Tele2 AB (publ)

to the Tally 2 Q3 interim report 2021 conference call. At this time, all participants are in the listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. I must advise you that this conference is being recorded today on Tuesday, the 19th of October, 2021. I would now like to hand the conference over to your speaker today, Shau Johnson. Please go ahead.

Thank you very much. And good morning, everyone. Welcome to the Q3 report call for Tally 2. With me in the room here today, I have our interim CFO, Peter Landgren, our chief commercial officer, Henry Tigrot, and our head of B2B, Stefan Trampus. I'm glad to present to you today the second consecutive quarter of growth with good results across all segments. Sweden B2B in particular turned to growth for the first time in several years while we saw commercial momentum picking up in Sweden B2C. During the quarter, we also finalized the consolidation of our international footprint through the divestment of T-Mobile Netherlands. While I am impressed by the development and efforts of the management and employees in the Netherlands, we clearly stated during the capital market stay that our midterm strategic ambition is to be the leading operator in the Nordics and the Baltics. Thus, our focus will be on this specific region. As we will now go through this quarter's numbers, I'm even more confident about reaching the ambitions that we set out earlier this year. The group and user service revenue show the growth of 2% in the quarter on the back of strong performance in the Baltics, growth in both Sweden B2C and B2B, and a slight tailwind from roaming. Underlying EBITDAO grew by 5% for the group in the quarter, driven by end user service revenue growth and continued execution of the business transformation program in Sweden. As I mentioned earlier, we closed the T-Mobile Netherlands sale in the quarter, marking an important milestone for the company. The board intends to propose an extraordinary dividend of at least 11 SEC per share pending the receival of cash proceeds. This gives further proof of our midterm ambition of having the best industry shareholder return. During the quarter, we paid out an extraordinary dividend of three SEC per share to our shareholders. Together with the second tranche of the ordinary dividend of three SEC per share paid out in October, Teletube will have distributed nine SEC per share this year to shareholders. This is yet another proof of our midterm ambition. In Sweden B2C, we see that our value-led strategy through price adjustments on the back of product improvements are continuing to bear fruit, while net intake in mobile postpaid turned positive. After a successful 5G launch last year on the premium Teletube brand, we now launched 5G on Comvek to further assert our strong position in the mid-tier segment. This gives us an enhanced product offering prior to a quarter with seasonally higher activity for handsets. I'm very proud to say that Sweden B2B saw growth in the quarter. We're in the middle of a major turnaround within B2B, and Stefan and his team is doing an amazing job to fulfill the ambitions that we presented to you on a Capital Markets Day. Our more granular approach with clearly defined segments and a developed understanding of how to balance value and volume has led to a major improvement in performance. Our operations in the Baltics are clearly performing very well, both in terms of end-user service revenue and underlying EBITDA growth. We see that our -for-more strategy is very much working as we monetize the increased demand for data by our customers. But let's move over to the Swedish consumer segment on slide four. With previous modest market activity, commercial activity started to pick up in the quarter, and we saw positive net intake for mobile postpaid. With price adjustments made previously during the year, having full effect in the quarter and a slight tailwind from roaming, we were able to grow mobile postpaid ASPR by 3%. As a result, we saw mobile postpaid end-user service revenue of 2%, so growth in that of 2%. Fixed broadband continues to show steady growth, both in terms of volume and ASPR, leading to a solid end-user service revenue growth in the quarter of 4%. In the cable and fiber segment within digital TV, we see continued strong ASPR development on the back of pandemic unwind, as we now had a full quarter of premium sports. Combined with a growing contribution from Comhem Play+, this fully offset the slight decline of RGU's, and we were able to grow end-user service revenue by 1%. With a strong ASPR development in our core services and pandemic recovery, we were able to grow total end-user service revenues in Sweden B2C by 1%. Let's continue with Sweden B2B on the next slide. Mobile net intake was positive with 17,000 revenue generating units in the quarter, driven by positive net intake in all three segments. Mobile ASPR declined by 4%, while still declining. This is a clear improvement in the trend, as we see SME intake contributing to a better mix and focus on profitability in large public and private starting to have an effect. We also see a slight tailwind from roaming in the quarter. With increasing mobile volumes, continued growth within IoT and solution sales, we were able to offset the decline in the legacy fixed services, and total end-user service revenue grew by 1%. And now let's move to an overview of Sweden on slide six. End-user service revenue grew by 1% in Sweden, as both B2C and B2B segments saw growth. Underlying EBITDAO increased by 4% through end-user service revenue, wholesale revenue growth, and structural cost savings related to the business transformation program. Cash conversion continues to be high in the quarter at 65%. As we keep growing underlying EBITDAO, and the full run rate of 5G rollout has not yet been reached. Then let's look at the Baltics on slide eight. Our operations in the Baltics are performing well, both in terms of absolute numbers and in relation to our competitors. Net intake was strong in the quarter for the Baltics, driven by mobile cosplay growth in Lithuania and Latvia. We saw Aspyr growth on similar levels as in Q2, as we continue to monetize increased data consumption through our more for more strategy, and are helped by slight tailwind from roaming. Let's move to the next slide. We see continued strong end-user service revenue of 12% in the quarter with growth across all markets driven by Aspyr and volume growth. Higher end-user service revenue led to an underlying EBITDAO growth of 6% on an organic basis. Cash conversion saw a slight decline compared to previous quarters, as continued underlying EBITDAO growth was offset by slightly higher capex, as we now have started to modernize our core networks to prepare for 5G. So after this little overview, I'd like to hand over to Peter to go through the financial overview.

