Elisa Oyj

OMXH:ELISA

Earnings Call Transcript 2021-Q3

[Vesa Sahivirta, Director of Investor Relations]

Good morning, everyone, and welcome to Elisa's Third Quarter 2021 Conference Call. I'm Vesa Sahivirta, Head of Investor Relations. And here together with me is a very familiar CEO, Veli-Matti Mattila; and CFO, Jari Kinnunen. We start this meeting with the presentation followed by Q&A. And we don't have, at the moment, audience here, so we go straight to the conference call lines. Veli-Matti Mattila will go through the main points of the interim report, and Jari will focus more on financials. Now we are ready to start. So I give word to Veli-Matti.

[Veli-Matti Johannes Mattila]

Thank you, Vesa, and welcome on my behalf as well. Third quarter was another good quarter for Elisa. Our strong development continued by revenue growing by 6%. Our EBITDA was up by 3% and our earnings per share was up by 9%. Mobile service revenue was also increasing by 5.5% year-on-year. And in Finland, postpaid churn decreased to 16.3%.Postpaid mobile subscription base increased by 53,700, of which machine-to-machine and IoT accounts for 38,600. So the IoT business is starting to get momentum. Fixed broadband subscription base was also increasing by 1,800. And overall, the good momentum for 5G continues. Network covers now over 60% of Finns. Elisa's network has the widest coverage incident, and we are in nearly 130,000 cities. We also upgraded our EBITDA guidance for 2021 to slightly higher.The revenue growth was coming partly from acquisitions and our content partnership from Nordic Entertainment Group. But of course, mobile services, domestic digital service businesses as well as equipment sales increased revenues. And of course, the revenue growth and also our productivity and efficiency improvements contributed to the EBITDA improvement. Mobile service revenue growth, of course, comes from 5G upselling, but also from upselling higher speeds in 4G. Of course, we also have made some product changes, including some price increases.And the competition remains keen both in consumer segment as well as in corporate segment. The lower churn, 16.3%, was coming mainly from B2B side since we have this one big public sector contract where the different cities have moved to another operator during the past couple of quarters. Now for the third quarter, we see clearly less movement and thus this decrease in the mobile churn really came from B2B side.And since we have had -- or we had some discussion in the second quarter conference call regarding to the operating leverage, I'd like to point out also a couple of things. In third quarter '21, our revenue includes low or 0 margin items that we did not have, for example, in third quarter '20.Those are the Viaplay revenue that we consolidate now and high equipment sales altogether, EUR 12 million. If we exclude those third quarter revenue growth was 3.6% and EBITDA 3.4%. So there is really no change in operating leverage compared to the third quarter '20.When we come to our segments, Consumer Customer segment was growing by 5%. Mobile sale revenue, entertainment business as well as equipment sales increasing the revenues. And the traditional fixed line services are in decline, as they have been for many years. EBITDA growth was 2%.In the corporate side, the revenue was growing 8%. camLine acquisition contributing to this, but also the domestic digital services, our IP business as well as mobile services and equipment sales contributing positively. And again, traditional fixed line businesses and other fixed services contributed negatively. EBITDA growth for Corporate Customer segment was 7%.We are building a sustainable future through digitalization at Elisa and that really gives inspiration for all Elisians in our daily work. And our strategy has really 3 focus areas where we increase mobile and fixed service revenues. We focus on growing digital service businesses also globally. And also, we focus clearly on quality and improving productivity and efficiency through the quality improvement. And in these all focus areas in our strategy, we see a clear potential for additional growth.Our upselling continues in mobile side now 5G-driven -- driving, of course, very much the smartphone penetration of a new kind of smartphone penetration that is 92%, and 14% of smartphones are now 5G devices in our base, 80% of the voice subscriptions are at 4G or 5G speeds.And as we see the lowest speed here in 4G is declining continuously, meaning that there is movement not only to 5G, but also to higher 4G speeds in our customer base. And also, the proportion of data bundles continues to grow. So the business model change that we have been doing over the years is continuing to all-you-can-eat bundles.Based on our Net Promoter Score, we can clearly see that our 5G customers are most satisfied in our Capital Markets Day. In March we gave some data. We do not continue to give the data every quarter, but we can say that the same development and the same kind of difference we see -- continue to see with 5G customers being more happy than the non-5G customers.That of course, means -- and 5G also continues to be the first choice for customers and those different -- two things mean that our new 5G customers are willing to pay more and the increased billing on average is more than EUR 3 per month per customer. 5G services, we have also launched for prepaid and the latest operator study shows that Elisa's 5G network has the widest coverage in Finland.In our digital service businesses, in entertainment, our video services business, our original series, Mister8, won the top price for the best series at this year's Cannes International Series Festival, really good evidence of the quality that we are producing with our original series. Also, we have season 2 of Elisa Viihde original series Nyrkki launched in September, with really positive reviews, also was among the most popular content during the launch period.These two examples are showing the strength that we have in our streaming services, Elisa Viihde Viaplay, when the market, of course, has many international competitors and the competition is, of course, high, but our strength is really in the unique set and widest set of Finnish content. In IP services, we have -- we see growing demand for identity management and speech recognition services that we do provide and also increased demand for workstations and support services that Elisa provides, we see increased demand.In the International digital services side, we launched a new brand for our industry software business, we call it now Elisa industry. And in the beginning of September, TenForce joined Elisa industry team and complements our offering with the EHSQ capabilities, for operational risk management capabilities and digitalization of those to our factory customers. CalcuQuote again broke the threshold of going above 200 customers in electronics manufacturing and is really making great growth in their product area.In Elisa Videra, we start to see organizations to return to the office and the hybrid working really starting. There are multiple global rollout agreements that we've done now with Microsoft Teams Rooms, and we are expecting 700-plus Microsoft Team Rooms to be delivered by the end of the year. And with Videra's capabilities really to deliver multi-device, multi-vendor solutions with high quality to customers seems to be a strong demand there. And also, together with Microsoft and Poly, we are actively facilitating companies adapting to the new hybrid working capabilities by combining the video capabilities at the office and at the home office.And then in regards to our outlook, the outlook for macroeconomic environment has improved in Finland to somewhat -- some sense competition in the Finnish telecommunications market remains keen. Revenue will be slightly higher than in 2020 and our comparable EBITDA will be slightly higher than in 2020. So this is the upgrade from our earlier same level or slightly higher EBITDA guidance. And our capital expenditures will be maximum 12% of revenue.And now I give the word to Jari, please.

