Telia Company AB (publ)

operational free cash flow year-to-date, of which 2.9 billion clearly above the 8.2 billion level needed for the minimum dividend. And looking at the structural part of OFCF, we've generated already 7 billion kroner year-to-date. With our Norwegian Finnish Tower transaction expected to close before year-end, we have a pro forma leverage at the very low end of our targeted range. and even including the second tranche of the 2020 dividend due to be paid out in November, we expect to end the year at a slightly higher level than the 1.99 times here, but still comfortably at the very low end of the 2 to 2.5 range. Our multi-year ambition to reinvent a better Telia is progressing to plan. Here we've picked out a few highlights from the quarter. We've just this past week won several Customer Satisfaction Awards, In Sweden, SKI awarded Telia the best operator in the enterprise segment for the 18th year in a row with an increased distance versus all our competitors. And Halobot was awarded the best in the consumer segment for the 12 out of 14 years. In Norway, Etsy awarded OneCall the best consumer brand, and within the enterprise segment, we not only won first place with Finero, but also second place with Telia. Both these surveys are a good recognition for our renewed effort to improve customer experience and are evidence of the quality position we have set for ourselves across our footprint. In the consumer segment, we're seeing solid momentum in our conversion strategy. Sweden added 8,000 convert households in the quarter, Norway 6,000, and Finland 15,000, and sales are ahead of expectations on the high-value Swedish 5G Plus mobile bundle, including Netflix and Seymour. Also in Sweden consumer, the launch of Champions League and the associated campaign starting in Zlatan has generated good engagement so far, with overall brand consideration increasing, and especially for our TV offerings. On Seymour, we've seen a 38% new sports subscription increase versus last year, and we've seen a 30% growth of sports subscriptions within our Telia Sweden IPTV customer base. We've also seen that viewing among our sports subscribers have been high for the rounds that have been played so far, and I hope you all stayed up to see Man United win and Ronaldo win. get that goal in the 81th minute last night. Moving to Finland, where we're further ahead in the content with active strategy, we've seen a 170% year-on-year growth in joint Telia and Seymour customers, now over 210,000, providing us with a much better consideration towards Telia, up 19 points, and a lower churn of 7 points and improved value for money perception. In the enterprise segment, We're reporting service revenue growth for the second consecutive quarter for the whole Octelia Group, with revenue growth in each of the enterprise segments in five of our seven markets. Our enterprise strategy aims to reverse the declines of the past few years through combining connectivity alongside ICT solutions and security solutions. We call it the Smart Orchestrator. In the quarter, our growth funnel was enhanced by deals that amplify our enterprise convergence and innovation strengths. And specifically, we saw deals that combined data analytics, private networks, and IoT solutions. And specifically, we signed our largest crowd analytics deal to date, where we'll provide the Finnish Road Authority with insights on traffic flows over its entire road network. On private networks, we signed the largest private 5G enterprise mobile network to date in our region with the mining company Agnico Eagle. and we've signed the deal to roll out our dedicated mobile network services for a major industrial project in Sweden. And on IoT solutions, we've extended the deal we have in utilities with Stockholm Exergy, and in real estate, we signed an eight-year contract with Academiska, who's one of Sweden's largest real estate companies. We're really building vertical strength in the real estate and the transportation areas. In the TV media segment, we continue to experience high commercial share of viewing levels in both Sweden and Finland. Early in the quarter, admittedly in the quiet period for advertisers, we were somewhat hampered by the Summer Olympics being broadcast by a competitor, but in September we recovered to previous high levels. Moving to our Connecting Everyone strategy pillar, 5G rollout continues in line with plan and we retain our leadership in Sweden, Norway, Estonia and Lithuania. We continue to expand pop coverage, now at 54% in Finland, 31% in Norway, and we've launched real 5G services to 25 Swedish cities so far. We remain the sole 5G supplier in Estonia, covering 17% of the population across 15 cities, and Oslo was measured as the fastest 5G capital in the world by Speed Intelligence during July, which we believe is due to the 5G leadership we took in Oslo early on. Also in Norway, the 5G spectrum option concluded successfully. We increased our holdings in the 2.6 GHz band to 2 times 30 MHz and maintained our holding of 100 MHz in the 3.6 GHz band. We also obtained our desired position in the spectrum band, further cementing our position as the only credible challenger in the Norwegian market. Turning to fibre, we've now surpassed the 1 million connected customer mark in Sweden, taking our full fibre subscriber base to above 1.8 million across our footprint and an 8% growth. Worth noting is that we now only have roughly 200,000 XDSL customers remaining in Sweden, which supports our view that the drag from declining legacy revenues will become less and less ahead. As we now modernise 4G and roll out 5G, we're accelerating the shutdown of legacy. Structural cost reduction related to these migrations amounted to 120 million kronor year-to-date, which is helping offset cost increases related to, for instance, an increased share of customers in open city networks. In addition, we're utilising 3G to a lesser extent, having reduced traffic further in the quarter, now having only 25% of total voice traffic left in the network and only 3% of data traffic. Finally, we're on track to close the announced tower transaction in Q4, which is only pending final local in one market regulatory approvals. We've already received clearance from the EU, and as we've stated before, the experience from this transaction has left us with an appetite to do more elsewhere in our footprint, and we're actively preparing the next chance for a transaction in early 2022. Moving to digital transformation, we're also on track. Our IT transformation is about optimising the IT platforms we use and optimising the strategic partners we select. This quarter, we've selected VMware as our strategic partner within cloud solutions, aiming to scale the native cloud infrastructure further, thereby gaining efficiencies. We've also selected Pluralsight as our strategic partner to support our technology skill transformation. This quarter, we reduced IT costs by 68 million kroner, largely driven by the decommissioning of IT platforms, further utilization of nearshoring, and our ongoing selection of strategic partners, which results in vendor consolidations. So far this year, we've reduced IT costs by 173 million kroner. From a KPI perspective, we continue to see positive momentum in our digital transformation of products and processes, and year-to-date, we've shut down more than 100 legacy systems and 50 product lines, leaving us well on track to remove up to 80% of our existing products by 2025. Amongst our people and our workforce planning, we're on track to deliver the 1,000 FTE FTC reduction commitments, and 550 FTEs have already exited the company so far this year, and we've reduced the number of consultants by around 200, despite increasing consultants for a short-term basis in our Swedish market. And in our free-to-air channels, we are transitioning towards offering our advertisers a higher-value, more addressable set of customer targets via our digital platforms and building our inventory and ad tech platform accordingly. In the quarter, we saw an all-time high in digital consumption, which led to digital ad revenue growing 24%. On delivering sustainably, the transformation of Telia towards consistent and sustainable growth is progressing as planned. We are on track to deliver on the financial ambitions we've set out, both for this year as well as for the mid-term and long-term, and we're building the foundations that will enable that. This is despite some headwinds that we've faced this year, such as clearly the development in Finland. Cash generation to enable attractive shareholder remuneration remains strong, and our balance sheet is very strong looking into the end of the year and into 2022. As you know, we know sustainability is thoroughly integrated into our business strategy to both inform and strengthen execution. And looking at the progress we've made in the quarter, I'd like to highlight a few things. First, we've been awarded the Gold Level Recognition, top 5% among 75,000 companies globally for our sustainability achievements by Ecovados, the world's largest provider of business sustainability ratings. And that's for our combined work across environment, labour rights, ethics and sustainable procurement. Secondly, having already hit zero carbon in our own footprint, we're making good progress on emission tracking of our total supply chains. Looking at the total emission levels in our entire value chain, the supply chain represents 85%. And as such, we're very happy to see that our efforts to make our suppliers set science-based targets have yielded results, as 7 out of 10 of our largest CO2 emitters have either set or committed to set such targets. Thirdly, our monitoring suggests that consumers rank as number one or number two in all our markets when asked about Telia's association with strong privacy measures. And finally, I'd also like to refer back to the data insights and IoT deals I talked about earlier. These are perfect examples of how we can innovate around our core, keep creating products that are