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Good morning, everybody. I'm Oliver Keil, Head of Investor Relations 1&1 Drillisch AG. We are happy to present our 9 months numbers to you with a discussion right after. I'm here with André Driesen, CFO of 1&1 Drillisch AG; and Markus Huhn, CFO as well, as you all know. And I may hand over to André right now. Thank you.
[Interpreted] Good morning. André Driesen, my name. I'd like to welcome you here on our telephone conference for the Q3 figures. As usual, we're going to talk about the business development and give you an outlook on the rest of the year or the overall year of 2019. Now just in the beginning, the business development. On Slide 4, you'll find the key figures of the first 9 months in 2019 compared to the previous year's period. The number of customer contracts has increased to 14.12 million, which is an increase of 860,000 compared to the previous year. 850,000 of this increase comes from mobile Internet, and the broadband business is rather stable. The amount of customers remains at 4.34 million, which is almost the same as the previous year. Revenue in total has increased by 1.3% to EUR 2.755 million, which is a rather low increase. But the service revenue, which is our focus, this is where we generate our margin, has increased by 3.4% to EUR 2.226 million in the first 9 months of 2019. The EBITDA compared to the previous year's level has had a decrease of 3.1% and over the 9 months of 2019 amounts to EUR 508.7 million. And with the ad hoc that we released on 24th of October after we received the arbitrator's opinion or the draft of it, we communicated this, as I said, the major effect here, among others, is that, not like expected, we got a compensation for the prepayment prices or top prices. But with this also other effects that restrict the comparison to the previous level. If we adjust it by that, and we would have had an increase of 6.8% to EUR 573.7 million. Now I'll come back to the EBITDA and the individual effects, which we will see on Slide 7. Now on the next slide, you'll see the customer contract in more detail. The comparison to the previous year comprises, the fixed line as well as the mobile Internet customers or mobile customers. And then you also see the monthly net new customers in mobile communications over the past 7 quarters, starting with the first quarter 2018, which is the first quarter after our merger. And if you look at the time line, then you can see that there is a fluctuation from quarter-to-quarter, but the overall average is about 210,000, and that was what we achieved in Q2 and Q3, too. And with rising existing customers, net growth is becoming more and more difficult because the churn must be set off, first of all, on compensation in order to have a good growth. So you need some more. Now on the next slide, you see revenue compared to the same period in the previous year. As I said, there is an overall increase of service revenue by 3.4%, whilst the other revenues were reduced by 6.7%, which is basically due to the low-margin hardware business, where, in the year 2018, we were generating higher revenues. This is also a matter of a hardware model being released on the market and also the prices, the average prices, whether you've got higher-value prices (sic) [ devices ] or lower-value devices in our promotions. So that doesn't have a real effect on the results because the hardware business is coming with low margins. It's not in our focus. Then there's another effect in our service revenues, which we commented on in the previous quarter, since there's a higher demand from our existent customers with regarding -- with regard to the current LTE tariffs. And so we offer them with reduced tariff prices in the first 12 months. And for reason, we've got a lot of existing customers which are switching. And for that reason, there is a negative effect on service revenues. If I adjust it by that, by what we had in the -- with the existing customers in the first 12 months, then the like-for-like service revenue without this effect would have had an increase of 4.7%. And we easily accept this because, in our purchase model of the MBA, a contract about fixed sale, we can have a more inexpensive purchasing even if the customer gets a lower price for the first 12 months. Now on the next slide, we come to the EBITDA. Here, you see the reduction by 3.1% on a year-on-year basis despite customer growth and despite higher service revenue. So unfortunately, the EBITDA is declining. However, the margin is still 18.5% compared to 19.3% in the previous year. So it's a little bit less, but it's not a dramatic drop. The EBITDA includes 2 effects, in the first place, which have a positive effect from IFRS 16. We've got a plus of EUR 4.7 million, which is a moderate positive effect. And then there were the integration costs that got lower. In the previous year, they amounted to EUR 12.4 million, and here in the first 9 months, we only had EUR 4.7 million additional expenses. So if you want to compare it, there's basically an improvement, although, there were some negative effects. For instance, the decision to increase the TAL prices, that amounted to EUR 4.4 million, actually, and the initial 5G costs that we have to pay in advance amounted to EUR 2.5 million. And then, of course, there's a big effect. That was EUR 59 million because of the elimination of the price adjustment mechanism. And I was just mentioning that before. It's -- we