Earnings Call: Q3 2018

Oct 19, 2018

So welcome and good morning to you all and to this presentation of our Q3 results that we present today. We do it the traditional way. Johan Denner Linde, our CEO and President, will start, followed by Christian Lueger, our CFO, and then we open up for Q and A. So Johan, take it away. Thanks, Andreas, and welcome. We'll spend about 15 minutes maximum to go through the highlights on the quarter. I'll label it as another good quarter. And for obvious reasons, the highlights on this chart tells a good story. We are on track. We'll continue to deliver improved EBITDA for the quarter about 6% reported and about 2% organically. So well on track there. Cash flow, very much on track on the guidance that we've had above last year's level, already now SEK9.4 billion. So comfortably in that guidance that we gave you last quarter. But we have to revise up the EBITDA for the year or remove the downside that we had in the guidance before on in line. So now we are only talking about slightly above last year. So that's the better predictability that we have after Q3. Our cost program is delivering. We are well on track on the SEK1.1 billion net cost saving for the group, already SEK1 1,000,000,000 year to date in the quarter 3. So strong focus on the cost agenda across our markets and I'll come back to that. On January 1, 2019, we go live with a new updated operating model. I'll come back a bit to that later, but it's about scalability and efficiency in the core and the platforms for the group as a whole and also better focus and more speedy go to market activities that we're making more clear from Jan 1. The big news this week was, of course, the closure of the Norwegian acquisition, Get TDC, as we are now the owner, proud owners of a great company, and I'll come back a bit to that as well. So all in all, another good quarter. Let's take one level down and talk a bit about the highlights from some of the markets. Norway, first time passing SEK 1,000,000,000 in EBITDA for the quarter, so it's a milestone. Very strong focus on delivery from the M and A. And of course, I mentioned the closure of TDC and GET. So we're all up to speed there on the integration discussions. And also after a year of consolidation of the consumer brands in Norway, we now have a very clear roadmap into 2019 what we aim to do in the Norwegian markets. We feel good about that into 2019. Finland, a very strong delivery on as a whole, but I'd like to point out the very strong B2B execution, a lot thanks to the acquisitions made last year and into this year on the ICT story. So we're growing and both on top line and profitability in the Finnish side of enterprise. We went live with the Liga, the hockey right in Finland, doing really well, and I'll come back a bit to that. And then we have early interest on the 5 gs. So we have a couple of key commercial launches with key partners that gives me hope that we have the right strategy for the rollout also with the new spectrum acquired in Finland. Sweden, a lot of good news in Sweden. We have growth. We are defending market shares across. The mobile service revenue growth in consumers, for instance, is 3%, very strong compared to the reported competitors. We have the most satisfied customers again on both consumer and enterprise and of course still the best network. So strong story in Sweden as a whole, but we are still fighting through a change of structural costs in Sweden and I'll come back to that as well. And the Baltics and Denmark mixed bag, we have strong execution in the Baltics on mobile. We have double digit growth, for instance, in Lithuania and strong convergence portfolio under Tilia 1 in Estonia. And Denmark is actually doing quite well in challenging times if you remove some one offs and comparables. And also a new launch recently on the consumer side is resulting in better NPS. So there's a couple of highlights and we can certainly deep dive into those on the Q and A sessions. But a few words on this. You see the service revenue development still negative, 2%, around 2%. We have a big component in there of removing basically 0 margin carrier traffic. So if you remove that, it's about 0.7%, which then takes us still in negative territory and that's legacy mainly, legacy decline that keeps us in the negative space on growth. And EBITDA still growing on the group level, around 2%. It is 5 out of 7 markets growing EBITDA, 1 flat and one decreasing, which is Sweden. So let's talk about Sweden. Why is EBITDA down in Sweden and what is not according to our plan for Q3? First of all, revenues, here you have both the legacy decline, but also less OTCs than the Q3 last year. We have the cost program that we talked about cost 18. It is not delivering according to our expectation. I'll come back to that. But we also have some one off costs in Q3, which is fairly big. It's about SEK 80,000,000 in difference versus Q3 last year and it's FX. And FX and something else. Thunderstorms, We didn't think about the thunderstorms, but we had a bad Q3 in terms of maintenance and repair due to that. And that was about SEK30 million higher than last year. So that's unexpected and it won't carry through into Q4 hopefully. So that's the story on the Sweden cost side. And as I mentioned, we are going live with a new operating model. It will enable both Sweden to be more efficient in go to market as well as the group common products and services to be more scalable and efficient as we also plug in other countries into the new platform that serves all the countries. We are moving 500 people from the Swedish operations into this common products and services from January 1. So Sweden will have less employees in that matter and focus even more in the go to market activities. That's the Sweden story. But overall then we are delivering on the cost program. As I said, it's about SEK 1,000,000,000 year to date. We have SEK 1.1 billion net for the year. So we are very comfortable on the full program. Sweden was expected to