Elisa Oyj
OMXH:ELISA
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
40.4
48.94
|
| Price Target |
|
We'll email you a reminder when the closing price reaches EUR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Elisa Oyj
You don't have any saved screeners yet
Good morning, everyone, and welcome to Elisa's Third Quarter 2022 Analyst Meeting and Conference Call. My name is Vesa Sahivirta, I'm Head of Investor Relations. And here together with me is again a very familiar team, CEO, Veli-Matti Mattila; and CFO, Jari Kinnunen. And we have also some audience here and a couple of my colleagues.
We start this meeting with a presentation followed by Q&A. And in Q&A, we take first questions from the audience and then from the conference call lines.
And now I think we are ready to start. So I give word to Veli-Matti, please.
Thank you, Vesa, and welcome to the Elisa Interim Report Q3 2022 on my behalf as well. Let's get started from the highlights from the quarter. Our revenue was growing by 7.6% while EBITDA was growing 4.2%. Mobile service revenue was growing 6.9%. And in Finland, we saw some increase in postpaid churn. As we know, during the summer, all operators, we had some strikes which was decreasing activities a little bit, but now it was back again, the intensive competition with -- in all channels and with all force. So we saw some increase in churn. Elisa's competitiveness pays off, however, very well in this more intensive quarters as well.
Postpaid subscriptions grew by 35,400. And actually, it is very much about machine-to-machine and IoT subscription based growth, and those were growing 37,200. In the fixed broadband base, we saw some decline, 1,700. The fixed line broadband business is quite stable. There is some reduction, especially due to the fact that we are disconnecting the copper-based ADSL subscriptions and some of those are substituted by mobile subscriptions.
5G continues very well. Momentum is good. Our network now covers 83% of the population in over 300 towns and cities. Elisa runs business for the long term. And our systematic long-term way of operating is also paying off during the times when we will have -- we may have dynamics like the energy price increases we have seen. So for us, the energy price decreases have not been such a big problem. We have mitigated early on those kind of potential risks. And that's why the situation in the energy sector hasn't disturbed and inflation overall too much of our progress.
Revenue increase came very much from the mobile and fixed services side, but also from the digital services, which were growing around 12%. Equipment sales was also very strong, not only due to iPhone release, but also in B2B side, there was equipment purchases increasing.
Mobile service revenue growth continues with our upselling of higher speeds, including also 5G. We also have made some product changes, including price increases contributing to the growth. And EBITDA, of course, the growth is coming from the revenue growth but also our continuous improvement in productivity.
We saw 5% revenue growth in the Consumer segment and EBITDA was also growing by 5%. Mobile, digital equipment sales, mobile services, digital services, equipment sales was growing for the segment. We had some interconnection price decreasing the interconnection revenues and also traditional fixed line services continued their slight decline that we have seen over the many, many, many years.
In Corporate side, the revenue was growing by 12%, EBITDA by 3%. And we saw mobile and fixed services growing in the corporate side. And of course, also digital services where especially the international digital services had higher growth rates. Also, equipment sales was growing. And the same things where basically creating negative impact to the revenues in the corporate side that we saw in the consumer side.
We continue to execute our familiar 3 focus area strategy. We have made some results on executing the strategy, but we saw very good potential in each of the 3 focus areas for our business, and we continue very determinedly. In the mobile development side, we see that the transformation to the data bundles from the usage-based subscriptions is almost done now, but our speed grade -- speed upgrade business model continues to work very well. 93% of customers have today a smartphone and 33% of smartphones are 5G devices.
In 5G, like I said, coverage is expanding. We have the widest network coverage in 5G in Finland, and we reached over 200 locations and over 84% of the population. Average billing increase is more than EUR 3 for 5G upgrades and the increase of customers continues really, really well. We will be phasing out our 3G network by the end of 2023 as earlier indicated and the preparatory measures have taken place already a couple of years. There is, for example, many things that needs to be done on the customer device side, for example, 900 and 2,100 megahertz frequencies will be freed up for other services. And of course, we will have a better customer experience and service quality with 5G and 4G to the customers.
