Operator:.

…abrupt start. Our CFO, Carl Mellander. So during this call today, we will be making forward-looking statements. These statements are based on our current expectation and certain planning assumptions, which are subject to risks and uncertainties.

The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you all to read about these risks and uncertainties in our earnings report as well as in our annual report. With that said, I would like to hand over the call to you Mr. Börje Ekholm..

Thank you, Mr. Nyquist. So welcome everyone to our Q3 report. During third quarter we continue to execute on our focused strategy, making good headway. We've a very strong product portfolio today. And that in combination with a good cost structure makes us very competitive. And that's what you see us delivering on during the third quarter.

Then move to the third slide. What we saw now is that the 5G is becoming a commercial reality with the first deployment in North America. We are seeing very good momentum in our 4G portfolio. That of course is 5G ready as a result of our upgrade. So operators can thereby modernize network without wasting CapEx and be prepared for 5G.

We see very good momentum on 5G in North East Asia but also in North America as those two areas leading the way. But it is encouraging to see momentum also increasing in Europe. So it is increasingly becoming 5G is not only a buzz word but it's actually true reality.

During the third quarter was the first quarter since the third quarter 2014 that we showed growth. It's a small number but we had headwind from contract exits during the last year that's impacting our top line. But it is really organic effect adjusted growth of 1%.

It is driven by network group 5% but it did encouraging that we have total trend of shrinking top line. Maybe more important, we have achieved a profitability on group level on net income. The first net income posted ever since beginning of 2016.

And we do that despite substantial provisions during the quarter that we will outline during the presentation. Digital services continue to improve and on the journey towards profitability, negatively impacted substantial provisions here on large digital transformation project.

But it's aided or helped significant cost out in common cost as well as R&D. We will spend some time updating you on the SEC DOJ investigation as well where we are engaged with authorities to try to find a resolution. And we are well underway towards achieving our target of 10% operating margin in 2020 and 12% beyond that.

So with that let's move into some of the overall numbers. Where you can see that we continue to improve our gross margin. And that is done despite provisions but we see - that's the strategy of investing in R&D to support and improve gross margin is working.

We see also that our cash flow, the free cash flow excluding M&A is positive and show strong improvement year-over-year as well as sequentially. We look at some of the businesses we see that network grew as I said before 5% FX adjusted and could deliver 16% operating income, putting ourselves at the level we expect in 2020 to be.

On DGS we continue to shrink the losses, it is still loss making but we are shrinking. We see lower gross margin during the quarter sequentially and that is due to - only due to the provision for the digital transformation project.

Besides that we see good progress on operational efficiency making us very comfortable that we are on the right path to turnaround and have low single digit margins by 2020. Managed Services solidly positive that's through cost efficiency efforts as well as contract reviews.

And the key in the managed services is that we now are increasing our investment in automation and machine learning to basically develop our offering towards customers, and we see very positive reception on that. If we look at our Emerging Business & Other, we are seeing improvement primarily driven iconectiv.

And here you should also expect media kind to be sold or partnered by year end. So we that happen. If we look at the development by market area. We see overall of course organic sales up 1% but the negative being Middle East and Africa, where we are suffering from a political and challenging economic situations in certain markets in the Middle East.

We see North East Asia falling which is partly driven by or caused by lower 4G investment in Mainland. But we see some good deployment of our NB IoT in Mainland. We see also a decline in digital services.

The South East Asia, Oceania and India, is falling slightly that's because of a tough comparable last year when we ended large-- some large 4G deployment in the third quarter last year. So it was a tough comparable. Europe, we are happy to see that that grow and that is driven by Brazil, Mexico and some parts of Europe.

And the strong growth accounts for North America which is of course investment in 5G readiness basically across all our major customers. So now I would like to turn to different topic and basically update you on the process with the US authorities. As we have previously disclosed, we have been voluntarily cooperating with the authorities since 2013.

First with SEC and since 2015 with the DOJ into our compliance with the US Foreign Corrupt Practices Act. At this time, we cannot comment in further detail. But as part of the investigations, we've identified facts that are relevant to the inquiries of the SEC and DOJ. And these are of course fact that we have shared with the authorities.

So we continue to cooperate with SEC and DOJ. And we are engaged with them to find a resolution. While the length of the discussions cannot be determined today, but based on the fact that we have shared with the authorities, we believe that the resolution of these matters will most likely result in monetary or other measures taken.

