Telenor ASA

OSE:TEL

Earnings Call Transcript 2021-Q3

[Sigve Brekke, President & Group CEO]

Good morning to everyone and to some of you also good afternoon, and welcome to our third quarter presentation. This quarter is another steady quarter in how we are operating the Telenor business. And I'm pleased to see that our growth ambition is delivering solid results in all our Nordic operations. The pandemic continues to affect our operations in Asia, but we now see sign of improvements and normalization of societies and the economies that we are operating in.This was a strong quarter with respect to subscriber growth across almost all our operations. We added almost 2 million new subscribers in the quarter. And year-to-date, we have added 7 million new subscribers in our operations. In my view, this is a proof of the strength of Telenor's operating model, also in the special circumstances that we have had in the last -- in the past quarters. And to further underscore the strength of our operations, we delivered a cash flow of NOK 7 billion in this quarter. Then let me go through some of the results and starting with Norway. Norway, and I'm very pleased, delivers another solid quarter and continues its excellent balancing act of growth and modernization. And as you may know, we are now only 5 quarters away from the targeted deadline of our copper shutdown, getting rid of our legacy technology. The growth from increasing mobile ARPU and fixed future revenues was 4%. However, as you know, we are running then on peak run rate in the copper decommissioning project. As a result of that, the total S&T revenues decreased by 1% in this quarter. EBITDA remained stable in the quarter, as reduced gross profit caused by decline in copper revenues was offset by structural cost initiatives, reducing the OpEx. As we also have talked about for several quarters now, we have started the journey that we call beyond connectivity, putting services on top of data access. The focus is on near core services like insurance, storage and security. And we started this journey in Norway some quarters ago, and service revenues have become an important part of the business model. And I see a potential for continues growth in this area, both in the B2C and in the B2B segment. And this quarter, we saw a 6% growth in service revenues in Norway, bringing total -- the total growth to NOK 531 million. Then to the other Nordic business units. Finland and Denmark both delivered strong S&T growth of 4% in the quarter. In Finland, the growth is driven by mobile upselling from 4G to 5G and growth in the consumer segment for fixed broadband. While in Denmark, we see a targeted and focused strategy yielding solid results. Telenor's win, as you know, is in a stabilization phase and reports a 2% reduction of S&T revenues in this quarter. And Mobile S&T declined by 1%, which is more or less the same level as the previous quarter. As I have stated before, I'm not satisfied with this result in Sweden, and we will do better. However, Sweden has, for the last couple of years, been through a modernization journey. The second quarter was a milestone in respect of the IT transformation program with migration of customers to the new [ IT ] BSS platform. During this modernization, however, Telenor Sweden has been working towards having a stable subscriber trend. Our ambition is now to take a clear market position, especially with our Telenor model brand and capitalize on our 5G and network investments. It will be important for us to address the pressure we have experienced on ARPU the last year because, as we see it, the Swedish market should be a growing market, and we would like to take our fair share of that growth. Let me then move to Asia. Here, again, I show you the same graph as we have showed you several quarters now in a row after the pandemic came. Our Asian markets experienced, unfortunately, another wave of COVID this summer. However, due to our modernization efforts, our operations are now more resilient and robust than they were before the pandemic. This includes both digitalization of our distribution channels and the implementation of touch-free operation. I'm going to talk more about that later. As a result of this, we can see that we have been able to add new subscribers in all the Asian markets during this quarter. In Pakistan and Bangladesh, we had S&T growth of 7% and 2%, respectively. And in Thailand, we have faced pressure on the top line, and I will come back to Thailand in a minute. In Malaysia, the solid quarter-on-quarter improvement come from efficiency focus and strong market execution resulting in a stable Q-on-Q S&T revenues. However, COVID continues to pose uncertainties, but we do see now that the fog is lifting and the societies and economies are opening up. So we are optimistic about the coming quarters. Then a little bit more about Thailand. In Thailand, we continue to see a significant headwind from the pandemic. Most of the third quarter was affected by country-wide lockdowns, leading to reduced call volumes. And as the COVID situation persists, we see pressure on ARPU development as a result of reduced affordability among our customers, but also a tough competition in the market. When the pandemic hit, dtac had a very strong position among tourists and migrates, even higher market share in those 2 segments than our overall market share. And when Thailand closed down, this resulted then in a material reduction of the customer base in the beginning of 2020. Since then, dtac has been focused on the domestic market and has, quarter-by-quarter, been successful in attracting new subscribers and increased their customer base. During the last year, dtac has gained access to the 700 frequency spectrum. This has not only meant better coverage out in the remote areas, better indoor coverage in a more city type of areas, but it has also increased our Net Promoter Score among our subscribers. We have also seen customers coming in on the 700 frequency spectrum with a higher ARPU and a lower churn.With the modernization efforts conducted during the pandemic, I believe dtac is well positioned when the economy activity in Thailand starts to increase. I'm pleased to see now that the Thai government has signaled that they want to reopen the country for vaccinated tourists from November 1. Then I want to go back to the 3 strategic pillars that we introduced at our Capital Markets Day in the beginning of last year. And our strategy remains the same. And as we also have said before, we have decided actually to accelerate some of the strategic programs during the pandemic. And let me give you some views on the main focus going forward, starting with the pillar on growth. In the Nordics, we have demonstrated strong value-added service growth in the Norwegian markets, and I'll talk about that. And we now believe that taking service learnings from Norway into the other Nordic operations can yield the same results there over time. And this is why we have just recently launched security services in Sweden and Denmark and -- for the B2C segment, and we are also launching new B2B services especially in Sweden. The rollout of 5G increases the opportunity to broaden the service offerings and use brand and digital distribution capabilities to address what I call beyond connectivity type of services. The growth in Asia, we will continue to capitalize on the data growth. And remember that in Pakistan, Bangladesh, the penetration of smartphones is still relatively low. As the economies are now opening up, we will leverage our granular go-to-market approach and personalization capabilities to attract new subscribers, and stimulate data use and mitigate the ARPU risk. Then to the second pillar, modernization. During the pandemic, as I said, we have accelerated some of the programs, including modernization and digitalization initiatives. And we are moving then towards what we call the touch-free operation, using robotics and automatization to run our operation. Currently, more than 50% of our network and IT operation is now fully automated and intelligent. The cloud adoption of network functionality is already at a 65% level, and we are targeting 75% in the network domain. On IT, 45% of all the IT applications are now in the cloud and 90% of the data traffic. I will claim that we are an industry leader in this respect. We are also sunsetting our legacy networks. Copper in Norway is one example of that, but there are also more examples. We have sunset the 3G network in Norway, and we are about to do exactly the same in Malaysia. And almost 40% now of our entire network across the business units are 5G enabled. We are about to become what we call a digital telco. And as a result of that, our operations today are more efficient and more resilient than it was in the beginning of the pandemic. The last strategic pillar, responsible business. We have started to take steps on our climate ambition. We have put forward tough targets on being carbon neutral in the Nordics by 2030 and 50% cut of carbon emission in Asia also by 2030. While we have a clear path on how to do that in Norway -- in the Nordics, where we have access to renewable energy, the cut -- 50% cut in Asia requires strong efforts in both reducing the energy consumptions through network modernization and AI-based management, but also to work on getting access to clean energy sources. I've also in previous quarters talked about our ambitions when it comes to the structural agenda. Our strategy aims to strengthen our positions in the markets where we are present. This is the rationale behind the planned merger in Malaysia, which is progressing according to the plan. And we expect, as we have said before, to see this approved during the first half of the coming year. And we will also continue to look for other value-creating structural opportunities in our portfolio. And with this, I leave the floor to Tone that will go through the financials.