Also, this change and transformation improves our energy efficiency and saves electricity. We have auction in Estonia for the 3G -- for the 3.5 gigahertz spectrum that was ended in May 2022. And now 700 megahertz spectrum auction is scheduled to be beginning 8 of November.
In the digital service businesses, on the domestic side, our entertaining video business continued strongly. The environment is very competitive with a lot of streaming services, especially. Our original series are having a good success. Our original series All the Sins have been sold to more than 60 countries, making it currently the best-selling Elisa series internationally and also our new original series Next of Kin has been sold to Hulu in the U.S. and making it available to over 40 million subscribers. This is underlining the differentiation of our entertaining video services in Finland and Estonia.
IT Services continues also momentum, the current uncertainties in the geopolitics have increased demand for cyber services, especially in the end user-focused attacks. And we have got new customers for digital workplace and hybrid cloud services in finance, energy and manufacturing sectors.
In the international domain, Elisa IndustrIQ, has made 1 major deals sedApta, TenForce and CalcuQuote in steel production and electrics manufacturing sizable deals. And camLine also had a camLine Forum, which showcased Elisa's international digital services in Dresden. We had over 40 international companies from various industries in 17 countries participating in this event where we introduced the whole portfolio of Elisa IndustrIQ services to customers.
Elisa Polystar continues the cardinality integration and business is proceeding really well. We have a very strong order backlog for Elisa Polystar as well. And Elisa Videra continues also to support the enterprises, organizations to move to hybrid working, which means reinvesting in spaces and related video meeting rooms in Q3. Elisa Videra was delivering over 100 solutions to 27 countries across Europe, Africa, Asia and North America.
Our mission, a sustainable future through digitalization is something that is really creating purpose for Elisians and it makes excitement to our daily work. As you know, in the 4 areas of sustainable future, digital, social, economic and environmental, we have set ourselves targets that we report on a quarterly basis and for mobile network energy efficiency in Finland, where the change in energy consumption is minus 4.7%, the population coverage for more than 100 megabit per second connections in Finland is 84.2 and proportion of female supervisors, including the diversity from that aspect also continues to be improved at 29.7.
Our patent portfolio development continues as well. The size of active patent portfolio is now EUR 321, a number of first applications in the third quarter was 8. We, of course, continue in many ways for creating a sustainable future. We make choices and activities. For example, waste heat from Elisa data center is used for district heating in Helsinki area in the cooperation with the energy company, Helen, which is in -- mostly in Helsinki, the Elisa efficiency, energy efficiency in our data center will improve and become environmentally positive.
That means that the data center will actually reduce global emissions. Elisa participates in energy saving measures in many ways in Finland, Estonia, for example, optimizing our mobile network. And Elisa was recognized as 1 of the top-performing digital companies in the greening digital companies: Monitoring emissions and climate commitments report.
And we have upgraded our outlook and guidance for 2022. We see that the growth in Finnish economy is expected to slow down to some extent, increasing levels of uncertainty relating to Russia's war, Ukraine such as inflation, energy prices and global supply chains will continue and competition remains keen. Our upgraded outlook is that the revenue will be slightly higher this year than in 2021. Comparable EBITDA will be slightly higher than 2021 and CapEx will be maximum 12% of revenue.
And then I guess Yari will continue.
Thank you. Let's start with profit and loss. Q3 continued with strong good trends, growth in revenue and earnings. Revenue growth EUR 38 million or 7.6%. And behind this EUR 38 million, EUR 1 million negative change coming from interconnection and visitor roaming, equipment sales was growing EUR 7 million.
Service revenues in Corporate segment increasing EUR 20 million, driven by digital services, mobile and fixed services and negative impact from fixed voice. So these revenues in Consumer segment increased EUR 12 million, mobile and digital services growing a negative impact from fixed voice.