Thank you Kjell, and good morning everyone. Please turn to page 11 in the presentation. As in previous quarters, we have included this slide to illustrate the top line development with the roaming impact on a separate line. Please keep in mind that the organic growth rates on this slide are adjusted for currency movements. With the restrictions now starting to ease up, we now see a gradual roaming recovery. And as a result, outbound roaming provided tailwind of 29 million sec in the quarter. However, even if we strip out the roaming effect, we see the underlying business improving, and we were able to grow end-user service revenue by .9% ex-roaming. In Sweden BTC, mobile post pay grew by 1% ex-roaming and fixed broadband by 4%, driven by price adjustments and also volume growth in fixed broadband. Within TV, we are helped by somewhat easier comps, as sports broadcasts were shut down, part of Q3 last year. And now we also see ComHemPlay Plus starting to contribute to the top line. But this didn't fully compensate the continued decline in the legacy DTB business, resulting in TV end-user service revenue decline by 2%. And to summarize, Sweden BTC end-user service revenue was quite flat, excluding roaming, as growth in the core services was offset by the legacy decline. And as Kjell mentioned, we now see Sweden BTC growing for the first time in several years, as the business shows good progress. Growth in mobile and solutions was fully compensating the declining legacy fixed services. Our Baltic friends continue to deliver fantastic growth. End-user service revenue was up by 11% excluding roaming, with new customers added, price adjustments and upselling, all enabled by our -for-more strategy. So to conclude, this marks the second consecutive quarter of end-user service revenue for the group, end-user service revenue growth for the group. So please turn to slide 12 for the group results. The end-user service revenue growth, along with the continued execution on the business transformation program, were the main factors behind the -single-digit growth in underlying EBITDA. Items affecting comparability of minus 75 million SEC were mainly related to restructuring costs attached to the business transformation program. And please note that last year's figure included a positive one-off of around 110 million SEC. DNA increased compared to last year, as we continue to amortize the book value of the Comhem brand, following the merger with the Teletube brand in the second quarter. And finally, results from associated companies and the JVs improved, largely related to our 25% stake in T-Mobile Netherlands. So let's have a look at the cash flow on slide 13. We continue to see strong cash generation with equity-free cash flow of 1.9 billion SEC in the quarter. Compared to last year, it improved by some 200 million SEC with underlying EBITDA growth as the key driver. We also had a positive change to working capital, where external handset financing in the both ticks contributed. Net financial items paid also improved, as we benefit from lower interest rates compared to last year. And finally, looking at the last 12-month equity-free cash flow of 4.9 billion SEC has been generated, which is equivalent to some seven SEC per share. So please move to slide 14 for an overview of the capital structure. In the third quarter, the extraordinary dividend of three SEC per share was paid. Leverage, or economic net debt to underlying EBITDA, still stayed in the lower end of our 2.5 to three target range as a result of the strong cash generation and the underlying EBITDA growth in the quarter. In October, the second range of the ordinary dividend was also paid. And if we adjust for this leverage, would have been at around 2.7 at the end of Q3. And worth repeating, we have now paid nine SEC per share in total dividends to our shareholders in 2021. And as already communicated, the board intends to propose another extraordinary dividend of at least 11 SEC per share once the divestment of T-MO by Menderlands is finalized. So let's continue with slide 15 and the progress on the business transformation program. So we continue to execute on the program and we reached annualized run rate savings of 425 million SEC at the end of Q3. And this resulted in 90 million SEC of cost reductions affecting the P&L in the quarter. And the efficiency improvements adding during this quarter came from the technology, IT, and commercial organizations. And we remain committed to the saving targets of at least one billion SEC. And with that, I'd like to hand back to Kjell to cover our key priorities going forward.