[Tone Hegland Bachke, Executive VP & CFO]

Thank you, Sigve, and good morning and good afternoon to everyone. As Sigve alluded to, we see that COVID continues to impact our operations in Asia. However, despite pressure from lockdowns also in this quarter, I believe we, overall, delivered a solid set of results. Organic S&T revenues remained stable as solid performance in Finland, Denmark, Pakistan and Bangladesh offset the revenue decline we see in Thailand, Malaysia and Sweden. OpEx decreased by 1%, and our focus on structural modernization continues according to plan. EBITDA decreased by 2%, driven amongst other things, by the one-off item in Sweden last year, impacting EBITDA with approximately 1%, and we also see increased energy costs impacting both OpEx and COGS. Free cash flow for the period ended at a strong NOK 7.2 billion, summing up to NOK 13 billion so far this year. Moving to revenues. The organic S&T revenues remained stable this quarter. We see, as I said, continued solid performance in the Nordics, with Finland and Denmark being the high performers this quarter, both showing 4% growth. Finland is delivering growth from 5G upselling and fixed broadband, while the solid performance in Denmark is a result of targeted market initiatives which has resulted in a 4% ARPU growth and 1% increase in customer base year-over-year. In Norway, the solid performance in mobile continues with 3% mobile ARPU growth. And excluding the revenue, the subs and traffic revenues increased by 4%, and this is almost offsetting the high 46% decline we see in legacy revenue this quarter. The copper decommissioning is progressing at full speed as the copper customers are actively seeking more modern solutions. The retention rate is so far above our expectations. We also continued to see solid performance in Pakistan in this quarter. They delivered a 7% growth, which is driven by a 6% increase in customer base. We also see a 35% increase in year-over-year data revenue. In Bangladesh, the strong customer growth continued, adding another 1.6 million subscribers this quarter. We are delivering a growth of 6 million customers or 8% the last 12 months. Overall, S&T revenue ended at 2% and we also, here, see a strong increase in data revenue of 23%. In Sweden, as Sigve said, we are in a stabilization phase. The S&T revenues, as you see, decreased by 2% and mobile S&T revenue decreased by 1%, which is in line with the 1% we saw last quarter and a result of ARPU pressure, both in B2B and B2C. The subscriber base is up 2% from last year. And as Sigve also said, going forward, we aim to improve performance, particularly in the B2C segment especially related to our main brand. In Malaysia, we see decreased revenue of 3%. However, we also see gradual improvement in performance from targeted market initiatives, supported by government stimulus packages and easing of restrictions as a result of high vaccination rates. In Thailand, lockdown in the third quarter and a long-lasting COVID situation is impacting competition and also people's purchasing power. As such, we see ARPU pressure is more than offsetting the positive subscriber growth we have seen in the last year. Moving to OpEx. As you might remember, the third quarter last year was a very strong OpEx quarter with a reduction of 8%. Despite this, we still achieved a 1% OpEx reduction this quarter. We continue to balance out underlying cost increases by delivering on our modernization agenda and structural initiatives. So far this year, we estimate that savings from structural initiatives amount to NOK 800 million and is supporting the net OpEx reduction of NOK 700 million or 3% year-to-date. A good example of this is Norway, which delivers a strong quarter with a year-over-year OpEx reduction of 3.5%, driven by exactly structural modernization. We also continue to see solid contributions from modernization in Thailand. The cost reductions can be observed across all categories, except maybe not surprisingly, the energy area. In line with market development, we have seen increased energy pricing during the quarter and particularly in Norway, in the Telenor Infra company, and in Pakistan. The energy costs had a negative impact of NOK 80 million on OpEx, which is equivalent to an increase of 1%. As for energy cost, I would like to share some more insight into the development we see. We have received some requests or quite a few in respect of energy costs. So that is why we would like to share a bit more of what we see in this area. And compared to last year, we see an increased energy cost of NOK 135 million. The increase is evenly split between increased prices and increased volume. The growth in volume is naturally a result of an expanded network footprint and increasing data usage among our customers. As part of our climate agenda, as Sigve also talked about, we are running group-wide energy projects to improve energy efficiency and to reduce our CO2 