Earnings Call: Q3 2019

Oct 17, 2019

Good morning, everyone, and welcome to the 3rd quarter presentation of Telia Company's results. We do it the usual way. We have our President and CEO, Christian Lueger, coming up first to talk about the quarter and then followed by Douglas Luebbe, our CFO. For the Q and A session, I would really ask you to limit yourself to one question and one follow-up so that we can have everyone being having the time to ask a question. If there are time in the end, you have you're more than welcome to have more follow ups. And we will end 10 sharp because I guess you will also like to listen into other conference calls today. With that, Christian, welcome. Thank you very much. Good morning, everyone. Welcome to Thalia. It's the Q3. It's my Q1 to present with as a CEO and President acting for this company. But as you know, I've been here for many years as the CFO. So I should know my stuff. I'm just going to try to fix this a little bit. So Q1, it is as expected. We do what we have told you we were going to do. We are improving our results. It is positive 1% in this quarter. The first half was going to be worse than the second half. And we are improving and that comes primarily from the cost agenda where we are down 4% on the OpEx side. And the quarter is then a picture of how the second half should look like. We should be an improvement compared to the first half. Cash flow already at SEK11.6 billion. We have guided on SEK12 billion to SEK12.5 billion for the year. Douglas will talk a little bit more about that. We have a little bit good momentum in working capital that will probably spill also to quarter 4 as a negative. But overall, we are on good track and the 12% to 12.5 percent is still what we guide on. The share buyback program, I will start to talk about that before we go into the operational because that is also a big thing, of course, today to understand why have we decided not to propose to the AGM to go for the last leg of the SEK 15,000,000,000 program that we set in place 2018. We have today returned SEK 10,000,000,000 or will have we have committed to return SEK 10,000,000,000 or 6% to our shareholders through the buyback program. And there is one part of that ambition, SEK 5,000,000,000 left for 2020. There is some different reasons for this. One is the overall leverage and where we also have a strong credit rating ambition. And then the economic outlook is uncertain. And then you can say, well, the economic outlook, should that affect an operator that much? Well, not maybe so much on the business as it could do on the financial sector. And we are dependent on borrowing money and we want to keep flexibility in how we fund the company and how we fund the shareholders and also how we invest have a flexibility to invest going forward. And therefore, we have decided it's better to stop the program where we are right now after 6% already given back. And that has nothing to do with the dividend policy or our dividend ambition, which is very important part of both the Board and the company's program. And we have today over 5% direct return to our shareholders on the dividend. That's the buyback program. And then if we look then at the EBITDA recovery, as I said, the EBITDA would be cost agenda, but it's also a somewhat better momentum in the revenue side. It's difficult to see on this picture. It looks like flat between quarter 2 and quarter 3. But in quarter 2, we already got some indications, but also proof points that the commercial agenda, both in the B2B side and the B2C side, is giving traction. It's a little bit slower on the B2C side than we can see on the B2B side, but it's coming effectively into the company as we run our commercial agenda forward. On the B2B side, we can see primarily on the large and public segment that we do good. In Norway, the last two quarters have been very good. And in Sweden, we're also doing good in that area, not least driven by our ambitions around 5 gs and IoT. If we look at the execution going forward, we have a strategy that we have put in place in this company that remains. There are no changes to that. We have execution ongoing. And where I will focus in this job now is to accelerate the focus and execution on the commercial agenda in the B2C area. It is a very important area where we need to drive loyalty and stickiness and that we can do by better cross sell, up sell and deep sell and other activities. We have those agendas ongoing, but it will be part of my focus to review and see if we can do more and faster. On the B2B side, I think we have a good momentum and we just need to keep on having a good grip of how we do sell in a quite complicated market that is very different between the segments and has a lot of new elements that can be very good for us going forward. The efficiency program is running well. We are getting out SEK 200,000,000 from our new operating model this year and we will see that going into next year and that continues for many years. But the big effect comes now where countries off the year end. And that is primarily the IT and product management areas that go together. So we secure that. We develop one thing once and we use the same IT competence and architecture and whatever we do cross market. Just to illustrate a little bit around the pricing and the changes and the offerings we have done in Sweden, it is not that visible at this time if the effects have come through from the pricing and offering changes we have done in Sweden on the mobile side. And this is to illustrate how it looks like in reality. So you can see that we if you look at the right hand side of this picture, you see the base of customers we have in mobile, both mobile broadband and mobile handset subscriptions. And the blue part is what has been affected already from the price change that we have done