Earnings Call: Q3 2012

Oct 17, 2012

Good morning, and welcome to this press conference for our Q3 results. I'm Cecilia Edstrom, Head of Group Communications. Andreas Ekstrom, our Head of IR, will moderate this conference as usual. But I'd like to go through some practicalities before we start because we have a lot of attention today. You're all very welcome and we will try to cater to as many questions as possible. But in the interest of keeping the time, Lars Niver will start by analyzing the quarter and then Perane Blumkiewicz will follow with a run through of the numbers. There will be about half an hour after the presentation to put questions. And because there's such a huge interest, I would kindly ask you to limit your questions to 1 at a time. We will take questions both from here in the room and over the web. And when you do get a nod from Andreas that you can put your question, please state your name and the organization that you are representing. After the press conference, we have scheduled a number of interviews. But because of the increased the intense demand for interviews, we will not be able to cater for any more, which haven't put up their requests already. So we will take interviews for those who have scheduled them beforehand. With that, I would now like to hand over to Lars Nieberg for an analysis of the quarter. Could I kindly ask everybody to sit down or take quick pictures from the back so that we don't detail the web comments. Welcome. Good morning. Thank you and welcome. I'd like to deal straight away with what are the issues that have generated considerably media attention lately. The allegations directed at TeliaSonera about our operation in Uzbekistan are very serious. So let me state clearly, there is 0 tolerance of corruption and bribery at TeliaSonera. This is extremely important to me personally and something we pay attention to every single day. I have said it before and I will repeat it, TeliaSonera did not bribe anyone. Helios Sonira did not participate in money laundering. 5 years ago, we invested in a license in Uzbekistan to provide telecom services. Why did we do that? A key reason was to create growth and generate value for our shareholders, but not just that. At Tirius of Nera, we believe that telecommunications is a force of good. Anyone who has watched the extraordinary developments during the Arab Spring must be aware of this. It's an undeniable fact that modern telecommunications speed up a country's long journey towards democracy. It's also undeniable that telecommunications helps eradicate human rights abuses. We believe that our presence in Central Asia contributes to the advancement of democracy and human rights in the long term. Now I will not make any further comments or answer any questions regarding Uzbekistan. There are 2 ongoing investigations, 1 initiated by the Labour Board and another one by the prosecutor. We now have to wait for their conclusion. And in the meantime, we will cooperate with them and answer all their questions. I would now like to talk about some other recent allegations in the Swedish media surrounding our operations in Nepal. I want to make it absolutely clear that the story in the Kansafarra last week was wrong, actually wrong. The Kansafari claims that TeliaSonera acquired its operation in Nepal from Ray Baddoo Singh or a company controlled by him. We did not. Mr. Singh was a shareholder and chairman of the Board of Spice Nepal until April 2006, at which time he sold the holding, left the Board and departed the company. TLDR acquired its controlling stake in Spice Nepal or MCELL as we now call it in October in 2008. That is 2 years, 2 years after Mr. Singh left the company. Now that I clarified this, I'd like to tell a completely different story, a much more important story. Nepal is a great example of what telecommunication can do to help a country to develop. I have been to Nepal 6 times in the last 4 years. When I go there, I have 2 objectives: to meet our employees and to meet the politicians. When we took the decision to invest in Nepal, we took a major risk politically. The country was in a period of major political change aiming to build a true democracy after the 7 year period of civil war. Nepal is one of the poorest countries in the world with a population of about 30,000,000 people. The country lacks basic infrastructure for electricity, leading to power cuts of up to 60 hours a day. At the same time, there is substantial potential in the country in form of hydroelectric power waiting to be utilized. In order to develop its resources, the country desperately needs expertise and fund investment. This will not happen without the reliable telecommunication network. That's where we come in. Since TeliaSonera acquired EnCell, mobile coverage in Nepal has increased from 40% to 90% of the population. And don't forget, it's a country with very big mountains, so technically it's difficult. At the same time, more than 60% of the Nepalese are now using a mobile phone every day. It also turned out to be a great investment for us. We generated an annual return on capital of 30%. But for us, it's not just about business. Every year, hundreds of thousands of Nepalese leave the country in pursuit of a better life elsewhere. Too many find themselves victim of human trafficking or appalling working conditions. TeliaSonera is creating opportunities for these people at home in Nepal. Enfel is now directly providing jobs for 1500 people, creating new opportunities for tens of thousands more through sales channels, construction sites, etcetera. We are regarded as one off, if not the most attractive employer in the country. Why? We allow collective bargaining in a country known for frequent strikes. I don't think we have strikes at Enco for years. We provide extensive training to our employees where basic schooling is insufficient. We have introduced our group wide performance management by setting targets, evaluating performance and identifying personal development needs and plans for all employees in Nepal. In addition to developing our own business and staff, we also want to contribute to Nepal in a broader sense. Nearly half of the children have no access to primary schooling. That will be made education and supporting children a priority. We invest in projects that reconstruct primary and secondary schools and providing learning materials and access to Internet in remote and poor areas. This year, more than 11,000 children will be supported by M cell. Similar examples can be found in every country where we invest. This is what it means when TeliaSonera invests in a poor country. I hope this helps you understand that