emissions. This work is led by the technology teams as an integrated part of the Telenor's technology strategy. We estimate that we, by these initiatives have been able to reduce the increase in energy consumption with 50% from a forecasted 8% increase to 4% increase in the first half of this year. And this is despite seeing a 23% increase in data consumption and also having expanded our network footprint significantly the last year. This focus and project will be an important contributor towards our climate target as it, in addition to limiting our energy consumption, is looking for green energy deployment in our markets by rolling out solar power to targeted sites. Going into 2022, Telenor will, amongst other things, run a greener energy initiative in Pakistan to increase the share of energy from both solar and wind. Furthermore, in the Nordics, various alternatives for deploying and evaluating green energy are ongoing, including power purchasing agreements. And looking at the graph, we see that the impact of price is highest in Norway reported through Infra and in Pakistan, while we see that the impact of volume is highest in Thailand and Bangladesh, due to the extensive network rollout in the last year. Moving to EBITDA. The organic EBITDA decreased by 2%. We see solid performance in Pakistan, Bangladesh, Denmark and Norway, which contributes positively. The EBITDA growth in Finland is muted as a result of an accounting correction of NOK 85 million. Adjusted for this correction and also for the reassessment of lease contracts that we talked about since last year, we see an underlying EBITDA growth in Finland of 4%. In Thailand, tough competition, lockdowns and reduced affordability is putting pressure on S&T revenues and as such EBITDA, but it's partly mitigated by solid OpEx reduction. The development in Sweden is impacted naturally by the large positive one-off related to the CopySwede settlement last year. However, the underlying EBITDA decreased also by 4%. And this is driven by negative development in S&T revenues and also increased sales and marketing costs in the quarter. In the other category, increased energy cost, as I mentioned, in Infra in Norway, and also higher costs related to increased activity levels and also M&A are the main contributors to the negative impact. Across the group, we see the impact from increased energy costs negatively impacting EBITDA with approximately 1 percentage point. All in all, and without the negative impact for these above-mentioned items, the underlying operational EBITDA is slightly positive. Moving to net income. Net income to equity holders of Telenor was NOK 2.6 billion, which is a decrease of NOK 1.9 billion from last year. This was primarily explained by negative impact from currency on financial items and EBITDA, in addition, that we last year had a gain of disposal of assets of around NOK 900 million. These negative effects were partly offset by lower taxes. Earnings per share this quarter ended at NOK 1.89 per share, and the return on capital employed on a 12-month rolling basis remained stable at 13%. Moving to the cash-related items. CapEx, excluding licenses, amounted to NOK 4 billion. In Norway, the 5G rollout and copper decommissioning is running at full speed, supporting our superior network position and laying the foundation for future services revenue growth. In addition, 5G investments in Finland and coverage expansion in Thailand are key elements of the CapEx spend. CapEx to sales ratio for the quarter was 14.6% and year-to-date, the CapEx spend is 14.7%. Cash flow before M&A was NOK 6.2 billion or NOK 7.2 billion, including the third tranche of the CEE deferred payment we received this quarter. This figure also includes NOK 0.6 billion related to Myanmar. The increase of NOK 2.8 billion compared to last year was primarily driven by working capital improvements, but also the ESA payment of NOK 1.2 billion that we had this quarter last year. Total cash flow year-to-date stands at NOK 13 billion, which is equivalent to this year's dividend amount. Leverage ratio this quarter decreased to 1.9, driven by the solid cash flow generation. And lastly, I conclude my presentation with the outlook for the full year. As we have seen this quarter, the performance continued to be impacted by the ongoing pandemic. And even though COVID still represents an uncertainty, we do see signs of improvement on the horizon with regards to the opening of societies and economies. In the Nordics, we are basically back to normal, except, of course, the roaming revenues.Our expectation for 2021 were based on a gradual recovery in the Asian portfolio during the second half of the year. Overall, the Q3 results are in line with our expectations and we maintain our outlook for 2021. However, we do observe that the year-to-date performance is in the lower end of the range. And with this, I wrap up our presentation and open the floor for Q&A, Sigve.