[Jari Kinnunen, CFO & Member of Executive Board]

Thank you. Let's first go to profit and loss. Q3 continued good growth trend in revenues and earnings lines. Revenue growth 6.2% or EUR 29 million. If you take a look to -- or breakdown of the growth, interconnection and visitor roaming was negative EUR 1 million. Equipment sales in both segments was growing with EUR 7 million.Service revenues in Corporate Customers segment was growing EUR 11 million. And mobile service revenues, both domestic and international, digital service revenues contributed positively, negative impact from fixed services. Service revenues in Consumer Customer segments were growing EUR 13 million and mobile services as well as domestic digital service revenue contributing positively, negative impact from traditional fixed line voice services.And in terms of equipment sales and net cooperation revenues, which were altogether EUR 12 million. And as mentioned by Veli Mattila, low margin and low contributing to EBITDA, excluding that impact the 6.2% revenue change would have been 3.6%. And the EBITDA growing with EUR 6 million or 3.4% to EUR 186 million. EBIT growth was EUR 8.7 million or 7.8% to EUR 121 million. EPS growth 8.9% to EUR 0.6. All in all, best ever earnings in Q3.Then if we move to Estonia, with continued strong performance both revenue and EBITDA growing and revenue with 8.2% mobile and fixed services growing as well as equipment sales. EBITDA growth at 4.5%. In mobile services, growth driven by upselling to higher speeds. Also increase in subscription base contributed positively to mobile service revenues and postpaid base was growing 8,400 and prepaid base 2,300. Churn was slightly higher than in Q2, but still at a fairly low level, 8.9%.Then CapEx, which is in line with 12% from revenue guidance. Reported CapEx in Q3 EUR 64 million, excluding license leases and acquisitions, EUR 60 million. And cumulative year-to-date CapEx, excluding licenses, leases and acquisitions, EUR 173 million, which is 11.8% from revenues. Main CapEx areas, 5G network rollout and coverage increases and other network and IT investments.Then moving to cash flow -- Q3 cash flow. Reported cash flow was EUR 86 million. And comparable cash flow EUR 89 million. Last year, EUR 97 million. Positive impact to cash flow change from higher EBITDA. Negative impact coming from net working capital change driven by higher inventories and with somewhat higher in order to mitigate possible disruptions in supply chains.Higher taxes through -- higher paid tax advances and higher interest paid interest, which was due to change in timing of interest payments as a result of refinancing debt beginning of the year. Cumulative comparable cash flow 9 months, EUR 250 million. Last year, EUR 255 million. And cash conversion remains high operating cash flow conversion at 68%.Then to capital structure and returns also continuing in line with the targets, net debt to EBITDA 1.9x in Q2, slightly down from Q2, which was 2x. Equity ratio, 38.5% also in line with target. And return ratios continued at good level, driven by efficient capital structure and improving earnings. Return on equity at 29.9%. Return on investments, 16.9%.In financing, the renewal of committed revolving credit facility of EUR 130 million in Q3, new maturity 5 years plus option for additional 2 years. And we did also include sustainability target in the loan and sustainably grid for the pricing. Maturity -- debt maturity profile is well balanced and average interest expense below 1%.Now I will give word to Vesa, please.