deliver about half of that and will not meet half of that, but the other countries, as you see, and group functions are compensating. So that's the good news. And Sweden cost, of course, is very much in focus for Q4 and leading into 'nineteen. So it's by no means something that will carry through as a trend or anything. We have comfort in the plans for Sweden going into 'nineteen and onwards. Then a few words on the mobile revenues. We are still in growth for mobile. It's an important part of our business. It's about almost 1% on the service revenue for the group and it's built up mainly through ARPU increases across the board. And you see Sweden is about 2% overall. I think it's a 6 percent ARPU increase in the consumer side. Norway also increasing. I think it's 1% on consumer. Finland very strong ARPU development overall. And then also as I mentioned into the Baltics, you have a very good momentum in the pricing up and also bringing customers into the larger buckets. So fairly good story across the board on the mobile side. The Finland, a lot of investments in new bets and they are paying off. We are seeing a good interest and a good start to our ownership of the rights on the hockey. We have about 70,000 customers so far, very much on the stand alone offerings. Half of them approximately are new customers, I. E. Not Telia customers. That's really good news. And more than half are coming in on the higher side of the Liga passes, which includes then a lot more hockey. So we have good we have no reason to believe that we would have to change our ambition or appetite for this ride. On the contrary, we are very encouraged by the early signs. And also very, very encouraged by the M and A that we have executed on. And the point I'm making here is that all the acquisitions that we have made on the B2B space, we are delivering above our M and A case, I. E, our requirements that we have committed to and the synergies that we have laid out. We are well ahead of those plans. So that's strong execution in Finland. Then I will close with a couple of comments on the acquisitions that we have made recently and the one we closed this week. The TDC and the GET company is now in our hands. It was approved without remedies. We're very happy about the process, obviously, quick, efficient and fair in our opinion. And we will make sure that we live up to the commitments in the consumer and the enterprise space as pointed out. Very clear integration road map established with the 2 companies. We are now going to get to know GET and TDC. So it's a bit early to talk about any changes or any numbers, but let me give you a few highlights on the preliminary Q3 numbers that we have just taken part of. Basically, revenues are flat as we see it, TV unchanged and broadband growing slightly. So those are the highlights that we can give you at this point in time. But we have obviously no reason at this point to change any of our predictions. And we are now getting in to know the company and the people. And then we will come back to you Q4 or maybe in the CMD that we're planning for Q1 with any updates to the synergy estimates that we have laid out, which you know is SEK 700,000,000, SEK 600,000,000 EBITDA, SEK 100,000,000 on cash flow or CapEx. So euros 700,000,000 in total, very comfortable on those synergy estimates to be kicking in full run rate latest by end of 2021. And we mentioned the previous acquisitions just to show you that the track record that we have on the acquisition is strong and we have no reason to change our confidence around the teams in Norway and here at Group. The last slide, a quick update on the Bonnier deal. Really no news, to be honest. We have filed with the EU Commission. We are now in that process, which we still expect to be closing in next year, half next year or in even second half of next year. It's a tedious process that we will have to go through and respect and look forward to, to educate our stakeholders about this deal. And repeating the logic of the deal, obviously, that we have been spending a lot of time on over the last few months since we announced this deal is that it's both an offensive deal bringing new revenue streams, new business logics into the Swedish and Finnish markets as well as a defensive deal ensuring that we can protect our core and also protect our TV business into the future. I think we're getting fairly good feedback now from the stakeholders and investors we're meeting that this deal will deliver and we're confident, more confident than ever that we will deliver on the synergies laid out and repeating them SEK 600,000,000 full run rate EBITDA effect. And you should plug in 2020 already SEK 500,000,000 of operational free cash flow from the combination of synergies and stand alone business and then we'll give you any further updates as we go along. With that, I'll see you back at Q and A. And Christian, please take the stage. Thank you, Johan, and good morning, and welcome to Stockholm and Solna. We have a solid quarter delivering according to our expectations. And I will go through the numbers, as Johan said. As you've seen this morning also, we have the share price impacted by the dividend that is traded ex the dividend today of €1.15. Service revenue, if we start with that, we had a flattish service revenue development whereby the equipment sales is high. The equipment sales is partly driven by a new handset recycling program in Norway, which is a new product and an important product of making sure we have a solid offering. Otherwise, the service revenue is down. And if you look at the right hand side, you can see that the Carrier is down quite a lot. And Carrier is primarily low margin and no margin business that is declining on voice. And without that, we have a decline in 0.7% instead of 1 0.9% in the quarter. I'll come back to Sweden and Denmark a little bit more. But on Denmark, primarily, we had a one off last year in the service revenue that impact both EBITDA and service revenue. And without that, the