[Sigve Brekke, President & Group CEO]

Yes.

[Tone Hegland Bachke, Executive VP & CFO]

And moderator, may we have the first question, please.

[Operator]

[Operator Instructions] We will take our first question from Maurice Patrick from Barclays.

[Maurice Graham Patrick, Managing Director]

Just if I could just dive into Sweden a little bit. I mean, Sigve, in your prepared remarks, you talked about how you're not happy with the Swedish development and how the market should be growing. I mean maybe if you could elaborate a little bit on what -- why the kind of the revenue growth declined from the second quarter where you'd obviously talked about the stabilization, whether it was tough comps of what drove that.And then just in terms of some of the trends you're seeing, I've always seen Sweden being probably more SME focused than your competitors in that market. I just wonder whether your sort of view on the operations were the same for all your segments or whether perhaps the B2C going particularly well or large enterprise. So maybe split some color in terms of how you see your operations across your verticals.

[Sigve Brekke, President & Group CEO]

Yes. Thanks, Maurice. What I tried to say is that we have been through a technology transformation. That is now more or less concluded. And then we have been focusing on arresting the subscriber decline that we have seen in the previous quarters. And now we are really looking at how can we now with the kind of base in place be more active in the market with services and products. So then to answer your question, we are happy with the way our low-end brand is doing. That's a Vimla! brand. It's a fully digital brand. And we see that we are acquiring a lot of customers in the price-sensitive segment. We're happy with that. We are quite happy with the SME approach that we now have, and we see that we are holding or even taking some market share there. So the 2 main issues we now have to address is the more high-end customers in our main brand, Telenor, and we need to be clear in the market position on that, and it is on the larger customers. On the larger B2B customers, we see now an interest of moving into especially SD-WAN services as a software-defined services. And there is an ask for -- from these customers, B2B customers to do something there. And they are also not trying out private networks. But the main focus in the more short-term window is then to be clear on our main brand position and then with the new BSS techno in place, we're also able to be more competitive on products and services out in the market. So that's what we are doing. And that's why I'm saying that we have stabilized the subscriber trend. We have more or less stabilized the revenue trend. It goes a little bit up and down in the quarter, and now we will return to growth. I cannot tell you exactly when that's going to happen, but we see now that the activities we have put in place is -- they are going to give us most hopefully, a growth part where we take our fair share in the market.

[Operator]

We'll take our next question from Peter Nielsen from ABG.

