Earnings Call: Q3 2017

Oct 19, 2017

So good morning, everyone, and welcome to our Head Office here in Solna for the presentation of the Q3 2017 for Telia Company. As usual, I'm accompanied with our CEO and President, Mr. Johan Denner Linde and our CFO, Mr. Christian Lueger. And I don't think we should spend any more time. So Johan, welcome up. Thank you, Andreas, and good morning to all. We're in Solna Headquarter, where we are also letting you here test our 5 gs live services. I'll come back to that. But let's start with some of our highlights for the quarter. We want to remind you on a few things. First of all, let's start in Norway, where Norway continues to be performing organically, but also stepping up when it comes to our acquisition, notably Solfonero, where I want you to know that we're heading into 2018 with a €400,000,000 synergy program realizing full potential of that integration. So that's a good news. I feel comfortable about that. Another part of our comfort in the quarter is the Swedish cost focus, which is yielding in the quarter. Remember, we had a 5% ambition to take down OpEx in Sweden for the second half. We're now half through the second half, I. E. Q3, where we're down 6% on OpEx in Sweden. So comfort on that as well. In Sweden, we also see unfortunately a continued delay in some permits regarding fiber installation and delivery. We estimate that to be approximately affecting 8,000 in household installations, which I'll come back to in more detail. Our cash flow, which is very much in focus for the year as you know, which is solidly in the 8.8% year to date territory, and we'll come back to that to guide you for Q4 where it will actually come down a bit. But year to date, very, very strong delivery on our cash flow. As you know, we have started our reallocation of capital from our associates where we have divested twice in Turkcell, our direct stake during the year. And also after Q3 closing, we had an ABB in Megaphone resulting in a divestment of approximately 6%. But we have also received dividends from both associates during the year, which is, of course, then supporting our dividend based cash flow for the year. We spoke to you not too long ago as part of our global settlement in around Uzbekistan. That's worth reminding us all about. And there are no further ongoing investigations against our company anywhere in the world as far as we know. This has created a positive momentum and positive atmosphere around our divestments in Eurasia as well. So those are the key takeaways for the quarter that I want you to walk away with. But let's take a little bit deeper look into the numbers at least on a high level before Christian drills down even further. Service revenue are down if you look at group level. But if you look underneath, we're actually growing in 6 out of 7 markets on service revenue organically, which is positive. I mean, it is possible to produce our growth, which we're so eager to do and investing to do. In Sweden, we are hampered, as I mentioned, by the fiber one off installations. About €120,000,000 in the quarter affecting the numbers. So without the fiber OTC part, we're pretty flat on service revenue for the group. EBITDA started out the year accordingly to our expectations, and we said half second half will be stronger. You can see that it's significantly stronger in Q3, still slightly negative though. And that is, of course, mainly related to also the fiber side, which has a big impact on the one off revenues with high margins, which of course then shines through to EBITDA. But it is a pretty stablegood development underlying on the organic Nordic Baltic performance. Take a look at Sweden. Before we go into numbers and stuff, this week has been a good week for the Swedish team, where on Monday, the Swedish quality index appointed or awarded Telia's B2B side, the business side as the most happy customers in Sweden. That's a great demonstration of the efforts we have in our service delivery to Swedish B2B customers. Also Hale Bopp, our 2nd brand in Sweden has the most happy consumers and customers in the consumer space. That's a great proof point that we're doing good things across the Swedish market. Another very important part is the P3 network test, which is a well established way to measure how good are the networks in the market. We last year came out on top. We continue to be on top and we strengthened actually the measures from last year now being regarded as international top class means that the Swedish customers are enjoying the fastest network with Telia. So that's, of course, on the back of a lot of investments, a lot of hard work from the teams and great engineers across our markets. So well done there. If you look at the numbers then where I started, the good news obviously that we said we would come down on cost in the second half. We are coming down on cost. We have cost control and we're delivering on that. So again, what we do what we say is what we do. And we have no reason to revise our 5% ambition for the second half. When it comes to EBITDA then, it is, as you can see from this picture, impacted by the fiber, slow fiber development and to close that gap we'll come back to briefly soon. Otherwise, we have the right trends in the underlying Swedish business, which is also important for you to see here. A few words then on the fiber. We're speaking a lot about fiber because it is part of our core business going forward. We're digitalized in Sweden. We're the leading fiber operator. We have not revised our ambitions to fiberize 1,900,000 households, and we are taking our fair share of the market. But the market is affected by 2 things. 