good for our customers and good for society. On the back of crowd insights, which clearly was a big enabler to governments during the pandemic, we've just launched travel emission insights, where we enable municipalities to instantly get a view over the emissions generated from travel within a certain area. geographic area and will in time provide solutions on how to reduce emissions and the tracking of them. Our strength in IoT will clearly benefit us as 5G industrial use cases develop, providing us with further opportunities to monetize our 5G investments smarter than anyone else can in the region. Now to the markets and starting with Sweden. where it's great to see a return to growth. Despite the continued legacy headwinds, you can see here service revenue actually reversed to growth for the first time in almost six years. Yes, the increase is small, but it's broad-based and it's driven by both mobile effects and by both consumer and enterprise. All sub-segments grew this quarter, except interconnect and pure legacy segments. More importantly, you can see our underlying service revenue, excluding legacy enrolment, grew by 3.5%, the strongest rate since we started calculating underlying revenue in this way. The enterprise segment grew by 1%, with positive growth in mobile, and all but one customer segment grew in the single digits, with only SME declining low single digits, but relatively stable to prior quarters, despite us continuing to carry a premium because of our quality position versus competition. In consumer, TV revenues grew at a healthy 10%, helped by strong sports content. Fibre grew 12% and mobile grew around 1%. Our cost base increased slightly as it was impacted by 60 million of pension saving, mostly non-cash, so underlying EBITDA delivered a small growth in the quarter, if you also exclude last year's one-offs. Moving to KPIs, the performance is solid. with increases in mobile, broadband and TV customer bases, as well as in R2. In mobile, we have positive net ads in both consumer and business, with a slightly improved R2 versus last year, mainly as a consequence of increased value-added service usage, similar to the second quarter. We did see a slight increase in churn within the consumer segment due to the price increase that's taken on shared plans, but this was compensated by a lower B2B churn returning to the lower levels after the loss of a large public contract, which had a negative term impact in Q1 and Q2. Broadband netbags returned to growth this quarter as the growth in fibre more than offset the copper decline, even after adjusting for a small one-time adjustment to the base. And the fibre growth was generated both within our own network as well as within open city networks. Likewise, the TD customer base continues to grow by 6% year-on-year, and our food for both broadband and TV grew as well by 3% and 4% respectively. Encouragingly, these strong trends are supported by attractive sports content as we increasingly become the aggregator and home of entertainment, with a wide range of entertainment both from Seymour, from Viaplay, and now, as of September, having Champions League. Married to Finland continues to be a tough market for us, but the revenue did improve sequentially, and it's nearing stability around the 3 billion kroner level per quarter. Both the consumer and business segments were largely stable on revenues on a light-for-light basis, supported by 5G and the start of the sports season on TV. TV revenue grew by a healthy 6.5%, and mobile revenue was stable, and our B2B datacom business turned to growth for the first time in over two years. We did, however, see declines in our legacy fixed broadband, and to lessening products. In an overall tough environment, though, there are some bright spots. We're seeing TV growing positively, as is access to content products. 5G continues to come with an uplift, an ARPU of more than €3 in consumer, and the premium is even larger for enterprise. And with a 5G customer base just shy of 150,000 subs by the end of the quarter, we're continuing to roll out an upgrade to 5G at pace. Beyond the revenue challenges, we did have some increased pension costs impacting EBITDA, resulting in a 4.5% decline. From a KPI perspective, the mobile subscriber base is growing, but it is driven by enterprise where we add customers in the public sector, although at a lower ARPU, which dilutes the overall ARPU. Positively, churn has continued to reduce, and it is looking like 5G could help us sustain this positive trend on churn. Now, just to give you an update on our turnaround efforts, they're very much focused on a value versus volume commercial strategy alongside structural cost takeout. Specifically, we're restoring our brand and network perception to improve value for money perception and the early signs of positive. Secondly, we're expanding 5G pop coverage, increasing our potential to migrate more customers to 5G. And when we combine 5G with content from Seymour, we see much improved consideration and reduced churn. Third, we're shifting to our own channels by exiting expensive third-party channels that encourage churn. And fourth, we're shifting sales incentives to a value versus volume-focused incentive scheme and have stopped our historical practice of pursuing subs at any cost. And finally, we're in a process to restructure our workforce be finalised during quarter four. In summary, we now have a plan and we're executing on it. Yes, it will take a few more quarters, but we're very confident that the turnaround will come and it will have a material impact going forward. Moving to Norway, service revenues are reversed into positive clarity again, despite that we're still at burden by the ICE National Aerobics Agreement, although as you can see, it's sequentially lower this quarter at £55 million. Underlying momentum has continued to improve, with the enterprise segment growing at a very healthy 3.4% pace, driven by mobile, and the consumer segment now going 2.3%, driven by both mobile and broadband. With stability in our consumer customer base, we're aiming for this growth to continue, as we've now implemented speed-based pricing in our premium unlimited offerings under Telia X. And at the same time, we continue to see great strength in the enterprise segment, both through Finero and Telia. New customers, such as the Norwegian Postal Service, will start to migrate over to us during the next few quarters. Churn in both segments have been broadly stable in the quarter, and ARPA is growing due to value-added services, more specifically insurance. BAS represented just over half of the year-on-year ARPA redevelopment that you're seeing here. fully mitigate the lower revenue from the wholesale contract, leading to a small EBITDA decline. Moving to what we call our lead markets, the trends remain very strong in our Baltic operations. In Lithuania, service revenue growth accelerated to 8.1%, with EBITDA following and growing 9.3%. This quarter, our mobile trends particularly stand out, growing above 10%. But fixed is also stronger than in prior quarters, growing just shy of 7%. The consumer segment remains the main revenue driver, but we're also seeing the enterprise segment grow too. In Estonia, both service revenue and EBITDA grew by 6%, and just as in Lithuania, the consumer segment was the main driver, but the enterprise segment is not far behind, and both segments showing growth in both mobile and fixed services. As we said in Q2, the Danish service revenue is stabilising and even turned to a growth of 2.2% in the quarter. However, this was driven by interconnect enrolling, which came with limited or no growth margin. To drive further improvement and sustainable Danish revenue in EBITDA growth, we have changed management during the quarter, where Petter Schermack, a telco inspector, who has been advising us on our strategy since the turn of the year, and someone I have known for many years, is stepping in as acting CEO until we have a permanent solution in place. The costs are impacted by a non-cash balance sheet clean-out, and excluding this, EBITDA is broadly unchanged year-on-year. And finally, to TV and media, service revenue grew 15.4% from both growth in advertising and pay. Advertising continued to recover, albeit at a slower pace than previous quarters, as the recovery did already start in Q3 last year at 12%, but driven in no small part by a 24% increase in digital ad revenue. Pay grew by over 20%, helped by stronger sports content, and looking back over 24 months, revenue in TV and media is almost back to pre-pandemic levels. As you know, unexpected content costs are increasing, with both the Euros and Champions League affecting the quarter, which clearly affects our EBITDA, and content costs will ramp up further in the fourth quarter as we take a full quarter of Champions League and incur the usual fourth-quarter fiscal jump in content. Our Seymour subscriber base grew 20% in both Sweden and Finland, and in addition there was a transfer of 60,000 customers from Finland to the TV and media units, so that we ended at 560,000 and 275,000 customers respectively. I'm sure you're all curious about Champions League. It's early days, but we have indeed precisely already mentioned positive impact on Swedish TV subscribers, a positive subscriber uptake on the back of it, recovering the outflow of sports subscribers after the Euros, which ended at the beginning of the quarter. All in all, sports-related subscriptions have increased by 40% year-on-year. These movements are, however, masked by the fluctuations of the lower RQ non-sports subscriber base, but despite this, revenue is growing positively. We've now embarked into a multi-year period of a stronger content offering and will be monitoring the different aspects in which Champions League impacts our business, both on IPTV, on streaming, but more importantly, on the attachment to our access products that ultimately drive convergence and customer lifetime value. So now, PC, I'm going to hand over to you in the financials.