and the offering change we have done. So it's a quite small part of our total base that we have a change from and still that has given us a 3% increase on ARPU. And then the next part, the pink part is coming through as customer now transfer within the same packaging because they're locked in for subscription reasons of others, they will slowly, gradually also change in to the new offering models that we have. And then we have a big base still to work with going forward, and that is something we'll come back to. So this just illustrates that this small part of the customer base, the changes in that has given a 3% uplift on the ARPU in this period. Then we have some negatives from IDD and top ups have been less. There's some signals also now I think of the bucket inflation in the environment and that is something we try to avoid to not have less top ups and possibility to upgrade in the market on the offerings. So this is something I think is positive and we have more opportunity to take out. And that is also supported, of course, that we are awarded the best in quality in Sweden on Hale BoP in the consumer segment and on the B2B side. So this is based on coverage speed and reliability and makes me proud and also helps us in our journey going forward to deliver more value for a good value for all of us going forward. The B2B trend has improved and I have been here since it was minus 10% on a yearly basis and now we are getting closer to minus 2%. And we have said it's going to be a slow journey and it's both the legacy coming out, it's been a price pressure in several markets and we are starting to find how to work with the glue of IoT growing 20%. And the 20% per se is of course important, but the most important part is that it becomes an important element in when we discuss with companies like we have done now Boliden, RBBS, Torenzo and Volvo Construction that has we have done cooperations with to use 5 gs, IoT and other elements to be more relevant in our offering. We had an acquisition of a company called Foneer in Norway, a B2B company. We have now gone through the transition and the integration of that and turning the trend there as well with our own new customer base also very positive on the large and public segment. And the same in Finland. Meanwhile, in Finland, we have some good progress. We also have the toughest pressure from the legacy part on the DTD at this point. As said, OpEx is coming down 4%. It will continue to go down in the 4th quarter. And for 2020, we look at taking out further synergy realization in Norway. We have the new operating model that will end this year with a run rate of €200,000,000 cost base coming down. We will have some easier comparisons and we have the other efficiencies that we drive. So this is something extremely important and we have guided on to be around 2% per year in net reduction on the OpEx side, which means with average inflation in our region around 4% gross savings, which is a tough target, but not unrealistic and actually also important and necessary. So that's how it's built up. 5 gs, I already mentioned some of these companies and what we're doing. You can see here that we decided to upgrade our 5 gs or our actually network in Norway with rolling out 5 gs. We had a position where we needed to upgrade our network within the next 4 years. We decided then to make that to do to do that. But in the same time, it is important part of our fixed wireless strategy and is also important part of being having a good coverage and a good network in Norway with the market share we have. In Finland, we also have launched gs services and an offering in devices. It's a first step going into that. In Sweden, we are mainly on the B2B side, working with customer cases. And here we are waiting for the spectrum auction coming in quarter 1. Hopefully, then we can close that and see what base we have for building going forward and we can take a decision on how we want to do it there. Finally, our outlook for the year, as I said, is unchanged, SEK 12,000,000,000 to SEK 12,500,000,000. We have a strong quarter 3 cash flow that gives us the basis also for this. What we do declare is that we have some uncertainty going into 2020. We don't guide. We will come back and guide in quarter 4. But it's important to understand that the elements we have in play with a very fast working capital achievement and also some question marks on how we want to drive CapEx, where we don't guide on CapEx, but we say we want to have the flexibility to do good business cases where we find them, put some uncertainty to the cash flow. And the guidance will come when we come with the quarter 4 results. Thank you. I'll hand over to Douglas. Lobben, welcome. Morning. Thank you. Thank you, Christian. It's a As Christian mentioned, we have had a good quarter. We see a service revenue decline of around 1.3%. But if we exclude the low margin carrier voice, that is a decline of 0.9%, which is similar to the previous quarter. In Sweden, we see continued decline from the legacy, but we have managed to offset that with various price increases across both fixed and mobile throughout the year. In respect of OTC, we continue to see a decline in Sweden. In Finland, we've got legacy pressure as well as pressure from the copper dismantling, which is affecting the voice revenues. Norway is flattish but is impacted by a one off of around SEK 20,000,000, which we'll explain later. When we look at EBITDA, we are quite pleased with the 1% year on year development and that is partially from the development that we see in service revenue, but also from the cost reduction, which Christian has mentioned. In Sweden, we've seen a good cost reduction that has offset the legacy decline, giving us a flattish development. In Finland, we see pressure from the gross margin on equipment, which is dragging