And the magnitude of these measures, we can't estimate today but they maybe material. Let me assure you that we are very committed to having a robust and peaceful purpose compliance program and we are continuously looking to improve a way to manage compliance risks throughout the company.

It's not only what business we do; it's actually how we do business as well. We have been working our ethics and compliance effort for quite some time.

More than a decade, so but in parallel with the investigations we've done - we've decided and taken actions to strengthen our ethics and compliance program with policies, processes and tools for preventing, dictating and remeditating non-compliance. We have accelerated those efforts in recent years.

We've done that after - call it external compliance advisory firm that we brought in 2016. But ever since - the Board of the company to review our compliance program. They have basically found the program to be good but they have also identified areas that we need to strengthen. And we are implementing the recommendations now.

We've done many improvements over the last two years. And just to get a sense for the areas we are covering for improvement is for people and culture, third party engagement, compliance and investigation capabilities and internal controls. So this is a work that we work at full speed, but at the same time it's an effort we can never stop.

We continuously need to strengthen our compliance program. And we are taking those efforts. If we then sum up, we are on track with our focus strategy. On Networks, we are already in the range we guided on margins. ERS substitution up 86% and cost are coming out.

Most importantly, our investments in R&D are paying off with a very competitive 5G ready portfolio. In DGS, our ambition is to have low single-digit margins by 2020. We see now that we're making progress on our turnaround plan. We see good order intake and good development in large parts of the business.

And so we see losses being reduced, but we still need to do more to turn around some of our transformation project, but we are comfortable about the target for 2020 that we will be low single-digit margins. On Managed Services, we are --in the ambition we had for 2020.

And that's done by the contract we have address but also through cost efforts and taking cost out in service delivery. So now there in Managed Services, we are increasing our investments in artificial intelligence, automation and analytics.

In the Other and Emerging Business, we are partnering with one Equity Partners on media kind and that's a transaction we expect to close in the fourth quarter by the end - or late --by the end of the year really. The end of this quarter early next --with remains to be decided from a practical perspective.

And we are making significant investments in emerging business. Our IoT UDN and Emodo. But we are also committed to be very disciplined. So if we do not reach the objectives we put out, we would basically discontinue funding. And we on the contrary if we reach we accelerate funding.

So we try to be very disciplined in the work here and we see good progress especially on the IOT side, where we have taken some pretty big contract during the quarter, still very low on revenues in those contracts but a big potential for the future. So we see that business to be on track with the shrinking loss thanks to iconectiv.

With that I will give the word over to Dr. Melendez..

Thank you, Börje and good morning, good afternoon everyone on the call. And let's drill in bit more into the segment views starting with Networks, where we see the momentum continuing here 5% organic growth in the quarter.

A clear sign of strategy that bite with the investment in technology leading to the competitive portfolio that we have talked about for a while, and now we are reaching 86%.

That's in combination with further costs out has driven up the margins on hardware and services not least, and delivering then the 41.5% gross margin in the quarter excluding restructuring of course.

And the market mix here in networks was rather favorable because of the strong North American proportion, and also when we look at the business mix, it does contain quite the strong proportion of software and capacity upgrades here, driven by data traffic of course.

And at the end of the day then an operating margin of 16% which is in the 2020 targets span already is quite a strong sign of execution. Indeed it's a services and sales was down 6% but that is flat that represents; you could say a flattening of the decline which was 12% in Q2.

And so also here we do as Börje said we do see the business moving in the right direction and of course driven essentially by the virtualization trend and operator is preparing for 5G.

The gross margin here, as you see it we do report an improvement year-over-year and the decline quarter-over-quarter to 36.9% is really only attributable to the extra cost provision that we have had to make in relation to the digital transformation projects that we talked about here.

This is of course not satisfactory and we're taking a lot of action to accelerate the turnaround of these projects needless to say.

But despite this operating income continue to improve quarter-over-quarter, and we record here a loss of SEK1.4 billion by no means good or accepted as such, but of course an improvement sequentially from the SEK1.5 billion level, and basically we see that the cost out efforts here are tracking well in digital services.

And this is then why operating income actually sort of compensated by the cost out from growing from gross margin. And we also continue with portfolio optimization and we see more and more efficiencies here both in service delivery and R&D as well.

When it comes to Managed Services, we report another strong quarter and sales down but that of course as planned given our strategy to exceed certain contracts, that's going well for delta 42 - mentioned and good also to see that we are actually growing in a couple of areas here managed services IT for IT, and network design and optimization, both of those areas show healthy growth in the quarter.

