Tele2 AB (publ)

Thank you very much, Serena, and good morning everyone, and welcome to the Q3 Report Call for Tele2. With me here I have Mikael Larsson, CFO; and Samuel Skott, EVP, Sweden Consumer.

Today we'll walk you through the results for the quarter, give you an update on our ongoing initiatives, and then move over to Q&A, so we can address the topics that you are most interested in. Please turn to slide two for a brief summary of the results for the quarter and of the first nine months of the year.

The Tele2 Group end-user service revenue was flat in the quarter and year-to-date. This is in line with our full-year guidance of flat growth.

Underlying EBITDA, excluding effects of IFRS 16 increased by 5% in the quarter and 4% year-to-date, driven by cost reduction as we continue progress on the synergies. This is also in line with our full-year guidance of mid single-digit growth.

CapEx excluding spectrum and leases amounted to SEK0.5 billion in the quarter and SEK1.7 billion year-to-date. Since the 5G rollout in Sweden will start later than anticipated, we have decided to lower the CapEx guidance for 2019 to SEK2.3 billion to SEK2.6 billion, down from SEK2.6 billion to SEK2.9 billion previously.

So, the conclusion is that we are performing in line with our guidance for the year. Now let's look at our strategic initiatives on slide three.

The Sweden consumer segment continued to make progress on our FMC strategy with 141,000 customers now on FMC benefits. This represents penetration of almost half of the addressable overlap between the mobile and fixed customer base of the less than a year since the offers were launched.

We took a major step by introducing mobile pricing as a new growth driver this quarter, similar to what we have done on the fixed side for years. We believe that we can achieve sustainable growth by monetizing increased customer satisfaction through annual price adjustments.

This is what we call the More-for-More Strategy. As a part of this More-for-More strategy, we introduced a new family offer and new data packet in the Tele2 brand.

Samuel will give you more detail on the strategy in a few minutes. In the Sweden business segment, we continue executing on our plan to turn into revenue growth and improve profitability.

However, this is still work-in-progress at this point as price pressure in the large enterprise market persists, and the strategic changes we have made are yet to have impact on revenue growth. In large enterprise, our focus is to take high margin contract in the private sector while cutting cost.

In SME, we are in to take market share and reduce churn by improving our mobile offering and using our fixed mobile convergence capabilities. One area where we do see sustainable growth is the Baltics, where end-user service revenue grew by 10% and underlying EBITDA excluding IFRS 16 grew by 6% in the quarter.

We continue to execute on cost reduction which had an impact of SEK150 million in the quarter adding up to SEK300 million in the first nine months of this year. We reached an annualized run rate of SEK650 million already after nine months and now raised our year-end target to a run rate of SEK750 million.

Please move to slide four. We maintained our guidance for end-user service revenue.

Since we expect revenue benefits from the commercial strategy to gradually ramp up, we expect end-user service revenue to be roughly flat in 2019. And thereafter, grow by low single-digits.

We also maintained our guidance for EBITDA. We aim for a mid-single-digit underlying EBITDA growth excluding IFRS 16 in 2019 and over the mid-term, mainly driven by front-loaded cost synergies in 2019 and a combination of revenue growth and cost reduction in the coming years.

Like I mentioned, we now lower the midpoint of our guidance for CapEx excluding spectrum and leases by SEK300 million this year to SEK2.3 billion to SEK2.6 billion, down from SEK2.6 billion to SEK2.9 billion to reflect later rollout of 5G in Sweden. We maintain the CapEx guidance for the mid-term at SEK2.8 billion to SEK3.3 billion.

This is the model by which we translate low revenue growth into slightly higher EBITDA growth through OpEx reduction. We then achieve higher cash flow through disciplined CapEx spend.

In addition, we use our balance sheet to lever up the growth in EBITDA within our target ranges of 2.5 to 3 times to grow the cash available for shareholders even more. This should lead to a very attractive shareholder remuneration profile over time.

This year, we have distributed a total of roughly SEK7.1 billion to shareholders through the ordinary dividend, which was paid out in tranches of SEK2.2 per share in May and October, and the extraordinary dividend of SEK6 which was paid out in August to distribute the proceeds from the sales in Kazakhstan and The Netherlands. Now let's take a closer look at the segment starting with Sweden Consumer on slide six.

The Swedes Consumer segment continued to deliver strong volumes with net intake at the highest level in several years. Our core services had a net intake of 35,000 RGUs and the legacy service decline slowed down further with an outflow of only 11,000 RGUs.

It is great to see such momentum in our core services since this is the area where we can really extract value over time through both volume and price as we execute on the more-for-more strategy and drive FMC in the customer base. As you can see in the chart to the right, we are yet to execute on the second of the strategy and monetize customer satisfaction through ASPU growth.