In terms of OpEx developments, Materials & Services increased EUR 20 million -- approximately 75% of that relates to higher equipment sales besides mobile and fixed equipments, there are increases in corporate network, local area network equipments, IT equipments and with a conferencing equipments.
Employee expenses increased EUR 8.6 million relating to increased number of employees also including acquisitions impact. Other impacts from salary increases and higher accruals relating to long-term incentive plans. Other operating expenses pretty much at the same level as last year.
EBITDA growth was above 3% midterm financial targets, growth rate at 4.2%. And increase was around EUR 8 million. Depreciations fairly at same level as last year, and EBIT growth was 6.1%. Net profit and EPS growth, 4.4%. And there was a change in financial expenses, minus EUR 1 million almost completely coming from temporary foreign exchange change, unrealized temporary foreign exchange, which will be at least partly gained back later on.
Taxes change was EUR 2.2 million. Half of that relates to higher profit before taxes and the other half relates to losses in some subsidiaries and we will be booking tax receivables relating to those later on. So this will eliminate the impact going forward.
We have past weeks and past months received questions regarding energy and electricity prices and inflation impacts. And it is so that we have a systematic way to operate and focus on earnings development and also here, regarding electricity, we have many years hedging policy, what we followed. And for this year, we have almost completely hedged owned electricity purchases. And for the next year, more than 60% of the owned purchases are hedged.
Additionally, in the spring, in Q2, a new wind power agreement starts, it's a 10-year agreement at fixed price, and this will further increase the net rate for next year, and of course, impacts for coming 10 years. The price level was agreed and set in 2021.
Additionally, we have already long time improved our network energy efficiency and utilizing and using our own Elisa Polystar software and new technologies developments. And of course, we'll continue that work going forward.
Regarding inflation, the latest estimates, consensus estimates for Finland for this year, around 7% and Estonia, much higher, 17% very much driven by energy prices and wage inflation is a lower level, we agreed in the summer collective labor agreement that was done at 2% average salary increase.
New negotiations regarding collective labor agreements will take place early next year.
Regarding customer behavior changes in this environment, we haven't seen until now any material change in both segments in customer behavior. However, of course, we are not fully immune to this changes inflation and energy price changes, but we have with cost efficiency measures and also with price changes and price increases mitigated pretty much the negative impacts. And of course, going forward, we continue with those measures.
Then moving to Estonia business, good trends, continued revenue growing almost 9% driven by equipment sales, mobile and fixed services. EBITDA growth was 3%. Mobile postpaid subscription base was almost flat. Prepaid was increasing 4,200 and churn continued at a fairly low level 9.5%.
Then CapEx, reported CapEx in Q3 was EUR 67 million and guided CapEx, excluding licenses, lease agreements and acquisitions was EUR 63 million last year, EUR 60 million. Consumer segment, EUR 45 million and corporate segment EUR 22 million. And main investment relates to -- many investments relates to 5G network rollout and other network and IT investments.
And full year guidance, 12% CapEx to sales remains intact.
Then cash flow. Q3 reported cash flow was EUR 79 million comparable cash flow, EUR 87 million last year, EUR 89 million. There was positive impact coming from higher EBITDA negative impact through higher paid taxes and net working capital change or more negative net working capital change compared to last year. And this relates to lower payables and higher inventories and in order to mitigate the possible supply chain challenges, inventories are somewhat higher.
Operating cash flow was growing from EUR 126 million to EUR 131 million, and EBITDA cash conversion remains high at 68%. Then capital structure, which is in line with the midterm targets, net debt to EBITDA decreased slightly to 1.9x, equity ratio 38.6% and average interest expense to interest-bearing debt is approximately 1%. And return ratios remained at good level, return on equity, 31.1% and return on investments, 17.8%.
And now I will give to Vesa, please.
Thank you, Yari and now we move on to Q&A part, and we start first question from the audience.
