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Edited Transcript of ELISA.HE earnings conference call or presentation 17-Oct-19 9:00am GMT

Q3 2019 Elisa Oyj Earnings Call

Helsinki Oct 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Elisa Oyj earnings conference call or presentation Thursday, October 17, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jari Kinnunen

Elisa Oyj - CFO & Member of Executive Board

* Veli-Matti Johannes Mattila

Elisa Oyj - CEO, President & Member of Executive Board

* Vesa Sahivirta

Elisa Oyj - Director of IR

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Conference Call Participants

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* Adam M. Fox-Rumley

HSBC, Research Division - Analyst, Global Telecoms, Media and Technology Research

* Andrew J. Lee

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Henrik Herbst

Crédit Suisse AG, Research Division - Research Analyst

* Maurice Graham Patrick

Barclays Bank PLC, Research Division - MD

* Panu Laitinmäki

Danske Bank Markets Equity Research - Senior Analyst

* Peter-Kurt Nielsen

ABG Sundal Collier Holding ASA, Research Division - Lead Analyst

* Roman Arbuzov

JP Morgan Chase & Co, Research Division - Analyst

* Sami Sarkamies

Nordea Markets, Research Division - Senior Analyst of TMT

* Siyi He

Citigroup Inc, Research Division - VP

* Terence Mun-Sion Tsui

Morgan Stanley, Research Division - VP

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Presentation

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Vesa Sahivirta, Elisa Oyj - Director of IR [1]

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Good morning, everyone, and welcome to Elisa's Third Quarter 2019 Conference Call and Analyst Meeting. I'm Vesa Sahivirta, Head of Investor Relations. And here is a very familiar team with me, CEO, Veli-Matti Mattila; and CFO, Jari Kinnunen, as well as some audience.

We start this meeting with a presentation followed by Q&A. And following normal practice, we take first questions from the audience and then from the conference call lines.

I think we are ready to start. So I give word to Veli-Matti, please.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [2]

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Hello, everyone, and welcome to Elisa's Third Quarter 2019 Interim Report Review. We had another good quarter at Elisa, and we have executed according to the plan and according to the outlook that we told you earlier in the beginning of this year.

Our revenue has been growing by 2%. EBITDA is up by 6%. Mobile service revenue growth, 2.3%. We also have a churn almost on the same level, 18.2% this quarter as it was previous quarter. We have increased postpaid mobile subscriptions by 18,500 and fixed broadband grew by 8,100. We have seen the early adopters and innovators embracing 5G. In Finland, we have already thousands of 5G customers.

The revenue growth is contributed very much by Polystar acquisition but also with the mobile service revenue growth as well as with the equipment sales. EBITDA, of course, got improvement from the IFRS 16 change. But also our continuous improvement to the productivity creates efficiencies and profitability improvements. The ARPU, of course, got impact from the regulator-driven interconnection prices. We have also seen the campaigning and competitive landscape to remain pretty much on the same level as we saw in the second quarter.

And if we look at the segments, first, the Consumer Customers segment. Revenue growth by 2% and EBITDA growing by 7%. And in the corporate side, also we got revenue to grow with 3% and EBITDA by 4%. So both segments continuing growth in revenues as well as in profitability. We continue the execution of our strategy with 3 focus areas having -- and we see a lot of potential in every and each of the focus area to gain results to our shareholders and customers.

The up-selling works well and it continues. The number of smartphones that -- new type of smartphones, the penetration is continuously going up, being now 84% of the total phone base. Also, the number of 4G customers or highest-paid customers is going up, now being 71%. But also very important to notice is that the lowest speed of 4G, i.e., the 50 megabit per second speed level, that is going down, meaning that the customers are moving up in the 4G domain, so from 50 and for the others to higher speed level, so the speed-based up-selling continues -- continue to progress. Also, the proportion of customers in the fixed monthly fee data bundles is increasing, now being 74% of all the subscriptions. And we, of course, see good demand for our great services, providing not only Nordic and Baltic but also internationally with our Vodafone partnership, great roaming prices.