So again here gross margin improved significantly year-over-year driven by the cost efficiency that we do and the 40 contracts that we have reviewed now. Of course, automation, technology playing an increasing role here and we'll see more of that going forward as well.

So positive results for managed services again stable sequentially exceeding the 2020 target level on operating margin. Emerging Business and Other, Börje mentioned already it's really driven by the iconectiv number portability business that we started in Q2.

Both media sets improved and contributed to the improvement year-over-year and here selective investments, yes, they will continue. We do this in a discipline way and with a quest to find the future, the growth areas including IoT for example.

But, all-in-all gross margin as well as operating income improving in emerging business and others, both sequentially and year-over-year. So if we look at the full P&L then just the sort of the headline numbers there, SEK53.8 billion sales. The 36.9% gross margin and operating income then of SEK3.8 billion or 7%.

And I'd like to drill into two aspects here. If we move to the next one showing the operating expenses and then after that we come in to gross margin. So on operating expenses starting with SG&A.

Cost out continued to impact positively here by 700 as you can see and there were some offset so one is then the revaluation or customer financing mainly related to Middle East, SEK0.9 billion.

And we also see the existence of field trials for 5G with customers, and this is going to be a fact of life for the next 12-18 months, where we investing in the field trials and that's of course paving the way for 5G together with the customers.

As we say in the report though, we of course maintain the 2020 target level and we will absorb the costs for field trials within our financial performance including the 2020 target. R&D on the other hand increased then also results of our execution of the strategy with the networks going up, ramping up.

Sale while as I mentioned before them, we are taking cost out in digital services. So that's offsetting partly here. And of course R&D being such an important --the cornerstone for our gross margin improvement. We can turn to gross margin and look at how widespread the gross margin improvement is here. You see all the segments contribute.

And when it comes to underlying margin performance over the year, we see it that's a strong improvement trend in 2018 continued now delivering Q1, Q2 and Q3 of 36% and 37% here respectively, so tracking well towards the target range of 37% to 39% that we have stated for 2020.

I mentioned a little bit before here that the gross margin in the quarter was supported by software and capacity sales. There was also a bit of catch-up in the IPR business that we could consider going forward.

On the other hand we also had absorbed the provision for the digital transformation projects that we talked about before into this gross margin. So if we move on to cash flow then as you see mainly the P&L here is contributing.

And we had some inventory and accounts receivable increase here, which has to do with the increased business volume and as well as ramping up for Q4. CapEx under control more or less the same level as usual, actually Q 2017 was an unusually low quarter so that comparison is a bit difficult at SEK1.1 billion this quarter is rather normal level.

And all of this leads to free cash flow then excluding M&A of SEK0.7 billion. And the corresponding year-to-date number shows an improvement year-over-year of SEK6.7 billion in free cash flow before M&A. Balance sheet remains resilient.

I would say net cash has increased as you see here by SEK8 billion up to a level of SEK32 billion and the gross cash, a solid almost SEK66 billion. And no issues with the debt maturity profile either, no maturities at all as you see here for during 2018 and 2019. So all of these add to the resilience of the company.

Then finally planning assumptions and this is all in the report. I refer you to the full report of course for planning assumptions, but to provide a little bit of color starting with top-line. And what we see is that North America is really performing well in Q3 already. And there was a strong jump from Q2 to Q3.

We don't expect that to continue to grow. We expect a flattish North America into Q4, while the rest of the world can be expected to deliver normal seasonality. And with that and the obviously the group seasonal pattern will be a bit lower than the typical average levels. So that's something to think about when modeling the future here.

When it comes to gross margin, it's a good here to consider. Of course, we can we'll continue with the cost out on the one hand. At the same time as mentioned, the mix was rather favorable in the third quarter. So that's something to keep in mind going forward, as well as the IPR support we had here.

Maybe to add one more factor services as a share, as a proportion are typically larger in Q4 than in Q3. And then finally operating expenses then the typical seasonality Q3 to Q4 is between SEK1 to SEK2 billion higher in Q4. And if you compare it with last year 2017, you see a bigger jump but there we had actually some extraordinary items also in Q4.

So SEK2 billion was the underlying OpEx increase in 2017. So that's a good reference to have now looking at the future as well. So that's about it when it comes to the planning assumptions. There are a couple of other items written here as well, but you can look at that later and also refer to the report such.