It's Kimmo Stenvall from OP Markets. A couple of questions. First on the service revenues. It's growing quite nicely. How much of the growth was organic at the -- in Q3?
You mean the total revenue at Elisa?
Yes.
Yes. Well, the -- Yari can fulfill more details, but the acquisitions we've done didn't bring that much of a revenue increase. But of course, the equipment sales was also quite strong.
Yes. Acquisitions impact was EUR 2 million.
Okay. Then on Q4 and for the next quarters, how do you see that the mobile service revenue and all the other -- this kind of service revenue parts are growing. Is there any kind of hint that you can give on that side?
Well, we expect the mobile service revenue continue good growth maybe slightly below the level of 3, what we saw. But we expect a good momentum to continue there in the mobile side. Overall, we do not disclose the kind of expectations for quarterly revenue development. But we would expect a relatively good development also in the other side.
Okay. Then on the cost side, I think everybody is kind of speculating what kind of OpEx development, we will see in the next quarters or next winter that -- so what are your main concerns? Is it the energy prices or the personnel cost? Or what are the -- what are the main cost items that keeps you awake at night?
Well, if we think about Elisa, as Yari explained, we have been hedging pretty well the energy cost. Of course, we have other overall inflation that is for every -- any business, it's always a big concern. But we believe that we can mitigate with productivity improvements and our even strengthened focus for cost efficiency quite well.
Then indirectly, of course, the inflation is something that we watch very carefully because that, of course, is impacting to our customers, not only in the domestic market but internationally. And even if we haven't seen that much of any negative reactions by customers or impact so far, of course, there is a lot of uncertainty. And certainly, we are looking at that development also very carefully.
Thank you, Kimmo. Any other questions from the audience at the moment? No, there are no at the moment. So we ask first question from the conference call lines, please.
[Operator Instructions]
Okay. If this is my line, it's Andrew Lee from Goldman Sachs here. The question from us, the main question was on your working capital outflow, which you highlighted clearly Yari is accentuated versus previous third quarters. You mentioned why that is. But I wondered if you could just talk about the rebalancing whether you should see an inflow in Q4 to wash out that accentuated working capital outflow in Q3. That's question number one.
Second question is just on some comments that -- we really appreciate your detail on your cost inflation headwinds. You mentioned that you think your price efforts and cost efficiencies can offset those cost inflation headwinds or mitigate them, as you said, could you just give us an insight into what time line you mean for that? So do you mean that the price rises you put through so far this year? And I know the kind of the 4G price rises you put through last week, do you think all of those price rises are enough to mitigate along with the hedging and wind power you've signed up for? Is that all enough to mitigate the cost headwinds you're seeing right now from inflation in 2023 specifically?
All right. Thank you, Andrew. I'll let Yari to respond to the working capital question. In regards to the cost efficiency and the development, first, just reiterate that we are looking at very much overall the business kind of steering based on our financial targets where we have EBITDA growth target, more than 3%, which we have been executing and implementing and achieving. And that's the target we have.
On the other hand, we have a target for improving our competitiveness, but also improving our capabilities in the new businesses. And those also need certain investments in terms of cost that we will do and continue to do also with a good balance, taking into account the targets that we have for EBITDA development.
But when we talk about the potential additional cost increases due to inflation, of course there, we have many activities by which we believe we can also have a very strong impact to mitigate. Like Yari explained, we have made hedging for the energy then there are many kind of ways to improve productivity as we do with our long-term development of productivity improvement automating our processes, also discontinuing new -- some of the old technologies, taking new technologies increasing, for example, energy saving solutions, and also having even more focus on general cost efficiency in the company.
But basically, we have a culture and way of working practices for continuous improvement. And of course, that's the main driver for us to be able to provide good results over the long term as well. So Yari, if you go for the working capital?
