Warm welcome to the Q4 and 2018 report presentation from Telia Company. We will do as we always do. We will start with the CEO and President, Johan Dennelind, presenting the quarter, followed by the financial part with CFO Christian Luiga, and then a Q&A session. Welcome, Johan. Please take the stage.
Thank you, Andreas, and welcome. I see where we have the camera. There we do. Let us go straight at it. We have a summary of 2018 first. I think it's worthwhile remembering that we have delivered on our ambitions for the full year that we laid out early, what, about a year ago then, for 2018. Our cash flow coming in clearly above last year, our EBITDA slightly above, as we said, and delivering on our cost program that we also said was an important part of the 2018 priorities. I'd like to also highlight that in Q4, we have a lot of positive customer data points coming in from our markets, where both churn is slightly lower, but NPS importantly show loyalty increasing in some key segments. We're also getting recognized for some of the sustainability work that we've been working hard on over the last few years.
I think that is also good to mention in this context, where EUC is becoming increasingly important that we are well-positioned. The most important thing on this slide I would like to say is that we are also then proposing a dividend based on same amount as last year, which then leads to a higher dividend per share at SEK 2.36. We'll come back a lot to that, of course. This is overall a year where we delivered, but we had somewhat softer Q4 than we expected and that you expected, and we'll come back to that, of course. Before heading into Q4: in Q4, we did do two major divestments. Just to remind you, we had a call for both those occasions with you.
Uzbekistan and Kazakhstan is no longer with us, we've had a very important transformative year when it comes to resetting the focus fully into the Nordic Baltics. We are then, via the acquisitions that we made, now very well-positioned for the leading converged player in the Nordic Baltics. Of course, pending the acquisition of Bonnier Broadcasting, that will complete a lot of our ambition in this space. A quarter then that has a lot of positives in it, we're not shying away from the –5.5 EBITDA number. We'll explain that to you. A couple of other things, though. We have the cash flows very strong coming in, partly through the CapEx profile that we expected, but also of course adding Get HD from Norway into the cash flow. The transition there and the integration is going well. I'll come back to that.
We have some really important customer wins across our markets in the ICT space in Finland and Sweden mainly, which gives good hope and shows that we are competitive in this space where we have built capabilities over the years. Again, back to some key metrics on NPS in key markets. The EBITDA is troublesome to some extent. We knew it was going to come in lower, but it became slightly more lower than we expected, mainly due to Sweden. The Swedish numbers we'll go into in more detail. Looking at the overall service revenue and the EBITDA development, service revenue have been in negative territory for some time. It's further dragged down by carrier, and this is a conscious decision to move away from low-margin business. That, of course, has a quite visible impact on service revenue at group level.
Removing that, though, we're still in negative, then we have the legacy as a big drag with about SEK 1 billion per year from Swedish operations that takes us into negative. This quarter, we have not been able to compensate that with our core new services. EBITDA is down, as you see. It is partly a comparable issue because we had a strong Q4 in last year, but also it's a soft Sweden where we have about SEK 200 million of unexpected versus our own expectations and your expectations worse EBITDA, and Christian will go into more detail on that later on. We have delivered on our cost ambition of SEK 1.1 billion. We actually came in at SEK 1.3 billion. We have a lot of focus on resource cost, obviously. A key part of that component, both consultants, mainly consultants, and to some extent employees.
The total cost there on resource cost is down, which is an important part of the cost program. The key part of the cost program overall has been the managed of COGS related that come in from various parts of the business, but also a lot from the carrier side and the transit business where we're moving away from. Cost agenda 2019, obviously with us. We have the new operating model that we talked about last quarter, we'll talk more about as we move into the Capital Markets Day, which we'll come back to. It is the central unit taking more responsibility for the production of services across our six markets, where we have scale benefits coming in and also standardization moving us into position where we can move faster into respective markets with new services.
Obviously, we will also have a cost to take out on the OpEx side, the Swedish OpEx will be around 3% lower 2019 versus 2018. The positive things are still in the mobile space where we have service revenue growth. 6/7 markets are growing, and most of the countries are moving up on the ARPU side. Notably, of course, in one of our 11 countries, in the Lithuanian business, but also strong in Norway and Sweden. ARPU is helping us a lot as we manage the service revenue in the respective countries. Sweden is in a space where legacy is a drag, we've talked about this a lot, we will keep talking about this because we still have north of SEK 6 billion on copper-related revenues. Around half of that is pure PSTN, i.e., fixed telephony revenue, which is declining rapidly.