decline in Denmark should have been half of what we see on this page. And in Sweden, we do have the fixed and the OTC, and I'll tell you a little bit more about that in a moment. If we look at the EBITDA, the EBITDA is here, 1.8% and 6.4% with the currency. Currency is euro, Norwegian and Danish krona that drives it, primarily the euro. There is a solid development in 5 out of 7 markets. Here again, Denmark is a tiny red, should have been a green if it wasn't for the one time effects last year. The decline in Sweden, Johan has gone through that, And it is the Swedish revenue decline on fixed, SEK110 1,000,000 in fixed service revenue down in the quarter. OTC is also down. And the cost development is not in the same level as it has been in the previous quarters. Marketing is somewhat higher than last year and also the previous quarters, which we also see an effect of, which I'll come back to. And the cost saving program is less in this quarter, primarily on resources. Year on year, the comparison is different this quarter, and we talked about that the full first half year that we have a better comparison. So we're not increasing our cost, but we have a less comparison with last year quarter 3 when we started to take out both consultants and primarily in quarter 4 also employee numbers in Sweden. The other impact was the one timers on thunderstorms and the FX effects on equipment sales that we do in Sweden Enterprise primarily. If we then go into Sweden, there is a lot of positives from this as well. We if I first start before going into the numbers and talk a little bit about fiber, which I usually do, SEK 34,000,000 down in the quarter year on year, which puts us on a 77% compared to last year, SEK 74,000,000 year to date. I guided 60% to 90% level for the year. And being at 74% already now means that we will be in the mid range of that 60% to 90%. It will not be 60 and it will not be 90. It will be somewhere in between. The enterprise segment continues to be negative, but it is better than last quarter. We had a sort of a bigger one timer on the large segment in the last quarter, and I said that. And now it's back to the 2.7 ish where we typically trade on the B2B side, where large is the big decline and where Soho Smia is around 0 in development. And on the Soho Smia, it is still mobile growing and that the fixed is in decline. When we look at the B2C and mobile, as Johan said, we had a good development on our ARPU and we also have a good development on our customer intake. So customer intake has been positive, 11%, 11,000 on the consumer side, 15,000 in total. And the consumer revenue grew with 3% on mobile. And the ARPU uplift comes both from that the new customers coming in are coming in on a higher bucket or higher price level. We have some upsell and we have some price increase. So it's a combination of many activities. There's not one single thing that drives the price ARPU up in this quarter. I also want to mention, which is fairly new, but not new. I mean, we have been awarded the best TV services for many years in Sweden. And we have started with our OTT and play services. And that play services is developing well. We are growing 21,000 customers. We are also growing the active play users with 38%. And the number of minutes that people use this service is also increasing. And why this is important? Well, if we're going to be able to monetize this in the future, we don't only want more customers, we want the customers to use it more. And this proves that both of those things are happening right now. And that's the important message with this. And this fits very well into our other ambition to bring even the best TV services in the future with the Bonnier Broadcasting deal that we have done. If we then go to Finland, service revenue is up 0.8% and this is driven primarily by mobile. I would categorize all Nordic and Baltic markets, maybe except for Denmark, as very stable and positive markets right now. Finland is no exception. The mobile growth is strong. We grow 3.6% on mobile consumer build build revenue. And we grow number of customers, 15,000 here as well, like we do in Sweden. And both B2B and B2C is contributing. Actually, B2B is contributing more in Finland, the B2C to the growth level. And that is also very good to see because that was the main purpose of the acquisitions to strengthen our position in B2B and make sure we continue to have a good development there. And we get the bang for the buck, you could say, in our offering on the B2B side. But as said, B2C is also growing and it's a solid development. This and together with cost reduction brings a 6.1% increase in EBITDA, which is very positive, and we feel nothing but very comfortable and happy about Finland development right now. The only thing in Finland that you would mention is that there is still some activity in the market. Yes, I know that question will come. But we don't see it so much in our numbers and we try to do our stuff in Finland and do our price increases, our offerings and our changes to the market where we want to be a solid reference for our customers. In Norway, we have a decline in revenue, as you can see, 0.9, but we also have still the special numbers that are taken out from a regulatory point of view. If you take that out, the SEK30 1,000,000, it is actually a slight growth in Norway. That growth is coming from a flattish consumer development with wholesale that is still growing slightly. And if you look at the EBITDA, that brings us with all the synergies from the Foneuro deal, 15% EBITDA growth. If you take out the synergies from the Foneuro deal, the EBITDA growth would have been 4%. And that based on a flattish revenue shows that we are also taking out cost in a good level in Norway. The lead countries, Lithuania, Estonia and Denmark, let me start with Denmark. Denmark had a onetime effect last year when we closed down the prepaid in Denmark, and we got a onetime revenue one off. And without that, the EBITDA the service revenue should