So with that thank you and back to you Börje..

Thanks Carl. So just as closing remarks and to wrap up, we will continue focusing or continue executing on our focused strategy. That means that we will maintain a strong control of our cost position that we have worked hard to achieve.

And basically to make sure that we stay competitive on cost, but we will continue our investments in technology leadership because that allows us to have better solutions to customers, but also leverage technology to get costs down. We will continue to invest securely the shipping 5G as we now see 5G moving into commercial deployment.

With the first use case of 5G really being enhanced mobile broadband basically for our customers to deal with the exploding demand for data. They need new technologies to not have cost spiraling out of control. The second use case that we see are gaining increasing attention across our market, this fixed wireless access.

Clearly, the case in North America but also in other markets where we see that the interest is pretty substantial. Artificial intelligence and automation are for us key enablers for our future business development or future product portfolio. And we continue to increase our investments there.

So just to end, I would say we're committed to delivering our targets for 2020 and 12% beyond 2020. So thank you. And Mark we are now open for questions. So please introduce that part of the call..

[Operator Instructions] Our first question comes from Edward Snyder of Charter Equity Research. Please go ahead. Your line is open..

Thank you very much. Börje, if you could you mentioned 5G is become a commercial reality and I'm not sure if you're including the Chinese NB IOT in that statement or not, but you did call out North America and mentioned high mobile broadband and fixed wireless access.

So just try to get an idea of what systems you refer to in terms of commercial availability? Which carriers are you talking about the first deployment of systems that will eventually become commercial and in which carriers are we talking about? And if I could are you including the bad 71 system in that statement. Thanks..

Thank you. Now you know in North --if you look at the commercial availability, it's still very limited but the traffic is up and running, and there are subscribers coming on. You know that in North America there is one large operator, we normally never talk about the customers explicitly, but you know which one it is.

That have deployed a 5G Network and that actually takes in subscribers and they have already done their first installations. We see in China, as a matter of fact I mean the 5G deployments haven't really started yet, but what we see is an increasing field trials.

We expect commercial deployments in China to be coming in during next year then exactly what the timing will be I think the future will tell, but it's still to happen during next year, which is why we see increasing cost for field trials.

And that to put them in perspective there even the field trials in China are almost the size of a small European country. So they're pretty substantial, but that we see happening during next year. We remain very committed to gaining the market share there, and we're working very hard to make sure we have competitive offerings for the Chinese market.

Then if you look outside of China, Northeast Asia also as a Korea's there, Japan is there, and you're starting to see commercial deployments. There we see no commercial networks yet but there will be deployments and starting to come online. And there are some other markets as well that are very early in deploying.

So we are starting to see the network's getting ready, devices will come gradually. You'll see some devices coming earlier and then for the two terminals coming sometime mid next year. So it all here starting to come together for fairly interesting development in the near term..

And then in the Chinese systems, are they concentrating just on SA systems or they'll be doing NSA systems also?.

Exactly what they are going to do, we will find out but given the size of the deployment that is probably going to be a standalone..

Great, great and then final question if I could. Perhaps if you could provide an update on your progress with Intel on their 5G network process or ASIC especially in the light of delays that Intel seeing on the 10 nanometer process.

Is that impacting the development or your competitiveness in 5G base stations and if you need to get an alternative to that Intel's part?.

The-- what is that just to describe the case how we work. We, of course, work with multiple partners. So for us, we are not relying on the single vendor for a strategic component. And we feel quite comfortable that we are in good shape on the future development on the future roadmap..

Our next question comes from the line of Sandeep Deshpande of JPMorgan. Please go ahead. Your line is open..

Yes, hi, thank you. Two good question for me. I mean firstly on the North American deployment.

I mean where are you supplying --are you supplying across the board in terms of 5G because you talked about upgrading your existing base stations, but there is some deployments in the United States which are small cell base which would not be involving your base.

And so could you talk about the product range that you have from the low band, mid band and the high band? And then secondly, I have a question on the cash flow.

I mean you've shown this very impressive improvement in operating income less restructuring year-on-year, but when you look at your free cash flow improvement year-over-year, I mean the flow through to the key free cash flow is much less so than the improvement in the operating income.

Can we understand what exactly is happening there?.

Okay. Hi, Sandeep. Let me start, Carl here, let me start with the cash flow there. Yes, what you see is a bit of buildup in working capital inventory and accounts receivables in this quarter, but it's really a reflection of the higher business volume, ramping up for next quarter.