No surprise that it's declining somewhat more this quarter than we were used to. That was a part of the slightly worse EBITA for the quarter. The legacy headwind you see there over the quarters, it is in negative territory and will continue to be so. A component that has helped us balance this over the years has been the fiber OTC. As you know, we are at the tail end of the fiber rollout. This quarter actually slightly positive versus 2017. We are going to see a slowdown, of course, on the fiber rollout from now. We have reached around 1.8 million households for Sweden. We also start to show the numbers, how many customers we can reach on other open city networks, OCNs. That's the Sweden revenue profile. I will come back to the EBITA on the Christian section.
In Norway, we got an owner into Get in mid-quarter. We have been now getting acquainted with the people and the business. We are impressed with the people. We are also glad to see that we have stabilized some of the negative trends that we had during the first part of the year in Get, coming out in a pretty good Q4, where customers are stable and growing. ARPU stable or growing depending on in terms of TV or broadband. Revenues and EBITA are slightly up. That's important because there were some signals in Q3, as you know, that were a bit soft. This is a good platform for going into the joint company, Telia Norge, where we are now in full speed in merging these two organizations, or three organizations into one great challenger and alternative to the market leader.
Ending on a couple of things. I talked about ESG initially. We are working on this more and more integrated in our strategic agenda. Here are a couple of examples. We think we have managed the exit generation in a responsible way. We have engaged employees across our footprints in a program called Unite to make impact towards the SDGs, especially in the digital area. We have gathered Nordic CEOs and prime ministers in an ambition to broaden the engagement in order to reach the SDGs by 2030. We are driving force and voice in that. We are also looking how we can do more on reaching the very demanding goals around environment and climate. We will come back to that in the CSB. Important part of the Telia Company story. When it comes to our shareholder remuneration, TSR last year was good, as you know.
We have executed on our buyback program. We are not fully done yet. We had at year-end around SEK 4.1 billion gross value of the repurchase program and about 99 million shares. That of course means that there are fewer shares out there. We are suggesting to keep the dividend at an absolute amount the same, but that means we have an increase per share of SEK 2.36 proposed for the dividend of 2018. Look what that means in terms of payout ratio. We had around 80% last year, and this year, if the proposal is approved, it will be around 84%. Strong underlying cash flow there supporting the dividend proposed. That brings me into two final slides. We are looking into 2019. We will give you an outlook.
The fundamentals that we will talk about throughout the year with you is, of course, the core revenue growth that we're driving both in the converge space, mobile, broadband, TV. We have good momentum and good position in many of these areas and markets. Super important that we get that to grow more. The cost, the second box speaks obviously about the legacy headwind that will continue. We are still a few more years with that very big drag on especially Swedish fixed. The cost focus will continue with the CapEx discipline to remain. Then we will, of course, get the support from the M&A that we have done in Norway, and also we hope to execute on the Bonnier Broadcasting deal, which will give us further potential. All in all, this leads to a growth in operational free cash flow.
When we look at that for the year, we are comfortable that we will reach into the range of SEK 12 billion-SEK 12.5 billion compared to last year's SEK 10.8 billion. A significant step up in cash flow, which I think is a very important signal as we transit through another tough year in Sweden. But with other countries from being from good to great. The rating remains as an ambition for us to be an A- BBB+, and that you should take comfort in as well. To give you further comfort, of course, Christian, please come and talk about the numbers in more detail.
Thank you, Johan, and good morning, everyone. I'll try to guide you through the second part of the presentation. See if I have the camera right over there as well. Starting a little bit on the high level of the quarter and where we are at Telia. Telia is a quite stable, continuous growing company. We delivered 1.7% growth in EBITDA. We improved our cash flow for the year. We have guided for an improvement of cash flow next year. That means that we will continue to grow on EBITDA, and we will continue to drive the cash flow on the other elements. That is a necessity if you're going to have that kind of change. We know that we have, and we are a big group, and we'll have some entities that are a little bit weaker and some that are stronger.
In total, we are a stable and strong company in a stable and strong region. That's why we have a strong footprint focus of Nordic-Baltic. We have also made an acquisition with the cash we had at hand last year that will help us to drive further EBITDA in the year. I think that is an important statement overall before we step into quarter four and how that look like. If we start then on the revenue side and the revenue pressure, we see on this picture that the revenue pressure comes from Sweden and it comes from carrier. Carrier is low margin, and this is probably the last year we'll see these kind of drops we have done in refocusing carrier towards more IT transit revenue and less voice. We will see a less decline on carrier and impact on the group next year.