the picture being painted of TeliaSonera in media today is not the company I lead and work for. It's a very different company that I work for and a company that I'm very proud of. Recent events have highlighted not only our largest shareholder, but also our customers, employees and other shareholders have very high expectation of us. Their absolute right to do so and we will meet their expectations. Now I will spend some time on the reason why we are here to talk in about the Q3. I think the Q3 came in roughly as we had expected as the analysts had expected. We are flat revenue. We are down a bit on EBITDA. Earnings per share is 1 or less than last year. No big surprise, I think. This is the issue. We have an issue of not enough growth. And this is not a TeliaSonera issue. This is an industry issue. We continue to see growth in Eurasia, what we call the growth engine of our company. Broadband continues to have declines, not bigger or smaller than before. The big change is mobility. This is not a surprise. This is something we have seen coming for a couple of quarters. This has to do with the fact that voice is declining and the industry is not capable so far of monetizing on the extraordinary explosion of data traffic in our networks. So we have a changed situation in Mobility. Mobility has for 2 decades enjoyed annual impressive growth rates. My prediction, which I said already 2 quarters ago, is that those growth rates will disappear. We will see a flat kind of industry for at least a couple of years till we are able in a better way to monetize on the growth of the data traffic because the demand is there, people love our services and they use more and more and more. So that's not the issue. The issue is how quickly can we change the business model. This shows build revenue including and excluding Spain. Build revenue is voice, SMS and data. That's our business. Selling phones, equipment is not our business. We don't make any money. Here's where we make the money. Again monetizing on the explosion of the beta traffic is the challenge for the industry. And I felt that clearly, SOMIRA was not making enough progress both on the cost side and on this issue of changing the business model. And therefore, I decided some time ago to change the leadership and put the best person I have worked with to see if he can help us change the picture. I have been critical of higher customer service over the years. And I now see Marlin, who is running the broadband business, being successful, that's all making real progress in our customer support organization. This is a reduction of unwanted calls. Unwanted calls is a call that the customer has all the right to make, but if we would have done it correctly, he or she wouldn't have made the call. It's mainly driven by actually investing a lot of money in this organization initially. So we have increased the number of employees in the customer support organization in Sweden by 400 people. We have reduced the cost by 600,000. As we now get our processes better, I think long term, we will even be able to save money in this customer organization. But the first priority is to have a better experience for our customers. And second is, what does it cost us? Yes, Eurasia is our growth engine 12% in the quarter. We have now surpassed 40,000,000 subscribers in this part of the world. Cost. We did announce some measurement on the cost side. When the industry has no growth and our industry seem to have no growth in the coming couple of years And your costs go up by 3% a year. Your salary cost goes up or whatever. You have to do something. You have to reduce cost. I think we have shown over the past 5 years skills in being able to manage cost. We have always looked at the relation between the growth on the top line and the growth on the cost side. And as you can see on this picture, the growth of sales has always been higher than the growth of the cost. Peron will show you that in the Q3, we don't have that relationship within the Q3. We started already actually a couple of months ago before the summer thinking about are we really doing the things in the right way in this company. We have changed a lot in the past 5 years. Where we have changed the least actually is in the network management, in the product management. In those areas, we have changed the least. And I think we need to really think through how big portfolios of products are we going to have, how complicated networks are we going to have, do we need to have all those things that we have today, things that are important for the customer? I am convinced we are spending money that actually are not that important for the customer. So this is not a top down, I want 2,000 people. That's not the issue. We have worked in 8 work streams, and we have identified a number of areas we think we can improve. And based on that, Rana and I have said, we think over 2 years we can save SEK 2,000,000,000. That's the most important for me first. Now then I knew you would ask me what does it mean in a number of employees. So instead of waiting for your question, we decided to give you an estimate. And this is an estimate across the whole group. This is not Sweden or Finland. This is the whole group. We have 29,000 people in the group. So it's about 7%. We don't know exactly where. We don't know exactly when, except that it has to happen during next year and the year after. And we are working since I said a couple of months and we will continue to do that work. And as we know, we will get into the normal procedures with our labor unions and discussions and we will inform you in the appropriate time frame. This is what I talked about. Sorry, I missed that one. We have the same outlook as we had last quarter. I think I'll leave it there to Perona. Thank you, Lars. As Lars said, we had a weaker quarter, in the Q2 as we have seen in the 2 previous quarters, flattish top line and also increased cost. However, if you look at the 1st 9 months, we have a somewhat better balance. Top line is increasing with 1%. At the same time, costs are flattish. But given that we have had a margin compression, gross volume compression, our EBITDA margin is actually going on. You could see we're going down from 36% to 34.8%. That also hits our earnings per share somewhat down, but cash flow is strong. And also if we take away the proceeds that we have got from Megaform, we are actually increasing our cash flow, which I think is a strength in this environment right now. Lars highlighted the issues we have with the top line reduction, especially within mobility. Today, the group had, I would say, a rather stable top line growth in Eurasia with 12%, rather