[Peter Kurt Nielsen, Lead Analyst]

If I may, a quick one for each of you, Sigve and Tone. Sigve, you described another very strong quarter in Norway. And obviously, you talked about the strong uptake of fiber and fixed wireless access, but also noticeable, of course, that you're growing on the postpaid segment in mobile now again after some time of decline. Are you seeing, Sigve, early signs of 5G uptake and perhaps your leadership on 5G? Is that what is starting to come through already now, please?And then, Tone, just thank you for your comments on the energy cost and the impact, et cetera. Can I just ask on a broader level because we expect -- sort of consensus, I guess, expect increasing inflation sort of on not just in energy cost, but on a broader level, Tone. What -- how do you think it will impact Telenor? And how can you mitigate the impact of increasing inflation? Particularly perhaps my question is related to the Asian operations, where you arguably have a limited pricing power.

[Sigve Brekke, President & Group CEO]

You start, Tone, so that I can think about it.

[Tone Hegland Bachke, Executive VP & CFO]

I'll start -- yes, yes. I will start Thank you, Peter. Yes, we see, of course, that we are now in inflation mode in several countries and expect to be that going forward. This is, of course, you see how we are managing the OpEx. It is a key priority for us. And we are continuously working on these structural initiatives. And as I said, we do see underlying cost increases in several markets, but that is why it's so important to continue to modernize and have structural initiatives so that we're able to mitigate these increases. And then it will be -- as we have said all the time, it will go potentially a bit up and down going forward, but that would be our objective going forward. And what we see is that the portfolio of opportunities to improve the cost base, that is renewing itself as we develop and move towards becoming an even more modern telco.

[Sigve Brekke, President & Group CEO]

Yes. And then to Norway. The Norwegian management, they are really focused on the balancing act of not losing subscribers, but at the same time not being too aggressive with new market offers. Because we do know that the Norwegian market has a growth potential. And as a market participant, we should not be a part of destroying that overall market growth. So what we basically are doing is we now start to see some benefits out of our 5G rollout. We definitely see benefits of the very strong network position we have on 4G. We see benefits of the services that I talked about. And I think the ARPU growth in Norway now, about half of it comes from connectivity and half of it comes from new services. But we are also following the competitive landscape. So we have also adjusted some of the price plans and the offers we have out in the market. So it's a mix of all that, that has enabled us to both grow ARPU and also then in this quarter arrest the subscriber decline.

[Operator]

We'll take our next question from Ondrej Cabejšek from UBS.

[Ondrej Cabejšek]

I had a couple of follow-ups on Norway, please. So in terms of the legacy decline. Can you just walk us through the kind of time line in terms of -- you mentioned we're still at the peak, but then if I look at the subscriber numbers or what is left to basically decommission over the next 5 quarters, it would seem that we are approaching, at least going into 2022, some kind of lower drag from this segment? And then in terms of all Altibox acquiring spectrum and then talking about wanting to roll out fixed wireless access quite extensively. What kind of risk do you see from that to your so-called future fixed revenues across Norway? And finally, in terms of your main competitor being a bit more active in terms of bundling and family offers, how do you see that impacting Telenor? Those are my questions.

[Sigve Brekke, President & Group CEO]

Yes. Your first observation is correct. We are now approaching the kind of long tail of the remaining customers on the copper network. And that's why we are saying that we are running peak right now. I think we are -- the revenues that are declining, I think it's around NOK 250 million, on a quarterly basis now. And remember that NOK 3.5 billion in revenues coming from these customers when we started the program. And then they are not churning out quite quickly. We are very determined on meeting our objective of shutting this copper network down by end of next week -- next year. So yes, you are right, you will probably see that the peak we are talking about now, around NOK 250 million, will gradually reduce going forward.Then to your other question, I don't want to comment on our competitors. But what I can say is that we see that there is land grabbing still on fiber. That's why we are running full force the fiber rollout. This varies a little bit from quarter-to-quarter, and you will see a higher fiber uptake in Q4 than you saw in Q3. So it's partly seasonal. We are also running full force on the fixed wireless access product that we have, and especially now when we are going to introduce that for the 5G -- of the 5G network. And so that's a land grabbing that we see, and that will continue for quite some time.And then we see there are some blind spots also in areas where the people already have fiber. And of course, we will be looking at offering those blind-spot customers with fixed wire solution rather than rolling out parallel fiber. And I guess our competitors are thinking about the same. When it comes to the family offer, that is something that we traditionally have been very strong in our value proposition in Norway. And that's also what we are continuing now to see, can we come out with some new products and services in that segment, because this is a segment that I think we traditionally have a strong holding.

[Operator]

Our next question from Nick Lyall from Societe Generale.