In local organic, it was down 2.5% in total, and half of that is carrier. The other half stems very much to Sweden and comes from what Johan talked about, a legacy decline, not compensated by the other core revenue. In this quarter specifically, we have a period now where we are between ARPU uplift activities and previous price increases. We have had price increases in 2017 that have helped us into 2018. We have a known price increase right now in PSTN, and we will continue to work on the revenue side during the year. That is something I can talk about right now here. We are in that gap, and that actually makes this picture a little bit more painful than it has been in the previous quarter. Until we come out of this, it will look like this.
On the EBITDA development, you can see a very clear picture here. Sweden with the majority of the decline, actually a little bit more. We are growing slightly on the rest of the business. The Swedish EBITDA is a combination of what I talked about on the revenue side, the revenue mix with legacy and lower core in this quarter growing at a lower level, combined with the one-time bad debt that we had. It is a significantly higher debt that we have taken towards very few customers. On top of that, we have had a higher marketing and sales cost in this quarter. That combined makes this quarter weaker for us compared to the previous quarters and for you. Going in then to the Swedish revenue side, we can see then that the total was down 2.5%.
A couple of things here to look at is that even though the mobile service revenue is up 1.3%, and that is primarily now core revenue growing. In the previous quarter, we have talked about value-added services. We have also had an increase in invoice fees, and they have lapsed. Now we are down to more the core revenue growth in mobile service revenue. At that level, it is eaten up by a lower fixed side and decline in the fixed side, and primarily then from the PSTN side. If we look at the B2B side, we see that the decline continues to be at the lower levels of 2.5%-3%, and in this quarter, 3.5%. The change shift here, I think, in this quarter is that SoHo/SME is a little bit worse than it has been before. It is negative.
It has been positive or flattish for many quarters. It is here again, it is price increases that is lapsing into this quarter. Meanwhile, the large B2B is actually more stable in this quarter on the price and the volume side. We have had a good large, as Johan talked about, sales side, and that helps us in this. The marketing activities kept us to have a positive intake on the mobile subs, but came at a cost in this quarter and should help us into next year. If we step into Finland looks very flat this quarter, but it has some very good signals. The mobile ARPU in Finland is growing more than the subs declining. We have been very clear on that. We want to grow mobile service revenue. We want to have high ARPU customers, and we continue to do that, and we have a growth.
ARPU is up 3% in consumer, and total mobile service revenue is up 1.4%. The other positive thing is that Finland had a great quarter when it comes to new large customer intake. It's not visible in the numbers yet, but it gives us good foundation for next year. On top of that, we should remember we have actually made an additional acquisition this quarter with AinaCom, and that will also help us into next year on the profitability side. Even though the EBITDA is flat in this quarter, Finland did grow this year and will continue to grow next year. It has a good foundation for that. Strong organic EBITDA in Norway. It is growing from its own results. We have acquired Phonero. We have brought through the synergies that we promised, and they came out as expected.
We are also having a quite extensive and good cost program delivering a balance to the decline in the service revenue. On top of that, we have now acquired Get, as Johan said. It is delivering a growth on EBITDA and revenue in the quarter and is very stable. The similar philosophy of high-quality networks and good customer service is delivering a stable platform in Get, and it's very promising to see that coming into our now converged footprint in Norway for next year, where we can continue to grow cash flow, which has now grown 60% in two years' time and will continue to grow with the Get acquisition. Three other countries may be small individually, but they are contributing, and they have a good growth pattern right now. Even Denmark is growing on the EBITDA side from a, I would say, very good cost work in 2018.
Even though they have a slight decline in a difficult market on the revenue side, we are making things differently, and that has an impact. In the Baltics, there is a growth pattern right now. We can see that on our competitors' profile and our own profile, and that helps us to grow EBITDA in groups and helps us to drive cash flow. Latvia had a somewhat weaker quarter on the EBITDA side, but they have a new CEO since last summer, and he is now putting his plan in place to be able to deliver growth in 2019 on the EBITDA side as well. Cash CapEx is trending down. We have to remember that cash CapEx is the important part, and I'll come back to IFRS 16 later.
It's going to be even more important to understand cash CapEx, because every lease we do is going to be a CapEx. The cash CapEx was peaking in 2016. We had a Capital Market Day in 2014 with a very clear strategy and profile where we're increasing our coverage build-out, and we were also going to find a way to be more efficient in our CapEx handling internally, both on synergies, vendor side, and how we cooperate on building things together. We have succeeded with that, and the CapEx has declined. On top of that, the fiber has peaked and did that and is also on its way down. We continue to see a decline in CapEx into next year, primarily from the fiber side.