have been minus 4 percent and the EBITDA would actually have been positive and quite a good positive development. And that is based on a really good cost effort in Denmark. They've taken down cost and they worked as much as they can to develop that business in a difficult environment. The ATL pricing in Denmark is stabilized. The BTL pricing is still a little bit shaky. Estonia continues to deliver high profitability. It comes from all areas. We have mobile growth on B2B and B2C. We have fixed growth on B2B and B2C, and we have cost cutting. So it's a really good development. The service revenue in total doesn't look that much, but it is a good balanced platform in Estonia. In Lithuania, we have mobile service revenue growth, which is very strong, 14%. And the service revenue growth in total of 4% is actually then hampered by the fixed decline, same as we have in Sweden, all legacy fixed decline. In total, together, it actually brings the development of EBITDA also to total service revenue growth in Lithuania. So positive momentum, and I would actually put Denmark on the positive momentum as well here based on that one off in quarter 3 in 2017. CapEx. CapEx develops, has flattened out a little bit this year. My main messages on CapEx is that CapEx for quarter 4 is expected to be below last year. So the line will decline somewhat in quarter 4, ending a little bit lower than it is on this page. The other message is for next year, fiber CapEx will go down. And we have said up to 2019, all CapEx should go down. And from 2019, fiber should continue to go down. And we will come back on more guidance on CapEx when we get to year end and see how we see on this. 5 gs though will not impact the next year in any material way. And over time, we see it will be replacing the 4 gs investments. Should be noted, there is a SEK 700 auction coming up in December. It is official. The 4th December auction starts. Payment terms on that auction is 30 days net. Cash flow trend is positive. We have a 10.4 rolling 10.2 rolling 12 month cash flow. We have said that the cash flow for this year should be above last year's SEK 9,700,000,000 and should continue to grow in the years to come. And that we feel good about and it's a comfortable statement. We are driving the EBITDA CapEx and working capital together as our main activity in this company. And that's what we said in the beginning of this year. That's where we should see the upside and that's what we are delivering on. So exactly what we expected and how we should also see the future of Telia. Net debt to EBITDA, we have now paid the GET TDC acquisition on Monday this week. It was a big check of course. Another check going out is next Thursday when you get the dividend from Telia, the 2nd tranche of 1.15. And as we can see on this page also, we have continued to buy back shares, total SEK2.7 billion so far since we started, which is pretty much half the program of SEK5 1,000,000,000. And we have also the remaining part of the U. S. Beck settlement, which is expected to happen latest in quarter 1 2019. All in all, this keeps us within the leverage target of 2.0 plusminus0.5, a very important target for us to make sure we have a solid strong balance sheet even though we have done very important and good acquisitions. The EBITDA and EBITDA minus CapEx effect from GET and TDC and Bonnier Broadcasting, I just want to remind us that now GET will be reported from the 15th October into our numbers. We are of course reviewing and making sure we get the reporting up running as we speak. We see that the main effect then from last year was SEK1.8 billion on EBITDA and SEK1 1,000,000,000 in cash flow and volume broadcasting coming in most likely then in the second half next year. The main takeaways from this is the timing and that reminds you about the integration cost and the synergies going forward. And the integration cost in the TDC case will be then equally over 2019 2020 with about SEK200 1,000,000 each year. Finally, the outlook SEK 9,700,000,000 in free cash flow last year. We will come in above this year, driven by the EBITDA, CapEx and net working capital. The EBITDA is upgraded to slightly above and that is of course on the back of a 4% growth in EBITDA year to date and would make it close to impossible not to reach a slightly increase in EBITDA for the year. So that's all. And I welcome Johan Andreas. And Yes. Before we move into the Q and A, could I please ask anyone that isn't asking a question to mute their phones, so we don't have the same trouble as we had last quarter. And then we move into Q and A. So I invite Johan up and also a special guest star being our Head of Sweden, Anders Olsson, also to join us. Go on, please. And we start with questions from the floor. Ladies first, Johanna. Johanna Arkqvist from SEB. Three questions, if I may. The first one relates to Sweden. I don't know if it's directed to you, Anders. But why do you expect the visible impact from the cost cutting to be in 2020 and not 2019? So should we basically expect no change in the cost cutting structure in Sweden 'nineteen versus 'eighteen? That is my first question. And my second question relates to working capital. It was negative in the quarter, and I'm just wondering how we should look upon that in 2019. And last question, Eurasia. You have some bits and pieces left. How is that process on divestment developing? Thank you very much. So let me start with the Eurasia one then to make sure we cover that. We have 3 remaining assets, Moldova, Kazakhstan and Uzbekistan. We have had a quite lengthy and tedious complex process of finding the right path forward for divesting. We're in a good shape to fulfill our ambition to divest these assets in the near term. We have good interest. We have the right interest now, which has been important for us. And we are aligned with Turkcell on how these assets should be divested, the 2 ones under Fintur. So no reason to really change our expectations and hope that we will be divesting these assets