[Vesa Sahivirta, Director of Investor Relations]

Thank you, Jari. And now we move on to Q&A, and we ask first question from conference call lines, please.

[Operator]

[Operator Instructions] Our first question comes from the line of Maurice Patrick from Barclays.

[Maurice Graham Patrick, Managing Director]

Just a question on the B2B side. At the 2Q results, you talked about how businesses are delaying decisions on purchasing, but you are confident that would come up, come back. It seems like it has this quarter. Can you talk a bit more about like the business environment generally for corporates? Are you seeing a change in behavior? Are they starting to spend again? Those dynamics would be very helpful.

[Veli-Matti Johannes Mattila]

Okay. Thanks for the question. We see somewhat kind of change in the momentum, not radical change, but there is a little bit of more demand and more activity by the Corporate Customers. What we've seen, especially in the area of video conferencing solutions for Videra, clearly, companies are coming back to the offices. They understand that there's a need for video conferencing solutions that also work in the rooms, what they have and different equipment they have at the offices, combined with the remote working employees.So we see somewhat demand into that. Of course, there is also a bit of a challenge or, let's say, risk for many companies that due to these supply chain challenges in the world that we have at the moment that not all the screens and other equipment are coming on time, but that's a bit separate topic of that. But yes, in that front, we see some more activity.But I would say that there's still also hesitancy for companies to kind of be active due to the kind of pressures that they experienced in the COVID and also uncertainties. They still see a bit in front of them. So we are not yet back in the new normal activity in the corporate sector, but there is some improved situation.

[Maurice Graham Patrick, Managing Director]

That's very helpful. At the second quarter, you also said that you didn't expect much increase in roaming in the second half, but your B2B contract ARPU seems to have improved about 5 percentage points sequentially. How much of that improvement was roaming? Was it quite material or quite small?

[Veli-Matti Johannes Mattila]

Roaming didn't have hardly any impact into that since -- still the traveling that we've seen a bit kind of restarting visitor traveling within Europe and the roaming revenues in the European travel are very, very small, if any. We will start to see traveling starting to Americas. That may -- in November or December that may give some help, but we are not expecting too much. Asia traveling seems to be very low.So the roaming revenues are still -- they are down. What has made the improvement in corporate ARPU is really that we have been kind of shifting really low ARPU customers to one of our competitors. And due to that, the average revenue per customer has increased. However, saying that, we have also been able to increase the mobile service revenue by selling faster speeds to our Corporate Customers, including also 5G to our customers.

[Operator]

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

[Peter Kurt Nielsen, Lead Analyst]

Just a question, very much related to your comments about 5G. You said that 5G is the first choice -- is customers' first choice now. What do you mean by that? I am interested in how you see that. And also, what is driving the uptake of 5G at this point given that we have no specifics on a new 5G application, isn't just the higher speeds as in 4G upselling. Any color on that would be much appreciated very much, given that you are one of the first operators obviously of mobile for 5G.And then just have you seen any demand for 5G solutions in the enterprise business, which we have spoken much about, but seeing a little of to date? And then just a third sort of small follow-up. You mentioned the supply side issues and the idea as well. Have you seen anything in Q3 or towards the latter end of the quarter perhaps or any indication of any [ seems ] here to come?

[Veli-Matti Johannes Mattila]

All right. Thank you, Peter Kurt. First choice means that, for example, the devices, customers really go for 5G more than for other devices at the moment. That also turns the capability for us to sell 5G more. So that's what we mean with the first choice. The uptake really is we can say that there has been, of course, customers who have been after the latest and greatest, i.e. 5G itself. Then we have, of course, many customers who understand that the higher speed is really something that helps them.But more and more, of course, the customers will experience better kind of mobile connectivity overall. Let's say the mass market doesn't care whether it's 5G or 3G or 4G or whatever G it is, as long as they see value by the improvement of the experience they have while utilizing various applications. And even if you have a decent quality and quite good quality with 4G.When customers are making the 5G, they will still have, on average, better experience. Everything works much better in all kinds of circumstances where they are when they are mobile. So that's kind of the driver from segment to segment, a bit different, but basically same source, higher speed and better service quality by that.B2B 5G is still very much about piloting and finding the real business cases and relevant applications where some companies are quite active on and kind of committed to explore and find and there are great applications already visible. And then some companies are still a bit less active.But it is mostly a piloting phase still than that it would have been materializing to a extra revenue really much to us yet. But I believe that over time, there will be trade applications which demand 5G and that is driving the 5G in private network solutions, but also otherwise in the B2B environment.And finally, about the satellite question, so far, we have not seen any major impact from the satellite challenges -- global satellite challenges. But of course, the uncertainty is there. We all know how the containers -- there's a lack of containers and many other things.So it may happen that there is some challenges in terms of the deliveries, maybe delayed delivery times or so. But we are, of course, trying to mitigate in different kind of actions beforehand, for example, having a bit higher inventories. But like I said, so far, we haven't experienced any major challenges.