5G has started in Finland during this quarter. Elisa has been able to provide both subscriptions and many, many devices. And the early adopters really have been eager to test and start to utilize in those 4 cities where we have had the coverage. Now we actually included a fifth city yesterday to the map. And we also have been first in the world with Swisscom to provide 5G roaming capability. We introduced 300 megabit per second 5G subscription for the -- as an introductory level for customers to move to 5G.

And we have a lot of customers also on the B2B side to work with us to embrace and test and learn from the 5G opportunities, for example, the port of Helsinki as well as the city of Turku. We also hosted the first 5G e-sports arena event in the world and provided experiences with that business domain with 5G and provided 5G network for Tubecon, the largest live YouTube event in the Nordics. And also, we continue to provide new 5G devices to our customers, for example, Samsung Galaxy 10.

In the digital service businesses, with the domestic side, Elisa Viihde, Elisa Entertainment, IPTV is providing new original content, like the Shadow Lines, which is internationally recognized. It has had its premiere end of September. We have also provided new functionalities and new features in Elisa Viihde IPTV, which is growing. We have also engaged in e-sport with Elisa Viihde so that we provide e-sport content to the Viihde customers.

In terms of the international digital services, Videra continues to build its partner network to provide more coverage and more customer base. For example, we are the first globally certified Zoom system integrator now. And we are looking forward the cooperation to provide a larger customer -- customers, global customers into Zoom service, together with our total solutions with rooms and everything. We also are a certified Microsoft Surface Hub reseller in Nordics now.

Elisa Automate continues its path, for example, with cooperation with South Korea and LG Uplus. We have signed a collaboration agreement to jointly develop automation for 5G networks. We also have our automate virtual -- Elisa Automate's virtual network operations center has been nominated for the World Communications Award 2019 in The Innovation Award Operator category. So we have got recognition for our capabilities in automatization. The Smart Factory Management business line is also moving ahead, for example, complementing with its offering with new solutions, Smart Safety Locking and Smart Supply Chain solutions, which are very well received by our customers.

And then come to the outlook and guidance. We have upgraded our guidance for the rest of the year. We see that the positive development of macroeconomic environment is decelerating in Finland. Clearly, competition remains challenging and our revenue will be at the same level or slightly higher than 2018. And we upgraded the EBITDA. Comparable EBITDA will be slightly higher than 2018. CapEx will be maximum 12% of revenues.

And then we continue by Jari, please.

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Jari Kinnunen, Elisa Oyj - CFO & Member of Executive Board [3]

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All right. Let's first look at profit and loss development. We continued, exactly as we said beginning of the year, that the second half will be better, also helped by accelerated productivity improvement measures. And it's visible in EBITDA development.

Revenue changed EUR 11 million or 2.4%. If you look at different items inside that, interconnection and roaming was negative EUR 4 million. MTR prices reduced last December. Equipment sales were up EUR 3 million. And of course, biggest contributor, Polystar acquisition, so we started to consolidate in June. And we had now 3 months, full 3 months of Polystar and impact of EUR 8 million.

Service revenues in consumer segment were growing EUR 6 million. Corporate segment was still slightly negative at EUR 2 million. EBITDA growth, EUR 10 million or almost 6%, which includes IFRS 16 impact, approximately EUR 4.5 million. EBITDA margin improved to 38.4%. EBIT growth almost EUR 3 million, 2.5%, at EUR 111 million. Net profit and EPS, same level as last year. We had in taxes, one-off type of booking of EUR 3 million, which is an adjustment of deferred tax assets, which impacted, as said, EUR 3 million to net results in this quarter.

Estonian performance continued with strong development both in revenue and EBITDA. Revenue growth, 6.7%, EBITDA growing 8.5%. And very much same trends as in Finland, demand for data and demand for higher speeds contributing to growth. Also, we made some small price adjustments, which had positive impact to revenue and EBITDA. Also, subscription base continued to develop positively: postpaid, 3,200; and prepaid, plus 2,100. Churn was slightly higher than in Q2 but still pretty low at 8.3%.

CapEx continued in line with the guidance, which is 12% CapEx to sales at 56% and -- EUR 56 million. Excluding IFRS 16 change, CapEx was EUR 52 million. And main CapEx areas relate to 4G capacity and coverage increases as well as other network and IT investments.