As expected, the ASPU pressure continued this quarter as the affect of this year smaller fixed line price increase remains. This slide paints a good picture of how we use customer satisfaction to drive growth.

All of our commercial initiatives this year have been aimed at doing one thing and one thing only, improve customer satisfaction. So far, we have monetized that customer satisfaction through volume growth as you can see on the chart to the left.

When we look at these charts again next year, you should expect to see the affect of this strategy on the chart to the right as well as we monetize customer satisfaction through back book pricing. On slide seven, you can see the financial effect of the strategy so far.

Total end-user service revenue saw the first quarter of growth since Q1 2018 with a slight growth of 0.4%. End-user service revenue in our core services continue to grow, up 3% as you saw on the previous slide.

This was mainly driven by volume. We also see a lower drag from decline in legacy services driven by great performance in mobile prepaid and slight improvements in DTT ASPU, which is an area where we actually did significant pricing this year.

Continued execution across the entities resulted in a 4% growth in underlying EBITDA this quarter. Now, Samuel will walk you through our more-for-more strategy in more detail.

Thank you, Anders. Over the next few slides, I will talk about our new growth driver mobile pricing and how we execute the More-for-More strategy to build customer satisfaction, which we then can monetize through volume and price.

I however want to make clear and hope that you will appreciate that we will never publicly comment details and exact timing for possible pricing moves before they are implemented. Pricing will always be dependent upon market environment and the More-for-More principle i.e.

increasing customer satisfaction. But let's start on slide eight.

We have a structured and continuously ongoing approach towards pricing with the foundation being our focus to create great value for our customer. That's where it all starts.

Customer value is created through award winning network and product, great brands, which we position as leaders in the Premium segment, and clear more-for-more benefits. This then creates value for the customers that we can benefit from in different ways, pricing being one.

We have a yearly pricing cycle that includes both fixed and mobile products updated from prices and proactive value given to our customers are then used for gradual back book re-pricing, the majority which is done in the first quarter. On slide nine, you can see how we implement this strategy on the fixed side.

In broadband and TV this strategy has been in place for several years and after a relatively slower year of pricing in 2019, we have on the back of several product improvements and our FMC strategy increased front book prices for broadband. In the fourth quarter, we will now execute some smaller back book adjustments to optimize our approach as we do the major adjustments in Q1.

Let's turn to slide 10 to look at the mobile pricing plans. For our mobile business, pricing is a new growth driver that we're leveraging.

However, the principle and the mechanics are the same as in fixed. In the third quarter, we updated our Tele2 mobile portfolio as we increased front book pricing.

At the same time, we launched an advantageous family plan where you can add members for only SEK199 per line, and where everyone in the family gets their own data allowance. The family plan is simple and beneficial to our customers and it will help us on our quest to win the full household.

Just like on the fixed side, we will do some smaller back book adjustments in the fourth quarter to optimize our approach as we do the major adjustments in Q1. All in all, this is how we aim to achieve sustainable growth in the Consumer segment.

Each year, we build customer satisfaction by giving our customers tangible benefits that they value, and in turn, we will be able to translate that increased customer satisfaction into revenue growth through a mix of both volume and price. And with that, I would like to hand back to you, Anders.

Thank you very much, Samuel, and please turn to slide 11 for our Sweden Business segments. Within B2B, we see no fundamental changes in the market.

The price pressure for government contract continues, this is having an impact on our performance, which will likely continue for some time. Our initiatives to turn this business into growth are yet to have an effect and as a result our performance is similar to previous quarters.

The most important factor here is to turn mobile into growth. As you can see in these three charts, the 4% growth in mobile RGUs was offset by the 8% decline in ASPU leading to 4% decline in mobile end-user service revenue.

Our plan is to refocus the large enterprise segments with the private sector where pricing is better, and go after high margin contracts and cut costs to keep going EBITDA. In SME, we have historically not put enough efforts to take our fair market share and as a result, we are underrepresented in this segment, our focus will be to take market share by improving our mobile portfolio, manage our existing customer base better and utilize our FMC capabilities.

On slide 12, you can see that we are capping cost in this segment which resulted in a 4% growth in underlying EBITDA excluding IFRS 16 in spite of revenue decline. Please go to slide 13 for an overview of Sweden as a whole, while we see end-user service revenue inch its way up toward growth, we're still not there, as the decline in the business segment offset the slight growth, we saw in consumer this quarter.

However, underlying EBITDA, excluding IFRS 16 grew by 4%, despite the revenue decline, driven by continued execution on the cost synergies, partly offset by investment into growth initiatives. We continue to see strong cash conversion of 72% of CapEx spend is relatively low, now in between investment cycles.

Before we move on to the Baltics, I would like to walk you through the conclusions of the Swedish network audit, which we started last quarter to investigate the recent network outages. So please move to slide 14.

We find the conclusions of the audit reassuring for a few reasons. The audit found that the quality of our radio access network is excellent.