Thank you very much, Peter. So that allows you all please to turn to slide 17 for our key priorities going forward. I like to say that I'm very proud of the team's efforts when I see the results that we are able to present to you today and we show that we can grow both on the top and bottom line. As we gradually move to a post pandemic society, we will continue to make the investments necessary to assert our premium position in the market. On a fixed side, this means improving our fixed footprint by building fiber closer to property through remote FI, which is already showing promising signs from our pilot areas. In the mobile infrastructure, we are now finishing the final test for our 5G network in Sweden, and we aim to ramp up the rollout in order to achieve nationwide coverage. The execution of the business transformation program is progressing well, and we're on track to deliver an annualized run rate of 500 million SEC at the end of this year, and at least 1 billion SEC at the end of 2022. In Sweden B2C, we gear up our capabilities to address the 1.3 million non-FMC households while continuing to build a premium brand with increasing customer satisfaction that we can monetize through reduced churn or price adjustments on the back of product improvements. In the mid-year market, we will continue the success story that is coming. An introduction of 5G is a major step in this as we enter a quarter with seasonally higher activity. In Sweden B2B, we'll continue the turnaround that we have started with a new granular approach with clearly defined segments and a developed understanding of how to balance volume and value. This includes improved volumes in the SME segment while focusing on profitability in public and large segments. In the Baltics, we'll continue to build on the momentum and execute our mobile-centric convergence strategy through more for more offers, while ensuring that the growth we have seen will be sustainable. We have taken a major step in preparation of 5G by modernizing our core network and launched a fiber pilot project in Lithuania to trial a capex-like approach in order to provide fixed services to our customers. With yet another strong quarter behind us and restrictions starting to ease up, we can see that our hard work is starting to yield results. I'm excited to continue this journey together with my colleagues at the office and I'm confident that we can and will achieve the ambitions that we have communicated and reach sustainable long-term growth. So with that, operator, I hand it over to you for Q&A.

Thank you. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the hash key. And we would like to ask the analysts to limit themselves to one question. Once again, please press star one if you wish to ask a question. Your first question comes from the line of Andrew Lee from Goldman Sachs.

Yeah, good morning, everyone. So for one question, I was just gonna focus on Swedish consumer. You had flat service revenue growth and Swedish consumer ex-roaming. And your Swedish customer intake turned positive in the quarter, post-paid net has turned positive as well, but nowhere near where you were a year ago. So the question is, what does the run rate look like as you exited Q3? And so how much of an acceleration should we anticipate? How much is Sweden consumer running on all cylinders and how much is there in terms of acceleration to come? Thank you.

Well, let me start and probably Henrik will fill in a bit. First of all, I think you see that throughout the year we have done a good value versus volume mix with the moves we did with Comvik in the earlier part of the year, which was kind of unprecedented to the market. And now you see that we also looking into the volume side where Q3 we see positive volumes coming in. So I think we're kind of finding a good balance on that. It seems like we can keep two thoughts in our mind at the same time. Henrik, do you wanna add something? Sure,

thanks, Sheldon. Hi, Andrew. I think if you look at the trending, you do see that we're stabilizing and sort of moving back to positive terrain on the consumer side. I think for the fourth quarter, typically this is quite an active quarter in the business. And we do believe that we can work on that basis and continue the trending. That will, of course, go hand in hand also with a little bit further investment into the quarter as we see also post-pandemic recovery. I do want to point out that we're not fully out of the woods, let's say, and that we're still on the recovery path. So I think you would need to take that into a balance. But I do believe we can continue and strengthen our play on the consumer side.

Thank you. Andrew, can I just check if I understood what you're saying? So when you say kind of not fully out of woods on the recovery path, and when you say continue the trending, what exactly do you mean? Did you see accelerating run rate through the quarter and into Q4, or is the Q3 overall that you posted today an indication of the run rate that you were delivering out at the end as you exited Q3?

I think we have an underlying run rate that we're establishing throughout the third quarter. The fourth quarter typically is quite a busy season that we do believe we can pick up on. And I think that's how you would need to look at it.

And I would like to say, since I have the benefit of being here last year also, before Henry came, that we have a much stronger -to-market proposition in the fourth quarter of this year than we had last year. We can see in Q3 that that played out quite well compared to where we were last year.

Yeah, thank you very much. Andrew, at the same time, just a final comment. What I mean with the post pandemic is that we do see that traffic to, for example, retail and stores, that's not at the level yet of pre-pandemic. So that's the sort of balance I'm just putting on the table. Thank you, that's

very helpful.

