Earnings Call: Q3 2020

Oct 20, 2020

Thank you very much, Tara, and good morning, everyone. Welcome to this Q3 report call for Tele2. With me here in the room, I have Mikael Larsson, our CFO and Samuel Scott, our Chief Commercial Officer. And I have now been at the office for just over a month, and my first impression is that Tele2 is a company full of great talent potential and value. Tele2 has a solid position and a plan to build on, which we can see by the performance in this quarter despite the pandemic. However, I've also seen some room for improvement in various areas where I will focus my attention going forward. Today, I would also like to address the press release that was published this morning. PTS, the Telecom Authority of Sweden, has today announced that Tele2 is approved to participate in the upcoming 5 gs spectrum auction together with TENOR through our Net 4 Mobility Corporation. The authority has also published a number of security conditions that operators must comply with to use the 5 gs spectrum available in the auction. We have already planned for a rollout of 5 gs and the modernization of 4 gs and will ensure that the security conditions are met. The announcement today does not materially change our total CapEx expectations for the already planned rollout of 5 gs and also for the network modernization. But it will have implications on the timing of different parts of the project during the coming years. Mikael will elaborate on the short and mid term implications later in the presentation. The auction is expected to commence on the 10th November this year. With that, I would like to turn your attention to the results for the quarter and then address your questions at the end of the call. So please turn to Slide 2 for a brief summary of the results and highlights for the quarter. So as expected, we saw a full quarter of COVID-nineteen impact, mainly related to lower international roaming revenue in both Sweden and the Baltics. We also saw mobile prepaid and the suspension of premium sports and TV affecting the Swedish consumer business, although improving towards the end of the quarter. As we continued our focus to defend underlying EBITDA in 2020, Tele2 performed well in the quarter with an underlying EBITDA growth of 2% for the group. This was driven by strong performance in the Baltic markets, but also cost savings related to the Business Transformation Program and benefits from last year's synergy realization from the merger with Com Hem. CapEx excluding spectrum and leases amounted to €700,000,000 in the quarter, which is in line with our expectations of lower CapEx prior to the 5 gs rollout. During the quarter, the Extraordinary General Meeting approved the proposed extraordinary dividend to the company's shareholders. This was paid out in the beginning of October together with the 2nd tranche of the ordinary dividend. T Mobile Netherlands, where we own 25 percent, were able to acquire 5 gs spectrum licenses, which creates a good foundation for continued great performance going into the next generation mobile connectivity. In Sweden Consumer, we successfully finalized the implementation of Facebook price adjustments within mobile postpaid and fixed broadband on the back of our More for More strategy. Within the TV segment, the digital switch was successfully executed, which enables higher broadband capacity for our customers. In Sweden B2B, the market remains competitive both within the small and medium and large enterprise segments. We continue improving our commercial capabilities and modernizing our production platforms. However, the industry is facing challenges and we need to optimize our portfolio for profitability. In the Baltics, we see commercial activities recovering and continued strong momentum during the quarter. Despite the headwinds from COVID, all markets delivered strong top line growth, filtering through to underlying EBITDA. Going forward, we see the pandemic affecting our segments less as we see commercial activity recovering and the return of premium sports. However, we still see less international traveling outside of the EU, which puts pressure on international roaming revenues. We therefore expect an impact of SEK 70,000,000 to SEK 90,000,000 in the Q4 of 2020. Please turn to Slide 4 for a summary of our Sweden Consumer business. Mobile postpaid continued to show positive net intake during the quarter. Aptoo declined by 1%, but excluding roaming headwinds, the growth would have been positive on back of the price adjustments conducted in the quarter. Fixed broadband also showed continued positive net intake and improved ASPU growth, supported by the price adjustments. We have now successfully finalized our price adjustments on mobile postpaid and fixed broadband with limited impact on churn and continued volume growth, proving that our More for More strategy is working. The headwinds from the pandemic are more evident in mobile prepaid, where we see some recovery at the end of the quarter with solid net intake. Furthermore, in TV, we saw continued pressure on ARPU as premium sport content was only back at the latter part of the quarter. Total end user service revenue declined by 2% as growth in mobile postpaid and fixed broadband was offset by the COVID headwinds. Let's continue with Sweden B2B on the next slide. Mobile net intake was negative during the quarter as the pandemic continues to create uncertainty in the market and thus we see lower contract activations. The market continues to be highly competitive with price pressure along with headwinds in roaming revenue, which resulted in a continued mobile optical decline. Together with decline in both solutions and legacy fixed services resulted in a decline in total end user service revenue within Sweden B2B. Please turn to Slide 6 for an overview of Sweden. Total end user service revenue declined in Sweden by 4% due to headwinds related to COVID and continued price pressure within the B2B segment. In the quarter, we saw a negative impact of SEK 80,000,000 from COVID-nineteen, which was offset by cost savings supported by the Distance Transformation Program and last year's synergy realization, resulting in an underlying EBITDA growth of 1%. We continue to see strong cash conversion of 70% as