We have said and will continue to see need to improve our network to be the best network, and that will give more limited effects on the opportunity to lower the other CapEx than fiber. This is something we have talked about for a long time, and that is how we see it also going forward. A decline primarily coming from the fiber side. On the leverage side, we are at 1.97 if you include the full year 12-month EBITDA from Get at this time. The main transaction in the quarter, of course, is the payment of Get, but also compensated partly by the sales in Eurasia. We have also purchased back shares, as Johan said, and so far, 2.5% of the outstanding shares when we started have been bought back and has an effect then on the earnings per share and on the dividend per share.
We are at a stable situation, and M&A, we have completed the large M&A agenda, and meanwhile, the Bonnier deal is not completed yet in these numbers. Cash flow, operational cash flow. We are very much driven on operational cash flow. A couple of years ago, we intensified our focus in Telia. We have implemented education. We have implemented as part of our incentive scheme for our managers. We have set up programs. We have followed up. We are working in teams to actually work cross-border on how we prioritize our resources to make good things in the right place in the right time. This program we identified could give more than SEK 5 billion in working capital takeout. We have done SEK 3 billion so far, pretty much, and we see no change to that guidance.
It feels very good, and I think here the Telia Company has done a tremendous work, and it's not finance only. This is business-related in all aspects. Everything we do in working capital relates to a vendor or customer or how we handle inventory. It's very much how do we tie this thing together. Next year, we see a continuous increase in operating free cash flow. If I start with the elements that I always get a question about is the tax and the finance net and the pension effects that we had and on all this other part, the mid part of the section here, that is going to be quite flattish next year. We see no reason why tax payments should be higher than this year. We see a financial net that is going to be around where we are today.
We paid a lot of the acquisitions with cash at hand. Finally, we have a recurring pension effect of covering the pension payments from the pension fund in the way we should do in this company now that we started last year. It shouldn't be a big change. On top of that, we have a net working capital that will continue to have a positive development. We have cash CapEx that should slightly go down for fiber, and then we have an EBITDA growth, primarily then coming from Get, but from a stable business. That's how we see the development of the cash flow. That brings us to SEK 12 billion-SEK 12.5 billion next year in our guidance. I think this is a parameter we will talk more about and getting into this last page. I'm sorry, I'm moving a little bit on page here.
We now have a set of IFRS 16 coming into these books. These books are the standards that we follow and have to follow, and they do a lot of changes in these. Sometimes they do good changes, and sometimes they do changes that are more complicated. I think IFRS 16 has an element of both. It does put a finger on that reading the cash flow will be more important for all of us because that's where you're going to read what the company is really doing. While maybe that is the positive part of it also has some complications. On this picture that you see behind it is my attempt to educate us all in IFRS 16, in short, what it means.
If we take it first from the left-hand side, the thing is here that all contracts that we do, all contracts that is a lease, in some way will be taken out from the EBITDA. The office I'm standing in right now is we pay a rent for that. That rent or that sort of lease will now be a depreciation. When I sign a contract like this Solna office, it will be a CapEx. It will be very confusing to read the CapEx report, and it will be very confusing to read the EBITDA report. That's why I'm saying you need to move back into the cash flow more to look at what's really happening in the company.
Not only we need to recognize in our balance sheet those contracts and the committed period, we need to estimate and guess, you shouldn't say guess, but we're going to do a best estimate on how we think we will continue those contracts that are in place. If we expect to continue them, even though we don't know that, we have to book that value as well. I think that actually puts the finger on where maybe IFRS 16 is not so good. In the right-hand side of this picture is really what's going to happen then. We will have items from EBITDA today that will move into depreciation and financial net because values have to be discontinued, and there will be a finance element of this, and they will put the results in financial net.
Everything that we have there then in EBITDA will move into these two lines when we read our financial report. On cash flow, it will move from operational free cash flow, the part that we pay out, down to financing activities. What we show on this picture is that we will do an adjustment to the operational free cash flow. We will move this item back from financial activities up into operational free cash flow to make sure that all of you read our operational free cash flow tomorrow when you read our operating metric that we guide on in the same way as you do it today. This is where we're going right now. We know that EBITDA is a very important key metric for the investors. We also know that that's something we have followed in the past very much.
Due to these IFRS 16 changes, we see that it's going to be more complicated, and it will have an impact. I believe personally, it will take one year before we get acquainted with this and figure out how it's going to work in this industry. Until then, we just have to have a better dialogue and talk more about the numbers that we have, and not least in the cash flow. That's all from me for right now. No, I have one more thing. Save the date. We have a couple of things we will bring up when we get to the 21st of March, where we're going to have the Capital Market Day. We know there's questions around how we're going to drive Holston Group. That is something we will answer. We have a very interesting story around our new operating model.