And your next question comes from the line of Andrej Kapajsek from UBS. Please ask your question.

Hello, thank you for the presentation. I had a question in terms of commercial costs. If I'm not mistaken, if I'm looking at the numbers correctly, then just looking at the quarter by quarter this year, it seems to me that about 75% of the costs that you kind of didn't decide to utilize in the first half came back in the third quarter. But as we know, there were still a lot of restrictions in Sweden until the end of September. So could you maybe explain how you've been doing things differently in terms of interacting with your growth, as you mentioned, you know, stores are a bit emptier at the same time, you've got fewer stores than you had pre-pandemic. So just develop a bit on that. And then any outlook in terms of direction of the commercial cost relative to, you know, for Q as we head into that busy period that you just mentioned would be helpful. Thank you.

Well, I think you will recall, we talked about this a bit in July also, how not the first and second quarters saw a relatively calm market and that we expected fully that the third and the fourth would be much more active, which is a normal systemality, of course, around the iPhone launch, Black Week, and leading up to Christmas. So clearly, we are, and we said we would, we are investing a bit into that market activity, and that is reflected in the commercial costs.

Yeah, I can just add, if you look at it, and between the year and year on year, we see quite flat development between last year and this year, and as Kjell says, we expect, it will be intensified next quarter.

Can

I just check? Yeah, sorry, the quarter that is in Q4.

And in terms of -over-year dynamics, should we expect Q -over-year to be more intense than last year, because you mentioned, you know, first quarter you did save some money in this regard, so would you be reinvesting that, or would you expect more of a kind of flat-ish -over-year situation in the second quarter? The second, sorry, fourth quarter, of course.

We will have more activity, definitely, in the fourth quarter than you saw in the first two quarters. So, and my message is that the offerings out there now are very competitive, so we're getting a return from investing that money.

Yeah, and Rick? Yeah, Maurice, well, maybe to add to what was already said. So, yes, it will be a more busy quarter. Your question, of course, is what is it from a -on-year point of view? I do believe we are in a different situation than we were last year, also, on the pandemic. That said, on the marketing side, we've also been able, of course, to be, you know, to generate some efficiencies through the business transformation and the rebrand. So, I think, whilst we're investing more on the marketing side, on the one hand, we also have some efficiencies coming in, and I would say the sales cost will be, you know, so slightly up, also, versus Q4, but how that, in total, will look like, I think we're sort of pretty on a balanced play, given, of course, some of the marketing efficiencies that we've been pointing out.

We're happy about this. Gives us momentum into next year. Thank you.

Your next question comes from the line of Maurice Patrick from Barclays.

Yeah, morning, guys. Thanks for taking the question. If I could ask a slightly bigger picture question around Capex, you indicated this quarter you spent, you were focusing a lot on higher 5G spend, and you seemed to indicate much of that was around the core network. I'm just curious to understand a bit around how far you are in the process of rolling out the 5G network, you know, numbers of new sites that you're rolling out, whether it's mainly upgrading existing kits, and just where you think we'll be in the next, you know, by then, the next year, in terms of Sweden coverage, and just link to it. You talked about remote PHY investments. Should we understand that's more likely a 2022, 2023 activity, rather than this year? Thank you.

Okay, so the position of 5G depends a bit on whether we're talking Baltics or Sweden. In the Baltics, we're clearly still doing the prep work with the core, since, you know, we're still gonna do the spectrum auctions. But we are quite far down the line of clarifying the round. Picture for the Baltics. In Sweden, the testing and all this stuff is done. Orders have been placed, and rollout plans are put together. So you will see a lot of rollout going on over the next two years, and we're gonna cover the majority or most of the population of Sweden at the end of 2023. And of course, there could be some disruptions. You heard Berja talking about it today. But, you know, by and large, the momentum is there. So we're gonna do that. Remote PHY is, of course, in order of magnitude, much, much smaller in terms of capex. So yes, we're gonna continue doing that in 2022 and 2023. We have done quite a few installations this year as well. But we would think that we could potentially double the volume in 2022. Even though the final, we haven't finally concluded the exact numbers of that order of magnitude, that's quite possible. But again, from a capex point of view, that is not moving the needle in any major way.

Great, thank you very much.

Your next question comes from the line of Stefan Goffin from TNB.

Okay. Yes, hello. I have a question on the wholesale revenue in Sweden because that was the main deviation compared to my numbers. What is driving a 17% increase year over year in the wholesale revenue line? I mean, the business seems fairly lumpy. Why is that the case?