Sure. Yes, typically, Q4 is somewhat better. So there is certain seasonality relating to last quarter of the year. As I mentioned, inventories are now somewhat higher and sort of preparing for possible challenges in supply chain and as we go for busy season towards year-end. So we expect that to be -- I mean, we expect the inventories to be some slightly going to be lower than what the very end of Q3.
Okay. So kind of normalized across the whole year, even though you hadn't accentuated outflow in Q3?
Yes. I was comparing Q4 to Q3, I believe that was the question, no?
Yes.
We will now take our next question. Please state your name and company before posing your question.
It's Luis [ Legado ] from Credit Suisse. I have 2 questions, please. The first 1 is on CapEx. You are running year-to-date on CapEx, excluding spectrum at slightly below 11% versus your guidance of 12%. Can we get a little bit more of color on how should we be thinking about Q4 CapEx? And if you could give us some color into 2023 dynamics considering that you are already at 83% population coverage in terms of 5G. Any color on the dynamics when the 5G rollout will phase out will be helpful.
And the second 1 is on competitive dynamics in mobile in Finland, you were flagging that you saw an increase in competition after the summer, but as we are already 1 month into Q4, could you give us some color on how competitive dynamics in mobile are evolving and specifically considering that 1 of your competitors was flagging over the past 2 quarters that they were willing to shift to a more value approach rather than volume?
All right. Thank you for the questions. In terms of the CapEx, I believe that the total year of 2022 is going pretty much towards 12% -- max 12% CapEx. So it might mean that if the run rate so far year-to-date is below, we will probably have then pretty good investments in the fourth quarter so that the -- but however, so that the max 12% will be held.
The 5G rollout in '23 will continue and other investments, but as you may know, we are balancing the investment based on demands quite dynamically. However, the 12% -- max 12% CapEx is valid for next year as well.
In terms of the competitive dynamics during the fourth quarter, we see quite intensive competition and campaigning with gift cards and quite low pricings in the market. We have made some price increases ourselves in the 4G domain. We haven't seen too much of a follow-up of that or reactions in the marketplace from the competitors. We see that there is value that we provide for the customers enough that we could have some price increases also in the 4G domain. But of course, we will -- we will behave so that we don't lose any market share either. So we are not compromising our markets with our kind of pricing things. But in terms of competitors to follow, we haven't seen too much of that at least for the time being.
We will take our next question. Please go ahead, your line is open.
Hello, it's Maurice Patrick.
We cannot hear anything.
Hello Patrick are you able to hear us? Your line is open, please go ahead.
Maurice from and Barclays. Sorry about that. Telephone issues on my end. So, a couple of questions from my side, please. The first one, I don't know if you said it earlier in the call, I was a bit late dialing in. But can you talk a bit about the roaming, returning our roaming traffic and revenues in the quarter and the extent to which that was a headwind or tailwind, apologies if you mentioned earlier. And then just a bigger picture question. You talked about the savings from 3G switch-off. I'm just curious as to how much of a saving that will be from an energy and pace perspective when you finally get around to turning off the 3G network?
Okay. In terms of the roaming, we have seen, of course, improvement from the worst situation of COVID but we could say that we have slightly more than 50% return or the level of roaming is slightly more than 50% compared to the pre-COVID situation. We still have China very much closed and partly also other parts in Asia, where the traveling is not yet returned.
So we expect that once COVID is solved in China and some parts of -- other parts of Asia, we will see a bit more roaming return. In terms of savings in 3G switch off, we are not really detailing how much we are kind of saving there. But of course, it is significant and enough to kind of do those kind of transformations.
And the 3G side?
Sorry, I didn't hear, what you say?
Yes, sorry, on the savings from the 3G switch-off?
3G switch-off. Like I said, we are not detailing how much we are saving on particular projects, but it is significant enough this kind of transformation from 3G out that -- where we perform such transformations.
Thank you. We will now take our next question.
It's Terence from Morgan Stanley. Can you hear me okay?
Yes.