We have three main countries, Sweden, Finland, and Norway, that is driving the results and the performance of this group that we can talk more about. Those are part of the things we are intending to talk about when we meet in 21st of March, where I hope as many of you can come to and see us and listen to us and ask questions. That's all for me.
Very good. Thank you, Christian. We will now start with the Q&A session. I have to urge you or ask you to limit yourself to maximum two questions. We will answer them. If you ask more questions, we will take number three and four offline through the IR department in order to save time, to make sure that everyone gets to ask their questions. We all start with Stefan. Go ahead, please.
Yes. Hello, Stefan, DNB. I appreciate that it's difficult to give guidance on EBITDA due to IFRS 16. Perhaps just to get some clarification on how you see the development on EBITDA, could you give some information on organic growth on EBITDA, given that we just had a big turn to the negative in Q4? Thank you.
Thanks, Stefan. Dr. Luiga and I firstly, we will have to deal with those consequences. Looking at EBITDA, please look at 2019 as Sweden still under pressure, on EBITDA. The rest of the markets supporting good or great, adding the M&A effect from the STVC, and the inorganic EBITDA growth. That's what we're seeing in the shape of the EBITDA movement. We're not giving you more exact guidance than that, but moving you down rather to the cash flow, where I hope Christian gave you comfort that the SEK 12 billion-SEK 12.5 billion is first of all, apple to apple comparisons to this year. Two, it's coming from both quality cash flow increase as well as the financial net and retention side, which is recurring, not just one-offs. It is comfortable guidance on cash flow for 2019. Perfect.
We can take the first question from the conference call team.
Thank you. For the participants, if you have any questions, please press star one on your telephone and wait for your name to be announced. To cancel your request, you may press the hash key. The first question, it's from Roman Arbuzov. You may ask your question.
Good morning. Thank you very much for taking my question. The question is to Christian, and is just on the cash flow. Thank you very much for providing some of the clarifications. It's very helpful. I was wondering if you could perhaps specify a little bit more what's going on the CapEx side, and if you could tell us how much you've spent on fiber in Sweden in particular for the full year in 2018. That would be very helpful. Also, what do you expect to Get cash flow contribution to be in 2019, please?
The last question was please? Okay.
Contribution of Get.
Thank you. On the fiber side, we've been north of SEK 2 billion on the fiber side in 2018. That's the number we talked about going down. On the Get side, I will not give you a guidance on the cash flow.
Okay. Can you have another thing on cash flow? Previously, you've talked about a medium term growth on cash flow, looking at your various levers in terms of how you guys have done such a tremendous job on the cash flow over the last few quarters. Some of these levers are arguably running out of steam, working capital, for example. You've done a tremendous job over the last couple of years, but it's hard to see how you can do so much more on that line, just as an example. When we think about the medium term ambitions on the cash flow side, do you think it's still reasonable to assume organic growth in cash flow over the medium- term, or is this no longer certain?
I guess given Johan's comments just now that 2019 guidance is comfortable on the cash flow side, do you still think we can take comfort in organic growth and cash flow for 2020, for example? Thank you.
I understand your question. I'm not going to give you guidance for 2020, are you correct, working capital will someday take out this steam and we're pretty much halfway through, as I talked about. I've said before, I'm careful of telling in which year all of that will come. It depends a little bit on how our initiative works out. We have that still to take out. In the end, a company like ours needs to find a good balance between the EBITDA and the CapEx, which you have looked at in many years, and will continue to look at the cash CapEx towards the EBITDA over time. That should grow in a company like ours with the acquisitions we do, with the conversion capacity we do, and that is something we will talk more about at CMD.
That is the high level answer to your question, I'm not going to go into any details on the 2020.
Okay. Thank you.
Ambition that we are committed to growing cash flow every year over time. That is still stands, and we're still committed to that. Nothing has changed in that respect.
Okay. Thank you so much.
Thank you, Roman. Patrick. Please. You have a microphone. Speak loud.
Thank you. Fredrik Lithell from Danske Bank. Can we talk a little bit about Sweden and the actions taken? You alluded to this already during Q3 when we were here. How much of the pressure you feel is legacy and how much is coming from competition and also your internal organization and your system that you are trying to modernize at the same time. Can you elaborate around those topics, please? Thank you.