now have the draft opinion of the arbitration proceedings. And in view of the future arbitration proceedings, in this year, we will not be able to compensate that. We don't think we can. And like-for-like, without the aforementioned effects, the EBITDA, if you want to compare it to the previous year's level, would have increased by 6.8%. Now let's come to the development in the mobile Internet. That's the next slide. Here you see the mobile contracts on the left side, and the mobile data usage on the right side. In the contracts you see that, in the area of LTE customers, quarter-by-quarter, we have a growth of about 500,000, so the year-on-year growth amounted to 2.1 million. Meanwhile, we've got 6.5 million contracts with LTE, also for the end customer with LTE service. And overall, we have almost 10 million customer contracts in [ total ] mobile contracts. 9.78 million is the figure. And the usage, which is the data usage per contract in our LTE customers is usually 2 gigabytes per month. And the overall average is somewhat more than 1.5 gigabytes, and the overall average includes the LTE customers, of course. So you can imagine that the ones which are not yet LTE, the 3G customers, consume much less on average. And the growth is also stronger among LTE customers. This is why we've got a year-on-year increase of usage of 50 -- 25.3%. However, in the total contract, it's only 23.1%. On the next slide, you see the revenue side -- or the profitability side. For the first 9 months compared to the first 9 months in 2018, you see revenues increased by 1.3%, cost of sales by 1.2%. This includes the percentage of the elimination of the price adjustment mechanism of the EUR 59 million, as I mentioned. So basically, the cost increase would have been much lower because we have had a growth in the strong margin service revenue. So we've got high margins here. The gross profit from turnover increased from EUR 805 million to EUR 818 million, which is a growth of 1.6%. And without the effect of EUR 59 million, we had an increase of almost 9%. Now we've got distribution costs in the amount of EUR 315 million, administration costs of EUR 76 million. Other operating expenses/income is EUR 22.6 million, and EUR 58 million impairment losses from receivables on contract assets. So overall, this whole area has had an increase of EUR 30 million, which is the largest percentage increase. It was because of the impairment losses from receivables and contract assets. This is because we focused more on the hardware, so inventory in the Drillisch brands has a higher hardware ratio than before. And this is why the impairment losses were increasing more here in this field. The profit/loss from operating activities, including all effects that we were talking about, amounted to EUR 391 million compared to EUR 409 million in the previous year. And the profit before taxes is EUR 383 million after EUR 407 million in the previous year. So you see the EUR 59 million come up here time and again so that, unfortunately, the results are burdened by it. Now -- and you see the EBITDA, EUR 508 million, as I already mentioned. Now next slide. This is the balance sheet. And here, you can see a clear increase of the balance sheet sum from the beginning of the year, where we had about EUR 5.2 billion, now it's 6.4% almost. This is due to the fact that by 30th of September, for the first time, we could put the 5G frequencies on the asset side, in particular, in the long-term fixed assets. And on the liability side, we've got the financial liabilities, basically, also long-term financial liabilities. As you know, we've got this agreement on the respite with the ministries and the Federal Network Agency, the Bundesnetzagentur. And then we have distributed our payments until 2030. And most -- this is why most -- the largest parts here are the long-term fixed liabilities. And the equity ratio is still 71% despite the decrease of the balance sheet because of the leverage that comes in. On the next slide, you see the cash flow. And the development here is very positive in the third quarter. So the 9-month figures are expressing this quite well compared to the previous year. We've got net inflow of funds from operating activity in the amount of EUR 227.5 million, which is about 88% more than in the previous year. And this includes, in the current year, around EUR 100 million of changes in trade accounts payable, which is a decrease. And this had a negative effect in the first 9 months in total. And another EUR 70 million change of contract assets and contract liabilities, which is what we invested into our existing customers and over the whole time of the contract. By higher base rates, this will be compensated. The other months are on a lower level. You can see that on -- like on the slide before. So it's very good that from the other working capital, we don't have any negative effect. The cash flow from investment activities, like in the previous quarters, is on a low level. You know that, in the previous year, in this position, we had a onetime, one-off cash outflow from the Yourfone Shop GmbH in 2018. It's still here in the figures. On the cash flow from financing activities, we've got a minus of EUR 217 million. Those were dividend payments in the amount of EUR 8.8 million and the EUR 3.8 million for stock repurchase at the beginning of the year. And EUR 32 million was the repayment of loans that we received from United Internet. And then we invested EUR 163 