CapEx spend is relatively low as we are in between investment cycles prior to the rollout of 5 gs and Remote PHY. Let's now move to the Baltics, slide 8. In Baltics, we continue to see great momentum with all three markets progressing well. We delivered strong net intake, primarily driven by a recovery with prepaid, but also by growth within all other services. The pandemic resulted in headwinds in international roaming revenue, but we managed to grow ARPU in all markets by monetizing the growth in data consumption and reduce legacy discounts. By successfully executing on our strategy, we managed to continue the end user service revenue growth, which you can see on Slide 9. Lithuania and Latvia have been performing impressively throughout the last couple of years, and we are very pleased to see that the turnaround in Estonia continues, resulting in a 7% organic growth in end user service revenue in the Baltics. We can also see that the top line growth is able to filter through to underlying EBITDA, supported by better equipment margins and cost control, resulting in a 12% growth despite a pandemic impact of around SEK 20,000,000 in the quarter. Continued strong EBITDA growth and relatively low CapEx spend as we are in between investment cycles led to a 83% cash conversion. So with that, I hand it over to Mikael. Thank you, Kjell, and good morning, everyone. Please turn to Page 11. As in previous quarters, we have on this slide extracted revenue from international roaming to show the underlying trend in mobile end user service revenue without effect from the pandemic. Just to remind, international roaming represents roughly SEK 400,000,000 in end user service revenue and SEK 300,000,000 in underlying EBITDA of the lease for the group on an annual basis. In Q3, which is usually the strongest quarter for international roaming, outbound roaming revenue were 71% lower than last year, equal to a drop of SEK 76,000,000 in end user service revenue for the group. In Sweden Consumer, we saw 6% growth in postpaid mobile, excluding effect from roaming, driven by pricing as well as volume intake. Growth in fixed broadband was equally strong at 6%, which did, however, not fully compensate for COVID-nineteen headwinds in digital TV and prepaid mobile as well as continued decline in legacy fixed services, while consumer end user service revenue, excluding impact from roaming, fell by 1% in the quarter. Within B2B, end user service revenue declined by 6%, explained by price pressure in the market and continued decline in fixed legacy services. Baltics continued to show exceptionally strong growth at 11%, excluding roaming impact, driven by higher ASPU, while our small legacy business in Germany continued to decline in the quarter. For the group, this led to an organic decline of SEK 0.7 percent or SEK 58,000,000 in end user service revenue, excluding impact from roaming. Please turn to Slide 12. Percent organically in the quarter as continued strong EBITDA growth in the Baltics, together with positive effects from cost savings programs, offset top line decline in Sweden B2B and SEK 100,000,000 negative impact from the pandemic. Items affecting comparability included a provisional release of SEK 109,000,000 related to a legal dispute in Sweden, where we have now reached an agreement. This was offset by restructuring cost of SEK 55,000,000 in relation to the ongoing business transformation program. Higher underlying EBITDA, in combination with contribution from our equity interest in the Netherlands and tailwind from items affecting comparability, led to 15% increase in operating profit. Please turn to Slide 13, cash flow. CapEx paid increased to SEK 649,000,000 this quarter due to higher network investments compared to last year and timing of customer equipment CapEx. Changes in working capital reflect temporarily low inventory levels in Sweden and the positive effect from external handset financing in Lithuania, which was partly offset by the earlier mentioned provision release. Taxes paid increased due to timing between quarters. This means that over the last 12 months, our continuing operations has generated SEK 5,300,000,000 in equity free cash flow, equal to SEK 7.7 per share. Please move on to Slide 14. The strong cash generation of SEK 1,700,000,000 in equity cash equity free cash flow for the quarter resulted in us closing the 3rd quarter with leverage at 2.2, below our target range of 2.5 to 3 times. Adjusted for the extra dividend and the 2nd tranche of this year's ordinary dividend, which were both paid in beginning of October, leverage would have been in the middle of the target range at 2.7% end of September. Let us move to Slide 15 and a short update of our business transformation program, where we aim at saving at least SEK 1,000,000,000 in OpEx over 3 years, with the majority of savings being back end loaded. The program is well on track. And at the end of September, we had reached annualized run rate savings of SEK 150,000,000 with savings of SEK 35,000,000 filtering through in the P and L for the Q3. Main part of savings added in the Q3 comes from efficiency improvements within the B2B, support and tech organizations. Please turn to Slide 16, financial guidance. Guidance is unchanged since last quarter but still worth commenting on. Starting with underlying EBITDA of the lease. Our ambition for this year has been to defend 2019 level given the negative effect the pandemic has on our top line and profits. Year to date, underlying EBITDA of the lease has grown 2%. And with 1 quarter to go in 2020, we can therefore conclude that if we do not end up being exactly flat for the full year, the deviation will be on the positive side. But one should also bear in mind that we meet tough comps in Q4 as we grew 10% last year in Q4 and now face headwinds from the pandemic. When it comes to CapEx guidance for 2020 and beyond, today's announcement by the Swedish regulator will, as explained by Kjell, have no material impact on the overall CapEx envelope for the rollout of 5 gs. As we had already included the effect of modernizing and replacing 4 gs equipment in our midterm guidance. Today's decision will, however, affect timing of CapEx. Short term, over the coming quarters, the 5 gs rollout and network