[Operator]

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

[Terence Mun-Sion Tsui]

I just had a question around your expectations for churn for the rest of the year. Obviously, as Finland really emerges from lockdown restrictions and people get back to normal. Are you expecting like a particularly intense campaigning period for Q4 around Black Friday, Independence Day, Boxing Day sales, all of these special events. Do you think it's going to be more intensive in 2021 compared to previous years being affected by the pandemic?

[Veli-Matti Johannes Mattila]

All right. Thanks. I cannot give you really any quantitative expectation for churn. But like you said, the fourth quarter is full of active sales seasons or sales events, Black Friday, Singles Day, Independence Day of Finland, Christmas and so forth. So we are really expecting a really active intensive sales season. We are prepared for that.There will be, of course, promotions, and we are expecting our competitors to be maybe a bit even overactive. So it is highly likely that the sales cost for fourth quarter are going up. It will be an active season. Like I said earlier, we are not driving the unnecessary competition, but we are really prepared and expecting quite active season.

[Operator]

The next question comes from the line of Stefan Gauffin from DNB.

[Stefan Gauffin, Analyst]

A couple of questions. First of all, we have seen acceleration in machine-to-machine subscribers with 2 quarters at plus 30,000. And you mentioned last quarter that there are new devices and new services in the market. Should we expect machine-to-machine to continue to -- at this level? Or has there been some special items this quarter?And then on the mobile churn, if you exclude the loss of the large corporate subscriber is the churn level stable? And so has the market situation been fairly stable? And then on Estonia, I've seen that the subscriber development has picked up in 2021 compared to previous years. What is driving this change? It seems like you're doing better than your competitors in that market.

[Veli-Matti Johannes Mattila]

In regards to this machine-to-machine IoT subscriptions, of course, it is difficult to say how the kind of addition of new subscription and the growth will further develop. We are in quite early days of the, let's say, mass IoT market yet. So there will be probably a fluctuation in the demand.But we are positive that there will be more and more devices, more and more used cases, pets to be kind of found or identified and to be visible for the pet owners, for example, or different kind of cameras you want to have in different places. Many, many different kind of sensors and so forth. So there is clearly a drive for increased demand for IoT subscriptions, but how the growth exactly will play out is a bit still too early to be said more in details.In terms of the mobile churn, we could say that if the kind of decline in this one Corporate Customer -- Corporate Customer kind of -- the losses from the -- in one Corporate Customer segment or Corporate Customer contract -- frame contract, if that had been on the same pace as earlier quarters, the churn would have been pretty much on the same level as in Q2.So we had a deceleration of the losses for that same contract in Q3. Meaning that, to your question, yes, the competitive situation was pretty much overall on the same level in Q3, what it was in Q2.Estonia, it is such that our Estonian operation is really doing a good work, good development. Overall, there's no 1 silver bullet that would have made the growth to take place there, but there is high-quality services, innovative services. Also, we provide the full service from fixed to mobile and also good video content there, also content that has been awarded original content also in Estonia. So there's various great developments that the organization in Estonia has done, and that's then the result.

[Operator]

The next question comes from the line of Sami Sarkamies from Nordea Markets.

[Sami Sarkamies, Senior Analyst of TMT]

I have two questions. Firstly, going back to the sort of more limited operating leverage at the consumer segment. I think you, to some extent, addressed this in sort of the prepared remarks, but just wanted to understand, in Q2, we saw 4.5% EBITDA growth at Consumer. Now that's only 1.6%. So where did the change come from? Did you, for example, have some sort of high cost elements in the third quarter? And how do you see this development going forward?

[Veli-Matti Johannes Mattila]

Okay. I will take one by one. Overall -- first, the quarters are a bit different. So you shouldn't draw a conclusion based on two quarters. There need to be further quarters to see what the real trends are. But what I explained about the operating leverage overall that, of course, reflects to the consumer segment, especially knowing that there is a lot of device sales. And there's also this Viaplay cooperation. But Jari, maybe you can elaborate a bit, if you like?

[Jari Kinnunen, CFO & Member of Executive Board]

Yes. It did impact both of those net cooperation impacts as well as high device sales in corporate segment. Then it's really that quarters are different and we had some marketing -- sales and marketing related expenses, for example, this quarter that we're at higher level.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. That's [indiscernible] we have to go back to [ 2019 ] before seeing you having less than 2% EBITDA growth of consumer. Then secondly, I would continue on the churn topic, which was quite sort of good in the third quarter, again, down from Q2. I think you said that most of this was driven by the corporate segment. But how did the development look at the consumer segment? And how do you expect the churn rate to develop going forward?