Cash flow also continued to develop positively, was EUR 97 million or comparable basis EUR 98 million, which is 15% higher than a year ago. And year-to-date, comparable cash flow is up 19.6%. In Q3, positive contribution to cash flow growth coming from higher EBITDA, net working capital change, although that was negative but was less negative than a year ago. IFRS 16 impact approximately EUR 4 million and negative impact through higher CapEx. Cash conversion -- operating cash flow conversion remained at high level, 71%.

And this and capital structure, of course, formed a very good, solid basis to continue with competitive distributions also in the future. Capital structure also well in targets. Net debt-to-EBITDA came down from Q2 and is now 1.9x. And we expect that to continue to go down in Q4. Equity ratio was 37.6%, higher -- above target, which is 35%. We did pay back EUR 180 million bond earlier this month. And after this repayment, interest expense will go down a bit more than EUR 1 million a quarter, starting from Q4 onwards. And average interest or interest-bearing debt is well below 1.5% after that payment. Return ratios remained at good level, return on equity, 27.7% and return on investments, 16.6%.

And now I give back to Vesa, please.

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Vesa Sahivirta, Elisa Oyj - Director of IR [4]

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Thank you, Jari. And now we move on to Q&A part. And first question from the audience. Sami, please.

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Questions and Answers

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [1]

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Sami Sarkamies, Nordea Markets. I have a couple of questions. Firstly, on mobile service revenue growth, it seems that you have slightly changed your approach here. It's currently more based on net adds than ARPU growth in both segments. Is this a right observation? And have you seen any reactions from your competitors?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [2]

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Well, the observation is right and wrong. What is right is that, of course, this quarter, we have gained some new net adds. But our focus is definitely on the up-selling higher speeds and also making some price corrections in the base. And that's the basis for improving MSR and the target for us. We have certain quite large B2B deals in the past. Some of them we lost but we also have won, so they have also contributed very positively to the net add figure for this quarter.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [3]

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Okay. And then continuing on mobile service revenue growth, you did achieve some improvement in the growth rate during third quarter. Do you think it's realistic to assume that this positive development will continue also going forward?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [4]

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We have a clear demand for higher speeds, willingness to pay continues, as we have said quite some time. And that creates a positive momentum for even increasing MSR. On the other hand then, we have the price pressure and the intensified competitive landscape, which is kind of diminishing the opportunity to capitalize the great demand we see. For example, with 5G, we have experienced already with this quite short period of time that 5G is bringing additional value that we could capitalize with a higher MSR. But of course, the price environment and the competitive environment is then having its impact.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [5]

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Okay. Then I have a couple questions on 5G. It seems that your rival, Telia, is planning fairly rapid rollouts in Finland. Should we expect them to take the lead in this market? Or are you planning similar rollouts also on your side?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [6]

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Well, we are on the lead.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [7]

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Okay. And then there was recently a memorandum published by European Union regarding 5G security. Did you see anything in there that would sort of impact the operators and their approach to sourcing from the different vendors?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [8]

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Well, of course, it is a very important topic, what the European Union is addressing with this, first, the survey and then the coming mitigation activities. And we, of course -- we have been contributing to this risk analysis. And we are also taking part on finding the right mitigation and the right opportunities. It is, of course, of great interest and kind of in our genes to provide the security with the communication networks and services we provide to our customers. And that's why we have invested heavily on our network operations to automate and also to cybersecurity.

In this report particularly, there was no big surprises for itself. And I think a very important observation is there that you kind of need to have multi-vendor environment to guarantee that you have alternatives and you have also capabilities to compare and also have some competition for different vendors to be as cybersecure as possible and with as high quality and service level as possible. So we fully support that focus on those issues and we work with together with the guidelines that are coming.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst of TMT [9]

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And then finally, a housekeeping question to Jari. Would you be able to disclose revenue, EBITDA and EBIT numbers for Polystar in third quarter?

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Jari Kinnunen, Elisa Oyj - CFO & Member of Executive Board [10]

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Yes. As said, revenue impact was EUR 8 million. EBITDA impact was just below EUR 1 million and EBIT was EUR 0.2 million.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [11]

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Any further questions from the audience?

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Vesa Sahivirta, Elisa Oyj - Director of IR [12]

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At the moment, no, we don't have. So let's take the first question from conference call lines, please.