Sure. Thanks, Fredrik. We can elaborate somewhat, then we'll deepen that in the CMD. First of all, I'd like to say that the Swedish team is doing really well in the market. We're upholding market share in all segments. We are even gaining in some. We're making our customers even more loyal and happy. We're investing a lot. We haven't reduced our ambition to be the market leader and improve in every aspect towards the customers. It's in that light, you have to see the transformation that's ongoing, that we have launched some year back. That transformation, admittedly, we have come back to you and said, "We need more time." It is more complicated and more costly than we thought. We have pushed some of the positive aspects, benefits of those programs into 2020, like we talked about last quarter. That still stands.
There is no way out of this, we are confident in delivering on that. Meanwhile, what do we do? We keep investing in the market. We keep doing our best towards the customer, we also take out costs short-term. Those costs short-term is what you have seen being taken out through the years. Also in 2018, we took out costs. I think OpEx was down some 2%-3% in Sweden. We're going to take out 3% in OpEx in 2019, that continues. The big structural benefits from the transformation and the investments in new systems and platforms, it's not coming until 2020 and onwards. That's the patience you got to have on Sweden, that's why there is a drag on Sweden for 2019 as well.
At the same time, when I mention that, I'd like to say that we are compensating on all other countries. On group level, we're still delivering on our ambition, delivering on our expectations to market, also improving the cash flow as we have said. That's how we run this larger piece of the company, with Sweden being an important one, not the only one.
Thank you. Thank you, Fredrik. Next question from the call, please.
Thank you. The next question, it is from Viktor Högberg. You may ask your question.
Yes, good morning, thanks very much for taking my question. Maybe I missed this, but could you please give any comments on how the process is coming along on Bonnier, your expectations on when we can get any news, when you expect closing? Any on that would be great. I was just wondering, in Sweden, two ARPU movements here. I am thinking about this first, the PSTN. It is flat sequentially, but like you say, a big drop year-over-year. Is that maybe due to price plan changes or some more fixed price or a less variable Q4, for example? The same kind of question on broadband here. Is this ARPU movement we are seeing a result of you having more open network clients or anything like that? Thank you.
Thanks, Viktor. Bonnier, I probably did not mention so much because there is not much news on the process. We can reiterate that we think something will happen around the summer for closing, summer or slightly after summer. That is the base plan that we see. Things are progressing according to plan in Brussels, where the deal should be approved, and we have not changed our view on the prospects of value creation of this deal. On the contrary, we see a lot of positives out of the preparations we are now doing in order to be able to take care of Bonnier Broadcasting once it is approved. We are finding this very exciting. We will come back and update you along the way on the deal as such. The ARPU is something When I can comment.
On PSTN, for instance, we had the price increase that we did last year, now those effects are more like to like. On broadband, you have a decline, but it's to a large extent due to moving some revenues from the broadband service revenue to the fiber installation fee. That explains the decline in broadband ARPU. It's a one-time adjustment.
Thank you very much. Thank you.
We have implemented price increases effective April 1 in Sweden. From then onwards, we'll have a price effect on the Swedish PSTN platform.
Okay, great. Thank you very much for that info.
Thank you, Viktor. Next question, please.
Operator.
Thank you. Next question, it's from the line of Nick Lyall. You may ask your question.
Morning, everybody. It's Nick at Societe Generale. Could I just come back to the connection revenue a bit on fiber, please? Could you give us an indication of what sort of impact finishing the 1.8 million might have on the connection revenue for 2019, please, and what we should think about? Secondly, on the other division, Christian, just it was a big boost last quarter, as you mentioned, some of the central costs came through, or central cost savings come through. This quarter, it seems to reverse quite a bit. Could you just explain why that is and why it's not sustainable like we thought it might be? Thank you.
I think I'll start with the second question. I actually need a repetition on the first. I didn't hear in the end there. On the second question, it's more a year-over-year comparison than it is a quarter-over-quarter change in the performance.
The first question was regarding fiber connection revenues in 2019, now that we have reached 1 million homes passed.
We have said that we are in a tail. We're still in a very difficult situation when it comes to prediction. It is expected to go down than it did this year. We were actually in the upper range of our guidance this year. We are pretty much on the same level for next year, 60%-80% as a guidance. We will see, during the year, how we succeed taking that through, depending both on our appetite to grab the market and the possibility to dig.
Great. Thank you.
Thank you, Nick. Next question, please.
The next question, it's from Andrew Lee. You may ask your question.
Can you hear me?
Yes.