Thank you, Alison. Let me quickly summarize the financials, starting with service revenue. At Arise, we see the growth of 2.3%, broken down by unit and market. And as mentioned, we have growth in all the markets but Finland, driven by growth in all key product categories. On the left-hand side, you see the same growth split by segment. And as you can see, also covered by Allison, we have a solid growth momentum both in our consumer segment and also in our enterprise segment in the third quarter. Yesterday, after nine months behind us, we have recorded a surge revenue growth of 1.0% and are well on track to deliver our outlook for the year of flat to slight growth. If we move to offbacks starting from the left, versus last year, total offbacks increased by 1.1% or 61 million. In Q3 this year, we have more than 200 million of structural cost efficiencies, mainly driven by the 750 fewer resources combined with significant IT-related savings. However, in the quarter, this is more than offset by pension-facing effects combined with inflationary pressure mainly from salary inflation. Moving to the right and take a look at the cost development by category, resource costs increased by 134 million versus last year. The reduction of 750 resources has given us more than 100 million of savings in the quarter with resource reductions more or less in all units and functions. This is, however, impacting the quarter more than 100 million, with a significant part of this being the effect relating to last year. Second, salary inflation effects are around 100 million, slightly higher than the regular quarterly average. And thirdly, also from the temporary investments we have done in Sweden customer service to protect and develop our customer experience. Marketing costs are flat in the quarter, in many of our markets. Going forward, we expect to see more efficiencies from our transformation program on marketing costs, but of course, the reported costs will vary depending on the quarterly activity level. Within other aspects, we have solid reduction driven by the mentioned 68 million lower IT costs from the transformation initiatives related to nearshoring, vendor consolidation, system decommissioning, and increased use of common products and platforms. Year-to-date, we are down 0.7% or 135 million in line with our plan. With a reduction of 750 resources after nine months, we are well on track to reduce total resources by 1,000 during this year. This will both secure a good result for this year, but more importantly, secure a strong run rate going into 2022. And to summarize, We are well on track versus our plan and have good visibility how to reduce OPEX of 2 billion by 2023 and 4 billion by 2025. If we move to EBITDA, at the right-hand side, you can see the total EBITDA decline of 1.9%, broken down by market and units, where the main reason for the decline is, as mentioned, Sweden impacted by pension phasing, Finland hurt by low revenues and pensions, and TV media impacted by increased content costs offsetting the service revenue growth. After nine months behind us, we have recorded an EBITDA growth of 0.8%. If we look at the full year, we expect to end 2021 at the lower end of the flat-to-slide growth outlook range. The main reasons for this are mainly due to the low-than-expected performance in Finland, combined with effects from a slower rebound of the non-EU roaming. As Alison mentioned, we see positive signs in Finland already, and the global roaming is hopefully starting to return a bit during the first half of next year. On CapEx, starting from the right, as expected, we see an increase in mobile network activities related to the ongoing mobile network modernization and 5G rollout in all our markets. Fixed investments are a bit down due to less fiber-related investments in Sweden, while we see a slight increase in the quarter within product development and IT due to some key transformation-related investments in Q3. As we can see on the left side, total cash capex on a rolling 12-month basis has increased to 13.6 billion, or 15.4% on the sale. Cash capex will increase further in Q4, both from higher planned activity levels, but also from the delayed effect of completed activities due to our long payment terms. It's worth to note that the ongoing global supply chain situation is starting to impact our business and therefore could have some delay effects on the CapEx levels going forward. However, so far, we have been able to mitigate this relatively well. All in all, we are on track with our investment suggestions in Q4, we expect to land around 15 billion in cash aspects in the middle over the targeted range. Moving to cash flow, starting from the right, we have reported a total cash flow of 2.9 billion in the quarter down from last year. This is a combined effect of lower EBITDA, slightly higher cashback, and a slight negative contribution of working capital in the quarter. On a rolling 12-month basis, we see solid cash flow at $11.9 billion, somewhat reduced from last quarter. And excluding contribution working capital, we are on a rolling 12-month basis at $7.5 billion, in line with our expectations. After nine months, we now have generated a solid $9 billion of cash flow, well above the needed $8.2 billion to cover the minimum dividend commitments. And we are on track from 2022 onwards to cover the minimum dividend commitment with cash flow excluding working capital contributions. On net debt and leverage, as mentioned, we have reduced our leverage by almost $3 billion during our operations. If we take the Q3 results and add the expected proceeds from the TAR transaction, performer leverage is at 1.99%. but keep in mind that we have 4.1 billion to be paid out in dividend during Q4. We expect by end of 21 that this will put us at the lower end of the targeted range. On outlook for 21, after nine months of the year behind us, and with our financials well within the targeted range, we retrace the outlook for the year. As mentioned, we expect EBITDA for the year to be at the lower end of the outlook range, with cash cashback expected to be in the middle of the range around 15 billion. On the mid-term ambition, given the solid top-line momentum we see, the ramp-up of the structural cost agenda, and the clear plans on how to turn around our low-performing units, we are well on track on our mid-term ambition. And with that, I hand back to you, Alison, to summarize the presentation before we go into Q&A.