1 is a huge demand still. We're not delivering to the demand out there. 2, it is getting harder and harder to access the last 1000000 households and we're getting into permit issues. And one permit can affect several 100 of households, of course. And here's an example of that, how one digging permit can actually affect larger area where you have SDUs, I. E. Households waiting to be fiberized. And a lot of the delay is related to permits. And that is, of course, not an excuse and it's an explanation to our slower than expected, slower than we wanted rollout pace on fiber. And the financial impact of this is very visible, not just on Sweden, but on group numbers, obviously. So here you see the financial impact, but also the paradox, which is on the positive side of the cash flow as we don't deploy SDU and installation, we also don't deploy the CapEx. And the net cash flow effect of this is positive, which you can see from this chart. Of course, since there is a delay, the CapEx will come back later and also the revenues associated with that. Norway, as I said, a delivery machine, strong in bringing together the brands, the several brands in the consumer space also preparing now and well on track on the Foneero integration. But the big upsides are ahead of us on the Norwegian integration. And this is the purpose of this slide really is to show you that now as we speak, the customer migrations are ongoing from the old network to our network. So our new 4 gs wide and fast, actually best in test also in Norway last year network where we're giving our customers a great experience there as well. So as we proceed into Q1 'eighteen, you will have the full potential of then also the €400,000,000 synergies for the year. So that is clearly on track. A few words then back to my opening remark. We have started to try out 5 gs also a more live environment with live customers most recently so in Tallinn around the digital summit, EU digital summit where there was a lot of interest to put it mildly. We had heads of states lined up to try out the experience with 5 gs and what it can bring to our customers, but also more importantly into societies how to digitalize societies where 5 gs really is a core component. And on that note, we're working hard also to get the EU to understand this fully and adapt the policy framework in order for us to be able to invest more as an industry to speed up the digitalization to realize the full potential for the countries. Very important area and we have been quite vocal on this both in Brussels and in our markets. Division X was launched about a year ago. We consolidated a lot of our different initiatives across the group, our innovation initiatives, our investment initiatives and some focused development around our future revenue streams that, of course, will go into our markets and support our business going forward. Just a few examples what's been done. We had an acquisition of Felcom during the year where we really strengthened our position in automation, transportation and of course the general IoT platform. We have launched Telia Sense, which is the smarter car, Telia Zone, which is now available for over 700,000 households. We're making the home smarter and enabling our partners to reach the customers in their homes in a very neat and smooth way. This is innovation, partnership driven. We have also done investments in companies. We don't do investments just to invest for value creation. We do investment where we clearly see you can add value to our core business and take us into new revenue streams. Our IoT is growing, not as fast as we want, but it's growing. I think we have about €500,000,000 plus a year to date in revenues and growing. So this is an area where we want you to start pay attention. We have more in store going forward. And also very focused initiatives around what we call crowd analytics, where we have a lot of information and data that we are anonymizing, aggregating and eventually commercializing for the benefit of our customers in various segments. So Division X is about the corporate power and the startup attitude to bring us into the future as the new generation telco. Step by step towards the pure Nordic Baltic and that is the divestments of associates that we're doing, notably so Turkcell and Megaphone during the last quarters. We are still significant shareholders in Turkcell. We're the largest shareholder in single shareholder in Turkcell with about 24% through the indirect holding in Turkcell Holding. And we're working hard also to resolve that matter, but no longer a direct stake in Turkcell. We're also reducing in Megaphone where we divested 6% in an accelerated book building. And we have we're still the 2nd largest shareholder there and continue to support megaphone on the board and for value creation going forward. These are also important for dividend streams through the year, as you know, and part of our dividend to shareholders' cash flow going forward. So that is what