in the near term. Then I'll take the working capital and then I will hand over to you on the cost for Sweden on this. So the working capital, we said that we feel very comfortable that we can take out SEK5 1,000,000,000 last year. And so far on that program, we have taken out half up to date. Exactly the timing is difficult to evaluate because we have very good programs, but we are not stressing or paying too much. We want to do this fundamentally from the base and at low price. And therefore, I can't give you the exact timing of it, but at least there's another SEK 2,500,000,000 to take out in working capital. That's my message. And when it comes to the transformation, we are in the middle of a big IT transformation or transformation to change the way of working. Big part of that is the whole change in how we're dealing with our customers, both billing wise, CRM, provisioning. That program we have said before that will be finalized 2019. We said now that that is delayed until 2020. And that will have some significant savings when we're done with that whole initiative. That obviously doesn't mean that we're looking for other cost savings during 2019, but that big initiative has a delay and that delay will cause those savings generated from that initiative will come 2020. Then we have Stefan. Yes. Hello. Stefan Gofang, DNB. Three questions. First, Sweden. Just I think you took out 6.50 resources in Sweden last year. Why don't we see a bigger impact? I know it's a tougher quarter in Q3, but still so why aren't we seeing more effect from this? Secondly, just checking, Finland was a great quarter just seeing checking so that there's not lower marketing spend this quarter that explains the solid EBITDA. And then thirdly, Norway, you're losing some mobile market share the competition Norwegian market at the moment? Thank you. We'll do the same flow then. I start and then Christian take Finland and Anders Sweden. So Norway, as you know, we have had since we acquired Tele2 and since we had a new entrant with ICE, there has been our message that we will not grow market share. We will probably have to allow or the natural effect of competition is that you lose customers and that you have seen. I'd also like to say that we have rationalized the brands on the consumer side, closed down chess, moved migration to Telia, and that has also resulted in some effects. But now as I mentioned in my intro, we feel good about the consumer road map into 'nineteen. We feel that both the propositions that we have, the brand platform established on the remaining brands is very strong, which means that I expect us to be more resistant and more resilient on the competition into 'nineteen and onwards. And that makes sense also timing wise as you have seen the dynamics in the market playing out. So the quick answer on Finland is no, no material impact on the quarter year on year on the marketing like we have in Sweden, for example, or the opposite. So When it comes to the cost in Sweden, the employee cost is one part of the cost structure. And there, we took out some people last year, but we also have, for instance, a big capitalization ratio on the consultant side in last year, which we don't have the same effect of this year. And in terms of the people that was taken out, it was not the most expensive part of the resource structure. And that means also that some part of that is moved out elsewhere of the resources that has been taken out. Good. Stefan? Stefan Billing at Kepler Cheuvreux. I have a question on Swedish fixed broadband. Your customer base has stayed unchanged in the last few quarters. You probably have around 500,000 DSL customers left, most of which probably outside your own fiber territory. How many of these do you think realistically could be fiberized by your or competitor infrastructure in the mid term perspective? And how do you view the risk of a declining fixed broadband customer base in Sweden? So you're right that we have a fairly big amount of D cell customer still in our base. I will not give you the exact number. What has to be remembered in these customers is that fairly many of them are in rural areas where it would be more difficult to fiberize those customers. And exactly how we will do the migration from copper based broadband customers to fiber is the work that we're doing to make sure that we're taking as many of them as possible to fiber. And then over time, there might be other possibilities as well to provide them with mobile services. But part of that base is obviously not in the major cities. They're sitting outside in the other parts of the country. Let me just add that in the quarter, we had a net. We maybe saw a positive. Fiber, actually broadband customers are growing faster than the decline in XDSL, and we have a slight ARPU uplift as well. So we keep a positive development of that business case still in this quarter, which is a little bit better than it was in the first half year. Maybe also mentioning the initiative that you have to get on the Open City Networks and the other networks, which we haven't been on before as a service provider and a come up. That's a strong drive in the Swedish organization to do that, investing to get on top of that, which increases our reach. Yes, simple as that. There's a possibility to grow even more on the wholesale side since our market share is very low there still compared to what we have market share elsewhere. And I also add something for once. It's less than 500,000 on XDSL. Can we have some question on the conference call, please? Thank you. The first question is from the line of Peter Nielsen. If I can just ask a question to Sweden, Johan, and also in Annecy. I guess it is the 2nd time now within the last few years that a major transformation program in Sweden has been delayed or the effects have been delayed for another year. Why should we feel confident this time that this time, it will work and we will actually see the positive impact in 2020? Perhaps Anders can, now that he's in