Thanks, PC. So to basically summarize the quarter, actually, we are delivering on our plan. We're proud that our commercial position took a step forward in the quarter with the expanded next generation network for 5G and new enhanced content and digital services being added. The momentum in almost all markets and all key product segments are strong, including in our largest market, Sweden, where, as I've said, we've seen service revenue acceleration for several quarters now, and getting closer to that sustainable and consistent EBITDA growth too. Our transformation is building the foundations for sustained structural customer experience and cost advantage, which is helping to mitigate some, but not all, of the recent headwinds. Furthermore, our ambitions to crystallise value from our assets are on track, but the tariff transaction expects to close next quarter, as previously communicated, and more will follow. but the tariff transaction already announced is putting us already at the lower end of the leverage range as we move into next year. Our outlook reflects a little single-digit growth in both revenue and EBITDA remains, and as Peter just said, we'll be at the lower end of that range on EBITDA this year, and cap-outs will be in the mid part of that range. So we're finally on our way out of the pandemic and moving forward with even more confidence on our transformation journey to reinvent a better Telia. We do believe that the pandemic has strengthened our role in society and cemented the need for ubiquitous connectivity, seamlessly combined with the best digital services provided by the most trusted provider. And as a result, we're really looking forward to playing an ever more important role in our customers' lives in the post-pandemic world. and for an improved market and structural position to generate consistently attractive shareholder returns for our owners. Let's go to questions.