As further proof of this, we were actually named the best network in Sweden by the recent P3 Benchmark Tests. As you may know, the radio access network is where the bulk of the network's CapEx goes, which reassures us that we do not have an under invested network.

The area where we need to make improvements is the core network. And these improvements are mainly related to simplification of processes, rather than financial investments.

The good news here is that the recommendations of the audit are in line with our current core upgrade plans, which means that everything is already included in our CapEx guidance. We now have a pipeline of improvements, which have already started and will continue over the next few quarters, including consolidation of our network operating center into Sweden to improve our ability to probably service the complex mobile and fixed networks we have there.

We will also improve the way we work with our suppliers, so that we can be strategic long-term partners and grow together. We look forward to implementing the recommendations of this audit and ensure that we continue to have the best network in the country.

Now let's look at the performance in the Baltics on slide 16. We continue to see strong results both in terms of volume and ASPU this quarter, while Lithuania is the main driver.

We are also happy to see that Estonia has maintained positive momentum in both volume and ASPU for a few quarters now. ASPU growth was particularly strong this quarter across all three markets.

While we do see a great underlying trend, this quarter was somewhat boosted due to the easier comps in Q3 last year, when we unfortunately had roaming outages. On slide 17, you can see that we had continued strong growth in end-user service revenue with solid growth in all three markets.

It's worth noting that Estonia turned the corner and grew revenue for the first time since Q4 2017 and so underlying EBITDA growth for the first time in three years. Underlying EBITDA excluding IFRS 16 for the Baltics grew by 6% somewhat lower growth than we are used to due to elevate the equipment margins in Lithuania in Q3 last year, continued EBITDA growth and low capital intensity led to strong cash flow generation, as you can see on the chart to the right.

And with that, I'm happy to hand over to Mikael.

Thank you, Anders, and good morning, everyone. Please go to slide 19.

Group income statement for the third quarter, revenue raised SEK6.85 billion in the quarter with a record high underlying EBITDA margin of 41% or 36% if we exclude the positive effects from IFRS 16 in this year's numbers. In the quarter recorded costs related to the acquisition integration of Com Hem or SEK7 million to SEK2 million, which are included in items affecting incomparability.

The major step up in depreciation amortization versus last year is explained by additional amortization of surface value from acquisitions of SEK298 million as well as depreciation or right of used assets under IFRS 16 or SEK296 billion. Net profits for the quarter almost doubled to about SEK1 billion, which is the result of the Com Hem merger and the transaction in the Netherlands.

Let us move to the cash flow statement for the quarter on Slide 20. Equity free cash flow increased by 67% compared to the same quarter last year, reaching SEK1.8 billion in this quarter explained by Com Hem being included in this year's numbers and also improves cash flow generation in the rest of the business.

EBITDA increased by 70% for continuing operations when excluding effects from IFRS 16 in 2019 numbers. CapEx paid were some 200 million lower in this quarter, mainly explained by the divestments of CapEx owned under Netherlands.

Negative trends in working capital during last year has been reversed with positive development year-to-date, largely driven by introduction of Comviq handset financing arrangements. Please go to slide 21, synergy update, in the quarter we had a positive impact of approximately 150 million of OpEx savings in the books leading to a total of 300 million year-to-date.

At the end of the third quarter, the annualized run rate or realized OpEx synergies raised 650 million, while we have operated the target for the end of this year to 750 million, which is mainly explained by faster headcount reduction that we originally planned. The 900 million three year target in total annual OpEx synergies remains unchanged.

Also for the revenue synergies, realization goes as planned with now almost half of the overlapping customer base on FMC benefit packages. Let's move to slide 22 for some of our financial guidance, and as Anders already mentioned, guidance for end-user service revenue and underlying EBITDA is unchanged, while the CapEx range has been lowered by 300 million for this year, explained by later than expected start of 5G investment.

Mid-term target range for CapEx is changed at 2.8 to 3.3 billion during the rollout phase of 5G and Remote-PHY in the fixed network. Please go to slide 23, group leveraged measured at economic net debt to underlying EBITDA of the leases will set 2.6 at the end of September up 0.2 in the quarter, explained by pay-out of extra dividend of 4.1 billion, partly offset against a strong equity cash flow of 1.8 billion.

When including the second quarter of this year's ordinary dividends total amounting to 1.5 billion which was paid to shareholders in beginning of October. Leverage would have been 2.7 to five times end of September i.e.

in the middle of our target range 2.5 to three times, and this means that we have year-to-date distributed 10.46 per share or a total of 7.1 billion to shareholders while at the same time as slightly reduced leverage from 2.8 beginning of the year down to 2.75 end of September. And with that, I would like to hand back to you Anders.

Thank you, Mikael. Now please turn to slide 25 for our key priorities going forward.