million of liquid funds or free cash in United Internet. And the free cash flow in total for the first 9 months amounted to EUR 218.9 million, which is 92% more than in the same period of the previous year. Now the next slide shows you the change of the accumulated terms of the 9 months and how they -- again, if you look at contract assets and liabilities, you can see that from quarter-to-quarter, we're investing less and less. That was the outlook that the guideline that we gave last year when we started doing it this way. We had the largest net effect at the beginning of the year because we had to spend a lot of money for smartphones, while having generated only a few additional clients paying the higher fees. But now we're getting closer to balancing off the new income from the new clients to financing the new smartphones that we are giving them and refinancing those new smartphones. With inventories, we had a negative effect in the financial quarter, which is us increasing our inventories. And we then reduced this in the second quarter, clearly reduced it in the third quarter so that we see a positive effect. In other working capital in Q1 and Q2, we had some special effects, some extra effects. One was an increased sum of prepayment or advance payments for broadband to a service provider. And in the second quarter, we reduced the -- our own receivables from trades and service -- goods and services, which we didn't have in Q3. So there were no such effects and taxes and CapEx have remained stable, CapEx at an excellent low level so that we have a free cash flow of EUR 137.8 million in the third quarter. This brings me to the outlook, which isn't news, really. Service revenue, well, including our increased -- reduced revenue from the change to LTE contracts, we -- well, we do expect an increased sales deduction. And with EBITDA, we -- well, we're expecting the final arbitration report. And thus, we expect some EUR 85 million additional costs, which is what we're expecting and take -- bearing this in mind, we've adjusted our EBITDA outlook to some EUR 690 million, so to put it in more concrete terms or corrected to EUR 690 million from previously EUR 721 million. So now this is it from my side. And now we're looking forward to your questions.
[Interpreted] [Operator Instructions] So the first question is by Ulrich Rathe of Jefferies.
[Interpreted] I've got 3 short questions. The first one is about progress in discussions with the other network operators. With whom are you talking? And who's involved? And what are you discussing currently, a larger investment or national roaming? That's my first question. My second question is, do you have any comments on the arguments that the arbitrator has given in the suggested arbitration report after -- well, how solid are the arguments? How do you evaluate these arguments? And my third question, if there is no, well, pricing changes happen, so what effect will high-margin have within the next 5 years? Just as a rough outlook and rough guideline.
[Interpreted] Thanks for your questions. First of all, regarding discussions with the 3 network operators. We're engaged in talks with all 3 of them, and we are optimistic that we'll end up with a positive result. We're not just talking about national roaming. We're also talking about other cooperation projects. However, please forgive us that we cannot go into any detail at this point. So we are on the right track. We are making progress, and we're engaged in talks. Once we know we have anything concrete to report, we will do so, of course.
[Interpreted] Any comments on the arbitration report?
[Interpreted] Well, it is an ongoing procedure. So there's not much to say about it. Well, of course, we've been -- we've looked at it closely, and we see that the methodology is correct and is easy to follow and easy to understand. However, we don't -- well, we do -- we have made a statement. We -- well, both parties were able to make statements. And so we expressed the fact that we do not agree with some assumptions that are made and some points that are found in the statements, which we do not consider to be correct, that we believe should be corrected. And well, regarding the competitiveness of 1&1 Drillisch at the deadline, the development of the margin, of the competitive environment. And well, there are some things that we consider to be not correct, but we'll have to wait for the final arbitration report to see whether anything changes in it or whether it remains unchanged. And then we'll know what the results will have been. In principle, basically, the approach is fine, but some assumptions in the report are not correct, in our opinion. Your next question was about the high margin and the outlook for the future. Well, now that we've adjusted for the effects and we have a high margin, but on the other hand, we do have other arbitration reports and other arbitration proceedings going on. We've got the price review going on. So we do assume that we -- our margin will be safeguarded, and we'll have to see at which level the margin will be -- capital will be safeguarded. The first price review did not give us any compensation, that was looking back on September 2017. That does not mean that the other arbitration proceedings that are currently going on won't have positive results for us.So I cannot give you any prognosis, any outlook. I cannot talk about -- I cannot presume to predict any decisions going to be taken in those proceedings.