I just wanted to go back on the net working capital again. I'm sorry if I missed some of your answers, but I just wondered if you can just explain to us in a bit more detail why it was so negative and why you're running so much more negative in 2022 versus 2021, I think in the 9 months, the change in net working capital is down like minus EUR 55 million, which is offsetting all the improvement that you're seeing in EBITDA. So maybe you could give us an indication of when you see this net working capital unwinding. Is it going to be similarly quite volatile and you see quite a rapid recovery? Or do you think it will be more of a gradual recovery on that front?
And then secondly, just on the staff costs, again, you mentioned that you've got an agreement of 2% salary increases for 2022, but with inflation forecast to be 7% in Finland, and 17% in Estonia. Are we thinking more likely that mid-single digits or high single digits wage salary increases will be necessary in next year?
All right. If I start from the salary side and then Yari continues of the working capital question. In the salary increase side, we haven't yet started the negotiations for the next collective agreement. So I wouldn't say anything for that. There are, of course, pressures from the employee side for higher salary increases. But on the other hand, there are very disturbing factors also in the economy overall that work to the other direction for capabilities to pay higher salaries.
So I don't take any position on that. We will see then early next year how things will evolve. But Yari, please.
Yes, regarding working capital, as said, now in Q3, the change of the -- the change difference in working capital was minus EUR 7 million, so compared to last year. And this is mainly coming from inventories and we are preparing, of course, there is busy season coming towards year-end and preparing for possible challenges in supply chain.
And as I said earlier, we expect Q4 inventory situation to improve. And overall, typically, Q4 is seasonality wise better than other quarters. So we -- then to your question about improvement. So it is rather sort of steady then sort of big change type of change in working capital.
We will now take our next question. Please go ahead. Your line is open. Hello there. We are not able to hear you. Are you able to unmute yourselves? Hello there, your line is open. Please go ahead. I'm sorry. We will move on to the next question. Please go ahead. Your line is open.
This is Stefan Gauffin, DNB. Can you hear me?
Yes, we can.
Yes. So a couple of questions. First of all, the growth in materials and services expenses, you mentioned that you had equipment sales also in the Corporate segment. Can you say how much of the increase is explained by equipment sales? And then secondly, there is an acceleration of growth in fixed service revenues. What is explaining this? Is this due to price increases? Or what is explaining this development?
Okay. The growth in the material services increase -- actually, we are not detailing how much is coming from which kind of line items in that. But of course, the increased equipment sales, which did happen, both in the consumer side for end devices, but also for the corporate business, for example, for LAN and video conferencing had a significant role in that. But we are not disclosing item by item and line by line, these costs. That's not our process.
The fixed service increase -- revenue increase we have seen, of course, a good development on the corporate networking side, also cyber security services. And overall, a good development there on the fixed services sales, also including equipment sales to some of the, for example, corporate networking solutions.
We will now take over next question. Please go ahead. Your line is open. Hello there. Your line is open. Please go ahead.
Hello.
Hello, cannot hear anything.
I'm sorry. [Operator Instructions] We will move on to our next question. Please go ahead, your line is open.
Sami Sarkamies from Danske Bank. Can you hear me?
Yes, now we can.
Okay. Yes, I have a question on the MSR growth, which continued at a high 7% rate also in the third quarter, even though your earlier comments would have suggested a lower growth rates in the second half of the year. What continues to surprise you on the upside here?
Well, there's no big surprises. These quarters are somewhat different that even if we something there might be minor changes. And it's just that the up-selling continues to continue very well. 5G is moving up. So no big surprises, but slightly more positive than we expected.
Okay. And then I would still go back to this equipment sales question. Would it be possible to get an approximate level for total equipment sales. We're reporting this separately under mobile revenues, but how much is there also on the fixed side?
Like I said, we are not detailing the line by line, the cost items. So unfortunately, we are not disclosing those.
Yes. But could you comment on the sort of level at fixed part at the moment? Is that somehow elevated relative to previous levels?
It is somewhat elevated as for the previous.