stable when it comes to broadband minus 2%, 3%, but we have seen the decline within. And as Lars said, this is an industry phenomena and we have enjoyed a pretty good ride compared to the rest of the industry in Europe during the last quarters. But it's not all entities that are doing bad within Mobility. We could see that Spain is growing what we call the build revenues with 16%. Build revenues include voice, messaging and data. Spain has also taken in more than 250,000 customers or customers subscribers, rather to say, in the Q3. Most of these are postpaid. And they're actually growing their business. Sweden still growing and I will come back more to the details around their builder revenue. Meanwhile, other entities are going down with 8%. And given that they have a pretty high growth on the data side, that means that we have a severe compression on the voice side. I would consider that in some markets we are looking at 50% to 10% in downturn on voice. Sweden that sort of sticks out in this more mature market. Increase has increased the build revenue with 1%. It doesn't mean that everything is turning upwards. We have now seen the last 3 quarters that the voice is going down with 3%, 4%, and it can't not be offset by the volume growth from data. It's actually increasing with 11% in Sweden, but it turns out to be 1% in build revenue. And that is lower than the last quarter where we had an increase in with 2%. We have also seen interconnection reductions and it is more to come, I would say, in the Q1 next year and that also hits the top line for mobility that's more neutral for the group. When it comes to broadband, we see that our IP based services are actually increasing compared to the traditional size. 52% is today IP based and 48% is traditional. The downturn in PSTN, the old telephony, is more or less at the same pace as before, down with 13% compared to 12% in the previous quarters. At the same time, we're actually adding new customers within VoIP, within TV and also within the fixed broadband. And we have today 560,000 TV customers in Sweden and around 1,300,000 in our whole region. We also continue to roll out fiber, which is a base for future IP based services, and we have today 536 connected customers in Sweden. And I hope after the problems we haven't had with the rollout of fiber that we have now a new setup that could also speed up the rollout of fiber, which is fiber, which is sort of the future of the carrier over the data. Eurasia, as Ross said, growing 12%. I think I'm satisfied with having sort of the better balance today with where we have 4 different countries contributing to our growth. UCL close to 60%, very much connected to the fact that MTSL has problem and we have taken all of their customers. Ncell continue to grow in a good way. And they have added on roughly 500,000 customers in the last quarter. Astecel, Ucel is also growing. And I think it's a good structure because if you look here, the biggest entity case is actually going down with 1%. Still we are delivering growth on top line. Looking more at the different parts of the result. We talked about gross margin before. We have seen a gross margin compression. It has stabilized in the Q3 also similar to the Q2. Pressure in mobility, given that we are taking down the build revenue, which hits our gross margin severely, it's compensated by better gross margin in Eurasia, especially when it comes to the carbon sand partly also Azerbaijan. The cost base that we have also talked about and touched upon is actually going upwards. We have been pretty good during the last years to take down the cost. We now see that the addressable cost base, the OpEx is going up slightly. And it's connected to, I will say, a bit unfortunate mix right now within the different business areas. Eurasia had decided to spend more on the cost side at the latter part of this year, which they have started to do. If you look at Eurasia from a 9 month perspective, it has a pretty good balance, 12% growth top line, 8% cost, but the phasing is somewhat different. But given now that broadband is not taking out cost as quick as they should have done and also that mobility service is actually increasing cost, we need to do something around the cost side. And you could also see that on the margin development, we are down to 35 0.8% in the quarter. And we see margin compression in actually all different business areas. Mobility is going down from $32,100,000 to $29,300,000 broadband from $34,100,000 to $33,300,000 and Eurasia from 51 percent and 0.5% to 50.3%. But that is the reason why we now have announced a cost restructuring program where we need to get cost to restore and defend our margins. Coming into the end of this presentation. Our associates companies are contributing more this quarter, EUR 250,000,000 more based on better underlying business, both in Turkcell and also in Russia. We have no negative one off sales from Turkcell this year as we had last year. Meanwhile, the contribution from Megaphone is somewhat lower. First of all, we have sold out roughly 10% for the company, but they are also affected by a higher leverage in the account given the new structures that they have. So the contribution for the time being lower. But overall, I think we should be satisfied with the associates. Earnings per share, rather flattish. The weaker operational performance in our own operations are partly compensated by associated companies. FX and net financial transactions are compensated by taxes and also minorities. And then we have the biggest change which is in the working capital, which is on the next page, sorry. I'll answer that later on. CapEx is in line with, I would say, last year somewhat lower than last year, euros 200,000,000 lower. We continue to invest. We have less of spectrum this quarter, but we continue to route and try to cover more of the confidence and also roll out the fiber. I said before that the fiber is important and we will continue to invest heavily here in Sweden. So now I'm back to the cash flow. I thought I'd talk about the working capital. As you can see, cash flow is roughly at SEK 4,000,000,000 which I think is a stable cash flow. We had downturns on EBITDA as you saw at the beginning, But the main part here is the working capital. We had effects from Norway where we had to pay some of our rental a bit early due to changes in the systems and we have also had a handful of sales spending that has affected us. Stable cash flow also in this quarter. Finally then, net debt to EBITDA. It's not the questions around this where we I got question what should we do with the proceeds from IPO in both Megaphone and potential also