I am going to say in order to give a little bit more time for Christian this time and also for Q and As later. So I'll speak to you soon again. Christian? Thank you. Good morning, everyone, and welcome. I'd like to start with saying this is a good quarter. I feel comfortable. I feel happy. We are doing what we expected. We have the fiber that is something that we have flagged for that did not go exactly like we wanted to, but it's external factors. Other than that, we are delivering where we want to. And before I get into the numbers in detail, I just also want to sort out a little bit about our differences in the result between the EBITDA and the bottom line. A lot of things is happening in a company like ours. And we have, as we have already announced, sold shares in Turkcell. And that gave us a negative effect on the bookkeeping, but it was a really great deal. We sold in the best market we thought and we had a price level of that sale that was the best in 6 years when it comes to a discount level. So we're doing good deals and sometimes it has effect on our bookkeeping, CHF1.9 billion down in just accounting effects. It's still added to our equity, so we improved our equity. Secondly, we also had the megaphone result, which was lower. That is also known. We report 1 quarter lag, so it's not a new thing for the market or us. And then we have taken out Spain, which we sold last year, which is also very obvious that we have done and it's no surprise. So we have some one timers coming through our income statement that we should know about and makes it a little bit difficult to follow certain lines. But in total, we are delivering where we should. If we start with our cash flow this time, because we have, as you know from this year, started to guide on cash flow. Cash flow is very important for us over time. We want to increase our cash flow. We have a guidance of being above SEK7.5 billion in operational free cash flow. Right now we're running on a rolling 12 month of SEK8.6 billion. We can see that the full year or the year to date number is SEK8.9 billion. That means we had a negative in quarter 4 last year. It will be slower, softer in this Q4 as well. We will have a negative. It comes from higher CapEx typically in the Q4. It comes from also the finance net. We will have some impact on the Q4. And we have usually our pension adjustment on our big pension debt in this quarter. That's why it's weaker in quarter 4 also this year. But strong cash flow comes from a lot of elements, including the CapEx that I will come back to, which has been one of our target areas this year as well later in the slide. Service revenue and EBITDA on group level. As Johan said, we are growing everywhere except for Sweden. Sweden has a negative impact from the fiber. Fiber is not the broadband part. Fiber is the installation fees that we get from our rollout of the infrastructure. Have to remember again, we are an infrastructure company and we are a service provider company. The infrastructure is a 5 year period. We're building out the infrastructure for Sweden and in Finland partly and in Estonia. That is a period where we will have a top up on our profitability and a negative impact on our cash flow from CapEx. When we have done that investment, we will continue to write When we have done that investment, we will continue to write the broadband TV and other services on these customers. This period, as Johan has already explained, we have an impact from external factors like the permits and some of the vendors. This is a market thing. It's not a Telia thing. And we are struggling like everyone else. We want to deliver. There is a demand. And it also impacts our EBITDA on Sweden very clearly. Other than that, we can see that the service revenue in all markets are growing, not everywhere coming through totally on the EBITDA, but there is stable EBITDA development, and I will talk about one of the countries also shortly. Sweden. Sweden is, as we talked about, impacted by the fiber. But if we look beneath that a little bit, we can see that mobile service revenue on consumers is growing. We have a net add of consumers customers this quarter with about 5,000. Making good progress in that market, we can do better, but it is a quarter also impacted by the Roan Black Home. But we have said before, we should be able to handle that, and we think we do that fairly well. We have a price increase. We had a price increase in 2016 quarter 2 on TV and broadband. We have not increased pricing since then and that has an impact on slower growth in this area. And on top of that, we continue to have the same pace on fixed telephony, €120,000,000 pretty much negative this quarter like we have had the previous quarters. And finally, we did sell we didn't sell, but TDC was sold to 3 and they have moved the traffic and that has an impact of SEK30 1,000,000 on the revenue and income of Sweden as well. So all that together, we think we're doing a fairly good job delivering in this market. And we have some price increases on fiber coming through now in the second half, and we have also increased prices on fixed telephony, as you may have seen also, not least in the Swedish newspapers. I want to add also to this then the B2B side. I said last quarter that we shouldn't expect a improvement strong improvement