Operator, can we have the first question, please?

Certainly. Your first question comes from the line of Maurice Patrick from Barclay.

Hi, guys. Thanks for taking the questions. Maybe a question on TV media and some of the puts and takes for 2022? I believe, Alison, you said, I think it was at the 2Q, you were happy with consensus around 900 million SEC for EBITDA for 2021. I mean, that would imply sort of quite low for the fourth quarter. I guess that's your point around the Champions League. But, you know, has TV and media got back to its old run rate yet? What are the puts and takes in terms of costs and revenues for next year? You know, can EBITDA grow in that division? I linked to that is... Will the full benefit from the Champions League be seen mostly in TV and media, or should we see some come through the opcos like in Sweden as well? Thank you.

Thank you, Morris. So, yes, we've been saying, I think we've definitely said last quarter, you know, EBITDA shouldn't be much more than 900 million for the year. And that's basically what we've been guiding to this year. This morning. You know, the different puts and takes are clearly we are very happy with the return of the ad business. And we are actually all, as I said there, all went back to 2019 levels when you look at Q3. So the return of the ad piece, very positive. And even more positive, we've got a bigger mix moving into digital ad revenues now. where you get more of a premium, and clearly that's the future. So good progress there. In terms of EBITDA development, we'll have to next year consume a full year of Champions League, which we've not had this year. So that will clearly have an impact on TV media EBITDA next year. But where do we expect benefits to accrue? We expect benefits to continue to accrue We expect benefits to continue to accrue on the Telia IPTV, which we're actually really delighted at how that's developing at the moment. And what we will also continue to expect to accrue is improved convergence and reduced churn as we see attachment to our access product. And that comes over time because some of the subscribers that want to come to us to get Telia are today locked into contracts with other providers. that will diminish over time as well. So I'd expect next year, because we'll be consuming a whole year of the cost of Champions League, that you won't see much EBITDA development in the TV media sector, but you will start to see it coming through in our core Swedish and Finnish telco businesses. Great.

Thank you. Very clear. Thank you, Alison.

Yes.

Thank you, Maurice.

And I think, Maurice, if you see, you know, in Sweden in the quarter, you know, 12% fibre development, mobile still growing 1%, TV up 10%. There's clearly an impact there of everything we're doing, not just Champions League, and I'm really hoping for more of that next year, particularly with reducing legacy headwinds.

Great, thank you. We've almost got two answers there, Maurice. On one Next question, please.

Your next question comes from the line of Andrej Tabasek from UBS.

Hi, good morning, and thank you for the presentation. I guess Finland is a big topic, so if I can have a couple of questions there, please. So first of all, you're now saying that you're targeting the turnaround in 2022. Is there any kind of more specific timing with respect to that? Second, if you could remind us of some of the progress you've made and what's left to do from your point of view before the business starts to perform as you wish or at least in line with the market. And then finally, and I guess most importantly, regardless of your specific issues in Finland, is there some kind of, you know, can you kind of rule out any kind of pricing disruption, especially in 5G and consumer, that would be a kind of peg to turn this business around And specifically, I'm asking because some of your peers are kind of pointing to Celia specifically in the enterprise segment, you know, being a bit more aggressive. So is this something that you can rule out in the consumer segment? Thank you.

Hi, Andre. Were you focused on Finland there or overall? It was Finland.

Sorry, I missed that. That's a specific, yeah. All three of them, yeah. Thank you.

