Elisa Oyj Ord A

Good morning everyone and welcome to ELISA's second quarter 2024 interim report, analyst meeting and conference call. I'm Vesa Sahivirta, head of university relations, and now we have a quite familiar team, CEO Topi Manner for the second time and CFO Jari Kinnunen, who has been here quite many times. And regarding one milestone, I just want to say that this is 100th interim report at ELISA for me. And last 41 of those actually has been the best ever in company's history in a year-to-year comparison. So quite a great continuous improvement indeed. But now to the agenda of the day. We start the presentation, followed by Q&A. And Topi will start the presentation. So I give word to Topi, please go ahead.

Thank you, Vesa, and good day, everybody. And by the way, Vesa, congratulations for the 100th quarterly report. That's quite amazing, I must say. And also the 41 quarters of improving result for ELISA. That is certainly noteworthy as well. So thank you, everybody, for joining this Q2 call of ELISA. The main headline for our... second quarter this time is that our earnings continued to develop well and we also started to see improving performance on the B2B side of the business which as you would remember in our case includes our home market corporate business both in Finland and in Estonia and then the international digital services part of the organization which separately enjoyed a revenue growth of 21% on year-on-year basis during the quarter. So looking at the Q2 highlights, our revenue increased by 2% and EBITDA was up by 4%. So if you would be looking on the decimal basis, then the EBITDA improved with a couple of decimals in comparison to Q1. Mobile service revenue increased by 4.7%, so in line of our mid-single digit growth expectation for the mobile service revenue. As stated, we saw improving signals and improving performance in business-to-business side of the business. And also the B2C segment continued to develop strongly. In international digital services, the revenue increased by 21%, as mentioned. That was boosted by the small Bolton M&A that we have been doing during the first part of the year. If we look at the organic growth for IDS on year-on-year basis, that improved to 7%. And we reiterate our target of double digit organic growth for IDS during the full year of 2024. In Finland, the postpaid churn remained at the same level at 15% in comparison to previous quarter, and then the postpaid subscriptions grew by 42,000 approximately. Of that, M2M and IoT subscriptions constituted 47,000 subscriptions. In terms of the fixed broadband, the subscription base increased by 600. And just recently, we also made two small acquisitions of fiber networks in the northeastern part of Finland and in the eastern part of Finland from Kaizanet. We continue to enjoy good 5G momentum and at this point of time the network covers more than 64% of the Finnish population. At this point of time, we are also differentiating our subscription offering positively from competition as we, during the quarter, included the 5G standalone functionality for all of our new subscriptions, both to consumers and corporates, actually as the first operator in Europe. And with respect to guidance, we are reiterating our full year outlook as part of this report. So with respect to Epita, the growth was driven by the mobile service revenue as well as efficiency. There were actually several components impacting the revenue growth. The main growth drivers were related to mobile and fixed service revenue, and as mentioned, to IDS. In terms of the decreases, the business disposals of Videra, that we sold at the end of last year and the discontinuation of Viaplay cooperation, they both impacted revenue negatively, but both actually improved profitability. Also, the service number regulation change impacted revenue negatively and the same goes for equipment sales. In this economic environment, With the sluggish sentiment among the consumers and corporates alike, consumers and corporates are prolonging the interval of changing their phones, and also the average price of phones is decreasing, thus impacting equipment sales negatively. Interconnection was also changed, driven by regulation, but here we would need to remember that that change is EBITDA neutral as asymmetric reduction is made on the cost side as is the impact on revenue. When we look at the EBITDA that was driven by mobile services, the mentioned business disposals of Videra and Viaplay, and also the efficiency improvements that we made earlier during the year that now start to bear fruit to some extent during the Q2 and then to full extent on the coming quarters. Our EBITDA landed at 190 million euros and the EBITDA percentage on year-on-year basis increased to 35.1%. Mobile service revenue, as mentioned, was up 4.7%. During the previous quarter, we still had a tail impact of earlier made price increases impacting the MSR growth. That was not the case during Q2. So the number of 4.7% is, to a large extent, to a very large extent, driven by 5G upselling. ARPU growth was 5.5% during the quarter, pretty similar growth both on consumers as well as on corporate side of the business, yet again driven by 5G upselling. When we look at the competitive landscape at this point of time, that is largely the same as it was during the first part of the year, but we do see some campaigning in 4G at this point of time. So competition remains