modernization will be slightly further delayed since we will now have to adapt our plans to the new rules. This means we now expect to end 2020 in the lower end of the guided range, SEK 2,500,000,000 to SEK 3,000,000,000, and we'll also start 2021 at a run rate around these levels. Midterm, that will say 20222023, we expect CapEx to be slightly higher than previously planned as the rollout of 5 gs will now have to be done during a shorter time period as we start later than we have planned and we'll also need to finalize the replacing of existing run equipment well in advance of the deadline end of 2024 as set by the regulator. After today's decision, network vendors will now be selected and changed timings timing will be reflected in our updated CapEx guidance for 2021 and the midterm. This updated guidance will be published in connection to the full year 2020 report in beginning of February. And with that, I would like to hand back to you, Jan. Thank you, Mikael. And please turn to Slide 18 for our key priorities going forward. At my first internal company appearance, I was very clear that I believe in evolution, not revolution. Tele2 has a solid position and plan to build on which I intend to continue. In Sweden B2C, we'll continue to drive FMC and family offerings to try to win the Swedish households, while continuing the execution of our more for more strategy as we did for mobile postpaid and fixed broadband this year. Despite the fact that society and businesses are increasingly getting more dependent on our services in the B2B segment, it is unfortunately characterized by complex solutions with insufficient profitability. This area will be one of my main focus areas going forward And altering this will take some time. But by optimizing our own portfolio for profitability and being advocate for a different customer relationship going forward, we will improve our capacity to cope with the current competitive market conditions. In the Baltics, we will build on the current momentum, which we see in all three countries by executing our mobile centric convergence strategy, while evaluating FMC opportunities and execute when and if the timing is correct. I'd like to emphasize FMC opportunities can stem from the regulatory side or from minor acquisitions. On the network side, we will continue to upgrade our mobile and fixed networks, both in Sweden and the Baltics, in order to maintain excellent services while we upgrade to the next generation technology. Simultaneously, we will explore opportunities to improve efficiency and set up in our infrastructure portfolio. And within this area, it could be possible for us to think of more sharing with other players in the industry and the more capital efficient approaches to the service generation. And again, we emphasize for now probably for the 3rd time, like Mikael did, that the PTS decision today will not materially change our 5 gs plans in terms of CapEx, but will have some timing differences. This is an outcome that we are fully prepared for and that we have planned for. Lastly, we will continue to execute on the Business Transformation Program, which was announced in the beginning of 2020 to deliver at least SEK 1,000,000,000 in cost reduction. All of this will lead us to lead to us consistently growing cash flow, which we can distribute to our shareholders. We can and will distribute to our shareholders. I'm very excited to be here as CEO of Tele2, and I will certainly enjoy leading the company forward. And with that, I hand over to the operator for Q and A. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. The first question today is from the line of Andrew Lee from Goldman Sachs. Please go ahead. Yes. Good morning and welcome, Kjell. Congratulations on your new role. Given I've just got one question and you're pretty clear on the CapEx side of things. I'm not going to ask on that. So I was just going to ask instead on the service revenue growth trends that you delivered in Q3 in Sweden. So they were down 2.4% ex roaming. How confident does that leave you that you can grow Swedish service revenues in 2021? And if you could give us any color on that bridge to growth, that would be really helpful. And maybe as a kind of cheeky, part B to the question, I wonder if you could just clear up a comment on Slide 16, where you said that Tele2 will issue an updated guidance for 2021 and the midterm at Q4. Does that mean that you're not confident in the midterm guidance that you've retained today? Thank you. All right. Let's try to build that bridge there. Thank you very much for welcoming me on board. Now when it comes to revenue trends, we also make the point here that towards the end of the quarter, we see an uptick again. So we had a big impact in the beginning of the quarter and then improvement towards the end of the quarter as the situation became a bit more normal. We see prepaid revenues starting to come back. We see some premium TV revenue starting to come back. So of course, it is our expectation, unless COVID takes a really turn for the worse, which we don't see right now, that this trend will continue to improve into the Q4 and the Q1 of next year in terms of comparisons to early Q3. So that will be the bridge towards getting back to some growth. We will have to deliver also on our More for More strategy as a company and of course as an industry. So this is something that we will be speaking about every time we speak to you and others. This industry really needs to embark on that train. And with that in mind, we are confident about this year. And like Mikael said, we think there is some opportunity for coming in slightly on the upside if things go well in the Q4. When it comes to the more longer term guidance, we're planning to come back to that potentially through a Capital Markets Day sometime when we announced the Q4 or maybe shortly after that where we will update it. But there is nothing that we see now that means that we are hesitant about the guidance. The fact that we don't talk about the midterm means that it stands. If we had any deviation that was negative, we would have talked about it. So we think it's fair to speak about that once a year, and we will do that again to update for a longer period of time when we meet potentially