[Interpreted] The next question is by Christian Fangmann, HSBC.
[Interpreted] Christian Fangmann. I've got a few questions as well. First of all, on the timing of the proceedings, what do you expect? Well, there's a shortened procedure. There was an agreement on cooperating with independent experts. Are we talking about March or earlier, later? What's your expectation very roughly speaking? And when is your third price review? So what do you think is a realistic time frame here? That's important for us. Secondly, my question on the net adds, which were quite nice. So what are you expecting for Q4, at the similar level, a slight increase due to the Christmas season? If you could perhaps give a brief outline on that would be nice. And finally, the free cash flow, the third quarter figures were very nice. So are you also expecting a good free cash flow increase for Q4? Perhaps you could also shed some light on that as well.
[Interpreted] Thank you very much, Mr. Fangmann, now as regards the timing of the proceedings and the same arbitrator or same the expert, once he has finalized -- or he will have finalized the first arbitration report, he'll look at the other ones. So it takes about 3 months, I think. So we're expecting the next results for Q1 2020. Just as you said, we've agreed on simplifying the proceedings and making it as quick as possible. We don't need long discussions or court proceedings to agree that an expert be called into the case as happened the first time. For now we see a timing where the price reviews are going to be delivered one after the other. And we roughly expect each of them taking some 3 months. That's of course, a question of the timing and the capacities of the expert. So I mean he cannot do everything at the same time and at once. So -- and the second report that we'll be looking at July 2018 will start shortly, and we're expecting it for the first quarter of 2020. That is our current expectation. As regards to net adds, in Q2, Q3, we had some roughly 200,000, which was the average of the past 1.5 years. Last year, we had a peak in Q4 because, there, we had very attractive offers during the Christmas season. Now we haven't decided quite yet. I don't see a strong acceleration. I see a strong competitive environment, so I cannot quite say yet whether we'll achieve that average or not. It's a bit early to say because Christmas season and Christmas business hasn't started yet. Free cash flow. Yes, I am optimistic as regards the fourth quarter. I explained it earlier. In the first 2 quarters, we had some follow-up effects, which I won't see -- I don't see them happening in the fourth quarter. Those came from the increases to our promotional expenses and prepaid contracts and the reduction of liabilities, which now have achieved a level where we say, no, there cannot be any significant effect in the fourth quarter, which is why I'm quite optimistic that -- well, I can't tell you yet whether it's going to be exactly the same amount or whether it's going to be slightly different. But yes, in principle, it will be -- it will stay -- will remain a good second half of the year.
[Interpreted] The next question is by Jonas Zum (sic) [ Jonas Blum ], Warburg Research.
[Interpreted] I've got 2 questions on network cooperations. Namely, we saw the mobile pact. If you say -- well, if you have to position yourself by 2021, what about the CapEx? Is it -- will that be in 2020 or 2021 only? And what amount do you expect? And secondly, we looked at the 3 German MNOs with their own cooperation and an offer to participate. So have -- do you have any evaluation whether this is interesting for you to participate in this as well, perhaps, given the fact that you don't have the spectrum to cover the rural area?And thirdly, in your reporting, you said that the financing strategy for 5G says to finance it mostly from current revenues. So my question, if CapEx for revenues increases the free cash flow, is this covered? Or might you consider increasing your equity?