The key to achieve sustainable growth for Tele2 is to reignite growth in Sweden, especially in our largest segment Sweden consumer. We will do this by ramping up FMC penetration in the customer base to reduce churn and increase pricing power over the long-term.

This along with a new profile and offering of the Tele2 brand is how we will win the Swedish household. We look forward to executing on the next step of the more for more strategy and growth through pricing as well as volume going forward.

In B2B, we have the ambition to turn into growth by focusing our efforts in large enterprise on the private sector and take high margin contracts while continuing to reduce costs. We also aim to take market share in the SME market by revamping our mobile portfolio, reducing churn and utilizing our FMC capabilities.

On the cost side, we will continue executing on the synergies and aim to reach a run rate of 750 million by the end of this year. In addition, we are investigating the potential for more structural change over time to turn Tele2 into a true integrated challenger.

We aim to get back to you with more details when we report our Q4 2019 results. Outside of Sweden, we will build on the momentum we have in the Baltics and we look forward to closing the sale of Croatia later this year.

With that, I hand over to our operator for Q&A.

Good morning, guys, this is Maurice from Barclays. Question really on the timing of B2B recovery.

You sort of talked about the timeline for the recovery in the past. Now you are saying it's going to take some time.

Looks like mobile and fixed is reasonably tough. What do you we think about the timeline for stabilization of B2B revenues, I mean where do we see ARPU stabilizing?

I know you talked about a mix of different segments there. Thank you.

Hi, Maurice. It's a very good question and a very tough one at that.

It's very hard to answer, because we do not have a crystal ball here that looks into the future, but what I can tell you is that we are going to aim to make this happen sometime next year. Whether that is possible or not, it's too early to say, but that's what we aim.

On the other hand, I mean what we are solving for is to get into growth in Sweden, and there are two components as you know. It's consumer and it's B2B, and consumer is by far the largest part.

So, the most important thing here is that consumer goes into growth, which we are now where we are -- Samuel delivered 0.4% growth in Q3, small, but still growth, and a nice trajectory there. And we do believe that we will be able to grow Sweden and the company next year even if B2B does not go into growth.

So that's what I can give you right now, Maurice.

Thank you, Anders.

Thank you.

Good morning. Thank you very much for taking my question.

My question relates to the cost savings. And there is a interplay and potential substitution between the synergy related cost savings from the Com Hem and Tele2 merger and the structural cost initiatives that you talk about as a potential additional lever for cost saving opportunities going forward.

So when you take the Com Hem synergies, right? You have now pretty delivered on your 900 target.

And it looks like you will be almost done by the end of the year. Lot of those benefits will come through in 2020 since that -– because you have achieved the run rate just now, they will be coming through a little bit later.

But then what about 2021? When you talk about mid-single digit growth ambitions for EBITDA in that year as well with your current guidance, it looks like you will have nothing left from the Com Hem merger for 2021.

And I guess this is where the structural cost savings can come in quite handy. And ultimately, my question is I had previously thought of the structural cost savings that you talked about as an additional lever that will come on top of the Com Hem -- the savings.

And that would mean that could potentially exceed your mid-single digit EBITDA growth, but the way the numbers are shaping up and the way your communication is, it looks like it will just be kind of a lever that will allow you to maintain the current momentum, the mid-single digit EBITDA growth and not necessarily something that will come on top of it. Any color here will be much appreciated please.

Thank you.

Yes. Thank you very much.

I think that's an interesting line of thought you have there, Roman. So the way we look at it is that I mean if we look at our mid-term guidance, obviously, we don't have much of growth right now.

All the EBITDA improvements more or less come from the synergies we realize on the cost side. Over time as growth comes into play, we will actually see EBITDA growth coming more and more from the revenue growth.

And we can see a scenario whereby we can deliver mid-single digit EBITDA growth only by the leverage we have from growing our top line. So, I don't think savings in the necessity mid-term to actually grow mid-single digits revenue growth is, however.

So the way I look upon it is that as the cost savings are phased out if you will, revenue growth is phased in, and we still should deliver the EBITDA growth. The structural savings we are talking about, those in my mind are also in addition to the plan we have and our guidance.

What remains to be seen, however, is what kind of structural savings we can have, and that, we are not in a position to talk about right now. We are looking into them.

We are planning them, and planning what to do. And it's something we plan to be able to discuss with you when we release our full-year results in the beginning of next year.

That's what I can give you this point in time.

No, that's great. Thank you so much.

Thank you.

Thank you. Good morning, everyone.

I just had a question around the pricing strategy in Swedish mobile environment. You mentioned that in Q3, you saw really strong volume growth, just wondering whether you're seeing any signs of the competition of fighting back to protect their market share.

And if not, do you think that when the customer starts to absorb the price increases that you're starting to put through, whether you'll see less churn that was the case when you started to increase prices in broadband and TV? Thank you.

Hi, Terence. Samuel here.