the EBITDA down. And we're obviously not pleased with that development, and it is something that we see will continue for the next quarter that we will continue to work on. In terms of Norway, we see a good development where we see sorry, where we see that the synergies have come through and we also see some one offs that has helped us. In terms of Sweden, the service revenue, as mentioned, B2C, we see a positive trend from the price adjustments that we've made. If we exclude OTC, the reduction would only be 1.1%. In B2B, we see a reduction of 0.9%, which is a slight decrease from the previous quarter. But I'd like to remind you that in the previous quarter, we had some strong one off revenues that assisted us. In terms of EBITDA, the Q was flattish, supported by the strong cost development that we had. A 4% a 5% reduction, which was brought about by good cost efficiencies and a trend that we expect to continue. In terms of Finland, as mentioned, the service revenue is pressured from the legacy decline and the interconnect loss. We also we see the pressure is specifically coming from fixed revenues. On the EBITDA side, we see that we have the pressure from the equipment margin that is much lower than expected. From a subscriber base side, we see that we have a flat quarter on quarter development despite a declining year on year. We have, however, seen a 2.4% increase in the ARPU, which has assisted the service revenue development. In Norway, we see pressure from the TV and fixed telephony business. However, this has been offset by mobile and by broadband where we've seen some good development. EBITDA, as mentioned, has improved. This is largely because of synergies where we see about a NOK 50,000,000 improvement or realization of synergies, but then also some one offs in a cost from a cost perspective. When we look at the led countries, Estonia has continued to deliver solid 5% year on year service revenue development. And thus, they have managed to translate into a 2% EBITDA development. In Lithuania, we've seen a trend shift in the after a successive 3 successive quarters of decline, we now see positive growth, largely coming from the fixed area. Unfortunately, in Lithuania, we see a drag on the EBITDA as a consequence of the resource costs that are developing negatively due to inflationary pressure. We will continue to work on the efficiency in Lithuania. In Denmark, we continue to see the pressure in the mass market segment where we see a decline in the service revenues as a result of price pressure. The team has done a fantastic job in terms of mitigating the costs, but longer term, this has to be questioned if it is sustainable. When we look at free cash flow, we have had a strong quarter, as Christian mentioned. The quarter showed that we delivered a lot stronger than what was expected, partially because we had a positive impact from working capital due to a phasing issue between quarters. We do see that CapEx is trending higher, partially because of the GET consolidation effect and then also an accounting effect in Norway from Switch. As mentioned, we do see that we expect the next quarter to have a drag on working capital. And therefore, we reiterate our guidance, which is between 12% and 12.5%. If you look at our net debt profile, it has come down in the quarter from about 2.65 at the end of last Q to around 2.5 at this Q for this Q. That is driven largely from the better operational cash flow that we've generated and that has assisted us. But I would like to remind you that we have 2 items that are ahead of us. First of all, the second tranche of the dividend, which is payable next week, which has a 0.16% impact on the pro form a and then the share buybacks, which is a SEK 2,500,000,000 for the remainder of the year until the 2020 AGM, and that has a SEK 0.08 impact on leverage. I can ask Christian and Andreas to join me. I was going to leave you alone up here, Douglas. That's you. Okay. Thank you both. Time for questions. We start with the floor if we have any questions from the floor. Otherwise, we go directly to the conference call. And operator, could we have the first question, please? Your first question comes from the line of Maurice Patrick. Please ask your question. Yes. It's Maurice here from Barclays. So a quick question on the ARPU trends in Sweden. So you've called out the increase in ARPU from the price increase, but also there's a drag from the international calling, which, if I see correctly, is around 3 percentage points in the quarter, which is somewhat larger than I would have thought would have been the case. So I guess the question is, is it really 3 percentage points for international calling? And is it different in B2B? Is it different in the other markets? Thank you. Well, maybe I'll ask you, Douglas, to answer that. But the first part is that this is an effect that will continue up to May, I think around May next year. That's when the new regulation came in place. And we do have differences between the markets, but I don't know if you want to elaborate it Andreas or Thomas? What you saw on the slide was only the impact on the B2C part of the segment. And of course, there is also an impact on the B2B side. I don't have on top of my head exactly how much that was. But as Christian said, it was implemented 15th May, so we will have that drag until then. And best guess is that it will be in the same magnitude. What we also state is that 3% increase from the commercial activities that we have done will gradually have an additional positive impact the more subscribers that we migrate to the new portfolio. Your next question comes from the line of Roman Ipusov. Good morning. Thank you very much for taking my question. My question is on free cash flow. And in the CEO letter, you have stated that as we think about 2020, we should the kind of