charge, give us some update here. And secondly, yesterday, one of your local competitors told us that they were enjoying good momentum on the B2B market in Sweden and are targeting the number one market position. Do you have anything to comment on that, how you feel that you are doing and responding and how resilient you are on B2B in Sweden? And just, 30, if I can squeeze in you. You talked to us about the latest trends at Get in Norway. We obviously don't have the very latest numbers, but certainly preceding quarter, TV revenues have entered sort of a decline. Is that something that concerns you? And have you discussed with local management sort of message to try to stop that decline? Thank you. Thanks, Peter. Let me again start on the last one. Yeah, we of course noted the results earlier. But as I updated you now, it's a fairly flat development, increasing on broadband and flattened TV. Of course, we'll get into this now and more details and knowledge on the existing operations. But as I also mentioned, there's no reason to change any of our predictions and estimates so far. This is a very well positioned company, which has a good and clear strategy on how to migrate customers upwards, how to price up and also how to mitigate the decline that has come on some legacy stuff. So we're very confident that we have good answers to your questions as we move along from here. Let me also cover part of the first question, which is then relating to prior to Anders entering the CEO, which is the program we laid out in 2014, the Invest TO Save program that we have delivered on. So I just want to mention that, yes, there was some slight delays on that, but we delivered on it. And the ongoing transformation now is a big piece of change. And I also said that in Q2, when you're in big programs like this, you will have effects between quarters that we have to deal with because it's impossible to predict the exact progress when you start programs like this. The only thing we really know is that we have to go through it because it's inevitable. The change is needed. Taking out the old, putting in the new is needed. And this is not a dramatic change. I have to just emphasize that. This is a move from late 2019 into early 2020 effects. And this is changing the mid- and long term potential of the Swedish operation. And as Anders pointed out, short term there are other cost means to compensate. And in terms of comfort about not being further delay, in practice what we're doing in the big transformation when it comes to the iterated part is that we're migrating the customer over to a common system. And that is happening here now practically. So there's a lot of preparation work that needs to be done to make sure we can do that. But that journey has actually been initiated and step by step that will continue out down to 2020, which means that we're already doing this migration here and now. So we feel much more comfort that we will not be coming back with any further delays. When it comes to the B2B market, it is a challenging market, but we feel very comfortable that we will maintain being the clear market leader there. We are having somewhat price pressure on the large segment. We're defending well on the small and midsize segment. And the positioning that we're having, the portfolio that we're having and the absolutely best network coverage that we're having will mean that there will be more important components going forward. So we feel very secure that we will be able to defend ourselves in the B2B segment going forward. Okay. Thank you. Thank you, P. K. Can we have next question, please? Thank you. The next question is from the line of Roman Arbuzov. You may ask your question. Thank you very much for taking the questions. I have 2, please. Just going back to Sweden costs, it's clear that you're running out this new operating model and then the transformation cost related savings will only be coming in 2020. On the other hand, you guys are talking about some of the other measures which are available for 2019. And Johan, I think, also sounded reasonably confident about plans going into 2019 as well. So with those 2 opposing forces, do you what do you think are the chances for Sweden costs to be, therefore Sweden sorry, Sweden savings or cost cutting to be high year on year in 2019 versus 2018? Do you think that's possible given, I think, the tone of your commentary? So that's one. And then just as a kind of a side question to this one. In terms of the transformational related cost savings in other countries outside of Sweden, so do we now expect these to basically come through in early 2020s? Because I guess you were running your new generation telco program in 2014 to 'eighteen, and then there was already some expectation that some of the benefits will start to materialize from 2019 onwards. So now that Sweden is delayed to 2020 and it sounds like you're making it, basically everything else will sort of follow Sweden. Does that mean that transformation related savings, sorry, will only be coming in early 2020s? And then just a final quick one on free cash flow guidance. Can I just ask you, is there any particular reason why you chose not to upgrade the free cash flow guidance given how strongly it's been running throughout the year? And for example, do you expect any funnies, any abnormalities in Q4 in working capital, for example? Thank you. So let me start from the end then and say that our guidance on free cash flow, operational free cash flow doesn't have a ceiling. So that's why we don't upgrade it. We have said above 9.7 percent and it's still going to be above 9.7 percent. And we don't see any strange things in working capital for quarter 4. When it comes to the cost programs, let me just go back and take one step back before we go into 'nineteen. We decided to go with a quite tough challenge for 2018 and that was a net cost program. And I've said that before, it's very few companies that have done a net cost program. So our gross cost activities