[Veli-Matti Johannes Mattila]

Yes. The improvement in churn was driven by corporate segment. So it means that the churn in the consumer segment was pretty much the same level as it was earlier in the second quarter. And competitive situation is fierce, our competitors are really driving with a lot of promotions and campaigns.We are responding. We are not really giving up our customers based on price. So we are doing that. But there are things that say competition going on in the consumer segment. And we are prepared for. And we continuously improve our productivity to keep our EBITDA growing like it was growing EUR 6 million now year-on-year.

[Operator]

The next question comes from the line of Abhilash Mohapatra from Berenberg.

[Abhilash Mohapatra, Analyst]

I'm really sorry for coming back to this operating leverage point. I know you've already discussed this. Just to sort of follow up on the comment there about the higher marketing costs, could you maybe just give us a bit more color on how exactly that sort of flows through across, what is that money being spent on? And I guess, how do you sort of see that evolving that marketing and evolving over the next sort of few quarters?

[Veli-Matti Johannes Mattila]

Well, we -- of course, like I said, have intensive competition in -- both in Consumer and in corporate segment. And the -- it's also -- at the moment or, let's say, for a couple of quarters, we have seen quite heavy campaigning also utilizing gift cards of several kind of tens of euros by our competition.We do respond to those because that's something we've said that we are not willing to lose customers based on price. So we will kind of respond to that. There's no easy way to get customers from Elisa in that sense. How much and which kind of sales and marketing costs we are putting our money. Unfortunately, we are not disclosing in further detail.

[Abhilash Mohapatra, Analyst]

That's helpful. And do you also see that situation changing anytime soon or is it fair to expect that, that's sort of status-quo for now?

[Veli-Matti Johannes Mattila]

Well, as I said earlier to earlier question, we foresee that the fourth quarter is especially heavy with different kind of, let's say, sales events of Single Days and Black Fridays and so forth. So we expect the competition to utilize campaign, money and promotion money a lot. And we are prepared to kind of respond to that, i.e., for fourth quarter, especially now for the fourth quarter because it is a particular quarter of having so many different promotional events, we expect the sales cost to go up a bit.

[Operator]

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

[Roman Arbuzov, Analyst]

Sorry to elaborate on this operating leverage point, but I did want to return to it. Perhaps I will try and ask the question in a different way. If I look at mobile service revenue in absolute terms in 3Q '21, year-on-year you've had an increase of EUR 11 million. And if you remember a point that you used to make historically that incremental mobile service revenues come with a 95% incremental gross margin.So I guess the base case one should expect all of this EUR 11 million to fall down to EBITDA. And yes, when we look at EBITDA, there is only around the EUR 6 million increase once we factor in some of the M&A contribution to organic increase of EUR 6 million. So you lose about EUR 5 million.And the question is, as you said, things vary quarter-to-quarter. Some quarters you may incur more marketing expenses, for example. But generally, as a rule of thumb, do you think it's -- and given kind of today, your business models and your priority, does it make sense to expect EBITDA increase to roughly equal the growth in mobile service revenue, and I mean the absolute amounts in millions of euros as opposed to percentages? So that's the first question.And then the second question is just around the strong MSR growth momentum that we've seen this quarter. You perhaps -- you're highlighting the 5G has been one of the key drivers along with 4G and also some selective price increases. Is 5G now contributing the most of that growth, do you think? In terms of the prior quarter, you used to say that 5G is around 1 percentage point of growth contribution. Is it now the bulk of that 5.5%?

[Veli-Matti Johannes Mattila]

Okay. To your first question, I don't know where you got this 95% margin. If it's coming from -- has come from us then it's miscommunicated. Even if the MSR revenue is of high margin, it's a bit of an overestimation of this number. So this EUR 11 million is not turning all to EBITDA for the first.But of course, the MSR is generating good EBITDA and continues to provide good EBITDA. Quarters are a bit different, so the kind of total contribution is, of course, of our EBITDA growth, depending on also many other developments that we have in our different businesses.For the MSR and 5G contribution to MSR, like we said in the second quarter, approximately 2 percentage points we get help from the comparable that in the comparable quarter, we do not have roaming revenues like we do not have now. So it's easier by 2% and remaining 3.5% growth we can say that a bit more than 1 percentage point is coming from 5G.