the starting point is that it's a stable base, excluding Bonnier, but you also see increasing uncertainty around 2020 operational free cash flow. So the way I read that statement is that the cash flow is expected to be flat with some downside risks. Can you please explain and confirm whether I understood that correctly? And also, I just wanted to cross check against your previous commentary that you were expecting your operational free cash flow to grow over the medium term, right? Is this no longer the case? Are we thinking flat as a base case for 2020 ex Bonnier? Thank you for the question. We had we said we had an ambition to sustain or grow the cash flow over time. So we haven't given any guidance for 2020 other than that or for any other year as well. What we say now with the stable base is that we have a stable EBITDA base in this company. It's not something that is rocking in any way and we have a good fundamental journey now on the EBITDA in the second half going into next year. So that's a good stable base with a CapEx view that we have want to have certain flexibility in and we don't know that answer yet. And then we have said that the working capital, we are doing really good on that and we have continuous possibilities for improvement, but definitely less than we have had in the past and therefore it could be a negative from that. All this together gives us uncertainty. We will not guide at this point. We will guide at quarter 4 and we will come back. But we there's no reason to not say that there is some uncertainty on that current cash flow level at this point. Okay. Thank you very much. And can I just ask a follow-up please on working capital specifically? And I'll ask it in very vague terms, but perhaps you can comment. So if we look over the last 3 years, including 2019, you've clearly had the 3 stunning years as far as working capital is concerned. And as we think about 2020, you've made it very clear that all good things need to come to an end that it's unlikely to be as amazing as the last 3. But then is it still going to be a chunky year, so to speak? Or are we going to go back to kind of a much more normalized level, if that makes sense? Yes. If I can answer that. I think what we try to flag is in that Q4, we expect to see a consumption of working capital that will bring us down from the current year to date growth that we've shown. As for next year, we will continue to work on working capital, but we're not in a position to guide at this point. Thank you, Roman. Could we have the next question, please? Yes. And your next question comes from the line of Terence Tsui. Please ask your question. Suisse. I had a question around shareholder remuneration. I know you mentioned at the start that the decision to terminate the share buyback early would have no implications for the dividends. But I was just thinking going forward, given that you mentioned that the cash flow composition could be a bit more uncertain, do you think it will be more appropriate to have a lower distribution of cash flows and dividends in the future just to reflect these more uncertain times? Thank you. Thank you, Terence. Two comments on this. One is that we think that the dividend is a very important part of our capital model. We have a policy, which is a minimum of 80%. And we feel that the dividend to our shareholders is important going forward as well. So that is the statement and guidance I want to give you going forward and nothing Thank you. Thank you, Terence. Could we have the next question, please? Your next question comes from the line of Lena Osterberg. Please ask your question. Hello. I would like to ask you on your OpEx reductions in Sweden. As I understand it, OpEx in Sweden is now flat for the 1st 9 months, while you have guided for a 3% reduction for the full year. So I was wondering how you expect to reach that and if the target is still achievable? Well, you can fill in, Douglas. But we also said clearly since quarter 2 is that we see uncertainty in the 3% target for Sweden, but we remain with our target for group. And that means that there is no clear path to the 3% even though we haven't given up on it. And we have seen before in Sweden and in other markets that we can have quite big swings in the percentage points. It looks big in percentage, but it's quite reasonable in number level. So what it will come out in quarter 4, we'll see. We are have an aim. And what we have said is uncertainty around that 3%. I don't know, Douglas, if you want to add something. So just to reiterate, we've always indicated that the second half of the year would be a lot stronger than the first half of the year in Sweden. We are executing on the plans, which you can see as evident from the Q1. But then in from Q3, in Q4, we do have some easier comparables as well, which you should recall from last year, but we do have plans in motion. But as indicated and as we've indicated before, we do see a risk in achieving the 3%, but that doesn't mean that we are less committed to reduce OpEx in the last quarter. Could you maybe just detail from which line items or cost items you expect to get the sailing in the 4th quarter? If you exclude the comparable, the main areas would continue to be in resource costs and then also in our marketing. Next question comes from the line of Nick Lyall. Please ask your questions. Yes. Good morning. It's Nick at SocGen. Could I just ask, Christian, on the canceling of the remaining buyback, could you just explain a bit more on why you're surprised or why the Board is surprised about the gearing levels and why the buyback has been canceled? Also, why that doesn't link into the cash flow guidance? You're sort of suggesting the cash flow guidance for next year is more about CapEx flexibility and less working cap. But can you just suggest why that canceling of the