phone? Okay. Thanks very much, operator. But we have another question from the web, Louise. Yes. Question follow-up. When you bought the spectrum 3 years ago, you saw Dutch prices were very high. ARPUs are now 25% lower than 3 years ago. Do you still feel Dutch pricing is too high? Or is it more a case of customers not getting enough with their bundles? It's a bit of both. Pricing, if you look in the Netherlands, the average price per gig to the consumer is still significantly higher than most other European markets, despite admittedly there's been some movement in since the beginning of this year. So you're right, some of it is the amount of data that you get in the bundles, but it's also relatively the pricing in the Netherlands is still higher than other markets that we've looked at. Yes. We have a further question on the web. It's from Thomas V. Handels Banken. Your dividend is clearly not covered in 2016, perhaps not in 2017 either. Will you lower your DPA? As I said on the call, we remain committed to our progressive dividend policy. And as James reiterated and we said in our press release, considering the incremental investments in 2016, we expect our leverage to nudge above the upper end of our range. The range is 1.5% to 2%. We expect that to spike up, particularly during the Q2, but likely throughout 2016, so that we can still invest behind the Netherlands and still pay our progressive dividend out. Next question on the web is how large share of customer base in Netherlands are prepaid? Could you give some flavor on adding postpaid subscribers and losing prepaid subscribers this quarter? And this question comes from Stefano san, Nordea. Yes. So you have noticed that there was no very cheap SIM only deals that were out there in the market. So we've seen high churn in our prepaid business, but we've seen good positive momentum in postpaid. I would expect that at launch, we will see a further shift away from prepaid and into postpaid in our Dutch business. Very good. Operator, have we had any success with getting any questions through the telephone? Unfortunately, we still have no audio questions on the telephone. I see. So we still have a little bit of a well, a fairly reasonable technical snag on the phone, but we are getting questions via SMS and web. So please continue to ask your questions that way. The next question comes from Nick Lai, a Scottish Fellow. He's worked for SocGen. Wondering a little bit about the running what kind of a running cost do we have for our MVNO today. Our running costs that we incurred with the Dutch MVNO this quarter. And then what rough idea of how much incremental cost do you expect to book for the new network in 2016? That would be above launch cost then. And then as a last question from Irma is what sort of margin should we expect for fixed within the VULA agreement, which virtual unbundling local access with incumbent in the Netherlands. So would you like to have a try on that one, Ample? Yes, I'll do the first couple and then maybe James can do the fixed question. Yes. So on the MVNO, the quarterly costs are around SEK 150,000,000 per quarter, so just under SEK 15,000,000 per quarter. We expect that to spike up a bit in the early part of 2016. As we have more customers on our network, we would be quite 100% coverage. And obviously, we not all of our customers will have VoLTE enabled phones. In terms of our fixed production costs next year, the cost of our own network, that should also continue to increase next year as we're still rolling out the network to the tune of around $100,000,000 roughly. But that's a very rough number, Nick, and we're not yet giving guidance for 2016. Thank you very much, Alisson. And then on Rula, James, what do we have there? What can we share? So on the FX side, the gross margin, so VULA is around 50% to 60%, and it's slightly down in the quarter. Thanks, James. Louise, do you have another question? Yes. From Tim Taylor in that market, especially if we see more fixed mobile M and A? Do you need greater scale in mobile to have consolidation to compete against larger fixed mobile vendor operators? Obviously, we have a strategy to fix fixed, which is Bula, to give us more access to higher speed connectivity, so that we can compete in the fixed end of the bundle. And our mobile launch will give us the ability to compete in the mobile side of the bundle. So we today have a converged offer already in the Netherlands. It will become an improved offer as we move forward, thanks to Vula and thanks to the 4 gs launch. And we are well placed to compete with those quad play offers that are in the market. And so and from an M and A point of view, that makes no difference to us really because we were always embarking on an organic and fixed and mobile strategy as we launched the network. Okay. I have another question. This one comes from Andreas Wolszon at DNB. He is wondering about the development in the Swedish business to business market and the SME segment. As Telesner had said yesterday, they are seeing some progress within specific segments. Are we do we agree on that picture? Or do we have a different view when it comes to the development in SME versus large enterprise? Yes. As I said in the presentation, we have seen some competitive pressure in the SME segment, which has driven our B2B business down 2% in the quarter. However, we remain happy with the progress that we are getting in the large