from where we are. We are around 2.5% negative, but we will slowly step by step try to take another digit. And we did take another 2 digits, 0.2 in this quarter. But it is around the same level where we lose out on a 5% decline in large have a growth of 1% in Soho Smir, which is very, very good and strong. And the Soho Smir is a strong segment we want to be in. That pays quite a lot also for the services and understands the services well. Finally, on Sweden, we said it will be a stronger second half than the first half. Quarter 4 will be even stronger. Quarter 3 is positively impacted by the cost reduction that we said would come. 650 consultants or employees to be taken out. A big chunk of those have already left in September. The rest is now leaving and having a much bigger effect in the Q4. Finland. Finland, we also had a continuous growth in mobile. Mobile consumer is growing 5%. We are doing it's a very good market. It's a nice market to be in. We have a little bit tested the waters on the customer intake this quarter. We have pushed a little bit harder on the SAC in the retail and the external channels. It has given a result on the gross intake and also on the customer side. We believe it was quite expensive to do it. We are testing. And we will evaluate how we want to do going forward. We haven't decided yet. But it did give result on the customer side, obviously. But we also want to have a good balance in how much we spend for acquiring customers. Otherwise, Finland, as I've said before, second half will be better than the first half and second half will be better than the first half. And they will also have an improvement coming through in quarter 4 on the EBITDA compared to quarter 3. Norway, Johan talked about wholesale bringing in the majority of the service revenue. I'd just like to say stable as a rock. That's all. Baltics. Baltics is doing well. Lithuania, Estonia, we are doing strong performance. Service revenue is growing. We are taking in customers, and we are doing well in these markets. It is good markets right now. And that also with the cost control we have and the cost measures comes down to the bottom line where we have an EBITDA uplift. When we look at the then the initial situation, we actually have a flat customer intake this quarter adjusted, and it's a slight negative decline in EBITDA, but it's small numbers. It is a little bit higher OpEx coming from a little bit on personnel and some other parts, but we have also then reduced the number of employees in quarter 3 with about 100, which will have an impact also going forward. Back to where we are both from a focus 2017, but also into 2018 driving the cost down in this group and where we have said that 3% on net cost down next year is something we should together with all our entities achieve, which is about SEK 1,000,000,000 net reduction in our cost. Eurasia is reported as discontinued, not so visible in our report. The trend is strong. The trend continues. The EBITDA was impacted in this quarter by the devaluation in Uzbekistan. Without that, it had been a positive double digit number. And the growth and the growth in Kazakhstan and the return in Kazakhstan, which has been a very difficult journey from a price point point of view and we have talked about it over 2 years' time is now visible. And finally, we are back on the plus side, and it feels very good. And we feel that, that return is very strong. CapEx, very important part of our formula. CapEx, we said, will go down in Telia from 2016 going forward. We have had a peak over 2 years and it should go down both including and on the bottom line that the rolling 12 month CapEx, excluding the fiber, is declining and will continue to decline and this is something we have promised. It's not that we have stopped a lot of capacity rollouts or buildouts. We actually a big portion of this comes from a different way of working, which we also said. We have now CapEx forums every 2nd week. We have rolling forecast. We work more together. We work with vendor consolidation. And just being smarter and think about where we need to invest helps a lot in this journey. We and that is also visible in the rewards we get on best network, etcetera. We are continuing to deliver on that in our markets even though CapEx is going down. 6.6% down on CapEx, excluding Spain And on cash CapEx, it's even 12%. And the fiber is going down, giving a net effect on the cash flow, of course. But honestly, we would like to deliver to all our customers that want to have fiber right now, so we get that infrastructure out in time. Finally, net debt to EBITDA, we have a strong balance sheet. We have had a sale of and sell down in Turkcell and Megaphone. Megaphone is not in these numbers yet. It was a quarter 4 impact. It will be a quarter 4 impact of SEK4.3 billion, as it says here, and we of SEK3.2 billion. And we will also pay out the 2nd tranche of SEK 4,300,000,000 in the dividend for the SEK 2,000,000 that we promised for this year. And then we have a final dividend coming from Turkcell of DKK 500,000,000 giving the total cash flow from dividends from associate to be around €2,800,000,000 for 2017, our expectation right now. The Nevola acquisitions has also impacted and the global settlement has impacted where we have paid the majority of the part of the settlement