So I think on this strategy, I mean, the mobile market in Sweden is a competitive one and has been and we see, I mean three different segments in this market. So it is highly competitive, and will remain like that.

However, our investments into the Tele2 brand together with having a full product suite with Com Hem makes us stronger player in the Premium segments, and therefore less sensitive with [indiscernible]. And on the back of that, we can do pricing, but also of course we introduced the family of plan at the same time, so that we can continue to have a good balance of both volume and price going forward.

So, I think net-net, this should be just a positive -- continued gradual positive move for our mobile business going into 2020.

In my book, in addition, this is value for money, and we're actually providing much more value for money now than we've been historically with this new pricing plan. So that should go hand in hand in the Premium segment I think.

Definitely. And even if we would lose some in kind of a single-play mobile area, we are definitely winning more by being much stronger as a household player now, and that is our focus going forward.

Thanks, it's really clear.

Yes, hi. It's Abhilash from Berenberg.

Thanks. Thanks for taking my question.

I just got one on CapEx please. You've obviously re-treated your mid-term CapEx submission; I guess you've seen some pressure from one of your peers today on CapEx guidance.

I appreciate that obviously there're more sort of diversified -- than you and have more countries to think about, but just would be interesting to sort of hear your thoughts on the 5G plans and then whether you think there's any risk that it ends up costing more than what your guidance currently [indiscernible]? Thank you.

Thank you. It's Mikael here.

I will try to respond on your question. For us, and how we look upon this and in our plans and predictions, we are having -- it's the only thing that has changed since last quarter is that the 5G rollout will start a bit later, it will probably be completed a bit later than we originally planned.

So, yes, we are pushing CapEx further into the future, the additional spending we will have for 5G. Except for that, there are no changes in what we -- the total envelope for building 5G that is part of our original estimate, and those numbers are better confirm now than they were one-year ago, when we communicated the CapEx guidance.

So, it's just as we're pushing CapEx somewhat into the future. At the same time, we are building capacity in the existing network.

So, from a customer experience perspective, this -- it doesn't affect customer experience short-term that we have this slight delay in 5G. I hope that answers your question.

Yes, that's great. Thank you.

Yes, thank you. I'd like to come back to this question of competition, I mean, you talk about volume growth and continuing in consumer, you mentioned the sort of shift towards higher value, which you think makes it sort of best vulnerable to competition, and also about outright share gains in SME.

Now, on the other hand, Peter [ph] has more or less sort of indicated today that part of the actions they're taking is actually there to release -- or build budgets for commercial measures. So, I'm not entirely sure why exactly do you think that really taking share and increasing volumes in the higher end is somewhat less risky strategy, in particular, because, the FMC capabilities that you now have are not unique to the market, that they're new to Tele2, but they're not unique in the market.

So could you just explain why in the higher end, do you expect less of a marketer defense of the -- who have share that you're trying to attack? Thank you.

So, Samuel here. I think, we can be very open about that we don't see this as a big market share kind of a competition in the Premium segment.

For us, it's about gaining cross satisfaction and loyalty with our own customer base. So that we can grow there with additional products, that creates volume, but also pricing as satisfaction grows.

So, for us, this is about positioning ourselves as premium and making sure that we give our existing customers even more value, so that they buy more and stay longer with us. We don't see this as a big kind of market share war in this segment in Sweden, I would say actually on the opposite what we've seen in the market the last year is the main brands in general providing more value to the customers.

And that is something that it's beneficial for the customers, but also for the market dynamics in general.

And for SME, which you also talked about, I think [technical difficulty] we consider being our fair market share all the time, and therefore, you get to a higher volume gain when it comes to SME. So that's what we have for you on this one.

I hope that explains our thinking at least.

Thank you very much.

Yes, thanks. Good morning, everyone.

I had a question on the top line as well, but maybe slightly more positive on the on the market growth outlook, including your ability to grow within that. So, first question is on the Swedish end user revenue -- service revenues, which improve to just under 1% decline in Q3.

You've highlighted in the past that you spent a greater amount of marketing spend in Q2 and Q3 and presumably the benefits from that as a backend loaded. So do you think there's an opportunity for your improvement in Q4 to extend and therefore maybe potentially get back to service revenue growth in Sweden as early as Q4?

That's question one. And then secondly, today, we had Telia highlight great escape from price rises and after uplift in 2020 and 2019.

Obviously, you can't be specific on what you're about to do. But is that something you can concur with?

Thank you.

Thank you very much, Andrew. So, on timing, when we're going to go into growth, this is very hard to predict.

So I'm going to refrain from doing that, but what we do see is that, we are in a position now, we have evidence and we see it, see it happening and we have traction and momentum. So we see we're going in direction of going into growth.

And that leads us to the conclusion that we today think that we will be able to grow this company at low single digits end user service revenue for next year. And I don't want to be more specific than that, because it's really, really hard to predict what's going to happen next month and so forth and when you actually going to take over.