Great. I had two questions. Just the first question is on Sweden. During your description in the presentation, it was relatively clear that a lack of price rises has not helped top-line performance in Sweden. Just wondered what your view is on the likelihood of price inflation re-acceleration in Sweden in 2019. Do you think the market is the right environment to support greater inflation in pricing? Secondly, just on the cost-cutting guidance elsewhere in the group, we have only had Sweden today. Should we take it that you do not have the visibility on cuts across the rest of the group to be able to deliver similar cost reductions as you did or even guided across the group for FY 2018? How should we think about broader group cost cutting? Thank you.
I will start with the last one. No, absolutely not, Andrew. We will have cost programs in all countries. What I said earlier was that when we get to the CMD, we will elaborate and declare how that looks like. Absolutely no change to the cost focus in any of our units in the group.
Moving to price side in Sweden, there are certainly opportunities. I mentioned one where we already have implemented one from April 1st. There are also opportunities that we are executing on in both TV and broadband. The big question obviously that we're on is what is the price elasticity in the mobile space, and how is competition reacting to that. That's something we're analyzing, looking at. Do expect price increases on the TV and broadband besides the fixed telephone that we mentioned. On mobile, we are monitoring and working on making sure that we stay relevant with the right price.
I would give these.
High potential area.
Okay. Thank you very much.
Thank you, Andrew. Next question, please.
Thank you. The next one, it's from Terence Tsui. You may ask your question.
Thank you. Good morning, everyone. It's Terence here from Morgan Stanley. I had a general question around your thoughts around operating leverage in Sweden. What sort of minimum level of service revenue trajectory do you think is needed to make the 3% net OpEx reduction achievable? Maybe related to that, what sort of margin do you think the legacy revenues are currently delivering today? Thank you.
Just to understand your first question, how did service revenue relate to OpEx decline?
I was just wondering, because of operating leverage, what sort of service revenue trajectory you need to make this 3% net OpEx target realistic.
The 3% OpEx target will be delivered, I think quite independent of the service revenue development, to start with. The question is if the revenue mix will drive costs in different ways, but that will be a direct cost related to the sale then. The OpEx guidance is very clear and very safe in that sense.
Then on the margin for the legacy revenues, please.
The margin is still high, and there's two elements of the margin. One is the direct platforms of the network and the platforms we use to deliver on this. Then you have all the indirect costs. The first one makes the margin quite high. Then we are above 60% at least. Then depends on how you see and how you can actually work out another model when you have PSTN out over time. In four or five years, you will have opportunity to build this company differently than it is today based on that you're actually taking out a quite big different type of revenue. That is not a known at this point. That is an upside on that.
Okay. Thanks for the clarifications. Thank you.
Thank you, Terence. Next question, please.
Thank you. The next question, it's from the line of Henrik Herbst. You may ask your question.
Great. Thanks very much. I just had a question on one follow-up on Sweden. In terms of the 3% cost savings. What is included in the sort of cost base you're approaching? Content cost, is that included, for example, and then wholesale revenues? I guess there's a shift going on in your broadband base from on-net to off-net.
Are those wholesale costs included? On that topic as well, you're at 4,000 underlying broadband subscriber loss. Can you talk a little bit what's going on with your DSL base, how fast that's declining, and maybe how many customers you still have? Thanks very much.
Yeah, I'll start with the cost base, and I'll leave to Andreas to talk about the broadband. On the cost base, Sweden did deliver 3% reduction in OpEx this year. The OpEx includes all staff personnel, all resource consultants, other consultants, all the facilities we work with, and it includes sales and marketing costs in our own channels. It includes the electricity we use and all the other type of costs that we have to drive this company and the platform. Content costs and network costs is excluding personnel. The network in itself of running that is a cost in the company. On that OpEx base, Sweden has delivered more than the rest of the group on resources in 2018, and that includes consultants and on staff, as Johan showed before in the pictures.
We guide that it will be at least 3% also next year, and part of that will come from resources as well, but also from the other elements.
Thanks. I guess the point is if your business model is changing and you're getting more resell customers, the other part of the cost base presumably then goes up. Is that right?
Exactly. That is the trick. We have a plan to take down costs over time, and that will be more stepwise. We talked about that in the past. We don't take down telephone poles on the DSLAM one by one when a customer leaves. You take it in chunks, and therefore you will have a slight incremental revenue, but a step change in cost over time. That could give you quarters or half years where it actually doesn't really play. On other costs like value-added services, content, et cetera, it actually is a direct related to the sales.
On the broadband subscribers, as you can see from our reporting, we have been quite good at mitigating the drop in DSL with taking up those customers on fiber. We have an even better position now after expanding our OCN footprint to 0.9 million households for this year. We can address that group more, and we will, while we also have a strong base to build on from the 1.8 million households that we cover with our own infrastructure. That's the plan.