[Operator]

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

[Panu Laitinmäki, Senior Analyst]

I have two questions. Firstly, can you comment on what is the penetration of the subscription number roughly currently? And then secondly, on the competition, do I kind of understand it correctly that it has intensified somewhat? And the question is basically that is there a difference between 4G and 5G?Because it seems to me that the kind of 4G pricing is -- we continue to see campaigns and they might be even more widely available than previous -- like previously, I had to go to the store, but now I can see it from operator websites by inputting my current phone number. But then do you see that 5G is still like less competed? Or do you see price rising there as well?

[Veli-Matti Johannes Mattila]

Okay. In regards to 5G penetration, unfortunately, we rather say that we are making more money with is. For example, we do state that it is more than EUR 3 for every customer we are gaining to 5G with higher Net Promoter Score, i.e., with higher customer attraction. Also, we reiterate that for the full year -- approximately 1 percentage point of the full year MSR will be -- or there will be approximately 1 percentage point positive contribution from 5G to MSR for the full year.So that's kind of the data we like to underline. And unfortunately, for the time being, we do not disclose the 5G subscriber numbers. There is a good growth. And like I said also that we do not try to get all the customers to 5G at once because we really want to have the customers to understand the value of -- additional value of 5G.And when they are step-by-step or segment and segment -- segment after segment the customers are getting the realization of the higher value of 5G. They also are willing to pay more. And that's important for us. But the pace how we are getting customers is satisfactory and basically a bit above our plans. But this is the kind of disclosure of the number of customers, unfortunately, at the moment.In regards to the competition, we can say that the kind of straightforward gift card and promotion competition might have increased during the year, not necessarily third -- during third quarter, but it has been maybe a bit higher level in the whole year. Now like I said earlier, we expect that there might be some increase in fourth quarter because of this different campaign events, and that's why we assume that we might have somewhat higher sales cost in the fourth quarter.

[Panu Laitinmäki, Senior Analyst]

Okay. Can I still have one follow-up related to the MSR discussion earlier? You said that out of the like 3.5% growth, about 1 percentage point came from 5G, but what about the rest of the 2.5 percentage points? Is this like the price changes or just the 4G upselling to higher speeds that's driving that?

[Veli-Matti Johannes Mattila]

Yes, yes. Almost more than 1 percentage point came from 5G. And like you said, for the -- some of the price increases, but also the 4G upselling contributes to the rest.

[Operator]

The next question comes from the line of Artem Beletski from SEB.

[Artem Beletski, Analyst]

I actually have three to be asked. So first of all, continuing with MSR discussion, and this impressive 5.5% growth in Q3. Could you provide some color on, so say, outlook for upcoming quarters? Is it fair to assume that comparisons are still fairly undemanding when it comes to also, say, roaming impacts and the 5G trends are there and to continue?Then the second question is relating to your corporate business and indeed, the earnings momentum clearly improved in Q3 compared to last year. And also looking at ARPU trends, so it has been better compared to what we have seen previously.Is it basically the type of reopening effect as it is now becoming more visible there, so people coming back to work and basically consuming more data. And the last one is really to Jari, just on net related impact, maybe you mentioned in the call about that. Could you maybe quantify what was the amount in Q3 in terms of euros?

[Veli-Matti Johannes Mattila]

All right. Thank you, Artem. In regards to the MSR and the outlook, we said the only outlook we really give is that we have a positive number in the growth. But what we could say that for the following quarter, it will be somewhere like we have had in the second and third quarter.Then the corporate segment improvement. I would not say that it is about reopening yet. The momentum is not that strong. We discussed earlier with 1 question about that. There is some kind of momentum for reopening, but it is more about our good development in mobile side in our IT business in Finland, of course, camLine also contributing -- camLine acquisition to the improvement. And then Jari, please?

[Jari Kinnunen, CFO & Member of Executive Board]

Regarding net contribution, it was approximately EUR 5 million in revenue. And I said earlier, EBITDA zero.

[Artem Beletski, Analyst]

Okay. Great. And maybe just, Jari, the follow-up relating to NENT, so it has been consistently EUR 5 million a quarter during this year, it's basically the fourth quarter, the last one, then we should basically modeling similar impact?

[Jari Kinnunen, CFO & Member of Executive Board]

Approximately. So other than that we had 1 month in Q4 last year sort of consolidation. So 2 months, not consolidated, but otherwise, yes.

[Operator]

The next question comes from the line of Ondrej Cabejšek from UBS.

[Ondrej Cabejšek]

I have a couple of follow-ups on the MSR trends, please. So you mentioned that 5G is the first choice for consumers today. Is there a number that you can put in terms of how -- what percentage of gross adds are coming in on 5G? I know you said you wouldn't talk about the total breakdown, but at least in terms of the gross out, that would be helpful. Could you also break down the contribution in terms of service revenue in mobile from consumer and corporate because you've done that for 4G and 5G?And then maybe a third question, I hope this is it silly, but you said in terms of roaming, that basically, there has been -- at the beginning of the call, you said there was no impact year-over-year from roaming. So no kind of recouping of the EUR 4 million per quarter that you said is lost. But then when you broke down the 5.5%, you said 2 of that is roaming. So how do those two kind of piece of information reconcile, please, I don't understand that part, if you could clarify.