[Nick Lyall, Equity Analyst]

Can I just ask a bit of a straightforward one, firstly, on Pakistan, please, Sigve. I mean you've had some tax cuts in the quarter, but the growth seems to have slowed. So are there any other issues that we should think about there, the economic problems starting to bite? Is there anything you could tell us about the backdrop?And could I clarify secondly on the Swedish question from Maurice, please. Just on the -- you've talked about investing in the main brand, but presumably that's going to be expensive, isn't it? So how long is that going to take? And is that a big investment in marketing over time? Or do you have to have a big investment in FMC products? Could you maybe talk us through what timing that might take and the cost, please?

[Sigve Brekke, President & Group CEO]

Now in Pakistan, your question was related to growth slowing down, whatever, you said?

[Nick Lyall, Equity Analyst]

Yes, a little bit. I mean I was expecting a bit better growth this quarter given some of the SIM tax cuts and other things coming through. So is there anything in there that maybe has dragged back growth a little bit? Or is the outlook still extremely strong and you're expecting better figures with the tax cuts coming through maybe into next quarter instead?

[Sigve Brekke, President & Group CEO]

No, I'm quite happy with the growth in Pakistan. And I really think that we are now taking our fair share of the market despite us having some disadvantages when it comes to the spectrum position. And we see now that our model where we are going very, very granular, going into really small pockets of the population, seeing where can we actually utilize the network strength where we have it and what can we do also in areas where we may have some congestion issues.And going forward -- but Pakistan, remember, Pakistan is also affected by the COVID. Even though there is no nationwide restrictions or lockdown, they're -- out in the villages and out in remote areas, there are effects. So I'm actually very pleased with what I have seen in Pakistan, both in the second quarter and in the third quarter, and we will see that to continue.In Sweden, no, we are not talking about major investments, we are talking about sharpening our market position in the main -- with the main brand in the more high-end segment. So it's distribution. It's marketing. It's product and services. Remember, when I talked about that we have migrated our customers over to a new BSS platform. In that migration period, we had to freeze. We were not able to launch new products and services. Now we are able to do that. So it's a combination of, I would say, all the 4 Ps: product, price, place and yes, the whole marketing mix that we are working on. So how long that will take? I cannot give you any guiding on that, but this is the management team's main focus right now.

[Operator]

Next question from Frank Maaø from DNB.

[Frank Maaø, Analyst]

And my questions relate to energy prices and CapEx really, 2 separate things. But starting with energy prices, we -- I noted that there seem to be no price effect on costs in Sweden, and that varies a bit between markets. But given the fairly sharp rises in the Nordics in terms of the variable power prices, our electricity prices, could you please give us some sense of whether or not there is an overhang there or lag? Or do you have fixed contracts -- fixed price contracts and what the duration of those might be? What we can expect going forward with regards to potential price effects as we go into Q4 and next year? So that's on energy prices.And then on CapEx and the 5G rollout in particular. Given the supply chain disturbances that we have seen globally, which also is affecting telecom equipment to some extent, do you see any delays in lead -- protracting lead delays or protracting lead times from vendors for 5G equipment, for instance, in Norway, where you are pursuing this fixed wireless access strategy as well that Sigve mentioned? And do you see any retaining price pressure on that due to the -- or CapEx inflation to where you would like to perhaps pay up a little bit to ensure deliveries in time?

[Tone Hegland Bachke, Executive VP & CFO]

Should I start with energy? Yes. Thank you, Frank. Yes, you are correct in your observation that there is quite a big difference in how the price increases impact our markets. And you mentioned the Nordics. And it is, as you say, we have different pricing structures, whereas we, in Norway, have, to a large extent, spot prices, which very many has in Norway and particularly those that maybe don't have energy as such a big part of their cost base as many others. And then we have a larger degree of fixed contracts in the other Nordic markets. We also, of course, observed that there are different pricing structures in these markets. I will not go into the duration of the contracts and things, but we currently don't see that there is an overhang as we see it as of this quarter.

[Sigve Brekke, President & Group CEO]

On your second question, also the supply challenges. We are in close and frequent contact with both on Ericsson, Nokia and Huawei. And from neither of them, we are hearing that this is going to be a problem in our markets. So it seems like we will be able to continue our rollout plan in Norway, in Finland, in Sweden, and then also we are starting in Denmark. So of course, this is an issue that we are following very, very closely. But as of now, the vendors have told us that in all markets, this is not a concern, at least in the near future.