buyback doesn't have any relation to the cash flow target, if that's correct? Thank you. It's a good question. First of all, cash flow has nothing to do with the buyback program. But leverage and which is net debt to EBITDA has an impact on how we view our flexibility in having a good rating and therefore being able to borrow in the way we want long term or at what price going forward. And that's also where the market conditions is stated on this page that I showed that in a turbulent market and if you want to borrow money to do things or have flexibility, a good credit rating is important and there we have a target. And then the cash flow per se is actually delivering on what we have said. So there is no difference there. So it doesn't impact this decision. So the decision is based on that deleverage. As we said already at the Capital Markets Day is that depending on how fast we get the return on the revenue side, that will also impact not our end game, but how fast we get to that journey. And that puts us in a somewhat lower level on EBITDA this year than we started this year out in our thinking. Meanwhile, we are actually turning the trend. In the same time, as I said, the industry is going to be impacted on this valuation from credit rating and others on the economics of the industry, but also of the world. And there we want to create flexibility. And that's the conclusion we came up with now. And then we decided to do it now and take to that decision already now when we had that view going forward instead of waiting. Okay. That's clear. Thank you. Could we have the next question please? The next question comes from the line of Peter Nielsen. Your line is now open. Christian, could you be so kind to comment a bit on Norway, please? You talked about the OpEx and the merger synergies in Norway. Could you talk a bit about how you view sort of the Norwegian market at the moment on the mobile side? You've had some issues getting back to growth. Talk about that B2C, please, and how you're seeing the B2B market in Norway, you increased efforts there and how that is playing out? That will be appreciated. Thank you. Thank you, Peter. On the OpEx side and the synergy execution, we stepped that up from 700 to 800 end game at the CMD. And we are on track on our journey. We feel that that is where we have good control and doing fine or better than fine. And so I think that the cost opportunity in Norway is also good going forward. But as you say, we have a commercial agenda as well and that's what brings in the money. And on the B2B side, I'm happy to see both in quarter 2 and quarter 3 that we are turning the trend on that B2B segment and taking a lot of customers, somewhat lower ARPU than the average, but adding on top on the total, moving from a decline into now a flat situation going into growth. And that's positive and that's what we have said before. We should be able to take market share in the B2B area. In the B2C area, we said we're going to lose some market share with ICE taking its role in the market as a 3rd player when we did the transaction of Tele2. And that is being a little bit they have taken a little bit faster room in Telenor as well than we wanted to. And I have said it before that I think we can do more in Norway on the B2C side and the commercial side. And that's what we're working with the team together with to do. And it has been a lot of focus of integrating all these companies and maybe that has had an effect on our ability to do the commercial agenda in the right way on the B2C side. But that is something we are definitely working on right now. And question, may I just follow-up quickly and ask, are you seeing a worsening on TV trends in Norway? You mentioned from GET that it is partly diluting your revenue trends. It's doing fine. We are stable on the gas revenue and that is according to our business case and where we think we should be. We had a decline now in TV compensated by broadband, but that TV was losing one partner and gaining another one and moving this customer. So I'm not worried on the get side. I think it's worth noting that, that partner that we lost, we lost that partner even before we took over the company. So now you see the revenue impact and the impact on the subscribers. Okay. Thank you. Okay. Next question please. Next question comes from the line of Cihay. Please ask your question. Hello, good morning. Thanks for taking my questions. I just have one question, please. I was wondering if you can update us of your tower strategies. I remember that you have a legally separate company that only own your towers. Would you mind to give us some details of how many towers you have in there and whether there could be possibilities for you to monetize that asset? Thank you. I'm not sure I should tell you how many towers we have at this time. So I'll pass that. But we have plenty of towers. And what we have done and that is to drive efficiency. We have created tower companies internally. So now we've separated out the towers in individual tower companies and they are led by separate management and we're setting up the SLAs between the tower companies and the rest of the business and that is to drive efficiency. I already said at the Capital Markets Day, I don't know where we're going, but I think we can bring more efficiency to this area and it could be through more tower partnerships with peers or it could be other constellations. But right now what we're doing is just making sure we have a good efficient business within the towers and have that separated. Thank you very much. Thank you. Next question please. Comes from the line of Ulrich Rather. You sort of referred to service revenue trend not recovering as far as you expected when you explained the change to the shareholder remuneration. Could you give a bit more color in which areas they're