[Interpreted] In general, about cooperation. The first pact or the first agreement that we concluded directly was on the background of giving you respect to the frequency payments. And then the 4 participating operators should save some interest rates, which should then be invested into expanding the network -- the buildup of the network, whether white spots should vanish. So we are going to build up some sites here. We won't do that in this year, I suppose. We will start with that in the next year. So we're talking about a few hundred sites that we will provide ourselves. It's not a significant CapEx really, but let's assume it will start or ramp up next year. And then it will extend over the next 2 or 3 years. And then there was a report that we saw yesterday that 3 MNOs, Deutsche Telekom, Vodafone and Telefónica, have found an understanding to invest more into building out the networks along the roads and railway system and also in rural system to set up 6,000 antennas together. And we were informed about that. We were invited to take part in that, but we have not yet had an exchange of all the details, so we can't finally value that. So it's -- or it's [ assets ]. So it's too early to say now whether and to what extent we will take part in that, and what kind of CapEx would be needed for that. Regarding financing strategies, out of ongoing income to be able to build up a network, this can work because the payment for the frequencies will take place later. So -- and we said before that, regarding investments into the network infrastructure, we assume that we will be able to cover that from our ongoing cash flow. Of course, there might be some peaks, but they should not be in a quantity as we anticipated at the beginning of the year regarding the cost for the frequencies and what upfront cost we would have had for that. So we decided that we can finance that through our syndicated loan. And from our point of view now, this is what we expect. If there should be any peaks in the next few years where the ongoing investment might be a little bit higher in the course of 1 year that we can take recourse for that so it will not be so much more than we planned for buying frequencies. So I think we can actually use the proven methods and means.
[Interpreted] The next question comes from [ Dennis Malhoven ], [indiscernible].
[Interpreted] I've got 2 just short questions about this whole arbitration report topic. To what extent is it realistic if the argument of the arbitrator would be valid but, in the next review, there should be a change so that there will be an adjustment?And second question, is there any other price adjustment mechanism that we should be aware of that, for instance, in 2020 or 2021 something else would just be eliminated?
[Interpreted] So to the -- independent of each other. So if we talk about the time end of September 2017 and when the expert arbitrator takes this next price review, the market situation is different because, in July 2018, of course, the market has changed, too, and the consumer prices have changed. So there's no indication of the first -- the results of the first price review is not an indication to say it should be like this or like that. So those things are independent because the situations are totally different. That needs to be evaluated. So it's not a prejudice or an indicator for the result of further arbitrator proceedings. For the price mechanisms or adjustment mechanisms do not exist. There was one variable part, which is now eliminated and the [ MBF ]. We've got the [ MBF ] contract to 2020 -- mid of 2020, actually. And with fixed mechanisms about how the price could change in the course of the year. And for the first period of extension, the rule is that the average price is for 12 months. And the highest price for the -- will be the highest price for the start of the extension period. And then on half year level, we have a possibility through a price review to continue the whole agreement of the price building in the first 5 years. So this is due to the fact that this contract was concluded already in 2014. And we strived to find a fixed price grid or fixed formula for the first 5 years, which could map the development of the market over such a long period of time. It worked in the beginning, but since 2017, it doesn't really work so well. And this is why the price review was demanded. And I think in general, everyone's agreed that in the course of time, when the data usage is increasing, that the unit costs must decrease. And we're all agreed that there is a certain margin in order to -- when we talk about interpreting the calculations, and this is part of the ongoing price review. So in the first proceedings for 2017, we didn't get a price adjustment, but I assume that in the future, this could change since the market is still developing and the growth is still increasing and the production cost for data are obviously decreasing we assume that in the future, we will have lower prices. Thank you.
[Interpreted] Currently, there are no more questions on the German channels. So we come to the English channel. Just one moment, please. [Operator Instructions] And we received the first questions. The first question is from Wolfgang Specht, Bankhaus Lampe.
A follow-up on the financing question. Does it mean that for the time being, you rule out any kind of cap increase? Second question is on roaming. Can you confirm that you have not called for the regulator to intervene by now? And the third question is on the cancellation of your EUR 2.8 billion credit line. Do you still see a stand-alone network strategy as most likely? Or are you also thinking about adding infrastructure or financing partners for the 5G network?