in k cell. We have set up deleveraging is the first priority to keep the net debt to EBITDA within our limit of 1.5% to 2%. So that is the main focus we have right now. So finally, stable earnings per share in this quarter. We have revenues at the same level as last year. We need to restore the balance between sales and OpEx. We have had a strong subscriber intake both in Eurasia but also within Mobility Services. And we continue to work with our assets. MEGAFONE are now intention to float, way to go and we're preparing also for the IPO within Haynesen. Thank you, Frohn. I will also invite Lars back to the podium. My name is Andreas Ekstrom, Head of Investor Relations. I will guide you through this Q and A session. A lot of people here, of course, and a number of people dialing in over the phone or listening via the web. So we will try to answer all your questions. If we don't have time with everyone, me and my team will stand by and answer your questions after the press conference. And the same thing goes for my colleagues in the press team. So we will start with a few questions here on the floor. And please state your name and where you're coming from. A familiar face in the first row. Andreas? Good morning. Andreas Jorgzan, SEB Einfrilde. Two questions. First, if you can share some thoughts on how to break this trend within mobility services and how to monetize on data? And secondly for Parana on the net debt to EBITDA side, it's quite not easy to get hold of money these days, but the bond market is quite favorable. Can you elaborate a little bit on why you should be in the range 1.5 to 2 times EBITDA on the net debt? Let me start. I think it's a conceptual acceptance that I think we have some difficulties with inside our own company. I mean, we've been for 100 years providing voice services. I mean, voice service is the best thing since sliced bread. Actually, voice services is becoming voice cheaper and cheaper and you could even go as far as go to a flat fee for voice services. I mean that's exactly what's happening in the U. S. With Verizon and AT and T. So then comes the issue. If you have an explosion of data traffic in your network and you've come from flat feed, at least we don't have flat fees. But there's got to be a higher correlation between if you use double as much capacity in our network, you have to pay at least a little bit more. And I think the buckets are too big. I think there are too few buckets. I think the top up function, the ability to buy more capacity is not ready. So there's a lot of things that have to happen. But I'm pretty sure that we're going to succeed. I think the whole industry will succeed. Ronen? Yes. When it comes to the ratio 1.5 to 2, I think that one of the reasons why we have been able to access the market is that we have had a very high rating. I mean we have one of the highest rating within the telecom industry. And the I mean, if you don't need the money, it's easy to access them on. So I think that for us it has been a good thing to have this range. And we are one of the lowest leverage companies on account of Telekom in Europe right now. So I think we'll keep like this. Of course, that will help us to get access to the bond market. Then it's also very true that you never know. I mean, now it's a very open market, but it could also close. I've also seen sort of the bond market where it has been closed for a while. And we have decided not to put ourselves under pressure at any point in time when it comes to accessing the money market. Thank you, Andreas. A lot of people, but a few questions from the floor. That means that we'll leave over to the conference call. Operator, please, can we have the first question? Thank you. Your first question comes from the line of Laurie Fitzjohn. Please go ahead. Thank you. It's Laurie Fitzjohn, BTIGRE. One question just on EBITDA guidance. And the guidance now implies similar margin in Q4 as you delivered in Q3. But historically Q4 has been a seasonally lower quarter. I just wanted to recheck, is there a reason for different seasonality? Or are we looking at more full year margin just below the 35% guidance? Thank you. Yes. We will probably be slightly below the 35, but we have also said this should be around 35, but there is 35,600,000 or 35,000,000 or 34,600,000,000 or 34,600,000,000. See. As mentioned, we are talking of very, very small numbers on a whole year basis, where we're talking about SEK 36,000,000,000 in EBITDA. It's a difference between perhaps SEK 100,000,000 or SEK 200,000,000. Thank you. Thank you, Lohr. Operator, can we have the next question, please? Your next question comes from the line of Andrew Lee. Please go ahead. Good morning, everyone. Thanks for taking my question. It's on Swedish mobile growth, which has steadily declined over the last few quarters from 5% growth, economic growth to go to flat this quarter. Some of it's in consumer competition. More recently, it's in corporate. But given your comments on mobile on the call today and the significant outperformance of Swedish mobile over the last few years in a market that's not so different than others in Europe, should we expect a period of top line declines in Swedish mobile over the next year or so? Thank you. Let me start. Maybe you want to add something. Yes, I think it's the corporate segment that we are seeing the most headwind in to start with. I think what we have seen in growth rates for the past 5 years in Swedish mobile has been exceptional. I have been saying many times that this cannot go on like this. And finally, I was right. Now I think the growth coming in the future will be based on or dependent on our ability to change the business model as I talked about a couple of minutes ago. I think the traffic today in our network probably like 90% of the traffic is data traffic and only 10% is voice. So our ability to monetize on that traffic growth, you saw one of the picture I showed you was 89% growth of the traffic. Our ability as an industry to monetize on that growth is going to determine whether we get growth or not. And yes, adding on to this, I mean, you have enjoyed sort of specific ride here in Sweden where we had transition from fixed voice into mobile voice for a while and that has sort of supported the daily growth in Sweden, where voice has been actually increasing during the last, I would say, 10, 15 quarters. Today, it's actually declining. So what Laure is saying here that means that it gets more and more important to actually monetize the data side to get up to growth again. And that will define how successful we will be. Just a sorry, just a quick follow-up. Sorry, Andreas. Mean, are you going to