normal, keen, tight as normal. The journey was basically stable at 15%. When we look at the segments, the consumer segment, as stated, continues to perform strongly with EBITDA growth of 5%. When decomposing the revenue development, we will need to take into consideration the VIA Play discontinuation, as well as the mentioned impact on equipment sales, as well as interconnection. When we look at the EBITDA percentage, the 41%, and if we look at that on a decimal basis, that is one of the best, if not the best, EBITDA percentage that we have had over the years in consumer segments. So, profitability-wise, delivering strongly. In terms of corporate customers, as stated, we started to see a pickup during the quarter. Companies, especially at the large end of the spectrum, start gradually to invest to connectivity, to software and to IT services. And we start to see first signals of that improving outlook. The revenue increased with 6% and EBITDA improved with 2% after a couple of challenging quarters during the past 12 months. The revenue growth was driven especially by fixed services and mobile services and also the IDS side of the business. The business disposals and the regulatory changes as well as the equipment sales will need to be taken into consideration also when analyzing the revenue growth on B2B segment. The EBITDA percentage on B2B decreased with a notch to 26%, driven by some large, a bit lower margin deals. Looking forward, we see a stable outlook for the EBITDA margin in B2B segment. So basically, no change there outside of some quarterly fluctuation. Looking at our strategy, we are all about building a sustainable future through digitalization. And our key strategic focus areas remain the same. We want to increase mobile and fixed service revenues. And here, especially the 5G up sales and continued investments in fiber play a big role. In terms of growing digital service businesses, IDS growth, improving is definitely important. And then taking a bit longer perspective, we see opportunities for growth in digital services revolving around the needs that our customers have in their homes. and secondly, also in corporate IT services. In terms of improving efficiency and quality, we continue to leverage the strengths that we have in continuous improvement in the culture of excellence and then certainly we'll be focusing on the efficiency and productivity of the business also by means of utilizing AI and automation going forward. The migration to higher speeds continues. This is a source of sustainable growth for ELISA. And when we look at now the penetration of higher speeds, which we define as speeds higher than 200 megabits, the penetration is 55%. And customers do value speed, and they are willing to pay for it, and they are happy when they get it. That is clearly witnessed by our customer satisfaction surveys and Net Promoter Score, where there's a marked difference between 4G customers and 5G customers in favour of the 5G customers. Currently, 59% of the smartphones are 5G devices, meaning that there's potential for us to grow in our penetration also in terms of the device landscape. If you look at the trend line of the penetration closely, you would see a slight uptick during the past quarter. And that uptick is basically accountable for the corporate 5G sales gaining momentum. So far, especially the large companies have been somewhat conservative in terms of taking 5G into use due to the overall macroeconomic environment, and they have been trailing back the consumers and the SMEs. But now we see that bigger companies are starting to convert their subscriptions to 5G. And as stated, that is the source of the uptick and an encouraging signal for the sales going forward. We have a leading position in 5G in our home market, and we are increasing our investments and meeting the customer demand in terms of fiber network. As stated, our current 5G population coverage is already over 94% in Finland and over 76% in Estonia. And when we look at the average billing increase when customers transfer from 4G to 5G, that remains intact, namely being €3 per month increase when customers take the 5G subscriptions into use. And I stated as the first telco in Europe, we have now included the 5G standalone functionality to our new subscriptions for consumers and corporates alike. So in this one, we are clearly a frontrunner on a global telco space. With the 5G standalone, which we call 5G+, customers are getting a better quality network more resilient network, they are getting better speeds, they are getting better energy consumption that translates into better battery life in their phone. Also, 5G network enables new functionalities like the slicing functionality that we are utilizing, for example, in our fixed wireless access offering. So here we are clearly differentiating from our competition and from the global telco space as a technology frontrunner. As mentioned, in the fiber space, we made two small acquisitions, buying two fiber networks in eastern and northeastern parts of Finland from Kaizenet. With that, we added some 14,000 homes passed and some 6,000 homes connected. So this is an example of, you know, additional measures in addition to organic growth that we are doing around the fiber business. In our ideas part of the business, due to the sluggish macro environment during the past 12 months, companies have been a little bit prolonging their projects. And while we