[Interpreted] Thank you, Mr. Specht, for those questions. Regarding financing and whether we can rule out a capital increase for the future. Now, we haven't planned for any such cap increase today. Of course, we can't rule that out for the future. But since the license fees do not have to be paid now, I don't see a need for that. We've got a very good and positive cash flow. And next year, we'll start with our investments. And from our, meanwhile, more than 14 million customers, we can generate a large amount of cash every month so -- and this is what we said. We assume that we can actually finance the network build from that. This is why we actually terminated the credit line. We could have left at least part of it if we had seen some need for it. Then we wouldn't have had terminated it but just reduced it. But currently, we just don't need it. And for that reason, we don't need any infrastructure investors. That's not the plan we have right now. And regarding the regulator, the Bundesnetzagentur, whether we've involved them already in our national roaming negotiations. No. We didn't see the need for that. We talk without MNOs and we see some willingness for negotiations and discussions. So we didn't see a necessity to demand an involvement and to find an arbitrator.
The next question is from Steve Malcom, Redburn.
I have 2 questions, please. First of all, just I'm curious to know whether the decision on the MBA pricing review, one, has influenced your commercial strategy where you're thinking around the strategy going forward, whether your -- there are any changes required because, clearly, the gross margins are going to be less than you thought they were, whether that means you push less so that you drive less data over the network. That's question one. And secondly, just your initial thoughts on the MBA renewal. I mean I think you have to decide by the end of the year as to whether you're going to extend the MBA, which currently expires in June 2020. I'm sure you're not going to tell us what you're going to do, but it would be useful to know what you think your options are and just sort of maybe put some color around those options as you go into that negotiation with Telefónica Deutschland.
[Interpreted] Yes. Thank you, Steve, for those questions. The fact or fear for the arbitration report on our commercial strategy. Well, that's an important point, of course. But we've got some ongoing arbitration proceedings still. And as I said, in general, we see ourselves concerned by the methodology the arbitrator used that we have some protection of our margins. You can, of course, discuss about the level and the -- some assumptions and so on. We see some things where we have a different opinion, of course. But right now, by this preliminary report, do we get influence in our strategy? No, we don't. On the one hand, it's not yet a final decision. And on the other hand, we still have other arbitration proceedings where a decision will come. So it will not hinder us in our daily business to win over customers and to design our products the way that we can be successful with them on the market. And the market is actually the necessary scale, and we have to just compete. Now the extension of the MBA agreement. Yes, of course, we should come up with an idea by the end of the year. But currently, we're still in ongoing discussions with all MNOs. So we cannot say now whether and to what extent by the 31st of December we will extend this contract. It's not far away, this date, I know, but as of now, it's still open.
Okay. Can I also ask, do you intend to update us on your sort of more detailed 5G plans with your full year results in February?
[Interpreted] Yes. With regard to our time line that we've got our stage planned. The first step was to acquire the frequency -- the frequencies, the second set would be agreement on roaming or further actions regarding infrastructure sharing. Yes. And as soon as we publish our full year results and have concluded the necessary agreements and the contracts and know what the network build will look like, then we will give some more detail.
The next question is from Joshua Mills, Exane.
Two for me. I think just to hear, firstly, on the methodology used by the price arbitrator. Because we're talking about 2 separate issues, I guess, one of which is market pricing, the other is margins. So if you could give us, if possible, an indication of where you think your case is strongest. And on the margin side, in particular, what margin the regulator is looking at when they think about a fair level of return for 1&1 Drillisch. I'd just be interested to know how you think that's changed over the last year to give you more confidence in future price reviews. And then secondly, just on fixed line momentum. So broadband subscribers flat this quarter. Has there been much change in the competitive environment in fixed? And how do you expect that development to continue into year-end?