are much bigger than the net cost saving, of course, in the group. So when we talk about the SEK1.1 billion for this year, of course, the activities to reach that with salary increases, with increases on rent or whatever you have and inflation is much higher. What we do now in our planning and we have already started both the cost effects that we have not done this year that we get to flow into 'nineteen, but also the new activities is to be a little bit more sensible on the service revenue growth drivers on cost and contra the cost savings we will do. So in Finland, expect higher profit. And that will be a slight difference next year from this year. That does not mean that the gross saving activities and the pressure on improving EBITDA, improving the CapEx efficiency, improving the working capital will be any different. But the program will be set up differently. Going then back to the different countries, the biggest transformation and the E2E mass market change that we are doing in Sweden is the biggest program in the group. We are doing transformation activities in the other countries and they all are different both in timing and size. We have never said that all transformation in all countries will be done 2019. Some of them have already given an impact. For example, both when we did these synergies in Estonia and also started to take out the copper much earlier in Estonia, those activities have already given fruit in that operation. So there's no 'nineteen deadline for the old transformations in the group. And some will come later and some will come earlier. And that is depending on how we can handle that from a market point of view and also growing EBITDA point of view. That was a very overall message. Then I don't know if you want to say something specifically on Sweden unders on the cost for next year. So I mean, we of course have some big structural transformational costs that we already talked about that have a more long term horizon that will give some significant savings. Then we have some other structural more mid term structural initiatives. Obviously, we're working how we can increase the digitalization, automation in the operations and by that getting out cost. And then we will obviously look at all other parts of our cost base to see how we can address that also in short term. So we're dividing them in different areas. Some of them have more long term effects and some of them have more short term effects, and we are addressing all of them. But no guidance at this stage whether you think you'll be above or below on the No. Okay. Thank you very much. Christian, can you just ask what are you working capital on? We have a lot of questions in the queue. So we have to cut you there. Short and sweet is the keyword for everybody else. Next question, please. Thank you. The next one is from Lena Osterberg. Please ask your question. Yes, please. Maybe I could ask this cost cutting question in a different way. Do you think can keep EBITDA Sweden flat year over year in 2019 as this has been your target before? Because you said already at the Q2 report that you were looking for other efficiency measures. So I assume you started already in Q2 to look at other things which could help you take down costs in Sweden? And then also, you recently downgraded your credit rating. I was wondering if you can maybe say if you expect any significant impact on your cost of debt and net interest into next year from that. And then also on the PPA of GET, now that we need to put GET into our numbers, how much should we expect in depreciation to add? And how much in amortization of brands and customer relations, please? Okay, Lena. I'll take the first. We'll come back to guidance for 'nineteen and onwards in Q4 and then we have a planned CMD also in Q1. We'll come back to that. Just repeating the messages that I've given on Sweden before that short term, there is a negative pressure that we are fighting both for this year and into next year. Of course, our ambition is to do as well as possible, but the overall guidance we'll come back to. But you have negative forces in Sweden that we're talking about now, but we're compensating with cost savings short term. So on the amortization and the PPA for GET, that is a work ongoing now. We just took over the company on Monday, and now we go through how that will be sort of worked into a purchase price allocation. So we'll have to come back on that, Elena. When it comes to the rating, I think you relate to Fitch that came out earlier this week. We do deal with Standard and Poor's and with Moody's. We don't have actually a relationship with Fitch. And they do this on their own. So I am more eager to see if Moody's or Standard and Poor's changes their view. And I think our bondholders is doing the same. And Moody's actually reiterated the BAA1 stable the other day also. Good. Thank you, Liana. Next question please. Thank you. The next person is Andrew Lee. May I ask your question? Yes. Good morning, everyone. Thanks for taking the question. Unfortunately, another question on cost cutting. I'm just trying to run Sweden, just for the group as a whole and your ability to compensate for the slight delay in the time of the transformational program. So I think, Christian, what you're saying is that we shouldn't necessarily expect a similar one €100,000,000 net cost reduction in 2019 like you did in 2018. Is that correct? Is there a reason why you shouldn't see similar EBITDA growth in 2019 versus 2018, all else being equal on the top line? Or maybe in other ways, is there a reason why we shouldn't see a similar boost to growth from cost cutting in 2019 versus 2018? If there's a way you can kind of couch your answer on with that backdrop, that would be helpful. And then just secondly, I guess one thing that investors are concerned about in digitalization and big cost cutting in general is the cost of transformation offsetting the benefits in the near term? So are there any incremental costs for transformation we should