in quarter 3. Strong balance sheet feels good going forward. All this said, we have an above SEK 6,000,000,000 7,500,000,000 guidance of the operational free cash flow. We feel comfortable about that. And we have a €2,800,000,000 in dividends from associate. So we'll have a cash flow that we have upgraded this year that feels comfortable and good going into the future. And we have said that we should be around the same level on EBITDA for 2017. And we have some uncertainty on one point and that is the fiber. But that said, that doesn't concern us when it comes to the guidance of the full year. Good. That was my short or my presentation, I should say. Perfect. Thank you both. I think we start with the phone conference, where I guess we have a lot of questions. So operator, please, could we have the first question? Thank you. Your first question is coming from the line of Johanna Alquist. Please go ahead. Thank you. Two questions, if I may. First, related to Norway, if you can say anything on I know you the migration on Foneuro. And do you see any loss of subscribers there? Or is the negative subscriber intake fully related to ICE gaining market share? And my second question is related to Eurasia. You stated that it's slightly more positive momentum now that sort of you can leave the finding of Pakistan behind. But can you say anything on how you view this process more likely being a country by country divestment or sort of Fintur as a whole bunch or any flavor on that would very helpful. Thank you. Absolutely, Janna. Thank you. On Norway, Foneer is performing as expected. And we're seeing the early results of the migration to Telia network is positive. So that's all good. So the mix of customer is really what you pointed to. ICE, of course, is growing sub customer market share and that's been seen and we're getting that back as wholesale revenues, which is an important part of our revenue stream for the year. But we also started to stabilize the retail proposition and market share for the various brands that we have in consumers. So I would say all according to our plan and expectations when it comes to customer development. On the Eurasian side, the reason I say it's more positive is that we don't have to spend time on questions like, is it only Uzbekistan? Do you have more investigations in other countries? Is this a risk we should be worried about? Those type of questions were part of our negotiations and discussions with the interested parties. Those are no longer there. And that's important for the psychology of the process. And I repeat what I say there. We have a good process. We had progress in the process. Turk are constructive with us on the divestment of Fintur. And now we also feel that the divestment of UCELL has potential to catch up, which we have been flagging before that UCEL may be slightly later than Fintur due to the Uzbekistan legal matters. So those are no longer reasons for going forward at least. So we feel good about the process and the progress over the coming months. Thank you, Johanna. Can we have the next question, please? Thank you. Your next question is coming from the line of Peter Nielsen. Please go ahead. Thanks a lot. A couple of questions, please. Firstly, on the fiber revenues, obviously, by the sound of things, you haven't seen any change or improvements in the momentum in terms of lead times so far in Q4. And you are not reiterating your sort of ambition from Q2 on in terms of fiber revenues for this year. So I take it that the 15% to 20% reduction year over year given that we're down 50% broadly to date will be difficult to achieve. But question, did I understand your comments correctly that you said you're not concerned about the year outlook impact from this. Do you also mean that on the EBITDA side, please? And then can I just ask in terms of Finland, you're reiterating or so you're commenting on having seen higher SACs in the Finnish market partly induced by yourself? Yesterday, the market leader obviously reported a high increase in churn. I assume you've seen the same. And when you say, Christian, that you expect a better Q4 than Q3, does that mean that you expect these activities to be last one, please? Johan, you're commenting on Fintur, but not really on Uzbekistan. Would you still expect to sell yourself before the end of the year as well, please? Thank you. Thanks, Peter. Let me take 2 and Christian will take the Finland part. The when it comes to the outlook, we're comfortable on EBITDA. And that's the only outlook we were commenting on regarding Christian's statement on outlook. So we're comfortable that will come in line with 2016. Yes, there's always risk. And as we see in the fiber deployment, it's slow and it has a big impact, but we are able to mitigate. That's our message. And another important point on the fiber is that it delays. It is not demand going away. The demand is there. People want fiber to their households. Unfortunately, we're not able to deliver on the pent up demand and the sold fiber contracts because of mainly as I showed you in my slides permit delays. But that will of course come around and we'll be able to deliver that and get back on track. When it comes to Fintur and Uso, I did mention Peter that Uso is now in a state where we're able to accelerate that process because now there are