[Interpreted] Thanks, Joshua. First of all, fixed line development. Well, we've stabilized, consolidated our customer base. We see that the prices in the market, if we look at the broadband providers, we've got prices that are marked by promotions, low price offers, so we decided not to decrease our own prices. So we're pretty much at the higher level -- higher range of the price range, but we have a stable customer base. So we look at our margins, and we don't want to water down our customer base by reducing prices. That's our fixed line approach, and this has worked well in the past few months and quarters. And so we want to continue in this vein. Secondly, the methodology and the margins and the benchmarks in the arbitration. Well, that is confidential because we're looking at an ongoing -- we're looking at ongoing proceedings. We cannot tell you anything about details. But very generally speaking, the market environment and our margin development is an indicator. But which exact values were used by the arbitrator and then what our own expectation is, we cannot talk in any detail.
Can I just come back with one follow-up regarding the appeals being made by Telefónica Deutschland for additional payments related to spectrum. Is that something which will also apply for the 2019 auction going forward? Or is it simply for the previous auction? I'm just trying to think about future liabilities.
[Interpreted] That is only about the option for auction 2015.
The next question is from Ben Rickett, New Street Research.
EBITDA trends in Q3 seem to deteriorate year-on-year even after the adjustments that you have called out. I'm just wondering what is driving that deceleration. Is it a tough 2018 comparable? Or are you seeing sort of deteriorating market conditions in this quarter?
[Interpreted] Well, it's correct. EBITDA growth, even adjusted, is in decline. Of course, in 2018, there was strong growth because there we tapped into great potential from using the previously unleased capacities. On the other hand, it is a market where the competition is fairly aggressive in its approach. So we have to follow that to a certain extent with our own offers, and we have to follow to a certain extent what the others do. And we cannot enforce higher prices, which also shows in the development in Q3. However, we do have an increase, even though at a slightly lower level. However, if you compare on a like-for-like basis, then EBITDA is growing -- or has grown. So the question is, what about the advance -- sorry, the advance payment prices. But that is a question that has to come out in the arbitration report, and then the question will be in how far this will be compensated.
The last question is from Yemi Falana, Goldman Sachs.
Two questions from me. Firstly, on service revenue growth. You're still doing nearly 10% year-over-year volume growth across your mobile base, which shows you still have good traction in the market. Do you see any upside to pricing supporting faster service revenue growth trends? And secondly, on profitability and margins, assuming nothing changes with the upcoming pricing reviews, do you expect that you can still drive an inflection in profitability and margins via faster LTE migration and/or cost cutting? Or do you expect the current trends to continue?
[Interpreted] As regards service revenues, well, originally, we had expected the year to show growth of some 4%. We've reduced that to 3% due to the fact that we've seen increased movement towards LTE offers in our customers. So in our current portfolio, we've got reduced prices in the first 12 months on LTE contracts, which slows down sales growth and revenue growth, but we do see that the other competitors have similar offers in the market. And so in order to be able to grow and enable to -- in order to be able to fill our capacities, we have to be in line with what is accepted and used in the market. And price increases are difficult at the moment. And we are quite happy that we've been able to keep our price points constant for a while now, and we -- well, we've got promotions and changing activities, but we do not see price hikes and price increase. So I don't expect any price increases to happen because I do see them as difficult in a market which is characterized by changing and aggressive promo activities by all competitors. And I think your other question was about margins. Well, on the revenue side, we do see a growth in service revenues, which I pointed out, which I tried to show when we were looking at the revenue situation. We have to look at the advanced prices. If they fall to -- on the basis of unit prices as they have in the past, then -- well, it's hard to make a prediction here because we've got the open proceedings. So it's hard to say what the coming years will look like, but we do assume that we're going to have a stable margin in the long term because that is our understanding of the agreement, but we cannot say at which level. And that is the ongoing discussion, and that is the ongoing point of contention.
We received a follow-up question from Joshua Mills, Exane.
Just wanted to get a sense of how we should think about the full year results and the guidance going forward. I mean is it fair to assume now that, given the number of price reviews which are ongoing, we will be given some kind of EBITDA guidance which both includes and excludes an estimate of what the impact of successful future reviews will look like? Or in your own business planning, are you now working on the basis that there is no additional discount offered, and that's what you're using to think about the guidance for next year? I just wanted to understand how we should really try to model this for 2020 and '21.