So that's one part and then the other part of single out here is actually the CapEx piece which in Q3, 2017 was abnormally low there were some extraordinary positive effects there. So there - that those two items really explained the Delta independence..

Okay and will this improve within fourth quarter? This conversion..

Sorry. Say that again..

Will the free cash flow conversion improve into the fourth quarter?.

We don't guide specifically on that actually, I can't say but we of course we put a lot of emphasis on the free cash flow generation, working capital release and obviously the profit side as well.

I can also mention actually one more item, it's --when it comes to restructuring cost of course that we have a cash outflow from the previous program happening now as well..

On your first question what we see today of course in commercially being deployed now is it's a millimeter wave, and that is going to be deployed in a call it small cell or suite macro fashion. And we have a competitive product range there. And that's what we see deployed now making less benefit of the --our 4G portfolio.

At the same time, we see that as we introduce mobility in 5G and NR to have the complement of low, mid and high band in 5G and 4G provides very good capacity in dense areas.

And that's why we feel our portfolio 4G offering that upgradable to 5G is the true competitive advantage and provides our customers with --actually cost efficient way to use 5G, but also to get the capacity..

Our next question comes from Aleksander Peterc of Societe Generale. Please go ahead, your line is open..

Yes, hi. Thank you for taking my question. Can I ask you to provide a little bit more color on the cost of 5G field trials? Are we looking for at SEK1 billion or SEK2 billion for example approximately annually? Is that happening just in the second half of this year or is going to spread over a longer period? That would be my first question.

Second one, I'd like to understand a little bit the color on the sequential movement in your North American revenue which is actually sequentially just a little bit up, but Q was very strong.

So do we have a pooling of revenue in North America in both Q2 and Q3 that results in this weaker Q4? And then generally speaking, I was just looking at a small quarterly pause in North America and then strong 5G deployments will continue next year or you are waiting for other regions enter stepping in 2019? Thanks..

We take --the cost of field trials, we actually expect to absorb the cost of field trials. So we're not going to put them outside over our performance, but you can see that they're probably a few SEK100 million per quarter.

The North America pooling, it's not really a question of pooling here, it's more that we are running very high volumes in North America already in Q3 and there's not so much capacity to actually increase that volume in according to normal seasonality. So we think it will continue on a high volume, it's by no means slowing down.

It continued on a high volume similar to the Q3 volumes. And we believe by the way that will - on that level will more or less continue also into 2019..

Our next question comes from Alex Duval of Goldman Sachs. Please go ahead. Your line is open..

Hi, everyone. Alex here from Goldman Sachs and congrats on the strong quarter. Just a couple of quick questions. Firstly on Europe, it looks like revenues there seem to be stabilizing in networks from Ericsson perspectives.

And that looks like quite a turnaround as that was one of the tougher regions from an investment point of view in the last year or so.

And so could you help us understand what's driving that turnaround and also toward extent that's down to market recovery perhaps related to improving in the network ahead of 5G and to what extent it's about those market share winds that have been announced in the press? Second of all, just on the gross margin side.

These continue to move in a positive direction even as you're rolling out new hardware related to these 5G upgradable base stations in the US, but normally when this kind of hardware rolls out in previous cycles, we've seen lower margins because it's people intensive work or there's price discounting involved.

So is there something different in terms of these 5G associated hardware revenues in this cycle when we compare it to previous cycles? Or was this just due to the fact that the US has better margins overall? Many thanks..

If we look at Europe starting with that, yes, it is a recovery. You have seen that starting basically second quarter last year when we announced the win in the UK. We have gradually strengthened our position. It's not a whole lot of a tailwind we feel, but we feel we have a very competitive product portfolio.

And the team in Europe and Latin America done a great job at coming back gaining, gaining position and gaining trust with customers and supplying customers with product. So we see that this is achieved a little bit on our own. If you look at gross margins, no, it's not different from the past.

What is different is that we are very disciplined in the way we approach new business. And we are super cost efficient in our service delivery. So we're-- it's not what we do with may be slightly different how we do it..

The next question comes from Achal Sultania of Crédit Suisse. Please go ahead. Your line is open..

Hi, good afternoon, everyone. A question on North America again.

Can you just --when you talk about these 5G readiness projects can you talk about exactly what are you doing specifically for the customer? Is it like installation of new sites or is it predominantly upgrading existing 4G sites? And how does that business change because we are still in very early stages of 5G? So let's say we go into 2019 and there are bigger rollouts relating to 5G.