[Operator]

I'll take our next question from Andrew Lee from Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

I had 2 questions. Firstly is on Sweden. And I guess your positioning in the market has been problematic for many years and as has been the case for some of your -- some of the other large Nordics in -- then on domestic markets. And I like hear you on your answer as to how you're going to go about and try and improve things, but ultimately, we've seen a mixed success in the past on that front. So the question is like what else can you do to sort out Sweden? And specifically, is M&A an option at this point in time? There have been some rumblings of the EU being more open to certain levels of consolidation. Obviously, you need the EU to be open and you need a seller or someone to do deal with. Do you think that's an option as we go into 2022 to finally sort out of this business?And then secondly, just on the energy costs. Thanks for the detail in highlighting what's going on in the quarter. Wondered if you can maybe give us how you're factoring that in the ongoing inflation into your guidance for the full year?

[Sigve Brekke, President & Group CEO]

Seems like they're hanging Sweden on me in some of these -- so you take energy and then I'll do Sweden, yes.

[Tone Hegland Bachke, Executive VP & CFO]

Yes. Yes, of course, we do see that in the market where -- which has so far been impacted by increased energy prices, that can be expected also to continue into the fourth quarter. And we see that still, at least now, we are in the end of October and we also see high prices here in Norway, which is part of the picture we also saw in the third quarter. And that is, of course, you see it's mainly Pakistan and Norway where we see the impact from the prices, and then we saw the volume on the other markets. But this is part of our outlook, of course, for the year.

[Sigve Brekke, President & Group CEO]

Then on Sweden. Let me address your M&A question with a very general answer. And as you know, we are not doing that answer market specific. We are continuing to look for structural opportunities across our portfolio. That's the rationale behind Malaysia. And if we see opportunities in other market, we will pursue them also if they are value creative. So that's the general answer.But then to the operation. We are not giving up Sweden. And I think you should recognize that Telenor is quite good at turning things around. We -- look at Denmark, where we also had challenges some years ago due to the competition and due to our market position, now Denmark is having a stellar performance. Look at Norway, tough competition. We continue to lead the market. We continue to growing in the segment. Look at Pakistan, also some challenges if I go back a year, how we have turned that around. Look at Thailand, in a much better position now than before. So this is something that I think we have demonstrated our ability to do. In Sweden, it has taken time. And that is also related, as I said, to the more infrastructure transformation that we have done. But now I'm quite confident that we know now what to do. and we want to participate in a growing Swedish market. There is no reason why the Swedish market shouldn't be a growth market, like we see in Norway, for example. And we want to take our fair share of that. So I don't think I can go more into it than that, but this is the main issue that Tone and myself is having. And also the main issue that the Swedish management is having with Bjørn Ivar Moen, as the new CEO in Sweden, with a lot of experience from the Norwegian market, both from the B2B segment in Norway, from the B2C segment in Norway, and also for some month he was acting CEO in Norway. I think he will take with him the best of what we have experienced in Norway and try to improve our position in Sweden.

[Andrew J. Lee, Equity Analyst]

Just as a follow-up, do you think that M&A is even an option in Sweden given what you're hearing or seeing from the EU regulatory backdrop?

[Sigve Brekke, President & Group CEO]

Another nice try. Again, a general comment to that. We don't know how the EU Commission or the Competition Commission is going to look at competition views going forward in any of the European markets. We know that there is an upcoming appeal to the European court, which of course we will be looking at. And -- but I don't think that we will get an answer to that before someone is bringing a case -- a merger case in front of the competition authorities. Then you'll get an answer on that. So we don't know. We hope that they now have a little bit different view on this, not least also after the -- what you have seen in the pandemic, the -- what shall I call it, dependency that these societies also in Europe have of strong connectivity players. But we don't know.

[Operator]

Next, we have Adam Fox-Rumley from HSBC.

[Adam M. Fox-Rumley]

You made a couple of references to increasing competition in Thailand in your presentation. And I wondered if you thought this was really an inevitable consequence or response to dtac needing to focus domestically? Or whether or not you could highlight any other factors that were at play there?And then secondly, because you're right at the kind of forefront of copper decommissioning in Europe, I'd love to know kind of practically what your plan is for the next 5 quarters for the copper switch-off in Norway? I mean as you guys at the end of the project, do you need to step up awareness, kind of marketing for awareness purposes? What are your kind of concrete plans for the next few quarters?

[Sigve Brekke, President & Group CEO]

No, for the coming quarters, it's a pull and a push effect. We see now that customers, again, coming out of the COVID situation, is demanding more and more quality, high-speed services. At the same time, the supply of that is us running full speed of fiber rollout and also on 5G rollout and also the -- using the fixed wireless access as a product. So now we are doing whatever we can, actually, to supply those customers that want to migrate from the copper legacy into more future-proof technology. So that's the way we are handling that. I cannot give you any kind of forecast per quarter in the coming 5 quarters, but we are doing as good as -- as much as we can now. And at the same time, the customers are really asking for these services.What we also see is that not only we are able to migrate most of those customers over to future-proof technology, but most of them also take up our TV offers. So the fiber customers also take the TV products, which is an additional potential for us to drive the revenues. So then, of course, we will be left with the long tail. We still have an issue with some of the wholesale customers that we have. We hope that we will be able also to offer them future-proof technology that we also then can migrate them out on the copper network and then completely shut it down. Was it another question also? Was it on Norway?