February or March for that discussion. Thanks. So very clear. Can I just clarify the comment you're saying on the uptick at the end of the quarter and then improvement into Q4 and Q1? Does that mean that you do think Swedish revenues can grow on a kind of 3 over the next 3 quarters or so? Well, we need to first keep the trends on Postpaid is doing pretty well. We need to continue the stabilization and uptick in prepaid and in premium TV. But of course, we then also need to stabilize B2B. That's why I'm very openly talking about that this is a challenge for the industry and for ourselves. And you can expect that we will be taking actions in B2B over the next couple of months in terms of the analysis of profitability and of complexity and how we look at the market. So this is an area of relatively short term priority for us. So we need to get rid of the drag from this part of the business and capitalize on the good sales and revenue performance that we see in B2C. Thank you. The next question is from the line of Roman Arbuzov from JPMorgan. Please go ahead. Good morning and thank you very much for taking my questions and congratulations from my side as well Kjell. I just wanted to follow-up on the B2B, please. So from the sounds of it, the overall B2B markets in Sweden needs a more rational environment and you've talked about launching a new tariff portfolio. Is it fair to assume in this context that you'll be more focused on EBITDA and profitability in that segment to infuse some rationality into the market? And therefore, we may expect continued weakness on the top line side of things. Is that a fair assessment or is actually top line the priority for you? Thank you. Yes. I think this industry B2B has tend to become very sales driven and very revenue driven and it's not unique to Sweden. In some countries, you take contracts with low profitability and then you do after sales that give you a decent return here. That's very hard to do in the public sector. So we need to be a bit granular in what tools we have in our toolbox. We need to make sure that we are good enough on the aftersales where that is realistic opportunity. We've come a long way in doing a good profitability analysis with the team here. So we will apply that in terms of choosing what battles to take and not to take. But what I can signal is that we will not be running after marginal contracts just for generating revenues. And I would hope that this signal is clearly read and understood at with our competition also out there because it really makes no sense to turn B2B into a sales channel, which generates limited profitability. So there are still good contracts out there. There's still good business to be had. We just need to be a little bit more accurate in terms of our approach to it. And can I just ask a very quick clarification? In terms of the TV declines and the premium pressure that you see there, could you perhaps help us understand what is the underlying TV performance if you exclude the temporary factors? Yes. I'll hand it over to Simon. Yes, Simon and Samuel here, I can take the one. I think underlying, we don't see any major differences in the performance of TV. We've had a headwind accelerated headwind due to the pandemic and it's on premium. It's made I mean, it's because sports were gone. We lost some premium subscriptions due to that. And we lost revenue, of course, because we couldn't get paid for those subscription at all during this period. Now at the latter part of the quarter, we're starting to charge customers again, and we're also seeing uptick in premium sales. So underlying, I would say, it's more or less the same as it has been. But now at the end of the quarter, we're also seeing a recovery of the premium part of the business. But I think also the forecast And is it possible just to roughly quantify, Samuel? Just what's the drag in terms of percentage points? We're not going to qualify exactly in terms of percentage points, but I think it's fairly easy to look at the business before the pandemic and during the pandemic. And there, you have a pretty good comparison. But I think also important to remember is that even if we have and clearly have headwinds on the premium parts, it's a very low contribution in terms of gross margin. So and I think that's one of the reasons profitability is that our underlying TV in terms of gross profit is not as hard as revenues. Thank you so much. I really appreciate it. Thank you. The next question is from the line of Maurice Patrick from Barclays. It's Maurice from Barclays. Maybe as a chance to hear from you and your recently started your sort of thoughts in terms of the ability for price increases inside Tele2 for the years ahead. I mean, the previous year, Anders, talked openly about the idea of wanting to move towards inflationary pricing on the converged base. I Do you still think there's room for price increases over time? Do you think the market can take it? Do you think consumers can take it? Is it fair to kind of assume the inflationary start price increases for the years ahead? Thank you. I have no doubt that consumers can take price increases. The only limitation to executing on reasonable more for more strategy is the industry itself. Well, for sure. Without being to push back too much, you're one of many key participants in that. And you have a choice to sort of play in that or to heavily to discount conversions to try and take share. Do you think you can drive a market to support that? Yes. I think within the 2 within the Tele2 and Comic brands that we will execute on them more for more. I would be very surprised if the management of Telia is not thinking about the same lines. But that's just based on what I think would be rational for the market leader to do. And if we are both executing on that kind of strategy, the market will follow. And even if one of the players decides not to follow, it will still be strong enough. And your point around losing on the previous question about losing a few high end customers on the context, I presume that's not to do with prices such as more just to do with pandemic, where we are and churn? I didn't quote did you catch that, Sandeep? Yes. Yes, that was purely due to the pandemic. Great. Thanks so much, Aditi. Yes, it's