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Operator [13]

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(Operator Instructions) And our first question comes from the line of Andrew Lee at Goldman Sachs.

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Andrew J. Lee, Goldman Sachs Group Inc., Research Division - Equity Analyst [14]

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I had two. One was just a follow-up to your up-selling commentary that you've just made. Do you see the same up-selling opportunity and demand as you move into 5G world as you see in a 4G world, i.e., do you think that up-selling tailwind will continue in the medium term?

And then secondly, just on competition, you've mentioned sort of intense competition. And one of your competitors has talked about an increase in that promotional activity recently. That doesn't seem to show in your revenue or your margin trends this quarter. I just wondered if you're seeing any real change in the competitive intensity in Finland at the moment.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [15]

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All right. Thank you, Andrew. Yes, we see that moving towards 5G, there is an opportunity to continue the up-selling and have a nice growth opportunity there going forward with more and more customers gradually moving to 5G. Definitely, 5G will bring not only speed but also other performance improvements where we see opportunities to have customers to pay more. Then like I said earlier, on the other side then is the competitive landscape, how much pressure we get from the competitive landscape. That's the kind of then the other thing influencing. But the demand is there. The willingness to pay clearly will be there for 5G as well.

In terms of the competitive landscape, we had pretty similar intensity third quarter as we had in the second quarter. Maybe we didn't see any oversized pricing attacks during the quarter, but we saw quite much promotional activity now and -- but nevertheless, whatever the competitive landscape is, we can compete and be quite dynamic to respond and also be a bit proactive if needed. So overall, pretty much same intensity but with a different way this quarter.

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Operator [16]

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

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Maurice Graham Patrick, Barclays Bank PLC, Research Division - MD [17]

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Yes, it's Maurice here from Barclays. If I could ask a bit about fixed wireless access, please. I believed you've launched -- you have a product, a 5G product there in the market and you had a 4G one for some time. Telia has also recently launched one. But how do you see the demand for this type of product? It's priced at a premium, I think EUR 45, EUR 50 a month, speeds of 500 megabits, gigabit speeds. How do you see adoption and popularity of these products?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [18]

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All right. To have wireless to substitute fixed broadband, we already have in 4G that development kind of continued. We had quite a few households in Finland that are already mobile-only households. And of course, 5G will bring additional capability to kind of serve the maybe a bit underserved fixed broadband areas, remains to be seen how the 5G really will impact with which pace. We have several testings going on with 5G fixed wireless and remains to be seen what the impact really will be. But the first, let's say, reactions are pretty positive.

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Maurice Graham Patrick, Barclays Bank PLC, Research Division - MD [19]

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I mean just as a quick follow-up, could you give some indications of the kind of the speeds and maybe usage of some of your early uptake customers are finding on these 5G products?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [20]

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Unfortunately, it's a bit too early to provide any stats regarding the amount of data moved in 5G and the speeds by the customers. But we have in Turku, for example, we have more than 1 gigabit per second speeds that we have been providing and several hundred megabits per second continuously. So the speed levels are approximately 10x higher than we can provide with 4G to customers.

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Operator [21]

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Our next question comes from the line of Terence Tsui of Morgan Stanley.

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Terence Mun-Sion Tsui, Morgan Stanley, Research Division - VP [22]

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I had a question around -- as a follow-up of the question earlier around CapEx and your equipment suppliers. Can you just remind us who are your equipment suppliers for your mobile network and which parts of the mobile network? I was also interested in the comments from the Finnish President recently and the use of Chinese vendors. Was just wondering what could be the implications for your CapEx if you had to change provider.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [23]

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All right. In terms of the CapEx, I didn't get your question what was exactly -- the suppliers we have in our mobile networks are Nokia and Huawei for the radio and then we have Ericsson in the core. And very important thing is that we are operating our networks by ourselves with very automated, very good digital tools that we sell also to other operators. So we are not buying any managed service for our mobile network here. But your questions about -- or did you have something specific for the CapEx?