enterprise segment and continue to sign up new big accounts. So yes, competition has increased from both the pricing and the sales commission point of view in that SME segment. Thank you, Alison. Any more questions from the web? We have a question from Kristofer Eksson at KBG. He's asking on Sweden, how much did Tele2 consumer lose at the extent of Cambic? Tele2 was very stable again in the quarter. Underlying ASPU was up. Year on year, we have lower customer numbers, which we explained last year, but those customers, we have stabilized the customer numbers, and we're slightly growing in Tele2 Residential now. There has been no uptick in the average switching that we see between Comvik and Tele2. That has been fairly stable for a number of quarters now. So we're not seeing any losses to say that Telkombe is losing out to Combi. Thank you, Elsner. We take the next question from the web. It's from Andrew Lee Goldman Sachs and it's retaliation you saw in Q2. Do you think we have seen the full impact of that in Q2? Or will we see more of an impact in Q3? No, you didn't see the full impact of that in Q2 because that really ramped up during the quarter. However, what we have seen since the end of the quarter is Kcell reducing some of the minutes, the off net minutes in their bundles. And so we're seeing a slight improvement in the competitive situation in the last 2 weeks, although the perception still with the Kazakh consumer at the moment is that the Kcell deal is totally unlimited. But as I said, early signs that there has been a little bit of pulling back from Kcell in the last 2 weeks. Yes. We have further on CapExel question on the VEZ, and that's referring to what Terje Soneira talked about the views on the interconnect in Kazakhstan this quarter and that they had taken corrective measures, how sustainable is your interconnect development this quarter in Kazakhstan? This question comes from Stefaan Gossa, Nordea. Yes. Obviously, coming the incoming bonus that we put in place in defense of the situation that Kcell launched earlier in the summer has had a benefit in the quarter. And it's difficult to see how that will evolve because it will really depend how Kcell dials back its promotions in the market going forward. So at this stage, we've seen no tail off yet. Very good. Thanks, Alison. And the next one is coming from a follow-up question from Erik Pesch. He's asking for some clarification what is included in the term investments into the Dutch operations. We're talking about that one when clarifying our mission to launch early in Q4 this year. So incremental marketing, distribution and expansion costs, which is in addition so the $100,000,000 to $200,000,000 is very much focused on those costs only. There will obviously be further underlying OpEx increases as well behind continued expansion of the network. We're only at 90% today. And as we ramp up more customers on our network and not every day is yet on 4 gs VoLTE enabled phones. There will be a short term increase in MVNO revenues going to T Mobile in next year as well. Building on that answer then, we have actually a follow-up from Ulrich Rat again from Jefferies. He is wondering a little bit about what we include in the term put forward, the launch in the Netherlands. What will be our focus as we are launching early in the Netherlands? Is it migrating own subs first to the new network? Or is it a question around new subs, so to speak? And can we then he's asking, can we migrate existing MVNO subs to own network without touching the customer, so to speak? Do we need to send out new SIM cards and so on to the customers to be able to move them? Would you like to start and I can build on that as well? Yes. So very much the reason we're saying too forward, Ulrich, is because we had always planned to launch in Q1. So this was investment that we had never planned in the Q4. So it is a real pull forward. We have already been focused on transitioning our existing base, and we've made very good progress there. We've been very much focused on those customers that are 4 gs ready, I. E, they had 4 gs handsets. And that transition is almost complete. And so very much the focus on this quarter and going into next year will be attracting new customers onto our network and still trying to get those existing customers that are either SIM only or 3 gs onto our 4 gs network. Now since the focus was really on on attracting new, it will therefore require new SIM cards. Thank you, Anderson. We continue with a question on the web from 10 3 Morgan Stanley. It's on Morgan Stanley. It's on Swedish mobile. You mentioned top ups being in line with last year. Are you surprised with this result given the increase in data allowance? And how much higher are the gross margins on top ups, please? No. We are our whole dual brand strategy and the development that we're seeing across Tele2 and Comvique is very much in line with what we expected. What you're seeing is you're getting good top up development in both Tele2 and Comvik. And it's good to see that, that top up revenue is still there. So no, it's all very much in line with plan. Yes. We have one question from Roman Arbesso, UBS. When can Comvik start growing ARPU? Good question, Roman. I'd like to see that, too. When can Thomas is always looking at how do we ensure that we protect the Comvique brand in the transition from prepaid to postpaid because it's such a significant business