Does that business mix change in the US as we go into next year?.

What's happening is that we're selling our 4G and our customers need to have a capacity in the 4G side. Data traffic is kind of growing at the rate of doubling every18 to 24months. That's happening today in North America. So they need new capacity.

So you will see a combination here or modernization of some call it some equipment that have old gear and that needs to be modernized, but you also see a densification to deal with the capacity needs again. So you see both of these.

How that is going to play out in 2019, we of course will see but the millimeter wave will be deployed in a different way. So of course that's going to impact. We see also at the same time some favorable developments for example the FCC implementing a short clock for new site acquisition and deployment.

So there are some things going on that can simplify rollout than it is today. And that's important in order to speed up the build-out. Otherwise this is a score so that's why it's kind of limited what can be done in North America. The lead time to grow fast is actually quite substantial.

So that's why we think it's going to level out at a certain level right now because just the simple time to get to --get to sides --to get power crew et cetera are quite substantial..

Okay, thanks. Maybe follow up on China. If I look at China, your revenues have actually-- Q1 was specifically weak and then we've seen some recovery in Q2, Q3. Like historically when China has ramped up in the mix we've seen some gross margin pressure and this time around it doesn't seem like you've seen any pressure from China rising in the mix.

So, again, like can you talk about the mix like what's happening in China in terms of product mix?.

The reality is you're looking at a little bit different way of doing business at Ericsson. So we said very early on that we're increasing our investments in R&D. We do that in order to actually keep our cost of our product lower. And we have invested quite substantial amounts to make our service delivery more efficient.

That's the combination why you see gross margin developing favorably. And of course, our task is to make sure we're commercially discipline to take the orders where we have the most value to the customer. That's what we will remain to do and that's what we have done so far, and that's no change..

The next question comes from Simon Leopold of Raymond James. Please go ahead. Your line is open..

Hi, thank you very much for taking the question. Good morning. I guess afternoon for you. I wanted to first clarify the commentary on seasonality. I think it's unclear what normal may be in this environment over the last several years for the various regions. So just wanted to square my math with you before asking a more broad question.

By my estimate looking at sort of the comment on North America being relatively flat sequentially in other regions normal. That would suggest sequential growth in the high teens range plus or minus around 19%. Just want to see if that's what you intend to communicate in that range.

And my broader question just relates to we've had a series of announcements on 5G awards and particularly in North America that have included Samsung, who's been a very, very minor player for a number of years.

Just wondering how you see the competitive dynamic and what we historically thought of as a duopoly for wireless infrastructure in North America looks like that third players and I wanted to see your thoughts on how we should think about Samsung as a competitor? Thank you..

Thanks Simon. Carl here. I'll take the first one. When it comes to seasonality, let me try to explain. So if you look at the pure mathematical fire average, it's actually a 23% up in Q4, but that includes for some of those here's one of IPR sales. So it's not so relevant.

Actually the more relevant I need to look at the underlying and that's around 18% growth seen in Q3 to Q4 and last year as one example was 17%. And what we say now then given these comments around North America and given the high capacity that we are running on. I said North America will be flat.

That's our expectation or flattish while the rest of the world might still show the typical underlying seasonality which is let's call it 17%. Hope that makes sense..

That's helpful and then in terms of Samsung as a competitor?.

Yes. It's --and you have seen that on the announcements that they are clearly there. And they are a competitive competitor. They have been globally a competitor in 4G as well, and we have seen some deployments not in North America significant, but they have a presence there as well. That's the competitive scenario.

I think for us, we need to continue to invest in our R&D to have a competitive product portfolio. And that's what we do to offer new features to our customers. That's the way we're going to compete and then I think we have a very good position in North America.

And once we will see how the deployments work, but we're quite comfortable with our current situation..

Our next question comes from Eugene Whettberg of [Indiscernible]. Go ahead. Your line is now open..

Thank you very much and good afternoon. I have a question on the spectrum situation going forward looking into Q4 of 2018 and also 2019 more specifically. We have the 28 gigahertz auction on November 14th in the US. How do you see that improving your outlook for the end of the year and then next year? Thank you..

I'm not so sure it's going to change our outlook for the rest of the year and into next year materially, but it is good that spectrum becomes available. And the US has more work to do on mid band and CBR as well as the 3.7 to 4.2. So we applaud every spectrum that becomes available.