need to invest to try and capture the benefits of data in the Nordics and specifically Sweden? I mean, we had Telenor state that they're going to require 15% CapEx for sales by 2015. Are we going to see you need to do that to think you need the model as you put it? No. I don't think so. I mean, if you look at the mobile business today, it's 10% and even below that on the capital sales. And in that, we actually have included also the 4 gs rollout. So I think it's a question of being much more efficient and make sure you take the right business decision where you would like to invest rather than automatically going up to the 50%. On I just wanted to remind you, Andrew, and sort of all the other analysts out there that there is another interconnect rate cut from the 1st January in the Swedish market, so don't forget about that. We had also on 1st July. Thank you, Henriette from Goldman Sachs. Next question, operator. Your next question comes from the line of Maurice Patrick. Please go ahead. Hi, guys. Yes, Maurice from Barclays. On cost cutting, I'm sure it's too early to give hard details of your plans there. But you have said in the past that your cost cutting had been top down in the future. It had to be more bottom up in terms of driving costs with a cultural shift. Has that changed? Or how are you thinking about that? Thank you. No, that's my question. This has changed. We as I said initially, we started a couple of months ago analyzing how does the mobile technology organization work as those people who manage the whole mobile infrastructure and also the broadband infrastructure. There are thousands of people working there. We have gone through the portfolio. We have a history at TeliaSonier. I think it's true for other operators too. We don't weed out our product quickly enough. We hang on to every product for years and maybe even 10 15 years. And every product that we have in our catalogs drive costs, significant costs, whether it's platform or people or whatever it is. So we started we have hired some talented product managers about a year, year and a half ago with the exact best purpose to get a better management of our product portfolio. At the same time, I'm saying I don't think we have a product portfolio at ThiagoSonera that is as good as it should be. We are the biggest player in this in many other markets. We should have a portfolio second to none. And we don't unfortunately. And we spent tons of money on it and we still don't have it. So there is something that can be improved significantly. And if the business is going to be flat for 3 years or 2 years or whatever and our cost goes up to 3% every year, we'll have to save money somewhere. And this time it's not the top down. This time we're going to make some fundamental changes in how we run the business. As I said, we have made many fundamental changes in this company. The areas where we have may very have at least success in changing is the core of the company. How do we manage the network? How do we invest in the network? How do we maintain the networks? And how do we manage the portfolio? That is 2 of the areas of the 8 that we talk about. And I feel convinced that we can change the way we operate and therefore reduce cost. Got it. Thank you. Thank you, Morias. I see that we have a question here. We will return back shortly to the conference call. But in the meantime, a question from the gentleman on the 2nd row. Hassi, Iksondorf, Iksondorf, when will you know how many jobs there will be cuts here in Sweden? And what parts of the Swedish organization are you looking at in this process? We look at the whole organization. And of course not only Sweden, we look at the whole group. As soon as possible Hans is my answer because I understand that when you announce something like this you create uncertainty and that's the last thing you want. But at the same time, we have to be transparent. When we do this work, we have to tell the people because we are now involved with hundreds of people in this discussion on how we operate in this company. A couple of months is my guess. It will take at least some. Thank you, Hans. You can leave the microphone to Pierre next to you. Hello. This is Pia Grittenberg from Dagensnier. You said that Telesson is spending the money on things that are not necessarily asked by the customer. And can you be more specific? What will you not do in the future? Well, let me give you an example to you. As I said, we have a product that is 8 years old and we have 8 customers on it. Maybe we should think about could we offer that those 8 customers another product, so we could cut that whole platform and the whole development? And that's an example of what I'm talking about. And we haven't had that discussion. And I don't think it's unique to Telefonica. I think it is a typical telecom kind of thing because we're all coming from the incumbent days. We have enjoyed growth for 20 years. I have worked in industries where we have no growth normally. And I can tell you it's a big difference to manage an organization with no growth compared to 1 with 8% growth. With 8% growth, you can make lots of mistakes and you will see nothing of it. You make a mistake at 0% growth, every mistake will show up. So we need to change the way we do things here in Telia. Not because we are bad. Our industry is changing. Voice is not growing and the industry has not so far been able to monetize the data explosion, which is a fantastic thing. I would be much more worried if customers said, I don't want your service, Thierry. I don't want to use your service. People love our services. And then maybe we also need to redirect our investment to newer progress and take away the old ones. That's what was taking up money. That's a good stand on more forward leaning products today. So I think too much on the old mature market, I would say. Thank you, Pia. We go back to the conference call. Operator, please. Your next question comes from the line of Jacob Bluestone. Please go ahead. Hi, there. Just a question on Finland. You've obviously put a new management team in place there. So I was just wondering if you could maybe give us a little bit of an update on how the turnaround is going with the business? Thanks. Well, we have Robert there now as the Head of Sumira. The problem is that we didn't have a Head of Sumira in Finland. And we have the same kind of setup as we have in Sweden, both a strong broadband and a mobility business. In most other countries we only have mobility. And it was apparent that we needed a leader in Finland for the Samira organization. I think the reception has been extremely positive. We have even some facts that can prove