hard to I mean, it's very hard to charge people for when they get no sports. So you get no that's all then fair enough, yes. Now that's coming back. Thank you. Thank you. The next question is from the line of Nick Lyall from Societe Generale. Please go ahead. Yes, good morning everybody and best of luck to Sheldon, the new physician. On the a couple of questions on infrastructure please, if that's okay. You talked about improving reliability experience but also financial value. So can you just talk a little bit on what you mean on that infrastructure point? Is it just more sharing, as you said? Or is it the potential for sale and leaseback or anything a bit more extensive? And then secondly, on the digital switch off, could you just give us a couple of stats on how much more capacity that gives you? And also, if possible, whether that's more scope for price increases if you can push through bigger speeds in Sweden, please? Thank you. Yes. Well, the first part of your question to reliability is basically the fundamentals of running the business. I think we still can go a further step in terms of having a good inventory, understanding of where we are in the generation of and the production of our capacities. So that's underway. It has been underway quite some time. And I'm kind of confident that that's going to land well. When it comes to the part of sharing, we all see the trends around us. We see what the Danes did, even though I don't think that model necessarily would work for Sweden because Denmark has very specific characteristics. But we see the value chain breaking up and former competitors working more together in with passive sharing and the opportunity of sharing infrastructure items. We do it already in the net for mobility, which is a success and makes the ticket for us smaller in terms of going towards 5 gs now. There is an opportunity to do more in terms of sharing and separating out some of our infrastructure assets. We're looking into that. I hope that we can speak more about that when we get together for the Q4 at the Capital Markets Day. But we have a very pragmatic approach to what we need to own 100% ourselves and what we can share and where we can have partners. So that's something we will be looking into. With a digital switch, take it over to Samu. Yes. So hi, Nick. The analog switch off, which means that we now only have a fully digital distribution of TV, means that in terms of short term customer experience, it's not a big difference. It's more a different for us because instead of what we do today is so called node splits. We push our network equipment further and further out in the network, more granular. With this extra capacity and extra frequency as we get, we don't have to do those node splits. So it's an easier way for us to do capacity upgrades, which is, of course, great for the consumer, but also good for us in a CapEx perspective. The next step of this is also that it will make possible for us to do remote PHY, which we are now starting to do, which is fiberizing our fiber coax network even more. And this will generate even higher speeds to more customers, but also ability for us to deliver more symmetrical speeds, which we know is a part of our pricing and more for more going forward. But this is going to be done region by region, customer by customer, and it's a long term project, we're starting now on the back of this digital switch. That's great. Thank you. Thank you. The next question is from the line of Terence Tsu from Morgan Stanley. Please go ahead. Yes. Thank you. Good morning, everyone. I had a question around the potential for Pan Nordic consolidation. Michelle, just from your experiences working at VEON and at TENOL in the past and now at TETI2, just wondering, do you think there could be a greater appetite towards Pan Nordic consolidation, both in market consolidation and maybe combining telcos and TV assets in the future? Thank you. Well, looking at U. S. With 3 or 4 players and then China with a few players and huge customer bases out there. Of course, Europe looks a bit like well, a scattered picture. And I think there is some room for consolidation in industry in Europe for sure. You referred to my previous experience. We saw a great example of a merger in Italy where 2 companies that had challenges became 1 strong unit. But we also saw in the Telenor days the Danish attempt at the merger. So let's face it, there is room for industry consolidation. There is a big hesitancy in Brussels towards making that happen. So I think the jury is still out how much energy people want to put into processes that may or may not materialize. Okay. Thank you, Charles. Thank you. The next question is from the line of Peter Nielsen from ABG. Please go ahead. Thank you very much and welcome to Tito Tusha. Thank you. Mr. You also want to hold back until Q4? If so, I fully understand. And then just a second question related to TV, please. Again, your comments on competition in TV and also being sort of swamped by international play services. Does any of this affect your own plans or thoughts or strategy for the Com Hem Play and Com Hem Play Plus? Or how do you see that going forward in this picture you're painting here? Thank you very much. Thank you, Peter. Well, I would say that when it comes to the infrastructure, I thought we are at an early stage here. So you took one of my words there. Don't analyze my words too strongly at this stage. What I'm saying is that we will have a quite pragmatic view on how we can generate more value, more shareholder value from making adjustments to how we produce our services. And we're open for partnerships, open for other solutions. How that's going to turn out and when will also depend on dialogues with 3rd parties. So after 1 month on the job, I'm saying we're keen to explore it, but it's too early to say how and when that takes 2 to tango and it needs a bit of more work internally. But as a directional statement, we are interested. You can take it clearly from me on that one. Now when it comes to the TV service, clearly, a completely new consumer pattern established over the last few years. And we are dealing with our role as an aggregator and an infrastructure owner is, of course, a very strong position to build