Yeah, yeah. Very clearly, yes, we have a multi-pronged turnaround in Finland planned. And just to be clear, we don't need to take market share in Finland to turn around this business. We just need to grow at the same rate as the market leader, monetize 5G at the same rate as them, and that alongside the structural interventions that we're making on our cost base, on our channels, and on our go-to-market will enable us to grow at the same rate as Elisa. So it's a value versus volume-focused strategy. What we've discovered as we've peeled the onion in Finland is both by dependency on third-party channels that encourage churn and our own sales incentive model that was just pursuing subs at any cost, we were being irrational in the consumer segment. We are stopping that as of now. And we are seeing good traction as we're starting to shift the perception of the brand on the back of 5G rollout. We're seeing good traction to 5G and the churn of 5G is lower. So it's very much a value versus volume focus strategy in the consumer segment. In the enterprise segment, We've seen a return to growth in our core Datacom business, and just as we're seeing in Sweden, our breadth of services beyond connectivity are really becoming attractive to the large public and key account sector. As I said, we signed the biggest enterprise mobile network deal in the region in Finland during the last quarter, really attaching IoT services, and those kind of services help us minimize the artery dilution that can happen when you have irrational players in the market and help us to hold market share. We think we're holding market share in the enterprise segment, and clearly that's our intention going forward as well. Does that answer your question on Finland?

Yes, thank you. And maybe just if you could be a bit more specific in terms of when exactly in 2022 you would expect the turnaround to occur? No, I'm not.

I think it's more likely the second half than the first half, Andre, to be honest. We need a few more quarters because, you know, as we pull out of third-party external retail and move to value versus volume, you know, that obviously has an impact. And as I said, you know, we are actively talking to the unions regarding changes and restructuring in the workforce that will happen starting Q4.

That's very clear. Thank you.

Thank you, André. Just as a reminder, please limit yourself to one question each. Otherwise, we won't be able to capture you all. Next question, please.

Your next question comes from the line of Terence Suri from Morgan Stanley.

Oh, thanks, André. Good morning, everyone. I'll just stick to the one question regarding the comments that you made earlier around towers and fiber. I'm just specifically interested on your thoughts on the assets in Sweden. You obviously got quite a high price for this set of towers in Norway and Finland. So the market is clearly quite hot. But maybe you can just talk about some of the, you know, potential disadvantages you could see from any deal or doing any deal in Sweden as well, please. Thank you.

Clearly don't see any disadvantage in doing tarot deals at all when we keep majority control and working with a partner such as Brookfield and Electa. Electa that are very long term in nature. and Brookfield bringing real competence, being the biggest owner and operator of towers in the world. As we said, our capital market there, we have just over 9,000 concrete and steel towers. We have three times that if you include all of the sites. Norway and Finland accounted for just around half of our tower footprint. And Sweden make up a chunk of the balance of that, not all of it, but a chunk of it. And we, as I said, we are proactively preparing the next tranche for a similar transaction and would love to get similar multiples. And we hope to be able to do something in early 2020. In terms of fibre, you know, we have a great footprint of fibre already, but clearly we have some white spaces And we have some opportunities, particularly where you see, like the Swedish government, are really keen to co-invest in rural fibre. So we will clearly be looking at where we can partner with others to fill out our wide space of fibre footprint in the coming quarters and years as well. And the fact there's so much interest in that area, we don't need to do it all ourselves now if we can find great partners with a very long-term view and we'd be good partners for us in our fiber strategy. So, yeah, lots more to do in the infrastructure area and excited about the potential there.

All right, thanks, Andersson.

Thanks a lot, Terence. Maybe we have the next question.

Your next question comes from the line of Stefan Groffen from GNB Bank.

Yes, hello. I have a question regarding the B2B market in Sweden. Tell it to alluded to that there has been some stabilization in the pricing on the corporate side in Sweden. And I just wondered if you agreed to this picture so that the B2B market could see a good recovery going forward. Thank you.

Yes, I would agree to that position. We saw a relatively stable quarter. And as I said, we actually saw low to mid single digit growth in all segments apart from SME. The SME segment still remains very competitive and a key competitor is being quite aggressive at times. There's always one that's more aggressive, any one quarter, but I'd say in totality it's pretty stable and even in the SME sector where we carry a real premium on R2 we are seeing stability with low single-digit declines, which has been very consistent for the last couple of quarters. So, yeah, I'd say it was a fairly stable quarter from a competitive point of view in the enterprise segment.

Okay, thank you.

Very good, Stefan. Thanks a lot. Next question, please.

Our next question comes from the line of Peter Nielsen from ABG.

Thank you very much. Morning, everyone. I had two questions, but I'm on under a strict instructions. I'll stick to the second one. Obviously, OPEX reductions is an important part of your three to five year plan going forward. We seem to be entering an environment with an accelerating and increasing inflation. Could you talk a bit about how and where you see that impact in Thalia and how you see your opportunities for for mitigating that, including passing on some of those costs to your customers. Any color here would be appreciated on your sort of medium-term view. Thank you.

Yeah, so clearly we have built in salary inflation into our plan. So that was always built in over the three- to five-year period, and that $2 billion is a net ambition. We are seeing a bit of inflationary pressure on energy. You know, we hedge the majority. But clearly, with spot pricing going up, we're seeing a little bit of an impact there. But we try to pass that on as much as possible. For example, our data centers, we pass on any inflationary pressure there. And clearly, if we see continued inflation, and where we see inflationary pressure on devices and equipment, we pass that on. And we will be monitoring the situation over the coming months as we create our plans for 22 onward, we're looking at if there is going to be inflationary pressure, what more can we do from a pricing point of view? But at this point, all manageable. And based on our strategy to consolidate the number of products, platforms, and partners that we have, we will use that strategy to leverage scale and mitigate some of the headwinds as well. And that's something we can do because of the scale of the business we have throughout the region and because we started with a very fragmented set of partners as well and that's not just helping us from a cost mitigation point of view it's also helping us from a supply point of view at the moment and I'm very happy that our network providers are giving us all the support we need so that we can keep our 5G rollout on track despite clearly the supply chain pressures which at the moment we just need to give much more forward looking forecasts to our suppliers. I don't know.