not recovering as fast as you might have expected? Thank you. I think it's Ulrik, thank you for the question. But when we started the year, I had expectation of a somewhat better B2C development and also a somewhat better mix. As you know, we have revenue from lower margin ICT. We have the core and then we have our new business with IoT coming in. And we expect a somewhat better mix and then we expect a somewhat better a faster journey in the B2C area. That's helpful. Can I follow-up with another question please? There was a very big EBITDA contribution in the line item other and eliminations within other operations. And I've seen sort of some observers are writing about this as this being low quality. My understanding, this sort of refers to cost efficiencies in the central costs. I was wondering, could you elaborate on that a bit? And also, is this part of the cost cut that you're showing for Sweden? Or when you talk about Sweden, is that strictly speaking the business unit Sweden and these central cost efficiencies pop up only in the discussion of the group as a group? Thank you. Thank you, Ulrich. There's 3 parts of that other portfolio on cost. And one is the efficiency we drive in the central CPS unit as we call it, common products and services. 1 is the head office and other businesses that we have in our group. And the third one is actually that we had quite good comparisons from last year. So there's a triple effect here. Those parts that come from the central products and services, they are not part of the cost target for Sweden. And so you could say that they should have some value from that. It is part of their EBITDA because they get the internal OpEx or COGS from that. So they get it on their profitability line, but they don't get it on their OpEx saving target. So we in our different parts of the organization focus on our own stuff. Oles, do you want to add something to that or No, I think it's well summarized. I think the 5% that we report for the quarter is on external OpEx for Sweden only. And that also goes for the 2% target we have on group OpEx. Of course, that is externally and there, common products and services is a part. So there it is included, but it's on the external cost. So it's not included in the target for Sweden or other countries. Your next question comes from the line of Andrew Lee. Yes, thanks. Good morning everyone. I just had another question on free cash flow. Even if we take out the working capital, kind of ignore working capital for now, today, it looks like a free cash flow warning. And I think you're suggesting that CapEx can't act as a lever to support that free cash flow or to improve the free cash flow trajectory into 2020. So I wondered if you could talk about any other levers you do have to improve free cash flow incrementally. So the first question was, can you cut costs to a greater extent? We saw the stumble in delivery in the start of 2019. So can you catch up on that into the start of 2020 and through 2020? And then secondly, should we expect greater price rises as a support in 2020 given the position you're in? Thank you. I'll leave the cash flow to Douglas and I answer the price. So you should expect more commercial activities in all our countries that should drive a higher ARPU or higher customer base and that's what we are working on. Some of those will be price increases, some of those will be portfolio changes and some of them will be cross sell and up sell so and deep sell. So yes, you should expect more on the commercial side from Telia in the next 12 months. Okay. And then from a cash flow perspective, we will continue to work on the levers that we've explained to you before. But obviously, the biggest driver for us is EBITDA and ensuring that we get a growth from our EBITDA. And that is one of the most important drivers from a cash flow perspective. We'll continue to work on working capital. So there's nothing that would change in terms of what we work on. When you talk about cost and ask about cost, we will continue to work on cost as well. It's a journey that will continue into perpetuity. But again, we don't guide for next year. We're not ready to do that yet. And in addition, Andrew, you will hopefully, we will consume the Bonnier deal. We will add that on top of this. Your Your next question comes from the line of Keval Khiroya. Please ask your question. Thank you. I've got a question on OpEx. You reiterated the target for full year OpEx to decline around 2%. But obviously, for 2019, you do have some quite easy comps from some higher cost items from 2018, things like bad storm damage and the higher market, which I think in Q3 and Q4, if you add the market, it amounted to roughly SEK 260,000,000. When we look at 2020, how confident are you in being able to deliver that 2% OpEx reduction? And can you give some more color on how Sweden should fit within that? Bring in mind, I guess, you don't have the same easy comps from these high cost items in 2018. You want to answer, Dolores? Or Yes. So I think first of all, yes, the bad debt is there, and we've mentioned that, that is one of the easier comparables that we have in Q4. In terms of storm, that is COGS. That is not included in the definition that we went out when we guided on the reduction. What I can reiterate is that for Sweden, we do see a challenge to get to the 3%, but we believe that we will deliver around the 2% for the full year for the full group. And that is what we also have as a target going forward, and we have no reason with the activities we have ongoing to change that target. Your next question comes from the line of Steve Malcolm. Yes. Good morning. I'll go for a couple. Just first of all, on the balance sheet, maybe you can help us understand where you think the right level of leverage is for the company and the glide path and the time