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Terence Mun-Sion Tsui, Morgan Stanley, Research Division - VP [24]

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Yes. And I was just wondering what the implications could be if you were not allowed to use Huawei going forward for your CapEx.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [25]

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All right. We don't have any estimates in regards to that. Of course, it's important that we can have a multi-vendor environment going forward and also that we can have competitive equipment in place for our Finnish and Estonian customers, so they are not left back to the developments in the networks in the other parts of the world. That's a very key for us to serve our customers well. You were referring to the comment of Finnish President. Now I have to ask you with which comment you mean really.

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Terence Mun-Sion Tsui, Morgan Stanley, Research Division - VP [26]

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I was just reading around the meeting that he had with President Trump and the discussions they had around the use of Chinese vendors and whether Finland will go down the path explored by the U.S. in prohibiting the use of certain providers.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [27]

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Yes. Well, as far as I understood, our President communicated very clearly that Finland is following the EU, first, risk analysis and also the mitigation plan. And those are ongoing. So the mitigation plan, we don't know which kind of tools there are and proposed by EU. It will come later this year. Finland is, of course, following very well the EU practices. And so far, there has been no clear mention at all in regards to having any Huawei ban.

U.S. has the Huawei ban. And they, of course, would like that to be exploited to other countries for their reasons. But Europe has also its own perspective. And of course, it's always important to remember that basically for any equipment, we have to be a bit cynical that if there are any challenges with the equipment we buy, the main way for us to take care of that we have cybersecure services to our customers is to operate ourselves and have capabilities to detect and react very quickly if something happens. And so far, with these vendors that I mentioned, we have had no problems on cyber or any kind of issues. And we have a very strong operational capability.

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Operator [28]

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Our next question comes from the line of Roman Arbuzov of JPMorgan.

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Roman Arbuzov, JP Morgan Chase & Co, Research Division - Analyst [29]

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I had two questions. The first one is on net income and operating leverage. So if I adjust the net income for the EUR 3 million one-off related to taxes, Jari, that you mentioned and I also adjust EBITDA for the IFRS impact, it still looks like your EPS growth is below your EBITDA growth. And that's been the case basically every quarter this year. So I'm just wondering, what's not working in terms of operating leverage? And yes, so that's question one.

And question two is if you look at the net income developments year-to-date, they've been perhaps somewhat less favorable than they have been in previous years. And we're looking at negative year-on-year net income year-to-date and most likely for the full year as well. So in light of this, I'm wondering how important is it for the company to maintain a growing dividend profile and whether you would consider using leverage essentially to maintain that growth path for the dividend, please.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [30]

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All right. Let me start by saying that I ask Jari to give you answer to this leverage first and then we will continue.

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Jari Kinnunen, Elisa Oyj - CFO & Member of Executive Board [31]

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Of course, we have had a strong record many years with distributions and we aim to continue with that. And as I did explain, cash flow has been growing. Net debt-to-EBITDA is within the target levels. And it will reduce in Q4 towards midrange of our target range. So there is no change in debt levels or net debt-to-EBITDA range to what it has been already longer time.

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Roman Arbuzov, JP Morgan Chase & Co, Research Division - Analyst [32]

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I'm sorry. Can I just add that -- well, I was more talking about operating leverage. And I just meant the flow-through of EBITDA growth into net income. And typically, you would expect to see -- or historically, what we're used to seeing from Elisa is a very nice flowing kind of a pyramid, right? So you start with some top line growth and then larger EBITDA growth, larger EBIT growth and then larger net income growth whereas it's kind of been the inverse of that in recent quarters. So I'm just wondering what's changed in that front.

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Jari Kinnunen, Elisa Oyj - CFO & Member of Executive Board [33]

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Yes. Okay. If we're thinking about the whole year, we still, of course, we have 1 quarter to go. And like we said beginning of the year that we have first part of the year -- or second half of the year, better development compared to first half of the year. And that is exactly, that has been the case. So EBITDA change in Q1 was plus EUR 2 million. In Q2, it was EUR 7 million. And Q3, it was EUR 10 million. And if you compare in terms of operating leverage and the growth changes, you need to remember that now we have an IFRS 16 change impacting in EBITDA level. And that means that the growth percentages, if you compare to the history, there's more weight in EBITDA change now this year compared to EBIT change. But that will change next year.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [34]

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Then to your question regarding the dividend, you know we have understood that the reliability is and the quality is appreciated by the market. And we have tried to execute with a very reliable way in the history and now. So we understand that it's appreciated by the market, then we will continue to do that. And our distribution policy is 80% to 100%. We have not been in the past years in 100% at all. With our distribution policy, we have room to kind of keep the good momentum with our distribution. And like Jari said in regards to the leverage, we have 1 quarter to go for the year, and we have also dynamics that are improving the leverage going forward.