Thank you.

Thanks, BK. I know your first question was why we only highlighted Man United. So congrats on the Chelsea win last night as well.

Yeah, but they beat Malmo, Andrea.

Yeah, I know. Spurs played tonight, by the way. Next question. Next question, operator.

Your next question comes from the line-off, Roman. My boot's off from JP Morgan.

Hi, guys. Thank you for the opportunity. I wanted to go back to the question of Finland's turnaround. So I appreciate its work in progress and to require a few more quarters. And thank you for your earlier comments, Alison, on what needs to be done. Do you think it does all come down to mostly distribution and the go-to-market strategy? And, you know, when I look at your results, it looks like you are building up your 5G base. So there's clearly some upselling going on. You're not really losing market share. Your post-paid customer base has been growing for a number of quarters. So the ARPU is not really firing up. And can that be down to maybe backend systems and how you manage your existing customer base? and things like, you know, data analytics, smart targeting, something along those lines, or do you think it's more of a distribution and branding question? Just additional color there, that would be helpful. Thank you very much.

Well, it's market position, it's network position, brand position on the back of that, and then distribution, go-to-market, and much more modern-day tools to drive the business. So it's kind of all of that, but... But you're right, if Elisa can get one euro uplift from 5G, there is no reason that we can't do that considering the market position we have as well. If we are changing the perception of the network, which we are, we have proof points. If we're changing the perception of the brand, still to do work on the brand, but our CMO who started out fixing Denmark, he's done Sweden, he's now off to Finland now. That is work in progress. But all of what we are doing to build a data analytics capability for the group is being prioritized for Finland at the moment. And so the more we move into our own channels, the more we'll be able to use the customer. We're calling it a customer value management boost. We're really pushing ahead in Finland first for the whole group. to see how that can really improve cross-sell, upsell, and convergence in general. So it is a distribution and go-to-market. It's also a focus. You know, we are, and that's more, you know, we're getting rid of some distractions around the edges that have been built up, whether it be esports or gaming in the consumer segment, or in the enterprise segment, you know, we're getting out of alarm businesses and other smaller periphery businesses. that were built up over the years. So focus, distribution, go to market, analytics, and then really going after the workforce and the cost structure.

Got it. Thank you very much. By the way, Lisa claims that it's as much as three euros for 5G uplifts. So plenty to play with.

That's what we're getting. We're getting three in the consumer and more than three in enterprise. But if you look at Elisa's ARPU over the last year, it's gone up by one. So that's what I'm referring to. They've probably got at least double the 5G customers that we have, and they've already got an extra one euro on their ARPU. But clearly, there's much more to go after. But even one euro a year from now makes a big difference. And we're going after structural cost interventions as well.

Thank you very much, Alison. Thank you.

Thank you very much. Thanks a lot, Roman. Next question, please.

Next question comes from .

Yeah, thanks very much. I have a slightly more technical question. It's on the pension, area of pension. It has been a source of volatility for the quarters, now in the third quarter again. So three sub-questions here in particular I'm able to address. The first one is what is the nature of this what you call phasing? It sounds to me that this is actually more like one-offs, but could you explain what you mean here by phasing? Could you talk about pension reimbursement to be expected in the fourth quarter as in the prior two years in the fourth quarter, whether that's coming again and then what amount, whether that's possible to comment on that? And then in the IR email this morning, there's sort of a comment that you are aiming to improve the accounting strategy. Could you comment on what would improve and how it might improve? Thank you.

Yes, I'll try to address those questions. So just to remind, last year we reported an OPEX reduction of 180 million, where two-thirds of that was non-structural and pacing. So a big part of what we are reporting this year is relating to last year. And last year there was some different kind of technical effects hitting in a positive way the third quarter. On top of that, we also have some, as we mentioned, some phasing effects from this year. And what is coming from it, there are some, let's say, one-time effects, which is hitting this quarter that kind of belongs to other quarters this year and last year. And on the improvement, I mean, what we are doing now, we have changed the way we accrue for pension to avoid having this noise on the numbers. And the result of that is we're kind of getting a double cost because we're carrying the one-time charge, in addition that we're now doing a more proper accrual on the pension cost, and more specifically it's related to salary inflation and also on bonuses. So that's a very technical part. So overall, these cyber effects mostly belong to Q3, where a big part of it is Q3 last year, and there are some effects for Q3 this year. On the second question around reimbursement, we are looking into what room we have for pension reimbursement. I'm not going to guide anything more on that at this point. And then I think I covered the third question in my first answer.

So, yeah, you could say it's a one-off because it was a big negative last year and a big positive this year. But moving forward, we're trying to kind of smooth this out and there's no bad news in there.

Got it. Thank you very much.

Thank you, Ulrich. I think we have four questions left, so let's speed up and see if we can fit all in. Next question, please.

Next question comes from the line of Steve Harcum from Redburn.