no question marks in terms of those legal processes surrounding Uzbekistan. And they were at least perceived to be an issue even if I claim they were no real issue in order for us to divest the asset even before the settlements. But now that's that is also gone, that cloud of uncertainty. So we feel good that we can accelerate from here. Christian? Thank you. On Finland, Peter, yes, churn has been high. And as I said, we will evaluate how we want to do in quarter 4. That said, we still believe that we had a slight negative year on year development in Finland. We are very sure we will have a positive year on year development in quarter 4 in Finland. And I'm not going to go into how we will play the market. Okay. Thank you very much. Thank you, Pique. Next question, please. Thank you. Your next question is coming from the line of Irina Indriysyouma. Please go ahead. Hi, good morning. Just on the fiber rollout, as I understand the delays in permitting are creating a bit of a political debate in Sweden. Are you seeing any signs of concrete initiatives from the government which can alleviate the bottlenecks and any timelines around that? And then also on Swedish mobile, how much impact are you seeing in the market from unlimited plans being offered? Is that a significant pressure point for you? And also any color on the roaming impact or usage versus your expectations? Thank you. So on the permit side, I mean, this is a very known issue with the various authorities that we're working. It's not the government. It is authorities that are dealing with the permits across Sweden. We have a very good dialogue with these various authorities and they are very well aware of the pent up demand that is out there and the deliveries that we want to do and the fiberization and digitalization of Sweden that is actually on hold a bit now. So it's not about understanding. It's about actually getting it done and it's about resources being deployed and it takes time. We have respect for that, but we're eager to be part of a solution to get going again because this is holding up I would claim it's holding up the country's digitalization agenda. On the mobile side, on the roaming, I mean, we have flagged to you that we have a change in propositions in all our markets, which we will deal with. We're not flagging that as a single item of part of worsening results. We will mitigate on pricing and proposition. But I would like to mention that our costs for roaming, I. E. Cost wholesale cost to other operators, We have said that before, I'll repeat that, we're in a good position. We have good scale. We have good agreements and we're maintaining that according to our expectations. While traffic is, of course, booming, we're maintaining costs under control. The unlimited. The unlimited in Sweden, most of that specifically Sweden? Well, the unlimited is a lot about our marketing positioning. We feel that we have strong propositions out in the market for the various segments and the various customer needs. So I don't think it's an issue for us for the moment. But of course, we need to be very close to the various developments. We are a data hungry nation and we're giving a lot of data to our customers, and we'll always have to revisit whether we need to do more or less. Great. Thank you. Thank you, Irina. Could we have next question, please? Thank you. Next question is from Henrik Herb. Please go ahead. Yes, thanks very much. I just wanted to ask about the Swedish business sales. The growth accelerated a bit in the quarter. So if you could just explain a little bit what drove that? And then especially with the headwinds from Roanoke at Home. And then secondly, I think you've mentioned at some point that you will have bigger portion of B2B contracts being renegotiated or coming up for renewal in the second half of 'seventeen. So I just wanted to see if you had anything to say around that. Are you sort of managing to extend contracts? What's going on with the price? And then in terms of the line loss, I'm just wondering, I mean, how many voice only lines do you now have? You've had quite, quite heavy line loss for years now. And are there a lot of lines where the customer only take fixed voice essentially left now? Thanks very much. Thanks Henrik. I'll do the B2B side, while Christian digs into the other questions. So as you've seen, the B2B market is still in negative territory, but has stabilized and improved over the year. And that's the positive I'd like to remind us all about. There's been Peter Nielsen's favorite topic for the last 4 years. So I think we're out of the worst. But I have to say that in SME Soho, we have very strong feeling and comfort around the propositions we have out there. The larger corporates and public, there are always going to be renegotiations in the pipeline. We have been able to maintain the customer relationship very well, I. E, keep customer share over the years and that's important to bring the customers into the next phase, new solutions and new pricing. And I think the team is doing a great job there, and we're holding up. Competition is fierce. As you know, we have consolidation going on just to make that point of whether it was tailored to buying TDC and nobody else. And they will of course be forceful in the segments also in large corporate. So far so good