We will now take our next question. Please go ahead. Your line is open. We will move on to our next question. [Operator Instructions] Hello there. Please state your name and company before posing your question. I'm sorry. [Operator Instructions] We will move on to our next question. Hello there. Please go ahead. Your line is open. We will move on to our next question. Please go ahead. Your line is open.
Hello.
Hello. Yes, we can hear you.
It's Ondrej Cabejsek from UBS. I have a follow-up on the cost side, please. So you mentioned in terms of energy specifically that next year, the hedge ratio goes down to 60%, but starting April, you have some PPAs kicking in. So I was wondering what does that do to the hedge ratio starting 2Q '23? And just looking at the kind of 1 quarter exposure and then taking into account that further 9 months are secured for this PPA, what kind of year-over-year increase would you expect in terms of energy costs?
And then also, you've been flagging to us to watch on the bottom line for operating leverage. And I think up until now, basically, the equation was held at the bottom line has been growing at a faster pace than the top line. This quarter, it is not true. It did, I think, to around 60%, 70% of the top line growth on the bottom line. So can you explain why that is? And what stage could we expect the operating leverage on the bottom line to shoot up again?
And then maybe final question for me, please, in terms of just -- you mentioned already some promotional activity in the fourth quarter. I think we've seen in some other markets, especially around the back-to-school period that this year has due to inflationary pressure is not as in the previous years. So if you have any insight into how any kind of promotional activity could shape in the fourth quarter?
All right. If we start from your first question related to cost, Yari, maybe can give light on that, please?
Yes. So we will give next year guidance in Q4 report and then we will give guidance for revenue and EBITDA. And at this point of time, we will not give any guidance for individual cost item as said earlier we have a policy of hedging energy. We have a measures relating to cost efficiency and plans for price changes and price increases going forward. And this -- they all impact. And -- so as said, we will come back to next year -- next year guidance with Q4 report.
Then you had a question regarding average if I understood and heard correctly and relating to net profit change, if I heard correctly. As said earlier, we had after EBIT, we had in financial items 1 -- approximately EUR 1 million unrealized temporary foreign exchange difference negative. So this will be gained back at a later phase.
And taxes altogether were EUR 2.2 million, negative change, half of that relates to higher pretax profit and the other half relates to losses in foreign -- some subsidiaries where we will later on book tax receivable. And again, this will be eliminated in the -- this impact will be then eliminated at a later phase.
So the -- excluding those sort of temporary or sort of one-off impacts in this quarter, EPS and net profit change would have been higher, even higher than EBIT change.
You were asking then about fourth quarter and promotions there. I didn't quite capture what your question was. So could you repeat the third one please?
Sure. So I think in Finland in general, the promotional activity in the fourth quarter is probably the main season. So I was wondering because we've seen in some other markets around the back-to-school period, which in those respective markets is usually the main season that perhaps because of inflation, the promotional activity hasn't been as pronounced as in the previous years. So I was just wondering what do you make of the upcoming period in Finland, whether you think that maybe this time around the competitive situation could be better perhaps than last year or the year before because of inflation.
Now I got your question. I don't expect -- or we don't expect any major changes even if we have some inflationary situations developed here. We are expecting pretty much the same kind of promotional activity, competitive intensity as earlier for the fourth quarter.
And maybe could you -- 1 more last question, sir. Can you clarify in terms of the 4G competition that you mentioned in your press release? Is that retention acquisition is that it's some kind of special segments? Can you just clarify that a bit, please?
Well, we see a relatively rational market in the 5G domain. But in terms of 4G, we see quite much of campaign-based competition, also usage of gift cards really using quite much promotional money for any different kind of customer acquisitions. So we have seen that especially focused on 4G, no particular domain of 4G, but in overall 4G and maybe the, let's say, of course, then focusing on the more cost-effective customer bases.
[Operator Instructions] We'll now take our next question. Please go ahead. Your line is open.
Hello.
Hello.