Good morning, folks. I hope you can hear me okay. Thanks for taking the question. Just a question on balance sheet and return on capital. The balance sheet looks in very good shape. You've got the dividend clearly coming out in 2014. We understand that, but it's still being in good shape. the tariff deal is closed. I mean, can you just update us on your thinking on returning sort of excess capital through buybacks to shareholders and maybe the timing and the sort of, you know, the puts and takes on that and why you wouldn't return excess capital, I guess. Would it, if you weren't to do that with full year results, you know, would that be because you see opportunities elsewhere to reinvest? Because, you know, maybe some concerns about the outlook. How should we read any decisions not to return excess capital? Thanks a lot.

Well, I think our capital allocation policy is very clear for the year. It's a minimum of two kroner per share dividend and we want that to grow in line with our EBITDA going forward. You're right, we're right at the low end of the two to two and a half range. We're still in the two to two and a half range. So whilst we're in that, I wouldn't expect the board to change anything. But clearly, if we were to do any more For example, tower transactions, that would obviously have to trigger the board to look at an excess capital return. And I'm sure they would weigh up the pros and cons of buybacks versus extraordinary dividend at that time. But that's not really a dialogue for today. But, you know, we do have a very shareholder friendly chairman. And, you know, there is no incentive for us to go below the two to two and a half range. So and. In terms of, you know, we've laid out our CapEx investments for the coming years. We don't see any immediate major acquisition needs. So I think if anything, if we were to have cash that took us below the two, then clearly our board would consider a return to shareholders.

I'm still very open-minded whether that's through buybacks or special dividends at this stage.

Yeah, I think that's something for the board to really discuss alongside our mid-term outlook when we get together in January.

Okay, great. Thank you.

That's for us to consult with shareholders as well, clearly.

Thanks a lot, Steve. Next question, please.

Your next question comes from the line of CEK from Citigroup.

Hello. Thank you very much for your questions. Just so I have a question on how we think about your midterm EBITDA trajectory. I think today's guidance change suggests that there will be probably about 7%, 8% EBITDA growth required over the next two years. And I think during the call, you made a comment about higher accountant costs and also thin lines might not return to growth. until the second half of 2022. So I was wondering, should we think about the delivery of your three-year EBITDA growth target to be more of a backend loaded? Is that the right way to think about it?

Thank you. No, we are very comfortable with our low to mid single digit outlook that we gave for the period. And, you know, some of the, you know, we're starting the Finland turnaround. That will start to benefit us next year. Roaming will start to return and we'll start to get more and more benefits from the transformation programme. So very much on track and we stick to our guidance and are confident in that.

Okay, that's very clear. Thank you.

Thank you, Siyi. May we have the next question, please?

The next question comes from the line of Fabi Lash, Mohapatra from Berenberg.

Yes, good morning and thanks for taking the question. Sorry to come back to Finland again. I think it's fair to say that past management teams have also talked about going ahead with a value versus volume approach in Finland. I guess my question is, what is different this time? Is it just that under new management, you'll be more disciplined in your approach in Finland, or is it simply that? With the 5G sort of opportunity, you see a chance to essentially grow service revenues by being sort of more rational on competition.

Yeah, I think the past management teams have never been there long enough to actually deliver any discipline or focus. So what's different this time? Yeah, we've got the opportunity of 5G and we've got the opportunity of content. And I really do believe we've got a management team that's really getting to the root of the problem in Finland and starting to turn that around. And we'll certainly be able to leverage the group transformation towards common product platforms, processes and partners. And that's what gives me the confidence. PC's been around a little bit longer than me. Do you want to comment, PC?

No, but it also goes in the focus of... not rocket science, it is actually making sure that we deliver on it.

And we have a much more robust integrated strategy planning process now that cascades all the way down to country and functional planning, something that didn't exist in Telia before.

Thank you very much.

Thank you, Abhilash. We have one more question in line, so I think we take that and then we end.

And this, and by the way, this is the last ever question for Andreas as the head of IR of Telia. on his 20th set of results, so make it a special question.

Your question comes from the line of Adam from HSBC.

Wow, no pressure. It was actually a bit of a follow-up to that last one, I'm afraid, but I wanted to ask a little bit about the balance between group-level policies and how those feed down into the countries. on things specifically like pricing and the balance of gross ads and churn, how much of that is really coming from the centre and implemented locally? What is locally focused and is then monitored from the centre? Because a lot of the conversations I think we're having around Finland, in particular over the last few quarters, seem to suggest that maybe oversight wasn't quite where it could have been. And I'd just really like to hear how that's changed, basically.

Yeah, so great question. It is the local markets own their go-to-market strategy, which includes pricing, growth ads, go-to-market, everything. But they are overseen by group, and we set the targets and the ambitions. Reiner equips the countries with the products, platforms, and partners they need to take to market. And then by getting the transparency on the plans from the countries at a group level, we're able to scrutinize, challenge, support, and get a much better understanding of the feasibility of the plan relative to the targets that we're setting. So it's a real mix of top-down and bottom-up and a collective ownership for the plan in the end between group and local markets.

Thank you, Alison. Good luck, Andreas.

Thank you. And on that note, I would like to end the call today by saying thank you, Andreas, for 20 fantastic quarters. I know those have not always been good. You didn't yet turn around Finland, but we wish you all the best in your future career. You're going back to the dark side, but I know you'll put a buy on as soon as you can.

And I look forward to watch Finland turn around from the dark side. Thanks a lot, everyone. That concludes the call for the Q3 report. Have a very nice day and reach out if there is anything you would ask more. Erik is dying to take calls. And as said, have a nice day. Take care.