that convince ourselves that Robert has started very well. Of course, he has also the challenge that we have to reduce cost. Finland is not excluded from this activity. So Robert will have to both break and put the pedal to the metal because we have lost market share in Finland for a number of years now and that will stop. Okay. Thanks. Thank you. Thank you, Jacob. Next question from the conference call. Operator, please. Your next question comes from the line of Ulrik Rat. Please go ahead. Yes. Thanks very much. My first question is on Swedish fixed. I understand in the Q3 you had unusually high cost because you worked through the fiber backlog. I was wondering to what extent that is true now and to what extent really that relatively high implied margin in the Q4 that Laurie was talking about really is maybe explained by that or whether it's saying it's too small effect to really see it. The other question I have is on Swedish mobile, again, back to this issue of some more competition in the corporate segment. And then I was wondering, can you give us some indication of how the price levels in the Corporate segment look relative to the consumer segment in Sweden at this point? Do you think that's sort of an unusually high point there that might give Tele2 and 3 the opportunity to attack more aggressively there? Or is it just a different issue? Thank you. Well, I can take the second question. I think prices in the corporate segment has been under pressure for a number of quarters, particularly voice prices, but also data prices. And I think that's one reason. But the other reason is, I think many of our corporate clients are concerned about their own business and are very careful. So it's a combination of high price competition and particularly voice but also data. And I think a cautiousness in the segment to invest. And then regarding the margin in broadband, yes, we have worked on the backlog. That's correct. And I think that will help in the Q4. We have also increased the cost for Customer Care, which sits in the 3rd quarter, might be slightly lower. But of course, it's a challenge to keep up the money that we need to have in the Q4. And we have initiated some initiatives to make sure that we could reach that. But it's not a walk in the park. Thank you. Thank you, Rich. Next question operator please. Next question comes from Peter Nielsen. Please go ahead. Thank you very much. Two questions please. First one Lars, you talked about network management and some efficiencies to be getting there. Last year at the Capital Markets Day, you outlined a plan for a move towards 1 common network management center. Just how far have you commented that process? And do you see some savings being realized here for efficiencies? And do you potentially see further network sharing across as you are sort of in line with your comments on perhaps improving efficiencies in your network management side of the business? And the second quick question relating to Turkcell please. We're awaiting the U. K. PIVI Council co ruling. Our latest update was a decision is expected by December, January. Is that as far as you know still the time horizon we're looking at? Thank you. Yes, it is. December, January. I think on the multi market operation, I think it's going slower than I had hoped and actually it's going slower than we planned. That's also the reason why I made some changes in the mobility management because we are getting under pressure. We have seen this coming for at least a year And we need to speed up both on cost in general, but particularly on cost of goods sold, which is driven very much by our network, whether they are in Sweden or they are in other countries. And when it comes to the networks in Denmark, we have already said that the first, I would say, 2 years will not give us so much lower OpEx. It will be lower on the CapEx side, but it takes time to dismantle some of the networks. So that will be seen later. Okay. Thank you. Thank you, Peter. No questions from the floor. We are able okay. We have a question from the gentleman in the back. Thank you. Thank you. Karri Lomikarlo I work for NTV3 Finland as correspondent here in Stockholm. Now there has already been a furious reaction in Helsinki concerning your plans to get rid of people. And the question is, why do you have to again kick out people although the company is profitable? And secondly, can you say something about the details concerning that? No. As I said, we cannot say or talk about beetles in any country. And you see when you have an industry that is growing every year for 2 decades, life is pretty good. But if the industry stops growing and the salary goes up 3% every year, you're going to save that money elsewhere then. So I think it's not an issue of TeliaSonier. This is an industry challenge that the industry doesn't see the growth coming any longer for a couple of years at least. And then that's the reaction of this is the result you get unfortunately. I think we have a question from Mikael here. Yes. Hi, Mikael Torrevall at Doge's Industry. Just to understand, when you're talking about getting more money from data, we could obviously not grow by getting more customers because sort of the evidence that everybody already has at least one SIM card. So but do you expect to grow market share? Or do you expect to create growth from actually getting more money from each customer? And then how much approximately? So basically how much more should you expect our phone bill to go increase? I think your phone bill will go down or has been going down for years now. I expect actually the voice part, Mikael, on the bill will continue to go down. Actually, I think we will have a flat fee for voice like they have in the U. S. The issue is how much do you pay for data? And if you next year use double the amount of data you use this year, are you going to pay anything more for that? Or is that for free? And the logic is you have to pay something extra if you use twice as much data next year as compared to this year. That is what I mean by saying I have to monetize the growth in data. The growth is there. The demand is there. I've been saying so many times the appetite for brand is unlimited. And I believe it is. And the question is as you use more, are you going to pay a bit more? I think we have to But how much is it? Well, I'd be happy if I could just maintain the ARPU. ARPU is coming down. Average revenue per user is coming down. If you just continue to make it to pay what you paid last year, I'd be happy. Clear answer. We leave it back to the conference call. Operator, please. Your next question comes from Erik Paris. Please go ahead. Thank