So, you have to make deal without for now at least Andrew. Sorry about that, when it comes to pricing in the market, I think I mean what we do and I think what, the company you're referring to do to are doing as well as that we are loading up our customers with customer satisfaction as Samuel talked about and by various means and therefore we will gain pricing power.

And Telia has done this before. So they have a head start and they have seen the positive effects of that and we came later and then hopefully we will see the same and we anticipate to see the same.

So, we're quite bullish from wherever it is now on being able to use price along with volume as two measures in order to grow this company for next year and onwards.

Yes. That's helpful.

Thank you.

Thank you, Andrew.

Yes. Good morning everybody.

It's Nick, Soc Gen. Can I just ask you on this please - on the pricing.

I'm just interested to see how far you think you can go. I mean you mentioned on the network review that you thought you had best quality on network and you're sitting at anything between 15% and 30% discount like-for-like on Telia prices.

So how far can you appreciate that? How sustainable -- how large does the discount help to be - to have sort of growth in FMC and growth in Family products.

Could you talk a little bit about how pricing you could think about putting through in time please? Thank you.

Yes, I'm going to answer. Thank you very much, Nick.

I'm going to answer it in a slightly different way. What we're trying to do now is to put ourselves in a position, so we can use price consistently over many years.

So it's not about having one year mega price increase if you will. It's having smaller price increases every year.

That together with a small volume where intake we are going to plan for, is going to lead to low single digits end-user service revenue growth. That's what this holding for.

So it's rather doing it for a long period of time and small magnitude than doing it in a short period of time with a high magnitude. And now we are adjustment today is that we are in that position for next year and onwards.

We have built a lot of customer satisfaction. I mean, the pricing plan that Sam talked about, the family package, the FMC benefit packs where you get doubled AA star or highest needs here or both actually if you're an FMC customers, we have more coming up next year in some of the benefits that really are meaningful for customers that we now have a super duper and network quality and got that stamp from P3 will help us and the re-branding of Tele2 is another thing.

So I mean, I think we've built the look of customer satisfaction that underpins the ability to take pricing in the premium segment over quite many years. And that's actually the aim, that's what we're trying to do.

So - and that's -- so far so good I would say, we're executed quite well I would add, [indiscernible]. So that's how I would like to answer it, Nick.

Great, thank you.

Thank you.

Yes. Hello.

A follow up on the earlier CapEx question, first of all, you postpone the 5G CapEx spend. Can you just give an indication when you expect this to happen to start, if it first-half 2020 or second-half?

Secondly, Telenor has highlighted the need for modernization or a network swap of the old or of the 2G and 4G equipment in Sweden. If this already part of your medium term CapEx guidance or could that modernization or network swap come on top of that?

Hi, Stefan. Thank you very much.

So I'll start with the second one. The modernization of the 2G and 4G is included in our CapEx guidance going forward.

So that is not in addition to anything, it's already included. And we'll do that when we do the 5G rollout.

When it comes to the timing of 5G rollout, it's a bit unclear today. First of all, what needs to happen is that we need to have the spectrum and there is a spectrum auction coming up, the high band auction maybe in Q1 next year, the date has not been set, so we need that one, that is one gating factor.

The second thing we need to understand is the network security legislation which is also due to happen both in Sweden and on an EU level. So when we know what they actually say, we are in a position to choose vendors, before that, it's a bit risky to do so, because we are making a lot of money investments obviously that should last for a very long time and you don't want to end up in a situation where you have to change while already have invested.

So those are the two gating factors, which are bit out of our control I have to say, so we'll have to watch by the sideline as you and once we get clarity we can move in - and next we start building. I hope that answered your question, Stefan.

Yes, very clear. Thank you.

Thank you.

Yes. Thanks.

Good morning guys. Two questions please.

One, just on the wholesale contribution to Swedish B2B, it looks like, you said that the EBITDA growth -- cost cutting, but what I can see it all and more comes from the wholesale revenue growth, I think there was 30 million extra EBITDA contribution this quarter, this 40 million loss. Can you just give us a bit more detail whether it's wholesale revenues are coming from in high sustainable, the growth that you're getting out of the wholesale business within B2B is, and second on Lithuania Tele gave a sort of muted warning on their ability to offset inflation and all the Q&A going forward.

You didn't seem to have the same concerns, maybe just sort of outline why you're so relaxed that you can keep taking price against an inflationary cost backdrop in Lithuania. Thank you.

So I will deal with the Lithuania question to start with, and then Mikael will take wholesale. So on Lithuania, I mean we had different decisions in Lithuania Tele on ourselves.