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Roman Arbuzov, JP Morgan Chase & Co, Research Division - Analyst [35]

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All right. Sorry, can I just ask on the net adds in the fixed NPV? I forgot about that question. Why were they strong this quarter?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [36]

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Well, the quarters are different. Sometimes, we have some MDU deals which are a bit larger to kind of land in certain quarters. And some quarters, there may be different situations. So the net adds increase in the fixed broadband has come mostly from the MDU side.

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Operator [37]

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Our next question comes from the line of Panu Laitinmäki of Danske Bank Markets.

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Panu Laitinmäki, Danske Bank Markets Equity Research - Senior Analyst [38]

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I just wanted to ask about efficiency improvements that you have made. Earlier this year, you commented that you will be accelerating efficiency improvements and then second half will be stronger partly because of that. And that seems to have happened. But my question is really that, could you explain what have you done? What was the magnitude of those actions? And do we see some kind of extra impact in Q4 and in the coming quarters still from this?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [39]

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All right. Like we have many times explained that our drive for improving efficiency is through continuous improvement in the kind of all-around Elisa. So we have just focused and got some of the more important productivity improvements to kind of generate faster. We are not kind of disclosing so much about what's going on because there are so many different developments going on anyhow. But it is just a kind of result from already a longer period of time for the system that we have to improve continuously our productivity based on better quality to customers and that way improving the productivity.

We are, for example, brought many automatization tools into place, using machine learning, for example, for credit losses, to predict credit losses better. And that way to reduce the credit losses as just one minor example and several others. So we utilize technology, but we also have the culture and kind of systematic capability to continuously improve. And for that matter, I can say that we are not at all a highest-quality company or -- for the customers or with our operations. There's a lot of room to be better. And with the system and systematic way we improve, we know we can improve continuously in different parts of the operations.

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Operator [40]

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Our next question comes from the line of Siyi He of Citigroup.

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Siyi He, Citigroup Inc, Research Division - VP [41]

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I have two, please. The first one is on the pricing corrections that you talked about in mobile. I was wondering if you could give us an indication about how much correction headroom do you have. And compared to the previous year, what kind of -- what kind of a magnitude of the price correction you have done this year compared to previously? And the second question is that Telia today has decided to keep the CapEx envelope and talking about a fiber rollout, particularly in Finland. And I was wondering if you can give us your updated thinking on your fixed infrastructure investments.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [42]

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All right. In regards to the pricing corrections and product changes, that's actually a pretty much continuous activity we have had during the past couple of years and also going forward that there are certain, let's say, cohorts of customers that -- and customer segment groups that have been left behind with maybe a bit too low prices somewhere. And then we have made price corrections, also providing a bit improved service levels in a way or another. There's nothing quite specific for this year comparing to the previous year, neither comparing to the next year.

In regards to Telia's fiber rollout, I cannot comment. I don't know what they have said about that. But in regards to us, of course, fiber is something we have been pulling gradually during the years based on the demand we see in the market. And for many areas, 5G -- 4G and 5G later on will be a solution. But of course, even for mobile network, we need to have fiber. So we are quite extensive fiber investor. In terms of how much we invest, we are not disclosing.

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Operator [43]

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

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Peter-Kurt Nielsen, ABG Sundal Collier Holding ASA, Research Division - Lead Analyst [44]

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I have two questions, please. Firstly, corporate market, last, last quarter, (inaudible) discussed a lot on the corporate market in Finland, which is clearly under severe pricing pressures. I was just wondering what you're seeing and how you feel you're fighting off the competition there. And I assume there has been no improvement. If I adjust for the Polystar acquisition, it looks for me that a couple of percent down on the corporate market, which perhaps a bit worse than in the previous quarter. Could you talk a bit about how things are looking at the corporate side of things now and how you view the outlook sort of potentially stabilization?