to us. And so it's all about getting the pricing right to encourage that transition and not suddenly lose the prepaid business to others in the marketplace who continue to be very competitive in that space. That being said, Thomas is always looking at price innovation and is continuing to do so either in the form of straight pricing up or in the form of new bundles. We're now seeing the average Comvik user in postpaid is consuming just over 2 gigs. So there's perfect opportunity to start trading them up now because they are growing very nicely, not consuming as much as Tele2, but still penetration is growing there. So there is a trade up opportunity in Comvik. There is a price up opportunity in Comvik, and we're always looking at what are the right bundles for that segment to ensure that we manage the prepaid to postpaid transition well. Thank you, Anderson. But as you know, of all the areas that I see ASPU opportunity, it's probably in that Combi area, but we just need to do it in a very cautious way. Okay. We'll continue with a question from Lena Spalkanege. How much of your 20% market share do you expect to capture during 2016? Elena, we are forecasting a very steady progression towards 20 percent. And we're not going to be giving out any specific guidance on what we're setting out to achieve in 2016. Thank you, Anderson. Here comes another question from Henrik Hartz this time from Credit Suisse. He's wondering a little bit about the Netherlands, of course, as this is the big news today and how we and wanted to elaborate a little bit on how we look upon distribution and how we plan our distribution in the our distribution in the Dutch market, more online, 3rd party or rolling out an extensive own network with Mona brand stores. Is there anything we can share on that matter? In the short term, it's very much focused on online and indirect, and we will build up our retail presence during the course of the next couple of years. We won't rush into building up that retail presence. We will very much look at doing it in we will measure the success we're getting online and via indirect channels before rushing into having stores dramatically December when we open our first store. Very good. Okay. We'll continue with Netherlands. And if you could clarify indoor coverage population as well as geographic coverage. Indoor is just under the 70% at this point in time. And then we have a follow-up question from Andreas Jovitzson from DNB as well. And he's wondering about Apple and Apple contract in Netherlands. Is that something we will have at launch? It's all work in progress and on track. So we're going to keep you a little bit on your toes there, Andreas, when it comes to Apple. Then also a little bit on And just on that, we don't need to have an Apple contract at launch to be able to sell Apple phones to our customers because the Apple contract is in the indirect channels. So even if we don't have it at launch, our customers will be able to access Apple phones. I also actually have a follow-up question from Liana Osterberg from Carnegie. And she's wondering a little bit about our Q4 guidance for Dutch Mobile implies EBITDA on losses of some SEK 300,000,000. Is this a reasonable run rate per quarter into 2016? We're not giving full guidance for 2016 yet. But yes, it's going to be fairly hefty losses in 2016 for mobile. That's why we're giving the guidance of up to SEK 200,000,000 per quarter in expansion costs. Thank you very much, Alison. Do we have any more questions from the web? Yes. No, euros 100,000,000 to €200,000,000 to €300,000,000 is a good estimate, Lena, per quarter for next year. Further on Netherlands, 10072 expect to handle the existing low base with regards to the focus of 4 gs VoLTE handsets? Well, we're already above the 50%, and half of those are VoLTE enabled. We VoLTE will only be switched on during the Q1. And as we and another reason for the accelerated launch is the sooner we can launch, the sooner we can start to get more 4 gs VoLTE enabled handsets into the customer base. So all new customers will be very much focused on attracting 4 gs VoLTE enabled smartphones. And then we'll continue to try and manage the base that is our existing base that are on 3 gs or SIM only. But our real focus is on bringing in new customers on 4 gs now. And Gautam, we continue with questions on the VAS. This is a question with the iPhone launching into Q4, do you see risk of additional churn on the Tech2 brand, risk of value attrition as Tele2 customers trade to products? No, we have a very strong 4th quarter marketing plan planned. The new iPhone 6S hasn't so far hasn't been quite as successful as previous iPhone launches. But the Tele2 Sweden team have a very strong pre Christmas campaign thing that will benefit and be good for both our Tele2 customers and potential customers and Comvik. I have actually a follow-up question from Henrik Harbst from Credit Suisse. He's wondering a little bit about some of the stuff that we've historically been giving around uptake of above 5 gigabyte bundles in Sweden. We said 28% in the Q2 2015, and he's wondering if we can give an update on that for Q3 of fiscal year? It's still around the same level. We're still getting about 30% above 5 gig in the take up. And the number of customers on our big buckets are increasing and in line with plans. Yes. We'll continue with questions on the web. We have one from Thomas Heitz, Hans Vanke. On