[Adam M. Fox-Rumley]

Just on the competition levels in Thailand.

[Tone Hegland Bachke, Executive VP & CFO]

Thailand. Yes, sorry.

[Sigve Brekke, President & Group CEO]

Yes, yes. Sorry. I will say that what we have seen in all our markets, let me start with that, is that when the industry is struggling due to revenue decline coming out of the COVID lockdowns, we are all starting then to kind of arrest that decline with new competitive offers. We have seen that in Malaysia, we see that in Pakistan, Bangladesh \and we've also seen that in Thailand. So it's a kind of industry action to trying to do something with declining revenues. So I think it's more that. But of course, it also has to do with dtac not strengthening its position domestically. And that is coming out now from having a network that we had issues with. Remember, what -- the transformation we have done in Thailand over the last 2 years, getting access to the 2.1 network, 2.3 network, 900 networks now, leaving behind the 820 network, getting actually to the 700 frequency, all that has happened in a very, very short period of time. It's a massive network transformation. And now I will say that we have a very competitive 4G network based on the 2.1 and 2.3. We now also have a competitive network based on the 700 between the rural areas. And that is what we also see coming through now in the customer service. And of course, when we are strengthening our position, there may be a direction from our competitors. We are not going to chase market share as a subscriber market share for the sake of the market share in Thailand. We are value driven. We want to take our fair share of, hopefully, a growing industry revenue base.

[Operator]

Our next question from Usman Ghazi from Berenberg.

[Usman Ghazi, Analyst]

I've got 2, please. The first one was on towers in Asia. I mean we're hearing some news about edotco expanding in Thailand, for example. I mean just why I know the towers -- you've highlighted that Nordics is a priority over Asia. But just given these market developments and the weakness in Asia that you're seeing for now, [ can ] tower monetization in Asia be brought forward? That was the first one. And then the second question was just on the cost savings that are expected to come from the copper shutdown. I mean given the pace at which you're going at, can you remind us of the timing of these savings and whether these savings can be delivered earlier than you might have previously expected?

[Tone Hegland Bachke, Executive VP & CFO]

Yes, I can start with the cost savings from copper. We are, of course, having some gradual cost reductions as we go along. But as we also said, the biggest chunk will come after we are able to shut down the network. And that will, of course, come after we have exited the tail also. So this will come in a few years' time. We expect the biggest part of that cost to go away.When it comes to towers in Asia, you are correct that we've had a different -- we have a bit of a different strategy in Asia. We have a more market-by-market approach, and we are looking into towers and we have been doing so. So far, we have not established a holistic strategy. But this is, of course, part of our agenda in Asia, but not -- it's not directly linked to the agenda we have in the Nordics.

[Operator]

We'll do our last question from Stan Noel from Bernstein.

[Stan Noel, Research Analyst]

I've got a question about Malaysia. A few weeks ago, Ericsson announced the partnership with DNB. So it looks like that the single wholesale 5G network is becoming more and more of a reality. And I wanted to know how you expect the regulatory framework to develop with regard to 5G? And in particular, will MNOs directly negotiate with DNB? Or do you expect the regulator to set wholesale prices in the country?

[Sigve Brekke, President & Group CEO]

Yes. We don't know that yet. So what has been going the last few quarters is more the technical testing, because if you are to then becoming a wholesale buyer of 5G, it needs to work with your existing 4G network. So that part we have been focusing on.The commercial part of this, the pricing model and also what you are asking about, it's still not agreed on. And of course, it's important for us, as an industry, to make sure that we are not taking value from the mobile operators and then passing on to this consortium. So these are discussions that now are going on between the industry and the government-owned consortium. And on this topic, I think the industry is very aligned. So let's see what those discussions or negotiations will result in. It's early to say.

[Operator]

We have no further questions. I will hand over the call back to the speakers for any additional closing remarks. Please go ahead.

[Tone Hegland Bachke, Executive VP & CFO]

Okay. That finished it, Sigve.

[Sigve Brekke, President & Group CEO]

It does.

[Tone Hegland Bachke, Executive VP & CFO]

Yes. Thank you, everyone, for calling in, and thank you for the questions, and have a nice day and afternoon.

[Sigve Brekke, President & Group CEO]

Thank you.

[Tone Hegland Bachke, Executive VP & CFO]

Thank you.