you. I have two questions. Firstly, on Swedish mobile. It seems that with the iPhone 5, you have with your Helvo brand taking more or less a price leading position in the market. And I know your competitors and also the distributors are quite surprised by this. Could you explain a little bit what the strategy is? Is it temporary? Or will you revert back to a sort of a in line price position there later? Secondly, Kazakhstan, you had a very good net intake and Tele2 has had also very good net tick for a couple of quarters. It seems like penetration is going through the roof more or less. And is there a lot of multiple SIEMs now in the market? What do you read into the market situation there? Will there be a backlash on subscriptions? Thank you. Let me start with the first question, more of a principal statement. I'm not aware of price points in Hale Bopp unfortunately. But Telia, the brand Telia is the leader in this market. And therefore, we have a special responsibility. When we had a price war in the spring, we did not participate because we are the leader. And that's my principal position. I don't know if Andreas knows some more details about the iPhone Hale Bopp price levels. There are a lot of speculations about price war and who is blaming who and leading that price war. I think that I did a screening a month ago or something and the difference between the highest price and the lowest price on the fighting brands was about €1,000,000 So I don't think it's a major difference between the brands. On Kazakhstan and the subscription, Karl, do you want to take that? Yes. So I think I think you probably are right now seeing given sort of the new emphasis in the market that we are really good at the penetration up here. And this is, I would say, this is the fact that we have multi SIM cards in this market. Also getting more and more data phones, etcetera. And so I think it does increase. But it's not giving us so much revenue actually. It's more that we're actually increasing numbers of subscribers. So we will see how long this will last. Thank you. Thank you, Erik. Next question please. Your next question comes from Lina Osterberg. Please go ahead. Yes. I just have one question. I'm wondering a little bit, you're saying that your priority is to take down leverage when it comes to the cash that we are getting from Megaphone and Kcell. But if we just take that cash and add it on to your current net debt, you would be at 1.5 percent and that's before even having the Q4 cash flow and the cash flow you will get in Q1 before you start to pay out your dividends. So therefore, I'm sort of curious on why you can't say anything more on any potential extraordinary dividend or share buybacking? I think we'll stick to what we also let's see that we have the money in the bank account before we start to talk about this and then we'll see. I think if we go back, Lea, and I look at our previous track record of if we have excess cash, we have returned to the shareholders. And you don't aim to go below the 1.5 times, right? No. No. I mean, it's I mean, we keep the range. If we figure below that, then that should be with different reasons, but I will tell you why like it. Okay. Thank you. Thank you. Next question from the conference call. We have a few minutes still. Your next question comes from Barry Zaytun. Please go ahead. Hi, good morning gentlemen. It's Barry Zeitouni from Berenberg. I've just got a couple of questions. It's clear that you're trying to reinvigorate your EBITDA growth by cutting costs. But I was wondering have you given any thought to reinvigorate your top line growth and whether you would consider any external M and A in doing that? And then my second question is on Swedish mobile and the developments in the corporate segment. My understanding is that the corporate segment makes up about half your Swedish mobile business. In Denmark, we've seen declines starting in the public sector then feeding through more into the private sector. So I was just wondering really on that curve where you are, are you starting to see declines now in the public sector? And should we expect further decline in the private sector to follow? Or would you say you're quite far along that curve already? Thank you. Well, he's right that you see the same sign in Sweden some time ago that the public sector started declining and the price pressure is the highest in the public sector. But I don't think there's any other parallel with Denmark. Our position in Denmark is very different from our position in Sweden. We are the number 3 player. The only market we are number not number 1 or number 2. And here we are clearly the number 1 player. So I think the parallel to Denmark is very dangerous to draw. And I would also say that we are seeing price pressure in the private sector as well, not only in the public. So I mean it's But it started in the public sector as well. What's the first question? What about M and A? Well, you can't go your top line with M and A. You have to do something with the price model. So I think that's what won't be helped by M and A activities. We need to do something with our models on the data pricing. But would you not consider more of an emerging market exposure within your current mix? I mean, because it's clear that Eurasia is providing excellent growth while the European parts of the business are lagging. So are there ways that you would consider increasing your exposure further east to boost top line growth on an underlying basis? I have said since I started here and as late as yesterday, the Board confirmed that Eura Ace is a very important part of our business. In 5 years that I've been here, we made one decision to move into one country. It's not an easy task to 1 find a market, find an opportunity and not be convinced that you can do business there in an ethical acceptable way. It's not easy. And I've been open about one opportunity. And I want to underline and I'm using it as an example. I'm not about to announce that we're going to go into Burma or Myanmar depending which time you prefer. But it is an opportunity. It's a virgin country. The political situation has changed quite dramatically in the last 18, 12 or 18 months. 