on. Now how are we going to work with the streaming side of it? Should it be partnerships? How much of this should we do ourselves? Is streaming an integrated part of our user interface. These are also strategic issues that I would like to discuss with the team and hopefully discuss more with you when we come back after New Year. But clearly, the trends are showing that the whole stack is breaking up a bit. And we while we have a strong aggregator and infrastructure position, we may have to adjust the approach a bit now for the medium term. Fair enough. Thank you and best of luck. Thank you. Thank you. The next question is from the line of Steve Malcolm from Redburn. Please go ahead. Yes. Good morning and Just a couple of questions on CapEx quickly. Could you just elaborate on the message you gave on the timing of CapEx? I'm a little confused as to why you think the short term CapEx will be lower. Is that because you're having to work hard to rip out the old 4 gs kit given the new PTS rules? I guess, the timing of the auction hasn't changed. Your ability to roll off 5 gs shouldn't have changed particularly. So can you just elaborate a little bit on the message you gave on timing? That would be great. And also just on Baltic CapEx, I mean, you're essentially spending nothing in Lithuania, like a couple of €1,000,000 per quarter, how long is that sustainable, do you think, given the traffic growth you're seeing, I guess, by sort of moving customers onto higher usage tiers? At what point do we see CapEx maybe catching up in those markets from the current incredibly low levels? Thank you. Good questions. I mean, the first one on the timing is relatively easy to answer. We have the auction coming up now in November. And you saw the announcement from PTS. We have planned for that. So there's nothing really surprising in it. But it could have, of course, gone the other way. When we have fewer players to deal with, it will also mean that the ramp up period will come a bit later than we otherwise could. You know that we have some of our network we have Huawei in our networks and they're doing a great job. But we will then have to plan with the other vendors. And that is absolutely doable, and we have had a good dialogue with them. But the ramp up will be a bit later than it would have been if, for example, we have gone with Huawei. So that's what Mikael is talking about when he says we will have lower CapEx prior to the 5 gs rollout. So early part of 2021, we will have lower CapEx and then it will start picking up as soon as we get more speed on 5 gs. Can I just ask, are you at all concerned that place your disadvantages to your competitors? I must admit, I don't know how much Huawei, Chile and Korea have got in their networks at the moment. But are you worried that this extra administrative burden will leave you behind them in terms of 5 gs rollout? No, not really. Let's face it. I mean, 5 gs as a consumer proposition in 2021 is not a killer application as such. It's nice for branding and marketing and talking to the customer base. But most of the new exciting products and ideas that 5 gs will bring to the market will come over time. So we still have time to get out there and be in front of the customer base. Remember, we were the first one to launch 5 gs in Sweden. So that is something that every Swede knows or should know. And we will keep that message out there. We do have 5 gs on the coverage bands, and we will build capacity bands in due course. So at this point, it is not something that we are overly concerned about. When we talk about the Baltics, yes, you are right in that the CapEx levels are relatively low. We did see very good growth in those markets. We may adjust the CapEx levels slightly up in the Baltics. It will still be not very material in the Tele2 context, but we will probably spend a bit more. That's why also we are emphasizing that we will be looking into how we can do FMC offerings to offload our networks. We think there is potential for regulatory improvements. A dialogue will go on with the authorities there so that we can offload some of the traffic and make use of these solutions. And that will be a part of dealing with traffic growth in the Baltics. Do you think you'll build any more fixed infrastructure yourself in the Baltics? Or will it be more on a wholesale basis or partnership basis you're looking at? We think it will be natural first to focus on the opportunities for wholesale and for regulatory changes in the market. We do have a very strange situation where you can sometimes come in a situation where the wholesale price offered to us is higher than the retail price offered in the market and that is not consistent with EU regulation for competition. So there is potential for dialogue around some of these issues. Okay. That's very helpful. Thank you. Thank you. The next question is from the line of Paul Sidney from Credit Suisse. Please go ahead. Yeah. Thank you very much. Good morning, everyone. I just had a clarification question on your CapEx comments just to make sure I've got it right. Is the message now 2020 the lower end of the 2.5% to 3% 2021% at a similar level to 2020? And then 2022 and 2023 likely to be above the top of the 2.8 to 3.3 range? So I just want to make sure I've got it right. Thank you. So to make sure that you get absolutely correct answer, I'll hand it over to Mikael. I will make a try at it then. You are absolutely right about 2020. As we see it today and after today's decision by the regulator, we see that we will end up 2020 in the lower end of the range, SEK 2,500,000,000 to SEK 3,000,000,000. For the 2021 and the midterm, the midterm guidance we have issued is still valid, but the timing might be effective between individual years, which means that 2021 will be slightly lower than we had thought before, today's decision. 