according to our plans and expectations in the large space. So let me start with the last question and the line loss and voice only. If I can actually defer that to you, Andreas, to come back on the voice only numbers. But the we had a price increase on fixed telephony in quarter 3. And as always, we have a high churn in the beginning. But there was nothing that was different from previous periods where we have had price increases. There is a quite strong reaction and then it calms down and then it continues. And I'll leave that to you to come with numbers. On the net sales, I didn't really understand your question, Henrik, but I think you said what is the positive drivers in the revenue side. And if you look at the B2C, I mean mobile consumer build and service revenue is growing. We have value added services adding to that, but even without that, it is growing on a year on year basis. And customer intake is 1 and also then moving even though Rome Lacone has had a negative impact that we had that last year, we don't have it this year. We have moved people into new price plans where it actually compensates for that. On the fiber side, we have a growth both from customers and price increases. And on the XDSL broadband, it is a decline from customer side even though the prices are stable. So I don't know if that was what you're after, a little bit elaboration on the different growth sectors there in the B2C. No, it's more the Swedish mobile, what is it called, build net sales. The growth accelerated from 1.4% to 2.3%. So quite a big acceleration. And I was just wondering what's the growth of that? Okay. So that's where the value added services. It will grow without that, but pretty much a little bit more than half of that comes from value added services and insurances. So What value added services? Insurance. Insurance. All right. And you do a little margin on that, I presume? Yes. We do a little margin, but we do a little bit more margin than we did before because we actually have our own insurance company. We have pushed that hard through in this Q1. This is the Q1 we push it hard through ourselves. Okay, great. Thanks. Thank you, Henrik. I'll get back to the line losses and we take the next question. The next question is coming from the line of Maurice Patrick. I guess I'd like to ask a bit about digital transformation. You have made a point in the slide deck talking about the efforts you're making on that. And you've spoken for some time, in fact, about the implementation of new technology to deliver savings, structural and also revenue upside through that. So I'd love to get thoughts from you in terms of expectations of how much that is driving cost savings and revenue upside currently and how much we should think about that into the future. You do give the 3% group cost reduction for next year, I wonder how much of that really is coming from this digital transformation? Thanks, Maurice. So without giving you a specific number, let's just elaborate a little bit more on the how we view this going into 2018 and beyond. It's mainly related to Sweden even if we have it ongoing in Finland and also in some of the Baltics to really reset some of the key platform systems and products for the future. And we're starting to see savings from that already, albeit small. We're going to see more of that going into 2018 and it's going to be part of those 3% at least 3% down that we're aiming for. But we still then have heavy lifting ongoing in the Swedish operation notably. So through 2018, you will start to see effects of that also on the customer side and better customer experience, better easier to proposition faster into the market and then you gradually will see the cost efficiencies coming through. But they're already visibly part of the 3% saving ambition for 2018, but they will also continue into 2019 and give significant effects into 2019. So that's how you should look at it. Thanks. I guess as a quick follow-up. You talked before about dual running costs of old and new technology negatively impacting the EBITDA, I think, mainly in Sweden. Are you still seeing those? Or is that now starting to wash through? No, we still see them because we have a lot of people working on digital transformation and that is also, of course, cost. And when we're done with digital transformation, those resources working on those initiatives will not be needed. And then you will get that effect. But the bigger effect is the efficiency that you will then have in the automation and go to market initiatives. Very clear. Thank you. Thank you, Maurice. I think we have 5 more questions, and we'll try to wrap them up as soon as possible. Next question, please. Thank you. Next question is coming from the line of Sam Dillon. Please go ahead. Hey, guys. Just a quick question on Swedish fiber. Beyond just the permitting issues, are you seeing any extra competition from the likes of IP only and other alternatives for fiber connections? And are you seeing the value of the connection fee being competed away at all? And in the long term, when all the fiber in Sweden is deployed, what percentage of Swedish households do you believe you will be able to cover with your own fiber? Thanks. Thanks, Sam. Competition dynamics haven't really changed this quarter. They have changed last year. They have increased