All right. Thanks very much.
Next question, please. I think we have five more questions from this call, and then we can go back to the floor, Fredrik.
Thank you. The next one, it's from Keval Khiroya. You may ask your question.
Thank you. I've got two questions, both of which on Sweden. Firstly, on mobile in Q4, you highlighted that marketing and acquisition costs were higher in the quarter. Have these since come down in Q1, or are you now living with these slightly higher costs to offset your tariff plans, which have a bit of a price from the competition? Secondly, you have discussed how it's been a bit more difficult to take out some costs in 2018 to a degree in 2019. Have there been any areas where you've actually had upward pressure on costs, and what would those be? Thank you.
I'll take the first one, and Christian can take the second one. As we said, we invested a bit more in the market in Q4. We intended to do that, but it became slightly more on top of that because the sales were good. Of course, that carries on into 2019. We're not going to give you any guidance on Q1 at this point in time, obviously. We did more than we expected in Q4, and we should maintain our discipline around the stack for customers through 2019.
On the cost side, yes, we do have a slight worsening, you could say, gross margin profile based on that. I'll take the most simple example here, and there's many elements, but the most very significant ones are legacy is going down a little bit more, and it's not possible to manage that cost directly. We have the best TV in Sweden. We do well. We grow our customers, and that drives content cost. It doesn't take away profit per se, but it doesn't come with the same margin loss that we have on the legacy. That is a shift in the gross profit that looks negative on surface in that sense.
That's clear. Thank you.
Thank you, Keval. Next question, please.
Thank you. The next one, it's from the line of Lena Österberg. You may ask your question, please.
Yes. First of all, my question is on the cash flow bridge. Maybe if you could clarify a little bit more. If I read it right, you will get roughly some SEK 500 million extra from Get year-over-year in addition to what you got in Q3. As I understand it right, you expect to have roughly the same pension effect, so some SEK 700 million out year-over-year. Same taxes, same financial net, CapEx down, and that will get you to SEK 12 billion- SEK 12.5 billion. Is that correct? My understanding of that?
I will not be able to be that detailed, but I'll say you're a little bit thin on the Get side. Then I'll say I reassure that the tax, the financial net, and the pension will not be worsening next year. CapEx is slightly down, and EBITDA will also be driven in the rest of the business.
Okay. Then if I look at the slide you have, I think it was slide 24, where you talk about IFRS impact and lease liabilities. Do I understand it correctly that you say that your lease liability will increase by SEK 15 billion? Is that the net debt impact from leases SEK 15 billion? In that case, if you could maybe just indicate how much your lease costs that are included in EBITDA today and will go away, how much they are, so we can understand the impact on net debt to EBITDA?
I wish I could answer that question, the first one I can absolutely answer is the SEK 15 billion, and that is the increase in the balance sheet asset side and liability side. On the other two elements, how much will it impact the cash flow and EBITDA? We cannot disclose right now, that's one of the reasons why it's difficult also to talk about those parameters that are impacted by that. We will come back to that, either in CMD or at the first quarter when we have to report it for the first time.
Okay. Thank you.
Thank you, Lena. Unfortunately we only have time for one more. Please reach out to us at the IR department and we will help you, those of you that wouldn't be able to ask a question, but we take one final, operator, please.
Thank you. The next one is for Peter Nilsson. You may ask your question.
Thanks a lot. I'll do it quickly, please. Firstly, you talked about, Johan, the transformation in Sweden, which you obviously talk more about at Q3, and telling us that the big impact from this will still come in early 2020. Is that still related to the one sort of large IT project, and will that really have such a material impact? Quickly on Get, are you suggesting that TV revenues for Get are flat in Q4? Is that correct? You're saying the customer base is flat, the ARPU is flat. Would that suggest that TV revenue growth has sort of recovered from decline and is now stable? Thank you.
Thanks, Peter. Confirming your question on the second one, that's correct. Transformation is a big topic, it needs more than a minute. Happy to see you at the CMD to go deeper on that. In short, it's more than just IT. It's the whole platform and system part and the way we work, manual work systems that needs to improve, and we can't get that full effect until we are done with the various programs. That will go into more detail as we meet you in March here in Solna, and I think that is a good conclusion.
Yes. Thank you, Johan. Thank you, Christian. Again, reach out to us if you have follow-up questions or more questions, and we will help you as much as we can, and wish you a pleasant weekend. Thank you.
Thank you.
Thank you.
Thank you. That concludes the call for today. You may all disconnect. Thank you all for participating.