20222023 will be slightly higher, but the guidance is still valid. And if we were to update guidance or change guidance in beginning of February or in February, March, the difference will not be huge. It will not be that material. And we should emphasize again that the total we're just talking about timing between the years. The total CapEx envelope is not affected in any material way. Okay. And just to be absolutely clear, so 2021, 2022 and 2023 within that 2.8%, 3 point 3% range? As we see today, but now we are making the detailed plans. On average. And we then talk about an average. Thank you. Thank you. The next question is from the line of Ulrik Rathe from Jefferies. Please go ahead. Thanks. Just wanted to ask first on that CapEx question, another angle on this. I mean, obviously, if a ban removes a competitor, the remaining contenders have an incentive and presumably the ability to raise prices. Have you locked in prices prior to the ban? Or why is this simply not a question of pricing? Is the competition between the existing fares sufficient such that the removal of 2 suppliers simply doesn't matter on prices? And then if I may just a clarification, the COVID impact that you had guided before, you're now guiding considerably lower in the second half of the year, but you're reiterating the full year guidance. I mean, obviously, the full year guidance does have a bit of room, right? You're saying roughly flat. Does this mean the roughly flat now has a plus sign in front of it? Or are there some unforeseen headwinds that eat into the upside that you're getting from a now lower COVID impact in the second half? Thank you. So on the vendors, like I said earlier, we have, of course, planned for different outcomes since this has been a speculation and a discussion for quite some time. We have had a dialogue with all the relevant vendors. And when we say that we don't expect any material change to the overall CapEx envelope, there is a reason why we say that. And I'm not going to speculate, of course. That's always dangerous. But it could be that some of the European vendors will sell less in China going forward if the Chinese are selling less in Europe going forward. So there could be a redistribution of production capacities and deliverables. But that's for someone else to answer. But we are fairly we are quite confident when it comes to the CapEx envelope as such. Yes. And then you want us to basically say that we're going to come in a little bit better than the guidance. I think we've said that, first of all, we are confident in delivering what we have guided. And of course, depending a bit on how the second wave or the echo or whatever people call it plays out. We do think there is an opportunity to come in slightly on the upside, but we prefer to be a little bit careful given there are so many external factors these days. Great. Thank you very much. Thank you. The next question is from the line of Stefan Gauffin from DNB. Please go ahead. Yes, hello. I had planned to look more into CapEx, but I think that's pretty answered right now. So a little bit more detailed question. I think your mobile subscriber intake was really solid. And just looking at Sweden, how much of the subscriber intake this quarter is related to Penny? And then just a question on OTT rights. Telenor recently signed an OTT deal with Telia TV 4. Is that something that you believe is an opportunity for you as well? Thank you. Do you want to go on the customer? Yes. I can start with the customer number. Yes. So of course, since we now launched PEME wider, it has, of course, ticked up when it comes to customer intake, and we're seeing very good awareness and consideration numbers. But on the full net intake, it's not a material impact. The net intake is driven by the levers we've put in place before pending. And on the OTT rights, yes, we do notice that one of our competitors have bought some limited OTT rights. This is a building block that may or may not fit into our models. So we are looking at what the structure should be. Nothing to say at this point. Okay. Thank you. Thank you. The next question is from the line of Adam Fox Rumley from HSBC. I want to come back to business, please. The ARPU that you present is on a pretty precarious downward trend. And I was wondering if there's anything you can do to find some support there. I mean, should we even think about a floor to pricing as something kind of conceptually there? Or I'd be interested to hear your comments. And then just separately, it's pretty clear from the release and also your earlier comment that you're thinking about some small M and A in the Baltics. Are you able to remind us of your framework? How do you think about setting deals in that context, please? First of all, I am not quite we 100% understood your conclusion and question on the first part. So but let's revert to that. And don't over interpret what I say about M and A in the Baltics. I mean, if there would be opportunities, they would probably be very small. We don't have anything that we plan to communicate anytime soon. So we're just saying that, that could be one option. I personally believe that the best option would be to get a fair regulatory framework and share the infrastructure that's already in place that's capital efficient for us and it's actually capital efficient for anyone involved. So that's our main track. And of course, where we are now, the mobile centric approach works pretty well. So I wouldn't over interpret that. But we're struggling a little bit with your first question on the ARPU side. I mean, I just mean to say that it's the ARPU trajectory is very negative. Obviously, pricing is under pressure there. But is there anything you can do to provide some kind of support in the market? Or is it just a question of having to compete and being more selective for the deals as the one they come up? So if we are now talking about B2B, then I understand your conclusion. And of course, the industry in Sweden now is seems to be very much deal focused and revenue focused. And profitability is not the first thing that people think about. And I would again be surprised, my previous comment on the More for More strategy, if the current management of the incumbents wouldn't be thinking along the lines that we are here to make a business. We're not here to just generate the relatively empty revenues. So when we come through our analysis, and that's not far ahead, we will try to apply that to the offerings that we make out in the market. And we will be willing to let bad deals go if need be. I'm pretty sure that you guys wouldn't want us to chase the top line at the expense of our revenue generation and