Kazakhstan, will everything MTR cuts should benefit EBITDA in Q1 unless competition decides to take all of those MTR cuts into further price cuts. So we are it's unfortunately, that's what happened this year. The MTR cuts should have been worth around $50,000,000 ended up going into pricing. The benefit next year is even more, and we are hoping that they can flow through to the bottom line rather than be reinvested in pricing. As I said on the call, with pricing already at $0.25 per gig in Kazakhstan, there it would be crazy if those MTR cuts did go into pricing because then we really would be out of the planet in terms of the level of pricing in Kazakhstan. So further on CapEx done, what do you expect to pay for the LTE spectrum in CapEx done? Can you say anything about that? We are the information coming out of the regulator is changing all the time. It's not quite clear whether it will happen early in 20 16 or not. We are monitoring the situation. We are we also don't feel the need to rush into 4 gs at this stage in Kazakhstan. There is still we have a very good 3 gs network that delivers very good speeds to the population. As you know, we didn't rush into 4 gs in some of our other developing markets. Baltics and Croatia are a good example. So we are we're assessing what we would be prepared to pay at the time that we feel the market is ready for 4 gs. Okay. We have a question from the Feb regarding Sweden, and that is what percentage of the operating base is now on the new pricing models with unsubsidized handsets, Allison? About 20% of the total customer base in Sweden. Yes. Thank you. We have another question on the web, and that is regarding Internet of Things initiatives. And Flu has been announcing a lot of Internet of Things initiatives. How big do you think Internet of Things can be for Tele2 on a 3 year view? How are you delivering European wide solutions in this area? Lars, since you're now in charge of new growth and N2M is your baby, why don't you take that question? Because I'm probably forward of listening to my tote. Exactly. No, thanks very much for that. First, I have to start by saying I'm very excited about being responsible together with Rami and Ingrid, who's running the business for Tele2. I think we are we have quite some high ambitions. We haven't given any specific details on what this will mean. But of course, we view this as a business that could have some significance for Tele2 overall. And it should be able to be a stand alone business unit that should be able to match our smaller areas or smaller countries as such. So without redeeming exactly what we are planning for this space, we have high expectations, and we believe this could be a reasonably large standalone business as well. Thank you, Lars. We continue with questions on the web. Can you explain why Dutch MVNO cost in 2016 will be increasing when you add new customers to your own mobile network? Do you still expect to carry a lot of voiceover to T Mobile's network? Yes, Allison, we already talked about this, but maybe you could clarify further. Yes. We will still have, what, 5% to 10% of our of the geographic coverage not yet met when we launch. And VoLTE will ramp up during the course of the year. So as we get more customers on our network, there will still be offload to T Mobile until we have 100% indoor and outdoor coverage and 100% 4 gs VoLTE enabled handsets. So just it's factually more customers and whilst we don't have 100 percent of everything, there will still be in the first half of the year increasing costs to T Mobile or increasing revenues to T Mobile. But then that should start to decline as we move towards the end of the year and into 2017. Thank you, Alison. So additional question on the VAB, Sweden. Margin in Sweden is clearly better than expected in Q3. The CEO comments to direct indicate this will be offset in Q4 as consensus margin for 2015% reasonable before Q3. Can we forecast a higher EBITA margin for Sweden 2016 than in 2015? Okay. Well, we haven't given guidance for 2016 yet. Q3 is always the highest EBITDA and therefore margin in the quarter in the year due to seasonality. So if you look back last year as well, we were already at 33% margin, but then it went down to 27% in Q4. Now I'm not expecting sustainable progression of our underlying margin in steady, sustainable progression of our underlying margin in Sweden, and we expect that to continue in 2016. Okay, Allison. Thank you. I think we soon will wrap up this. We will still do some additional questions. This is from the web. What are 22 competitive advantages in the Netherlands? A fantastic network and independent tests even before it is complete is proven that quality is very high. That fantastic network is significantly more cost efficient than anybody else's network because we have no legacy. And that will allow us, therefore, to offer great value to our customers. And third, we intend to reinvent the brand and make it disruptive and rebellious relative to the other 3 players that have been in the market for a number of years. Okay. Thank you very much. And with that, we conclude this 3rd quarter results presentation and Q and A session. Thank you all for joining and apologize for the technical problem. We will release our Q4 results 28th January. So with that, thanks and bye. Thank you. Thank you. This now concludes our conference call. Thank you all for attending. You may now disconnect