[Veli-Matti Johannes Mattila]

Okay. In regards to the MSR and the 5G growth, unfortunately, we are not disclosing the gross adds neither. We focus on that we will -- we are making more money with 5G. That's what we are disclosing. EUR 3 plus more per user and MSR contribution now a bit more than 1 percentage point for this quarter. The service revenue between Consumer and Corporate Customers, that division, we are not disclosing either, unfortunately. And then I give the -- Jari to respond to your third question about roaming.

[Jari Kinnunen, CFO & Member of Executive Board]

Yes, in that 5.5% growth, roaming was -- and there was also -- there was no roaming growth in Q3. The 5.5% coming from, as I said, 5G, 4G upgrades, price increases also what we've been doing earlier.

[Ondrej Cabejšek]

So can I just clarify then because I think previously it was implied that out of the 5%, the breakdown was kind of two roaming, 2-ish 4G and 1.5 5G. So can you just -- without the 2 percentage points, can you maybe clarify that the breakdown would be roughly equal the equivalent on 5.5% versus 3.5% somehow? Or just to get that correct, please.

[Veli-Matti Johannes Mattila]

Can you repeat your question? What are you comparing, sorry.

[Ondrej Cabejšek]

Because -- and apologies if this is completely wrong, but I believe previously, you mentioned roaming was 2% of the 5.5%, but now you're saying there is no roaming in that 5.5%. So if you're saying slightly more than a percentage point coming from 5G, then is the rest, which would be up to 4 percentage points attributable to 4G then without the roaming impact. I think I'm confused with previous and the current comments on roaming contribution.

[Jari Kinnunen, CFO & Member of Executive Board]

Yes. If you are comparing Q3 to last year, service revenue growth, 5.5%. So it's -- in terms of roaming, there is no growth in roaming. So it's not impacting the growth. But it's coming from 5G, 4G upgrades and price increases.

[Operator]

The next question comes from the line of Andrew Lee from Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

Just another question on the margin trends. Can you just give us an idea on whether the revenue mix with organic growth going forward, is it deteriorating impact or sort of support the impact to your margin going forward?

[Veli-Matti Johannes Mattila]

We have not basically given a margin as our financial target, as we change, as you remember, certainly in our Capital Markets Day. We are going after 3% EBITDA growth, absolute terms. And our target is to have 2% -- at least 2% revenue growth. In terms of the margin, it is, of course, important for us to drive margin as an internal parameter and to make sure that we are improving the efficiency.But our business portfolio is evolving so that we have, let's say, where the EBITDA contribution is percentually -- EBITDA contribution percentually is lower than in the telecom services. And this kind of phenomenon has taken place already some time. But it also -- but it doesn't mean that we wouldn't be very fierce driving our margin -- EBITDA margin.But on the other hand, end of the day, what we are driving, we are driving the cash flow and EPS growth, where you -- and how you see that the 6% revenue growth is turning to 9% EPS growth. So -- but the focus is not only in cash flow and EPS, it's of course also on the EBITDA margin. But for our kind of financial communication, we go for the EBITDA growth target which we now surpassed, for example, for this quarter being 6 point -- 3.6.

[Operator]

And we have one final question from the line of Adam Fox-Rumley from HSBC.

[Adam M. Fox-Rumley]

I apologize if this has already been answered, joined a bit late. But you mentioned earlier, rising competition in the mobile market through the course of the year. But I thought postpaid churn was actually particularly strong given the quarter at levels that we haven't really seen for quite some time.So notwithstanding the fact that you think competition could rise a bit in the fourth quarter. Are you optimistic that perhaps churn levels are on a downward trend or I remember levels that were much lower than this several years ago. Do you think that's the way we're going?

[Veli-Matti Johannes Mattila]

Well, the churn is, of course, the lower churn now in the third quarter, like I said earlier, the impact came from the corporate side. So the consumer side churn was pretty much stable. We are not giving outlook for the churn. It's not the first parameter we are optimizing when we are running our business. Of course, we are trying to have it as low as possible. But it is -- I would say that the churn levels probably will not change that much going forward.But what I said earlier about the fourth quarter a bit -- somewhat more intensive competition related to these campaign days that we see all seasons that we see in the fourth quarter, especially, and that's what we are anticipating to be quite active and we are prepared. What happens to the churn in those events? I don't think -- nothing special. But like I said earlier, for the sales cost it's maybe a bit of a hiccup.

[Adam M. Fox-Rumley]

If I could just follow up. Is there any reason to think that the fourth quarter activity levels should be higher than they are because holidays come around each year. Is the launch of a new iPhone this time more of a catalyst than it was last time to trigger behaviors?