I think the big issue is more the spectrum availability in Europe and the uncertainty that has created with the pricing, but we are in general --we will always applaud new spectrum that comes available because it helps our business long term. Because it helps the consumer long term..

The next question is from Amit Harchandani of Citi. Please go ahead. Your line is open..

Thank you. Good afternoon all. Amit Harchandani from Citi and thanks for letting me on. Two questions if I may. The first question is really about the product mix that you referred to earlier between capacity and coverage within the network's business.

Given the visibility you have at this stage, could you give us a sense for how do you see the mix between capacity and coverage shaping up at least say over the next couple of quarters if not more? And any other drivers or parameters that we could look at to get a better understanding of how that mix shift is likely to evolve? Which of course will help us also get a gauge on your margin profile? And a second question, maybe a clarification, I'm just wondering why the update on the SEC and DOJ investigations has been highlighted as a part of this particular release? Is there any material information that you have submitted or you have been made aware of in the previous quarter that has seen you come up with this today? And maybe not at the CMD or maybe not earlier, so just curious on the timing of this update.

Thank you..

Thanks Amit. If we start with the first on product mix. I would caution against thinking capacity and coverage because as I said a large part of what has to be done is densification. And to me densification, you can define as capacity or coverage depends on your perspective, right. So don't think of the business that way.

I think that as Einstein once famously said, one should simplify reality but not too much. And I think that is simplifying a bit too much. So you can see the product mix we have. It's a mix of hardware and software. It will of course fluctuate between quarters a bit. But it's also what we see in the new type of networks being built out.

Then about the timing. It's --I think we want to do work at making information available as we have it. And we have done quite a lot of investigations over the last - because we have cooperated since 2013 and 2015 and we have continuously investigated the matters at hand. And now we have shared all of those findings with the authorities.

And of course we felt it's appropriate to bring that as an update. So we --and the real update here is we have that we have breaches of our code or business ethics. That result in our judgment now that there could be measures taken. And we want you to communicate that..

Thank you. Then our last question comes from Johannes Schaller of Deutsche Bank. Please go ahead. Your line is open..

Hi. Thanks for taking my questions. So if I could just quickly coming back to North America. I mean you mentioned that you don't have enough capacity there really to ramp the business further.

Is that production capacity or kind of deployment capacity from your side? And did I get you right that you're essentially not expecting a higher revenue run rate in 2019 here than what you're seeing in H2 because of these limitations? So basically not more growth or did I misunderstand that? And then secondly just on digital services.

I mean you did a full review of the portfolio, Börje, when you came in and now there are some additional provisions. Just how certain can we be that this is kind of a one-off or is there really a risk that maybe you have some more provisions also to make for other contracts in that portfolio? Thank you..

Now if you start with the first one on the --we have said that there are a number of factors, site acquisitions, power crews et cetera that are limiting the growth in 2019 in North America. That's kind of what we have said. We still think that's the best judgment. Does it mean that it ultimately becomes flat? Let's wait and see.

If we can add growth towards the end of the year, but the reality is the demand again the data traffic at the end of the day doubles every 18 months. So there is a built in demand for capacity. And that's really what ultimately will be translated into to sale. So for us, we see and we think that a fair assessment that it's flattish next year.

If you look at the digital transformation projects, we took provisions this quarter for one large project. That's been ongoing and we are-- as we also say we're not --we're unhappy about our performance on these transformation projects, and we're looking at ways to change the way we run them..

But you still feel pretty comfortable about all the other contracts and that we shouldn't expect anything else in terms of additional provisions there?.

We feel very confident about it. This is as a matter of fact one digital transformation contract that is underlying the provision. I'm very comfortable about the rest of the portfolio. We need to fix this project..

And before I'll give the closing remarks to Börje I would just like to remind you all about the Capital Markets Day in New York, November 8th, And now you can actually on our website you can register for that event. So all of you are welcome and I'm looking forward to see all you there. But before that you will hear Börje's closing remark..

Thank you, Peter. Now you're all welcome to the Capital Markets Day. Of course, look forward to seeing you there. Until then, we will of course focus on executing on our focused strategy, making sure that we have competitive products, as well as a competitive cost position, critical for our long-term success.

And we will of course bring you up to date on our outlook as well as what we see for the future coming at the Capital Markets Day. And until then thanks and hope you have a restful rest of the week. Okay, thank you..

This now conclude the conference. Thank you all very much for attending. You may now disconnect..