Hello. Yes, we can hear you.
It's Adam Fox-Rumley here from HSBC. I had 2 questions, please. Firstly, just following up on a couple of questions around corporate equipment spend, asking it in a slightly different way. I was wondering, is there a change in which corporates are paying for their equipment? Or is this reflecting the change in the product set that you're selling to them? So you had mentioned a couple of things there, which maybe come with more equipment on your side?
And then the second question kind of look at the broadband base, it's fallen maybe 4% since the beginning of 2021. You did mention the fact that some people are switching old copper connections to fixed wireless access. And I wondered if I could just ask you to make either an ARPU or a gross margin comparison between those 2 services? That would be very helpful.
Okay. The main reason for increase in corporate equipment sales has been -- that we have been selling more services with equipment as well. So there is no change in how the customers are paying or no particular change in our products. Of course, we are further developing always the kind of services and products, but no major changes that had impacted. It is just that we have sold now, especially networking and video services more, including also more equipment.
In terms of the broadband, we are not giving kind of margin differentiation between the different product lines, unfortunately. So I cannot really comment on those. But we can say that we have quite comparable margin also on the mobile side compared to the fixed broadband side.
Got it. Comparable.
[Operator Instructions] Looks like there is no further questions from my end. I will now hand over for any additional closing remarks. I'm sorry, there is a few questions on the line. We'll take our questions now.
Hello, can you hear me?
Yes?
It's Felix Henriksson from Nordea. I have a couple of quick ones. First question is relating to MSR growth. Could you disclose the exact contribution of 5G as you've done in previous quarters, if I recall correctly, it was 2 percentage points in Q2. And the second question relates to digital services and the momentum there in terms of margins because looking at your group operation, our leverage did not really improve from Q2, and you're facing cost inflationary pressures.
So just wondering if you can help us out with any color on when will these businesses start to contribute to profitability more positively?
In terms of the MSR, it is slightly more than 2%. We can say the 5G contribution to the MSR slightly more than 2 percentage points. And in digital services business, the margin development, we, of course, have quite a few different digital service businesses in the domestic side, IT and then entertaining video. And then we have in the international side, video conferencing, Videra as well as Elisa IndustrIQ and Elisa Polystar. They have a bit different margin profiles. But of course, due time, we will expect ourselves to be able to disclose more, but also the continuous improvement is happening there for margins. Unfortunately, this is all I can say at the moment with our disclosure policy.
We will now take our next question.
Peter calling from Bank of America. Can you hear me?
Not that well. So if you can be very clear, please.
Peter [indiscernible] from Bank of America. Just 2 very quick ones in the end if I may. First one, just a quick clarification on the PPA agreement you have with power contract. It's quite helpful that you already say that it's coming half of the Finnish mobile network energy. Just is there any way to disclose how much that is of the group energy consumption you're using?
And then the second quick question on the mobile business. Just in terms of the mobile ARPU trends, which you report in consumer compared to corporate, it seems that consumer is growing nicely in ARPU with the mid-single digits, whereas the corporate segment is slowing down a bit. Is there any specific reason why this is the case that is delayed to some extent due to roaming. Should we expect this to continue?
Okay. To the consumption of our energy levels, we -- sorry, we are not disclosing how much energy we are consuming. Secondly, to the mobile ARPU in the corporate side, we have quite a few machine-to-machine IoT subscriptions that is basically drawing down the ARPU. So ARPU is a bit difficult indicator since it includes all kinds of subscriptions, which all are good to have and good to sell to customers. We'd rather utilize this mobile service revenue as an indication how well we have mobile services sold to our customers.
It looks like we have no other questions on the queue. I will hand over to you for any additional or closing remarks.
Okay. Thank you for the questions. So we heard that there were some technical issues with the conference call lines. So if you were not able to get through and ask your questions, so we are all here available for your questions and discussions afterwards. But now we'd like to thank you all participants and wish you a nice rest of the week. Thank you. Goodbye.