Well, clearly our part of the building, the ATP businesses here in Sweden, that's one major element. And of course we see some of these roaming effects, but please, Peter.

Yeah, I can comment on the extra shelter, it's ATP applications person and then roaming is recovering, people are coming to Sweden and that helps us in that field.

Okay, thank you.

And your next question comes from the line of Kevin Sui from Morgan Lake.

Yeah, thank you. Morning everyone. So just picking up on the theme again of investments and capex, I just wondered if you can just say a few words around the supply chain. Obviously you've got the big rollout of 5G. What's telling you to use access to things like labor, equipment and chips? And then the second part of this is just maybe you can elaborate a bit more on your plans for remote PHY. Why have you chosen to go down remote PHY? Why not full fiber, which is what several cable companies are doing and maybe just give us an indication of some of the build out costs for remote PHY would be great, please. Thank you.

So the 5G rollout and the component part is of course maybe related to the ROM at this stage because we've done so much of the preparations in our core networks. So like we all know that there are some small warning signs but we have placed orders, we are going into production mode. So at this point it doesn't look like it's gonna be a big deal for us. There can of course be some impact. We are to some extent hedged because in Sweden we are getting deliveries from both Ericsson and Nokia and the way of course such contracts are structured that gives us the opportunity if need be to adjust volumes. I don't think it will come to that but it is an opportunity that we have out there. And when you come to this discussion about remote PHY versus fiber, I think to some extent you're getting a little bit into the religion here. So several cable operators of course go with remote PHY which gives plenty of speed and reliability for all the foreseeable future. You've probably listened in on our capital market day when Jorgers took you through the 10G thinking that there is, it's a natural upgrade path for us to clean up the node splits and to get a simple infrastructure that is cheaper to operate and have even higher reliability. And at the end of the day if you use fiber you still have to buy quite expensive equipment to give higher speeds to the end user. So it is a matter of pros and cons but in almost any case that we operate the service delivery and the speeds that we can offer will be more than the market with any realism will need.

Great, thanks very much.

Your next question comes from the line of Ulrich Rasse from Jefferies.

Thanks very much. I was wondering about the revenue growth inflection in B2B. You are highlighting this very prominently as sort of a clear sign of your turnaround effort. I'm wondering how sustainable sort of this inflection is. Is this a sort of low-cost system lumpy item and you would say look there could be some quarters there where it turns negative again depending how things unfold. And what are the uncertainties? What are the major sort of uncertainties with regard to the continuity of the revenue growth outlook in B2B,

thank you. I will soon hand over to Stefan on that to the man himself. Clearly B2B markets are, also in Sweden are very competitive. So the big change that has happened here is of course the level of accuracy has improved tremendously over the last nine months. So much more data driven, much more clearly segmented and more disciplined. But please Stefan.

Yeah, hello Ulrich. First of all I mean our long-term financial objective for B2B which we presented at the capital market today was or is to return to growth and improve profitability. And I'm confident that the strategy and the focus areas that we put in place supports this in the correct way. Then if we look at the Q3 results, I mean Q3 2022 or 2020 was somewhat an easier comparison quarter for the fixed revenues. Looking forward to Q4, we had some one-off effects in Q4 last year on the mobile side. But with that said, I mean we can conclude that Q3 was really, really strong. We will achieve the trend shift that we were talking about in the capital market state to achieve less revenue decline in 2021. And our ambition is to stabilize the revenues in 2022. So we're sticking with the revenue ambitions and the financial objectives both for 2021, 2022 and long-term.

Thank you very much.

And then you said some, was a question about uncertainties as well. I mean, I would say that that would be market moves by our competitors. We haven't seen any of those. It is quite a stable market in terms of B2B. One factor that is a question mark that you're all aware of and that's visible for us as well is the semiconductor shortage. And that can affect us on the solution business going forward in Q4. But this is not affecting our competitiveness. We won't lose any market share. If it comes to that, then it's just delays in deliveries basically. And mainly that affects the equipment revenues.

Thanks again. Thank you.

Your next question comes from the line of Roman Abusov from JP Morgan.

Good morning everybody. Thank you for taking the questions. Can I just ask a small clarification on the -Mobile-Nebelin proceeds? The over 11 corona distribution that you're targeting, do you intend to distribute 100% of the proceeds? Or would you need to hold some back? And also perhaps you could discuss some of the related costs, anything to do with taxes or any other costs to close the transaction. And can I also just ask on the Baltics fiber, the Lithuania pilot, the timing of it, why did you suddenly decide to do it now? It seems like something that you certainly could have done a while back and the topic has been on your mind for some time. So why now, please? Thank you.