2 years ago would have been impossible. Today maybe still impossible, but we are looking at it. It will take us a year to come to the conclusion and then it will take another 2 years of building up a network in a country like that. We went into Nepal 4 years ago and we have invested heavily over 4 years and been extremely successful, much more successful than we had in our business case. And you can't assume that it goes that fast as it did in Nepal. To have a 30% return on capital after 4 years is nearly unbelievable. Okay. Thanks very much gentlemen. Thanks, Mario. Was there a question from Karl here? Yes. Karl Tullen from Lawrington. Just Denmark is apparently still a struggle and your EBITDA is falling despite cost cuts. Just curious to hear what your considerations are strategically? Well, there are many. No, but go ahead. Emotionally Denmark is important to us. I mean, it's part of the whole market. And on the other hand, the results are unbearable. So we've gone through the results. One way is to share that's what we shared the network with Telenor is the one way to get the cost down or at least to get the results to improve. I think we have to accept that we will never have the results in Denmark that we have in Sweden, particularly not in Sweden, but also not in Finland or in Norway. Can we deliver that? Yes. But we can't deliver these results, because now we have no return and that is unacceptable. Now I know what the next question is going to And yes, it is on the radar screen as a possibility. It will be stupid to say, we never think about it or fortunately think about all the alternatives. But I'm not willing to give up yet. With divestment or an acquisition? No, but then you can do different things. Then you can do different things. You can either sell or buy or merge or whatever. There are different alternatives. And we will see. I'm not willing to give up yet. Thank you, Carl. We have 2 more questions on the conference call. Let's finish them off before closing here. So, operator? Thank you. Your next question comes from Sasu Ristamakki. Please go ahead. Yes. Two questions on the cost savings, please. Firstly, the kind of initial or obvious savings measures that comes to mind generally reflect the or relate to the legacy fixed line network, whereas the kind of structural revenue problem that you highlight is very much mobile ish lack amendment. Do you see any kind of problem with that? Or how does this translate into markets where you only have mobile operations? And secondly, can you just shed a bit of light on your thinking of OpEx versus CapEx in terms of do you see an attractive offset reducing operating expenditure by maybe spending a little bit more on investments in some part of the business? Well, let me start with the first one. I think because of the market situation for broadband over the past 3, 4 years, they have worked more on their cost side than Mobility has. Mobility has enjoyed 2 decades of growth and taken out relatively little cost over the years I've been here. Both of them will have to participate in this because broadband has a much more complicated product portfolio and technical infrastructure, much more complicated than mobility. So therefore, broadband is an important contributor if we're going to be successful in reducing costs. But mobility hasn't historically reduced much cost. And therefore, they have also an important role to play to achieve these €2,000,000,000 over 2 years. If I understood, your last question was whether we were prepared to redirect or reduce CapEx. Or more on the idea of will you be prepared to actually increase CapEx to achieve OpEx reductions as a consequence? Sometimes you need to do that. But overall, we can't afford ourselves to go up very much on the CapEx. I mean, that's a cash flow issue. And I think it's more a question of giving the right priorities and redirect it into areas where we'll benefit from the investment so that we're just pouring in money on the old stuff. Okay. Thank you. Thank you, Sasu. The last question please and operator. Your next question comes from Akhil Dattani. Please go ahead. Yeah. Hi, good morning. It's Akhil Tahtani from JPMorgan. Just two questions, please. Firstly, on Spain. I just wondered if you could maybe just provide a bit color on how you're thinking about that business going forward, just in the context of your points earlier on the difficulty generating growth at the group level at the moment. And I guess at the moment Spain is performing pretty well. So how do you think about the merits of keeping that operation continue trying to grow it versus potentially seeking a disposal next year? And then secondly on working capital. I think the last quarter you were highlighting the attempts you're making to try and improve the capital working capital outflows that you've been incurring the last couple of years? I appreciate Q3 has got some very specific one off issues, but I just wondered if you could give a broad update on your thoughts on working capital going forward and how confident you are you can stabilize that number into next year? Thank you. Lars is down with Joergot. Oh, should I take YOYGO? Well, I thought it was pretty well known that we have the intention of divesting YOYGO. And they are performing reasonably well. Yes, good for them, good for the buyer. We made up our mind. When it comes to working capital, yes, I'm pretty confident that we will work with this in a much better way than we did before because we didn't even look at it. So now we know what it is and we know that it has an impact from certain price models. Of course, if we change prepaid to postpaid it will affect us. And also if you're funding phones for 24 months and you're paying it in 30 days. So I think I feel pretty confident that we could see that in a much better way than we have done before. And this time we had sort of one offs in Norway that I'm not very pleased with what we know at least for the course. Sorry, just one quickly on the working capital. Can you just clarify the point you made? You said that you've changed some of the ways that you do it in. So I guess I'm just trying to understand structurally why you would have sustainable negative working capital, just so I can understand what's changing and what's going to support the improvement into next year? Thanks. I mean, to be very frank, and we didn't even look at it, and we have increased our working capital with SEK 5,000,000,000 in the last 4 years. I'm not really looking at why we have done it. But now we are looking at that as a part of new pricing orders etcetera. And we look at the effect from a cash flow perspective also when we're creating new and new pricing offerings. And it might not be that we will have no higher working capital, but it's higher control than the much. We take obvious decision around this, rather to say. Excellent. Actually, I'll call you later. We can talk an hour about working capital. In the meantime, we close this press conference. I have my colleague Tomas Jans on there that will take care of the media. He's jumping up and down. And thank you very much for coming.