We are the market leaders, and if you know the story, I think 10, 15 years ago when our current CEO became CEO, we were number three in the market and as soon as then we have surpassed our competitors [indiscernible] and Telia, and are number one. In my mindset, Lithuania is an extremely well-run super-duper operator with a very, very strong brand and has outperformed the market consistently for quite many years.

And I think we are in such a strong position that we'll be able to continue this going forward. We do not see any of the pressures when it comes to costs on the life that others may see and I think we will be able to continue the path where we are on.

When it comes to wholesale, Mikael?

Yes, I would try to answer that question. Well, I can't go into that many details.

This is a regular wholesale business where we are conducting in Sweden in the B2B sector, and both revenue and profit varies between quarters and it's more volatile business and then the rest of the basis I will say, also where I've changed the accounting methodology, somewhat due to the integration of Com Hem over the past year, you should look at the Q3 numbers now they are more representative for how we manage this business today and in the coming fortress. I hope that answered the question.

Is there a sort of one offish boost from the accounting change in the EBITDA growth we can see from wholesale and B2B?

It can - you have - while not seen in previous periods. yes.

I hope that answers your question.

Okay. Thank you.

Yes, just to one please if I'm ever turned to the B2B markets, let's quote on as you talked about the intense pricing pressures in the large enterprise market, which if I recall makes you sort of consider stepping slightly back from this market. You're not talking about taking high margin contracts in the large enterprise segment, which sounds easier said than done.

Are there any high margin contracts left in this segment to be taken?

That's a very good question, Peter. So I mean there are two basically segments in the large enterprise market.

You have the public markets, public customers and they are all one under tender and this is where you have and were basically price is the only variable that you can put there, and therefore -- and the outcome of these and the price that one will become public as well in the end. So therefore you have a tremendous pricing pressure on these contracts.

Then you have the private sector, i.e. old companies and not held by the States or municipalities.

And there you're having negotiation, and there are no tenders, which means that you don't see the same pricing pressure at all, which you see in the public sector and this is the difference, so we will then obviously continue going off to the public sector or which we have quite much in terms of customers and put more efforts also into the private companies where we are around the represented today, and I hope that answers your question.

Okay. Yes.

Yes, thank you and good morning. A follow-up question on the CapEx questions from the chorus, related to the 5G rollout.

So you talked about the uncertainty surround vendor restrictions, et cetera, and previously talked about that it could lead to increases and cost for you that they would have to pass on to customers. Could you give us a sense of the magnitude if you would not be able to continue with the current vendor setup or if you see this to the CapEx guidance at all?

And the second one is also relating to the 5G introduction. How do you see device availability for Sweden go into potential 5G launches that is that a bottleneck or do you see that resolving during next year?

Thank you.

So, thank you very much, Jorgen Wetterberg. So the -- I mean, regardless of which vendor you use, there will be obviously an uptick in CapEx when we build the network and that's what we have been related to, or what was what we meant when we talked about price increases or cost increases going forward.

It was not related to a vendor as such, but the phenomena of investing into new technology. And then, as Mikael explained earlier, we now have much more visibility when it comes to the investments needed in order to do 5G from all the vendors than we did a year ago, when we actually came up with the guidance.

So we at this point in time, feel fairly comfortable that this is under control. And we will be able to live according to our guidance going forward, regardless of who the vendor in the end will be.

So that's what I can say that one. When it comes to the devices, I'll hand over to Samuel.

Yes, and I think I mean, we are seeing 5G devices around the world now. And many handset manufacturers are investing heavily into producing newer and more and I think especially given that we see a postponement of 5G currently in Sweden, there is no worry about having good 5G handsets, whenever we launch.

Okay. Thank you.

Thank you. It's Adam from HSBC.

I wanted to ask a question about the Tele2 brand perception in Sweden, please your advertising has been in place for a bit of time. Now, as you say, you're trying to make yourself more premium there.

Is there any metric or evidence that you're tracking in terms of consideration or promoter scores that you can share with us as to how that's going? And then secondly, just on the Com Hem synergies briefly, can you tell us what's left and how -- what you're expecting there because he'll see your guiding for that to take another 2 years to come out if I understand things correctly?

Thank you.

Hi, Adams. Samuel here.

So on the question on the kind of two brand. I mean, we've basically seen improvements across the boards since we did this re-branding, it's one of the most light campaigns we've ever had.

We see net impact profile of Tele2 brand improvement both through more safe but also lower churn, and we also see the net NPS figures improving since launch. So, overall, very positive support.

We need to continue this that it's about educating the market as well about our new position, but so far, very good I must say.

And your second question, this is Mikael. Definite, what remains and will remain for 2020 and 2021 is network and IT related service.

Websites come to start that these will come in the later period since it takes time to realize this energy. It's about combining the two networks, mainly, and some IT systems.

So those remain.

Perfect. Thanks very much.

Hello, Hi, good morning. Thanks for taking my question.

So I just have one please. And I want to circle back to your midterm, top high mid-single digit growth targets.