the intensity of fiber and broadband delivery, the full value chain, but nothing in the quarter that we single out. And we still stick to our ambition of 1,900,000 households by 2018 even if, of course, the delays are impacting that ambition. But we have an ambition, of course, to catch up and get the permits going and the fiberization going. So with 1,900,000 households, we'll be that's approximately where we'll see our fair share in the short run at least And then we'll see what we can do on the non organic side as well. Okay, great. Thanks guys. Thank you, Sam. Next question, please. Thank you. Next question is coming from the line of Keval Hiroya. Please go ahead. Thank you. I've got a question on Swedish fixed, please, and it's back to the line loss. You did mention that the line loss was slightly higher due to the price increase you put through, but it was 90,000 instead of usual quarterly run rate, which seems to be just under 60. Now the price increase you put through obviously came into effect relatively late in the quarter in the middle of September. How should we think about line loss for Q4 and even 'eighteen? Do you think this 90,000 number will actually improve? Is this just an initial response? Or should there now be a slightly elevated level with the prices for PSTN being higher? Well, when we do a price increase, of course, we do expect and we have respect for that some people think it's going to be too expensive and leave. And but we do a price increase. We expect that they will compensate more than the decrease in the customers and that's how you should see it. The churn is always more in the 1st months than later on and that was also a comment I made before. That's the only thing I have to say. It's great. Thank you. Thank you. Keval, next question please. Thank you. Next question is coming from the line of Stefan Gossin. Please go ahead. Yes. I'm Yes. I'm thinking a little bit about the fiber installations. Obviously, there is a quite big delay this year. Do you foresee that you can actually keep fiber installation stable or even increase in 2018? 18? So we're not giving you numbers for 'eighteen at this point. All I'm saying is that we see these as delays and they will come through them later. But that also means that we need to see the new deployment and the new process for those permits so they are not delayed because then you will just push that further down the road. But I do see a shift in urgency in addressing the permit issues. So I do believe that we will get to it sooner rather later hopefully. And then we will actually get back on track on that ambition that we've been talking about for end of 2018. Okay. Thanks. Thank you, Stefan. Next question, please. Thank you. Next question is coming from the line of Ulrich Rathe. Please go ahead. I have two questions, please. The first one is on operational free cash flow. Christian, you said you're feeling very comfortable with the guidance for more than $7,500,000,000 Obviously, that's sort of $8,900,000,000 year to date. So of course, larger than $7,500,000,000 can be a lot larger. I'm still wondering a bit whether there are any untoward developments to be expected in the Q4. I think you commented on working capital potentially being a higher outflow in the Q4, if I understood you correctly. Are there any particular issues that could drag down the Q4 free cash flow sort of in an unusual way? And is that the reason why you're not willing to touch the operation and free cash flow guidance at this point? 2nd question is on the permit issue, I'm sorry for sort of going on that again, but is it your impression that this is actually an issue across construction permits? Or do you have the impression that this is something specific to permit for fiber rollouts? And is there any particular reason why the authorities for some reason are holding back on the fiber issue on the fiber construction? So the second question, I don't think well, I think it's there are a lot of infrastructure projects going on in Sweden and not just fiber. So there's a heavy pressure on permit authorities across Sweden clearly. But I mean I don't think I don't know the details of other industries, but we are clearly affected by the process being slow. And that's what I've been commenting on that we think that it's going to clear up. We see the urgency now across the authorities and we are helping. We're not just complaining. We are part of the solution making sure that we are constructive and helping out and what we can do. But this is more of an explanation to you how things are working. But it's, of course, a priority matter for authorities and there are a lot of infrastructure projects going on. And on the free cash flow, yes, we are at €8,900,000,000 year to date. As I indicated, was we will we had a negative last year and we will have a similar pattern this year. The similar pattern is actually not working capital. I'm sorry if I wasn't that clear, but it is on the CapEx side and we had a pension side. And then I added also that this year we have higher interest cost or cost payouts related to the finance net that will come through in quarter 4. That's helpful. Thank you so much. Thank you, Ulrich. We have no further questions. So by that, I thank you both and see you again next year for the Q4 report. Thank you.