I'll start with the second one because it's very easy. That's because Pietra, who runs Baltics, asked me for permission to run the pilot and I said yes. So. Okay. When it comes to the first one, we sent a very clear signal when we announced Netherlands that the money is gonna be distributed to shareholders. And that's the message that we are basically giving. So we wanna just make sure that Teletoo is in the same situation after selling Netherlands as we were before. We don't wanna hold back anything. So we wanna make sure from a ratings and from a future dividend perspective, we have the same situation. And given that selling Netherlands means that in the future, there will be absolutely no dividend, of course, coming from Netherlands when it has been sold. That has a certain impact on our ratings and capital position. So we just wanna make sure that we have that picture crystal clear before we set the final dividend, which will be at least 11 kroner. If we were to go all the way and take the nominal amount, krona for krona, then all other things equal, we would have basically paid a extraordinary dividend. You see what I mean? So let's take that when we get the money on the account, we will talk to the board, the board will make a recommendation.

And is there any

cost

just related to that? Any specific cost that you're expecting during closing?

Peter, just to comment on that one, on the cost study, no specific taxes or such things. Obviously there are slight transaction costs in it, but that's reflected by us already. So that's a minor.

Thank

you very much. Thank you.

Your next question comes from the line of Kifar Kiroja from Deutsche Bank.

Thank you. You talked about supply chains, but there's also been increased discussion around inflationary impacts across sectors to an obscene accelerating inflation in Sweden. Can you talk about how you think about the impacts to your business as you see it today from energy or any other areas as well? Thank you.

Yeah, at this point we don't see anything that has a major impact on how we run our -to-day business. Peter, maybe there are some things that I have.

My view, I share your view. Obviously energy prices are increasing. That has an impact. And of course all else equal negative for us, but in the scheme of things, it's not the major cost items for us.

Okay, thank you.

Your next question comes from the line of Adam Fox-Famley from HSBC.

Thank you very much. I had a question on the sales cycle in B2B, please. What proportion of the customer base has had to consider new tariffs or products in business? I guess it's probably different by business segment, but it'd be interesting to know how far through that kind of process you are. Thank

you. Well, if we look at the development that we have, I mean there's lots of different products, so it could be a really, really complex answer to your questions, Adam. But if we look at the development of what we're doing in the market for the different segments, I mean we're taking in good intake in the SME segment, and the small segment on the back of the new portfolio that we launched this year. I think we're taking a conscious and responsible approach to the price in the market. We're well above of some of our competitors on the pricing there, so it's actually developing a little bit better than expected in that segment. On the larger segments of the public and the key private segments, I mean these are the contracts that we take in their pricing, are individual contracts and negotiations. And the focus in these segments is really to drive profitability, making sure that we stick with the pricing guidelines and improve margin totally according to the ambition that we set out for the different segments going forward. And we can see that this is yielding result, you can see that on the mobile aspect for instance, but also when we look at the solutions revenues that we are getting. So hopefully that answers your questions, Adam. Yeah,

thanks very

much. Your next question comes from the line of Nik Lio from Associata Genoval.

Yeah, morning everybody. Just a quick one maybe to Hendrik, just on the commercial strategy, given you started just recently, is there anything you're planning on changing particularly on the FMC strategy? And then secondly, it's very, very early days, but have you seen any change in customer behavior after the Telia Fiber price rises or the start of the UEFA service? Thank you.