frame to getting that. I think if your funding, the deal goes through, you'll be pretty much 3x levered, give or take, plus 0.2 of what the U. S. IFRS 16. So maybe just sort of an update as to where you think the leverage should land on a 2, 3 year view, which may help us frame on both of the dividend? And then just coming back to the OpEx. I mean, you said that there's no reason to change your view on OpEx, but you've also said that the service revenue trends aren't where you'd like to be. I mean, part of the OpEx story in Q2 was lower marketing costs. You think you can keep spending less on marketing and drive an improvement in the service revenue line at the same time? Thanks. So thank you, Stig. I'll start with the leverage. We said last year and going into this year that our leverage target was 2.0 plusminus0.5, I. E. 2.5. And we also said that the IFRS will have to be topped on top of that. And we currently have an effect of around 0.3 percent from the IFRS effect. So indirectly, we don't have a target on leverage any longer. But if you would remain the same thinking, it would be then 2.3 plusminus0.5 which would be a target at the upper range would be 2.8. Percent. But more importantly for us is to keep the credit rating that we are in and that's what we focus on. And of course, that could change over time what it means in exact leverage. And that's why we think that's a more important target. In the same time, we said that we'll come back on the leverage how we see it when we see how the effects of IFRS are both handled by the rating institutes and by ourselves. On the marketing, you have a point that, of course, it sounds strange when I say that the commercial activities can be stronger, but marketing and that's also including commissions and subsidies to an extent that they are lower. But it doesn't come automatically that you just throw up money and then you get your customer base you want. So that's where we need to just accelerate a little bit how we what we want to do and how we want to do it. I don't know if you want to comment more on that, Douglas, also. Yes. I think it's a fine balance that we carefully watch and we ensure that we are as active as we need to be in the market, but that we also ensure that we become as efficient as possible in our marketing spend so that we invest the right levels commensurate to the customer intake and the ARPUs that we generate from them. Just a quick follow-up on CapEx. I mean, with the extra CapEx that you're kind of thinking about for next year, can you just maybe add a bit more color on where that's going? Is it mostly on 5 gs and accelerating your network advantage? Is it more fiber? Is it balanced? Well, maybe it's not more fiber, but it's maybe the same fiber. And we have said that fiber should be able to come down. And now we feel that we have a strong agenda on fiber in different countries. And we are evaluating that and we want to see what kind of decision we want to take, what kind of business case we have in Estonia, Lithuania, in Finland, in Norway, in Sweden and Denmark. So that is one part. And then we know that the GET acquisition that we did is a very important part of our future and we need to just take that into account and see if there's something more we want to do around that. And part of that is coming out also with the fixed wireless thing now with our new transaction with Ericsson in Norway. And then finally, 5 gs is something we're not going to push out broadly, but we'll need to relate to and see how we can make a difference. And we are the leading network and want to continue to be the leading network. And we just want to have the flexibility in that area to do what we think is necessary. Thank you. Very helpful. Thank you. Thank you. Remember to limit yourself to one question, please. Next question. Your next question comes from Daniel Stefan, Gauffant. Yes. I thought I had canceled the question. But I can still I was looking at the cash flow and the different components, and you've already answered part of that. But you have also utilized some tax loss carry forwards. And I just wonder how much you can still utilize this going forward. Well, and that's true. And I was quite clear that from 2020, it will be less. I don't know that yet. It depends on how we come out. And that's just not an EBITDA line, which I have good control of. It's how we get the net result in the end in the different countries, which also is impacted by currency effects and everything. So it will gradually be more paid tax in 2020 2021. And when we get to quarter 4, we can give you more exact answer on how we see that. But it's actually too early to say how much more at this point. So you have to stay in uncertainty with the answer of it's going to be more, Stefan, until we know more, all of us. Okay. Thanks. Thank you, Stefan. Good to know you had more than one question in you. Next question, please. Your next question comes from the line of Arfaela Schmohepatron. Yes. Good morning and thanks for taking the I just clarify please what you're saying about your plans on Swedish B2C? So you talk about driving a higher customer loyalty, but then you're also talking about pursuing price increases and then sort of lower marketing. So I guess my question is, post today, do we interpret this as TDA becoming a more aggressive in Swedish B2C? Or do we still see you as a sort of rational market leader in Sweden? Thanks. I think it's important that we are rational in an industry like ours. And I would say that wherever I worked in this industry, it is an industry that works long term with its customers. It can't be reactive and it needs to build value and make sure it gets paid for that value over time. So the answer is yes, we will stay rational. And in that, we want to find a better stickiness and loyalty from our customers, which