[Veli-Matti Johannes Mattila]

In the fourth quarter, we have the Black Friday, we have the Singles Day, we have the Finnish Independence Day, we have the Christmas, we have also Finnish taxpayers are getting back their kind of if they overpay to the tax, they have money. That's -- there are quite a few kind of commercial events in the fourth quarter, particularly many. And we are used to have our competitors to try to be very active on those days, particularly in the fourth quarter. That's what we see. And we are prepared for and we highlight it now.

[Operator]

We just have another question from the line of Siyi He from Citigroup.

[Siyi He, Research Analyst]

I just have two, please. And the first question [indiscernible], if you can help us to think about the EBITDA contribution from the newly added services like from camLine and the NENT. I think you mentioned in Q2 that the cost cycle has been quite different from camLine and NENT. So I wonder if you can talk about the EBITDA that you generated over the last 3 quarters compared to the expected full year number. So do you think that there will be a much higher EBITDA contribution from those two services in Q4 compared to the first 9 months?And the second question, sorry, if I can go back to the operational leverage. I want to ask, when you look at consumers, do you see there is a higher equipment subsidy that -- on that equipment in order to promote 5G and 4G. And also, I think you mentioned that sales cost is going to go up in Q4, given that traditionally it's highly competitive market season.But from a year-on-year basis, should I think that the sales cost will go up in Q4 compared to Q4 '20? Because the higher competition you mentioned during the call, and maybe there could be some hard comps versus last year because it was affected by the lockdown.

[Veli-Matti Johannes Mattila]

If I start from your second question. For the first, we hardly have any subsidies in the devices. So we don't have that in Finland really. In regards to the sales cost, we believe that the sales cost may go up year-on-year somewhat comparing to the fourth quarter '20. To your first question, I didn't quite hear you were referring to two services and EBITDA contribution of those. So could you repeat which two services and what part of your question...

[Siyi He, Research Analyst]

It's camLine and also the NENT contracts. I think you mentioned before, there will be some contracts, but then the cost EBITDA contribution could vary across different quarters. So I'm just wondering for Q4, maybe we should think about higher contribution from those services compared to previous quarter, just simply because of the spread of the EBITDA cycle?

[Veli-Matti Johannes Mattila]

Yes. Okay. camLine and then the Nordic Entertainment Group contribution. Jari, you maybe can give elaboration on that.

[Jari Kinnunen, CFO & Member of Executive Board]

As already referred to earlier, the NENT cooperation contribution to EBITDA is 0 and also in Q4. And camLine, when we acquired the company, we said approximately EUR 20 million revenue and EUR 5 million EBITDA annually. So it is a minor contribution in Q4.

[Siyi He, Research Analyst]

So should I assume that the EBITDA contribution is more of evenly spread out through the 4 quarters?

[Jari Kinnunen, CFO & Member of Executive Board]

It's slightly back-end loaded. So second half is slightly better, but it's not a big difference. So it's between EUR 1 million and EUR 2 million.

[Operator]

And we have just a follow-up question from Ondrej Cabejšek from UBS.

[Ondrej Cabejšek]

One short follow-up, please, if I may, on the corporate segment. So you mentioned a couple of potentially kind of special effects as consumption was delayed over the past year, 1.5 years and coming back strongly now you also mentioned in your guidance that the macroeconomic environment is much more constructive in Finland.And I guess, at the same time, you mentioned potential supply issues, which could have a kind of, I guess, impact of corporate prepurchasing or preinstalling some solutions. So if we kind of strip out these 2 potential impacts that potentially came together in this quarter, first of all, do you see that? And if so, what's kind of the run rate without that in the normalized run rate going forward over the next year or so in the corporate segment?

[Veli-Matti Johannes Mattila]

I'm sorry, I didn't quite see that -- excluding what you would like to hear the run rate of corporate segment?

[Ondrej Cabejšek]

So you mentioned there are some delayed consumption from the past year, 1.5 years that is coming back now in the third quarter. And then you also mentioned some potential supply chain issues, which you said, I guess, customers are kind of implementing solutions potentially ahead of usual schedule. So if you could maybe elaborate on the impact that led to the very good numbers in terms of corporate performance this quarter. And then implicitly, what the kind of base run rate without those two impacts would have been?

[Veli-Matti Johannes Mattila]

I'm sorry, but in that detailed level, it's a bit speculative to give any numbers, and we are not going into that disclosure level. I'm sorry.

[Operator]

And there are no further audio questions. I will hand it back to the speakers.

[Vesa Sahivirta, Director of Investor Relations]

All right. Thank you for your questions. We hope you all very productive reporting seasons. Have a nice day, and goodbye now. Thank you.