margins. So that would be a starting point for it and see where the market then how it responds. But when it comes to the B2C part, I am confident that there is a a the perceived benefits that we offer to the market is definitely higher than what people are paying. So at the end of the day, with a stepwise increase as we invest a lot of money into upgrading our networks and going towards 5 gs, more capacity coverage. We should also be gradually increasing prices. I don't think that would be an issue with the consumer base. It is more a question of the industry getting out of this quarter by quarter thinking. Great. Thanks very much. Thank you. The next question is from the line of Johanna Alckqvist from SEB. Please go ahead. Yes, thank you. Just a high level question for you Kjell and congratulations again to your new job. But looking at the sort of asset portfolio of Tele2, it's quite a unique company with 80% being Sweden and a bit of Baltics and then you have the Netherlands and a bit of Germany on top. I'm just wondering how you look upon this map. I know all of you have made comments around Netherlands being non core. But where do you see Tele2 in a few years? Do you see are there any real synergies between the Baltics and Sweden, for instance? Or will you put the majority of your time on the Swedish business? So just big picture, how you see the map of Tele2 a few years from now? Well, of course, I see Sweden and the Baltics as one group. And we do need to spend a lot of time on our Swedish operations. But Petras and the guys in the Baltics are doing a good job. We are, of course, actively discussing their future with them. So we will spend the time on the businesses where we are in operation control. We're very happy with what we see in the Netherlands, but we're clearly not in operational control there. So that takes less attention from our side. And I do think that there are synergies between Sweden and the Baltics, in particular, of course, in areas like procurement, which is the obvious one. And also, of course, in terms of exchanges of competence within go to market. But the strongest synergies are clearly in the procurement, vendor management and these kinds of areas. And then may I just follow-up? I know we discussed consolidation in previous questions. But I'm just curious because when you mentioned that you might open up for other players in your network, I'm just wondering, would you see a scenario where, for instance, 3 is obviously looking to team up with someone. Would you consider letting them on to the network with Telenor? A very direct question. I don't know if you can answer it. Thank you. Well, as a Norwegian, I'm used to direct questions. Our primary discussion partner on the network infrastructure is, of course, our partner in Net for Mobility. So we start the discussion there. And then we see how far we can take this. If there are constellations where further sharing makes sense to us, then we would look into that. But I wouldn't overplay that, especially in the direction that you're taking in So our primary discussion is, of course, to do as much as we can with our current partners since we have worked together for years and see what we can further improve over there. Great. Thank you. Thank you. The next question is from the line of Lena Osterberg from Carnegie. Please go ahead. Yes. Welcome, Kjell. I'll then continue with Johanna's question. And just to clarify that a little bit more, Say that you would extend your network sharing then within network for mobility, how much more is there that you could share apart from what you're sharing already? Could you give some more detail on how you've shared the network so far? And then also the other question I had, if you could maybe provide some detail on how your churn has improved now that you've been working for quite some time with the customer overlap between Com Hem and Tele2 and loyalty offers, if you are ready now to share some trends that you see there? Thank you. Yes. I'll do the first one and then Samir will take the other one. I don't what I wanted to do with you now today was to signal a direction that we are looking at the potential within the infrastructure area, whether that is following the industry trend or leading the industry trend of separating out or it is to share more. It's too early for me to get into a detailed discussion about interfaces and these things at this stage. So take it more as a directional statement for now. And then Yes. So on the FMC base, we clearly as we have talked about before, we clearly see a positive impact on churn. But I think it's worth to keep in mind that the FMC base is still a minority of our total base of customers. It will still take some time before we see material impact on the overall business. But on the FMC basis such, we see a clear improvement on churn. And you're not willing to share what the clear improvement is? Is it in line with the synergies? It's along the benchmarks you have seen within other in Europe that has gone before us. We are very close to those numbers. Okay. Thank you. Thank you. And I'll now hand back to Kjell for any closing remarks. All right. That took us to the end. Thank you to all of you for who said welcome to me. I really appreciate that. I'm happy to be at Tele2. I must say it has been an interesting journey to come in as CEO of a company in the middle of COVID, where people are working from home. But that speaks also to the resilience of the management team and the employees of Tele2 that we are executing in a way of work that we haven't had before. Obviously, we have had freedom of working from home partly before, but this takes it to a brand new level. I also think that what we see in our surroundings now is a change communicated today that makes maybe have spooked up some of you and the markets. We have been planning for this for quite some time. We are very confident in our ability to deal with the 5 gs challenge coming up. We think that from a timing perspective, we're still okay. So I'm kind of happy with the first set of numbers and the strategy that we are building on. Now it's time for going at more granular level and see where we can improve our game. But thank you for taking the time. Good to have you all on the call.