I mean, understand it's a quite wider range, but if I think about you put 8% price increases in both of your fixed mobile from the penny going to pass it to the back book. And you'll have a strong message on your Baltic performance.

And so, I was wondering whether you are now looking at a performance going forward? Would you be more confident that top line growth rate could be more geared towards middle single digits rather than towards the opposite the intermediate term?

Thank you.

Hi, and thanks for your question. So this will ultimately be a tactical decision in the end and I think if history is the guidance of future, I mean look at what was done, where we use this strategy before in the Com Hem brand for several years, and I think you ended up with like a 1% to 3% effective price rise every year, and that's probably somewhere in that range.

We're going to end up here as well, I would guess. But as I said, again, it's a tactical decision, and it's something which we then will have to combine with volume growth, if we have stronger volume growth we will probably do less on pricing and vice versa, but I don't think we're going to out stretch ourselves to try to short-term do very strong revenue growth because that will cost later on, we will need to have sustainable growth over multiple, multiple years.

I think that is the key here. And it's quite hard also to be very specific on the midterm more specific than we are given that we are yes starting this journey.

And as we go along, I think we will be able to give you better guidance and unfortunately, I can do right now. So that's what I have for you.

Thank you very much.

Thank you.

Yes, thanks. Thanks so much.

I just wanted to sort of follow-up on your pricing strategy and brand strategy, I guess in Sweden, I think you have talked about a potential gap in the market you're seeing at very lower end being [indiscernible] mid-end rather than potentially launching something out for that lower end. Have you -- any updates you can give to us?

And then also, in terms of your back book pricing, I think in fixed line, you've always had quite a big gap between back book and front book, which allowed you to raise back book pricing even if you didn't do front book pricing in a year. I guess it's little bit sort of more difficult to -- it's a bit more complex on mobile side, but any thoughts there in terms of how much room you have to raise back book pricing without sort of changing your front book prices, is there a material gap?

Thanks very much.

Thank you very much, Henrik. So, on the low end of the market, you're absolutely right, we have identified a segment where the low end of the market where we're not presence with the brand, Com Hem sits in the middle of the segment, and Tele2 and Com Hem on the top.

And we are investigating whether that makes sense to actually go into that segment almost and this is something we're still looking at. We have made no decisions yet, but it's certainly something where I'm very close.

And then for the second part back book…

Yes, for the second, the back book potential, I mean, as you saw in the presentation we see potential for both Com Hem and Tele2 has diminished kind of gap between or the historical bigger gap between back-book and front-book pricing. So I wouldn't say that that's an additional opportunity, the opportunity we have is to continue to join in gradually with increasing value and by also being able to use pricing as a growth driver.

Great, thanks so much.

Thank you.

Hello, sorry to come back to CapEx again. I was wondering if you maybe could say something about when you expect to peak your 5G rollout, is that has also been pushed out in time or if you still expect 2021 to be the piece here.

And also if you could say something about price expectations on the Swedish high band licenses compared to the 700 megahertz?

Hi Lena, it's Mikael here. I will try to answer the first one, the peak what we definitely can say is that 2020 will not be peak year.

It's still too early to say it's a peak year is 2021, 2022, or 2023. We don't have that detailed visibility, given the factors, Anders mentioned uncertainty around licenses and the political situation or so that it will be later than 2020.

That's the only thing we can say. But also this is, as we have said before, we expect this to be rather be somewhat higher CapEx, but it will also continue over several years.

So you shouldn't expect any sharp increases in any single year.

And then when it comes to the spectrum auction, I think it's this is obviously highly sensitive and for competitors to discuss. So I think I'm going to refrain from that Lena.

I think what you probably should do is that you should look at the rules for this, this auction and compare it to the rules of previous auctions and maybe you can find something there which will lead you to a conclusion.

That would indicate that you will have to pay lower prices this time around. So I was just wondering if you also think so.

We'll have to wait to see.

Okay, could you maybe say something on the cost of hosting your network if it would come to that, that you feel that you have to change vendors? If you think that that would significantly increase your CapEx or if you think that that would still -- it would keep within the range?

Our estimate is that when we go to 5G, we can keep it within the range we have provided the market with.

Irrespective or if you have to swap vendors…

Yes, when we go to 5G, we expect us to be able to be in that range, and there are several ways of getting to 5G, what you're explaining is one, and then there are other ones as well. And then some cost more and some cost less.

But our estimate is that we will be able to go to 5G regardless of the method within the guidance, that's what we were based upon what we know today.

Thank you.

Thank you.

Okay. So, thank you very much for all the questions and your interest in Tele2, much appreciated, and if there's anything after this meeting, you know where to find us, and we're more than happy to discuss whatever with you.

And if not, I hope to see you in the near future, and by the latest one, we released the full-year report back on this Telco again. So, thank you very much and have a great day.