is part of actually also making sure they understand and can benefit from the value we create in a better way. So just to clarify, so it's about pushing customer loyalty through your previously stated plans of upselling and then cross selling, etcetera, as opposed to aggressively driving prices lower? If you ask me if I'm going to dump prices dramatically to get customers on a bundle of fixed mobile, the answer is no. That's great. Thank you. Next question, please. We have 3 more left, and I think we have time for that. Next question comes from the line of Adam Fox family. Thank you very much. I wondered if you could talk a little bit more about the outlook for Finland, please, because you've obviously spent quite a bit of money on acquisitions in recent years. So an with was the gross margin pressure you referenced in the presentation earlier, was that expected or unexpected? Well, I think the gross margin situation we have is not as good as we expected. But you could say we may be not surprised because we know it's a difficult journey, but it's a journey we have taken on and we need to handle. And one of the challenges in Finland is not now to attract the large B2B customers with this portfolio because we are getting traction on that. It is to figure out then how to build this delivery and this production of these services in an efficient way going forward. That's not a 1 quarter thing. You do that over time. And we are in progress of that. So we are starting to integrate now this year these units and we haven't done that before. So we bought them. They were standalone and now we're starting to integrate to get the efficiency out. And that is then pushing us a little bit on the cost. And then the sales mix has been a little bit different than we expected, as I said in the beginning. And that is also then a reaction on the COGS side rather than it's you can see it on the revenue side in net. I don't know if you want to add anything Douglas on this. Yes. We also had some challenges on the equipment margin and some of which was a one off in nature for the quarter. And then it is a different sales mix in our equipment, which has also resulted in a drag on the margin. And we will continue to work on that. But as Christian says, it is understanding how we leverage this in the best possible way. Thank you. That's helpful. Thank you, Adam. Next question please. Your next question comes from the line of Frederic Brudelin. Boulan. Fred, that's Bank of America. Just a quick clarification on CapEx. So if you could clarify your thinking, since you mentioned this opportunity to use CapEx next year is limited. I think at the CMD, you got it for reduction next year on the lower fiber CapEx. So can you explain to us what changes is phasing with the drop expected after that? Or if we just assume that the ambition has changed for 5 gs or other reasons? Thank you. We haven't changed our ambition yet. We are opening up for a flexibility on CapEx that we are working on. So one example could be how fast do you want to drive fixed wireless meanwhile, how fast will you like to close down copper? That will have an impact on our CapEx profile. Another one is the business cases we get in on fiber as a complement in this getting everyone to be able to have an Internet from Telia, how fast and how much should we participate in detailing Sweden, but on the other hand in the other countries on the rollout that is actually more starting now. And finally, going into, as we talked about, the GET CDC acquisition we did, a very stable, good base. Do we want to do something more? So we're opening up for having this discussion and want to be clear as soon as possible rather than we have decided anything at this point. Okay. Thank you very much. Thank you, Fred. Could we have the last question please? And your final question comes from the line of Henry Hub. Please ask your question. Yes. Thanks very much. I guess most of my questions have been asked. But just one follow-up on the Swedish broadband trends, I guess, on back of your price increase as well. You're back to losing about around 10,000 fixed broadband subs per quarter. Is that coming is that on the back of the price increases? Or that sort of continued impact from fiber overbills? And what are you seeing in the open networks? I thought you were expanding your footprint there a bit. Then I want to follow-up on the comment around fixed wireless access. So you're talking about Sweden as well or is that in other markets mainly? Thank you very much. I'll start with the last question and then I'll hand over to you Douglas. On the fixed wireless, it goes through all markets. The problem in Sweden is we don't know what kind of spectrum base we will have until we have passed the auction in quarter 1. And then we can more in detail nail down how we want to do that. But it also is related, as I said, to the copper shutdown and how fast and how we want to drive that. So but no, it's not only Norway. It is actually in all markets. Yes. And if I take the Swedish broadband, yes, you are correct. We do lose DSL customers, but that is a continuation of the trend that we've seen in the past. And we're not able to catch them with the fiber, but we do have a good traction on our Open City Networks where we are adding customers. And that trend is expected to continue. We've only recently adjusted the price increases, so it's too early for us to give a view on what the impact of that would be. It also connects to Christian's comments before on our commercial activity and the accelerated execution on that. Great. Thanks so much. Thank you. Thank you, Henrik, and thank you all very much for the attention. And we look forward to talk to you again on the road and then if not sooner at the Q4 presentation 25th January 2020. Thanks a lot and have a good day. Thank you. Goodbye.