Yeah, Nik, thanks for the questions. And yes, pleased to be here, I can tell you. And it's a great time to join Telia too in the combination of the strength of the company and the market and of course, where we are on the, hopefully the end of the pandemic. I think the commercial strategy was clearly laid out. I hope you joined that capital market, say that was before my time, but I think there's a clear direction we want to go in with the consumer business. FMC is a key part of that. Certainly now all the assets have come together. I think as it was laid out before, what I see at the moment is not a question of change of direction, it's a question of making sure that we execute on the next phase. And as you may have noted before the first phase was very much as a result of the merger, making sure that we retain those valuable customers. You can see a little bit that we're sort of at the end of that, we're sort of tailing off in terms of adding customers who are around 310K and that's sort of stabilizing a little bit at the same time. We will and we are in process of ramping up our next phase. For that, we need to bring a number of capabilities in place that are different from what we had at our disposal in the first phase, which is basically to address that 1.3 million households that was also pointed out at the capital market today that are, I would say, tell it to customers, but they're mainly single play. And therefore, we need to have a sort of a cross-selling approach. For that, a number of things need to be well in place in terms of being able to approach these customers in a data-driven way to make sure that also on the IT side, they're sitting on the right systems. As you probably know, we're still moving through some IT transformation that we need to have fully in place as an enabler. And there's a couple of other things that we are considering to follow through on. So, a bit of a long answer, but we're clearly moving in that direction. You'll see us picking up as we move into 22 on that phase too. I would say at the moment, it is putting the right enablers in place and actually, honestly also focusing on the fourth quarter, as we've pointed out before, which is a very strong season. And that's sort of where we are on FMC. In terms of customer behavior around Thelia, and which is sort of pointed out with probably more on the entertainment side. I think what we're seeing there is that the market in general is moving and entertainment is moving behind the paywall. That is a trend that has been going on for a bit of a longer time, obviously, with the asphalt players coming to market. It is now picking up speed sort of across the whole market that sports are moving behind the paywall, basically from old premium now on the asphalt base behind the paywall, I think is also a normal trend. We're also working on our entertainment strategy as we've laid out on the capital market stage. A couple of things that we have in the works that will see daylight as we enter the new year. For now, what we're seeing on Thelia, and for example, Champions League behind the paywall, there will be customers and also Thelia2 customers who sort of are very big fans of Champions League and have made that mark. Have we seen customers depart us? Yes, we have seen some. Is it material? No, it is not. And that's how we're trending. So yes, entertainment is changing. We have also very clearly laid out a strategy around entertainment and on the short term, is it significant for us in respect to the Champions League move? No, it is not.

That's great, thank you.

Thanks.

Your next question comes from the line of C.E. He from City.

Thank you very much. It's actually a follow up on the question previously. I think in your presentation, you talk about, you see some positive contributions from Common Play. And it would be interesting to hear what you see and the willingness of paying that particular product. And just back on your comments, you worked doing on the entertainment side. And I wonder if there is an ambition to stabilize your TV base. Because I understand that your target is to stabilize the cable TV revenue, assuming that stable customer base would be a cornerstone for that. But now with Atelia potentially taking some customers away and on the premium sports, and what are you planning to do to offset the decline? Thank you.

Sure, and thanks for the questions. I would say what we're seeing on overall, if you look at our entertainment business, we do see that, and I think Peter, you also talked to that, right? In terms of the financials, we have the DTT business that is sort of a declining business. And that is just, I would say, a legacy that will carry on. So that will put some pressure on the total entertainment business line as such. If you look a bit sort of closer into, let's say the cable and pay TV part, that's where we've seen, of course, in this quarter, a little bit of a, as they jump back from last year, that sort of helped us in a bit of a cleanup also on the RGUs. But in addition, we've seen indeed Common Play Plus sort of first start to chip in, where we've had a 12-month premium, let's say, and now these customers are rolling off. And we see a likely, a willingness to pay a little bit above our expectations, so I think that is good. It's still very early days, so we need to see what the stickiness of that will look like going forward, but early signals are good. And in general, we do believe this will help us to stabilize at least the historic trend, which was declining both on Boxer and on the cable TV base to stabilize certainly that latter bit. And then with the developments we have planned, and I don't want to take any sort of forward-looking specific comments here at this stage, but I think we're quite confident with some of the developments we're at the moment executing on that we can look at I at least look confidently at moving to 22 on our entertainment business and the ability to stabilize that side of the business.

That's very clear, thank you.

Your next question comes from the line of Jacob Bluestone from Credit Suisse.

Hi, my question's actually been asked, thank you.

We'll move to our next question, and it's from Apilash Maha Patra from Berenberg.

Hi, good morning, and thanks for taking my question. I've got a question around the B2B mobile aspews, and the chart that you show in the presentation. I was just wondering, excluding roaming and IoT, is it fair to think that B2B mobile aspews can sort of stabilize going forward, or should we continue to see a sort of -on-year declining trend, sort of more in line with what you've seen historically?

Yeah, hello Apilash, and thank you for your question. Of course, I mean, we've seen the mobile aspew developing better than previously, and this is basically due to a couple of things. First of all, the things that I was talking about, the pricing guidelines and bidding guidelines, and the focus on profitability in the large and public. Secondly, we have a good momentum in the small segment, yielding good net intake and decreasing churn as well as part of the new portfolio. And also the aspew on that segment, of course, is higher, which improves totally then with this development. I wouldn't like to guide anything on specific KPIs going forward, but we think the strategy that we've put in place will support us going forward, also in the mobile revenue that we have and the mobile line that we have.

That's great, thank

you. And our final question comes from the line of Ethan Nielsen from ABG, please ask your question.

Yeah, thank you. Yeah, I just want to follow up on the one question earlier about convergence, just so I understand your comments correctly. What you are saying is we should not anticipate and make the push from till it's all until sometime, perhaps well into next year on the convergence side. Did I understand that correctly? Thank you.