Yes. Well, for 2019, we don't have any positive effect from the price review. We had assumed that a price increase would be balanced off by the first arbitration report and will be contemplated by the first arbitration report, but that didn't happen. But we never had any positive effects at price review, so we never put them into our guideline. So we are not going to do that for 2020 unless we have an indicator that something like that might happen. But a guidance for 2020 will only be published in March as is usual, when -- as we always do, with our spring results. So hopefully, until then, we'll have some more insight on what the final arbitration report for press review 1 will have been, and then we'll see what the guidance for 2020 will be.
So we have no further questions in the English channel. I will move on to the German channel. [Interpreted] We have got a follow-up question from Ulrich Rathe.
[Interpreted] Two questions really. On the price review, you've pointed out a few times now that the -- we don't have the final result of the first price review yet, and which makes difficult for you to make any statements. Do you -- would you say it's realistic that you could give some more details on the subject? Or are these price reviews, do they all fall under the nondisclosure that exists? So can we expect more details once the decision is final, once the arbitration is final or not? Secondly, I do understand that you cannot make any definite statements, but if we look -- once we have the result of price review 1, are you confident? Or does it have any impact on your confidence and your expectations for price review 2 in any way? So has your expectation changed in any way if you look at price review 1 of what you're expecting for price review 2?
[Interpreted] Well, once there is a final result, it will not be made public. So the things, the details we can give out for the preliminary report, we won't be able to say much more than on the final one either apart from the actual final result. So we have an opportunity to make a statement and to give our opinion. We have done so, and we're going to wait and see what the final report says. But I cannot stoke expectations of -- that we'll make any benchmarks and assumptions and the entire report public. This will be and remain confidential. As regards to price review 2, well, it's hard to make a prediction on this because these are independent reports and independent expertises. So if report or review 1 had been successful, than the potential of review 2 would have been higher. But since review 1, based on the preliminary report, will not have any result for us, we expect the future proceedings to have some positive effects. But I don't want to speculate. And I don't want to sound confident and certain -- well, I don't -- I'm neither optimistic nor pessimistic. I think, let's keep it neutral. In principle, we have certain expectations which are founded by the methodology, I believe, but we will have to wait and see to what extent.
[Interpreted] The next question is by Mr. Christian Fangmann, HSBC.
[Interpreted] A question about the cost bases actually. And not a wholesale cost but different costs, other costs. If I look at the 9-month cost, for instance, the administration costs, they are around -- they have had an increase of EUR 8 million or EUR 9 million year-on-year. Are there no synergies from all the merger between 1&1 Telecommunication and Drillisch? I mean these are support -- the support costs are increasing, and in the business report, they say third-party costs are increasing, too, in other costs. Can you maybe elaborate a little more on that regarding support and admin costs and what's happening there in the background? I know the whole wholesale business is a separate cost topic, but maybe all the other topics could be highlighted a little bit to tell us why the costs are still rising in the administration.
[Interpreted] Well, let's put it the other way around. We still have costs from integration projects, which will, later on, lead to savings. But due to the big topics, like 5G and price review and the negotiations about all the consultation costs, we had consultation costs, third-party lawyer fees. So the expenses were relatively high, which do not come from the operative field. Now if I look at our day-to-day business, a big cost block, for instance, are customer service, parts that we need to buy in so -- to buy. So just we have more customers now, and it's, yes, but it's the extraordinary topics which we had to deal with very intensively in this year. And this is something that we weren't able to overcome with our normal organization, so we need to get external consultation. So it's not the synergies. It's rather extraordinary one-off topics that we have to deal with. In the future, we plan to reduce costs in the operative segment, to keep an eye on them and look for possibilities of optimization, of course.
[Interpreted] That's helpful. So it's external consulting costs for 5G as well as for price review consultation costs that made the costs higher in the admin segment, right?
[Interpreted] This was -- these were some drivers that led to an increase, but it's not a long-term cost increase. [Interpreted] Since I heard that there are no further questions, we would like to thank you all for your interest in 1&1 Drillisch. And of course, as usual, we are available for further discussions later on, easiest via e-mail because, this afternoon, we will be on road show or maybe through my cell phone. You know the number. Thank you.
[Interpreted] Thank you for your participation in the conference. And now please hang up your lines, and we will close the lines. Thank you.