be taking into account for next year? So let me take both of them. The net cost for the transformation next year will not be higher than this year in any way. So that's the first one. And I think the other one question is a very good question and brings me back to the profiling. Absolutely, cost will be on the agenda for 2019 as much as it's been for 2018. But this year, we have had a very different kind of program with a net program, including COGS, including COGS on services that actually are volume driven. So when Finland has been growing in Nebula and they are growing their COGS, they have been needed to take out another cost. We will continue to take out cost in the same pace and the same level next year as this level on the things that are within the cost program, But we will also be sensitive to make sure that the service revenue can grow. And if that means that a certain particular COGS needs to increase, we will let that happen. And that based on that, it will drive future and next year EBITDA growth. That's really helpful. So the way we should think about it is if we can strip out COGS from kind of other OpEx, your other OpEx line, I. E, your kind of fixed cost line should come down by similar net basis. Your COGS may go up dependent on your top line trajectory, but you should become as much more efficient in 2019 as you did in 2018, if we think about your free cash flow creation and conversion? Exactly. And the good and the complicated thing is that there are certain things in COGS like the network and IT side that are more fixed base and they will of course attack. Yes. Okay. Thank you. Thank you, Andrew. Next question please. Thank you. The next one is from Ulrich Rat. Please you may ask your question. Yes, 2 please. Thank you. The first one is sort of on the way you're prioritizing this Swedish cost situation in your communication. I mean, you're really sort of brutally upfront about it and really sort of putting it out there that there is a delay. I'm just wondering between the sort of different reasons why you have decided to do this, is this maybe because you really want to sort of create a sense of urgency also in the organization? You feel that maybe that urgency needs to be sort of emphasized also internally and that's the reason why you're making this quite upfront? Or is it maybe that you look at sort of market expectations and you think there's a real need here to update the market so that we can all sort of try to go back in our numbers and models and sort of see how much we have to cut. I'm just wondering where the motivation really comes from. Is it more really that you feel there is really an impact on the numbers that we don't know otherwise? Or the sort of sense of urgency in the organization or other reasons? My second question is, there is a very significant EBITDA uptick in other sort of I think group costs that where the cost savings are not allocated to the individual operations. Could you comment a bit about how sustainable that is, whether that's just a funny quarter or that's nice and that will sort of continue? And also, how much of that big uptick in EBITDA, I. E, cost savings in that non allocated bit, how much of that naturally would belong to Sweden if that group thing would be allocated as usual? Thank you. Thanks, Ulrich. So you should read my comments as more on that. We want to be transparent with you, and we want to make sure that you know that we're talking about 2 different things. We're talking about the cost program 2018 and there we said to you before that we wanted Sweden to be half of the 1.1. And now we're saying that's not really going to be the case, but we're compensating with other units, which has over performed on our cost 18 program. And then we're also talking about the one off effects of cost in Sweden that is not carrying through into the coming quarters, but we are still behind on the cost 18 program. But when it comes to the other part of Sweden cost comments that we're giving is the transformation effects. They were not supposed to come now. They were supposed to come in 'nineteen second half. They're not coming with the big structural effects that we were expecting in 'nineteen. They're moving into 2020. We just want to be clear on that. So read the comment as transparency and of course trying to be as open as possible externally and internally. That's just the way it is. So on the other very good question, again, 2 thirds of that comes from our common technology services on group, which Anders was running up to this summer. And we allocate the cost based on a plan. And if it performs better, that will come into next year's development. And 2 thirds of that comes from that part. The rest comes from TLF Finance, which is doing well on the financing business, but also from Carrier that despite the service revenue decline is actually also doing better. So that's the packaging of that other portfolio in short. Okay. Thank you so much, Ulrich. Time flies when you have fun time. The next one is from Terence. I'll keep it short. So I just had a question around the Finnish ice hockey. Just wondering what KPIs you think we should be looking at to judge whether this venture is successful. I was a bit surprised that the mobile net has been a really barge quarter on quarter despite all of the extra marketing around the ISOCE. Thanks, Harness. You should be looking at 2 things. 1 we showed you today is the stand alone intake on the proposition, around 70,000 customers, half of them non Telia customers. That's important to keep an eye on. But more importantly into 'nineteen, the effects of the Liga into our core services that you are not seeing yet correctly as pointed out by you that we will talk about and show you into 'nineteen. Okay. Thank you. Okay. Thank you very much. I know that there is more questions. Please reach out to Investor Relations. We are available all day. And thank you for contributing. We look forward to the season finale on the 25th January 2019 when we report Q4.