Ethan, shall I answer that? Ethan, thanks for that question. Our view on convergence is that we are carrying on with the initiative and the focus and it's key priority as we speak today. So it's not like we've parked everything and we will sort of switch on the engine again somewhere next year. So that's been your sort of perception and that's not the case. I think what we're saying is that there are a number of ways we can enter and continue on FMC. And the way we want to do it is in line with our overall commercial strategy, which is to look for a balanced play of value and volume. So you will not see us press the button on a hard aggressive type price play on FMC, that is not the way we want to do it. And we definitely will sort of continue this and move this forward in a balanced fashion, but not somewhere starting it up in the second half next year, for example. So we're working it, we're working it through also early into the next year and you will see us taking sort of balanced steps. So it's more like a continuum and building up momentum type trajectory that we're looking for, where we can balance value and volume in the market and bring these customers to us for a sustainable journey with us instead of for a quick buck or a quick deal.

Okay, thank you for that.

Sure.

We now have a couple more questions. So our next question comes from the line of Christopher Kalska from Handelsbanken, please ask your question.

Morning guys. So we have seen, if we look at the Swedish mobile market, we have seen the Hutch bring in a lot of subscribers over the past year. So I was a bit interested to understand how big of a threat you believe this is to your business, or do you actually believe it's good that they are able to bring in customers with current price plans and thereby minimizing the risk for them reducing prices in the market?

We talked about the strategic picture here before where I've said that there are two players that have all the assets that are needed to build the SMC story that Henrik was talking about. And of course, a lot of the transformation that we are going through now is about taking us to a level where we simplify and we can do this in a much more nimble way than traditional Fortelcos. So in that perspective, the two of us have that opportunity. The third player has some of those elements but has struggled quite a lot with making that work. And then you have Trea, that is a pure play mobile, growing their customer base. And I think you can go into the numbers, you will see it's their second brand that has grown the most. So the first brand shows limited growth. There is also an element of cannibalization. But I think their approach is quite rational. I think it's quite natural that they will have a feed from people who want to be mobile only. And if they execute well on that, they can have an okay position for that. So the position that we are taking is to develop Trea2 as the converge brand and of course, continue the success of Convik, where we have assets that definitely Trea does not have. So I shouldn't give credit to these guys for executing on a relatively clear strategy. We are getting traction on our converge story. And as we get out of the transformation program, we'll be in a great spot. Thank you.

And your next question comes from the nine, so Pontus Vachtmeister from SED.

Hi guys, quick question on the working capital. It was a slightly larger release than usually in third quarter, but also year to date, it's a better kind of nine months period than the previous years. Would you say this is pure efficiencies and just a better execution, or is it that we are seeing kind of inventors drawing down because of bottlenecks and you're just basically selling everything you've got and it's hard to replenish supplies for hardware? Can we see a version of this is my big point in the future. Thanks for the

question, Peter here. I would say that we have a strong work capital in the quarter and year to date. And first piece is of course that we get the help from external handset financing in the Baltics, Lithuania from last year and Latvia, so that's positive. Then I think if you compare to last year, I think you should recall that in Q3 last year, we had a little bit of swings with the one off effects in working capital negatively 100 million sec roughly, so that should be kept in mind looking near and near. And then I think you should keep in mind the seasonality. We are strong year to date, but then we entered the heavy Christmas and Black Friday period where we'll sell phones, which will bring it down a bit. So that's how I would look at working capital.

Thank you. We

have no further questions. I would now like to hand the call back to Kjell Jonsson for some final remarks.

Thank you very much and thank you to all of you for your questions. I'm going back to my original statements here. I think we were happy to see that we are delivering a strong quarter and we see that it's not one area alone that drives it. It is across the board and improved performance. Very happy to see our growth in the Baltics, but of course in the long run, the mothership is Sweden. So now we're getting back to growth overall in Sweden, which I think is a milestone. We see B2B that used to be a problem 12 months ago, a big problem is now back in a stable situation. And that gives us quite good hopes for going forward. I also see that on the Catholic side, we are definitely within our guidance. And for this year, we probably will be somewhere between the top and the medium range of our Catholics. So we could come in a bit up under the top. So cash flow generation is very, very strong at Teletub. So the third quarter is something that's a step on the way, but if you see quarter by quarter, there is continuous improvement and I'm very happy to see that. And I think we're gonna land this year in a quite decent way. I'm quite comfortable and confident about that. But again, thank you for joining us today and I look forward to speaking to you guys later.