And just a short one on the Elisa Automate and the network operating management software you developed. Are you seeing sort of demand for this? I think you are highlighting that you have sold to one customer. And can I ask what type of customers of yours are buying Elisa Automate, please? Just out of interest.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [45]

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All right. Thank you, Peter-Kurt. In regards to the corporate market, the pricing environment there is pretty much unchanged, quite heavy competition in different segments of B2B market, large customers, SME and entrepreneurs. We have our competitive capabilities to compete in those markets with pricing but also with any other capabilities we have. So no change there for the pricing point of -- from the price competition point of view. But that's the environment we are ready to operate and we can have a competitive offering there.

In terms of Elisa Automate, yes, there's clear interest and demand. We have, as operators, quite long sales cycles to decide on this. But we have several prospects and in different stages. Which kind of customers are buying? They are basically -- we have kind of a small- and medium-sized operators to be very interested. But we have also some very big operators quite interested what we are doing because the fame of Elisa Automate has started to be spread around the world.

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Operator [46]

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Our next question comes from the line of Henrik Herbst of Crédit Suisse.

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Henrik Herbst, Crédit Suisse AG, Research Division - Research Analyst [47]

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Firstly, I had a question around your churn, Finnish mobile voice churn, which is up about 1% year-over-year, if you could maybe explain that trend. I think in the past, you've had a bit of a headwind from loss of B2B contract, and whether that's sort of the case this quarter as well. I think there's been -- tend to be pretty low ARPU subs.

The other thing is on competition both on fixed -- or sorry, on B2B and consumer. I think beginning with B2B, I think in the past, you've said there's been some concern Telia has been pushing a little bit harder and whether you've sort of seen that stabilize. Or competition, you're still a bit concerned about competition in B2B?

And then on consumer as well, I mean you're saying that competition is quite intense. At the same time, you've removed your 50 megabits smart home bundle. So maybe you still sell it below the line. But it does seem like it's something you would do only if you were pretty confident with your -- with a competitive situation. So your thoughts on that would be appreciated.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [48]

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Okay. Yes. Regarding the churn year-on-year comparison, big changes. Really what you mentioned yourself about the B2B, quite heavy competitive situation earlier this year and before, contributing to the numbers now during this year. And we see some increase in the churn due to that. Overall, in terms of the competition in consumer or B2B side, in general, I would say that there are not-so-big changes from Q2 to Q3. You can see that we can well execute with this market conditions and we are ready to even more competitive market situation if needed. We have many competitive capabilities to utilize. To kind of elaborate more on the competitive dynamics, there are quite a few details. So I leave it here because otherwise I may mislead to concentrate on something which is only a partial thing in the competitive landscape. But overall, no change since second quarter.

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Operator [49]

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Our next question comes from the line of Adam Fox-Rumley of HSBC.

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Adam M. Fox-Rumley, HSBC, Research Division - Analyst, Global Telecoms, Media and Technology Research [50]

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I think this might be a bit of a follow-up to the previous one. But I was wondering if you can talk about the ARPU uplift you're getting from the transition from the 4G services above 50 megabits per second. I guess given the competition levels in the market, would it be correct to assume with your retention off of those price premiums might be falling a little bit?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [51]

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All right. Like we have said that the ARPU uplift and the mobile service revenue growth mostly comes from us up-selling higher speeds and also from some product changes, price corrections. We have seen kind of the tension or pressure from price competition towards ARPU and MSR already quite some quarters. There are particularly no difference now. So the change already happened to this pressure earlier. So in terms of mobile service revenue growth, we are not giving any guidance on the number. But we can say that year-on-year, we will make positive development going forward.

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Adam M. Fox-Rumley, HSBC, Research Division - Analyst, Global Telecoms, Media and Technology Research [52]

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Okay. So the kind of rate of below-the-line price promotions is fairly unchanged at this point?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [53]

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Pretty much so.

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Operator [54]

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(Operator Instructions) And there are no further questions at this time. Please go ahead, speakers.

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Vesa Sahivirta, Elisa Oyj - Director of IR [55]

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Thank you very much to the conference call lines. Any further questions from audience? No, we don't have. So thank you for participating in this conference call and meeting. And we say goodbye.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President & Member of Executive Board [56]

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Thank you very much.