have been having a strong order backlog, that has been impacting our revenue development. But now, during the quarter, we start to see these project implementations picking up speed. and that is visible in our revenue. So IDS revenue increased by 21% and the growth was boosted by the small acquisitions that we made during the early part of the year. We have a good order backlog and also good order intake. And as stated, we are reiterating our target to have double digit organic growth during the full year of 2024. We have always expected that growth to be somewhat backloaded during the year. When we look at ELISA Polistar separately, it's worthwhile to note that during the quarter we successfully renewed the quality and data security certificates in that part of the business. And we do have a good degree of order backlog as well as order intake. In industry side of the business, we successfully completed the leanware acquisition and we have at present time a strong order intake in that part of the business. In distributed energy storage, the startup that we have within the company around energy solutions, we actually included the solar energy utilization to that DES solution. And we also got the first customer to utilize it, namely Olkom, which is the local telecom of Åland Islands in Finland. In terms of domestic digital services, when we start from entertaining services around the consumer side, it's worthwhile to note that this year marks the 10th anniversary of ELISA original series and also our money shot. series that is actually the 40th original series won an award in Cannes festival earlier in June. We also added Max as well as MTV Katsoma Plus to our streaming service portfolio, thus improving our offering to all of our customers. We also did a small cleanup of our business portfolio by selling Elisa Kirja, Elisa Book, to BookBeat. When we look at the corporate digital services, namely IT services, we clearly have strengthened competitiveness. AI and automation are increasingly now incorporated to our IT services, to those that we offer to our customers, but also to our own service production. We have strong customer interests for our GenAI use cases, and we have a good track record of bringing tangible benefits to our customers that also enable scalability in our customers' business. Our use case funnel for AI is growing rapidly, so that's a very encouraging signal. And we also have first AI solutions deployed in our IT end-to-end end-user service production, improving scalability and productivity in our own business. Geopolitical uncertainties are driving at this point of time the demand for cybersecurity services, and there we are well positioned on the market with differentiating product and service, and that is really visible in the intake of new customers in this part of the business. One of the highlights for the quarter was that the Time magazine listed world's most sustainable companies in partnership with Statista. And in that ranking, we landed on a position of number 66. So, Schneider Electric was ranked as number one. And in our close proximity, we had very well-known international brands. For example, Microsoft was ranked number 64 and Puma was ranked number 67. We were also... ranking the best Finnish company in terms of sustainability, according to Time magazine and Statista. So this is a testament of, you know, the consistent systematic work that has been done around sustainability in ELISA over the years and something to be proud of. And then to wind up with our outlook and guidance, as stated, we are reiterating our guidance. So we expect the revenue to be at the same level or slightly higher than in 2023. And the same goes for EBITDA. We expect that to be at the same level or slightly higher than in 2023. As for capex, we have some quarterly fluctuation, but for the full year, we expect to stay within the bracket of 12% to 13% capex of revenue. So with that, I will hand over to Jari, who will go through his slides before we take the Q&A. So thank you very much.

Thank you. Let's start with profit and loss. Q2 was continuing. good trend with earnings growth and EBITDA growth accelerated now fourth consecutive quarter in role. So solid performance continuing. Revenue 1.6% growth, also that one improved from Q1. Still negatively impacted by divestments and net impact from divestments and acquisitions. is approximately 1%, so organic growth about 2.5%. Also in the reported growth impacting interconnection price change, that was beginning of the year, 3 million negative change. and equipment sales also impacting in both segments, like is the case with interconnection, negative 6 million. Service revenue growth was strong in corporate segment, 14 million and half of that coming from one big corporate deal in Estonia relating to software licenses and equipment. Also services in IDS or organic road in IDS contributing contributing to corporate segment change like is the case with domestic mobile and fixed services and digital services as well. Consumer segment, 3 million increase in service revenues, mobile services growing, negative impact from fixed voice and ending of streaming cooperation agreement last year. Epidemic growth was 4% to 190 million, margin improved from 34.3% to 35.1% mobile service revenue. Also efficiency measures as well as divestments from last year impacting positively to margin. EBIT growth was 4.8%, also EBIT margin improved to 22.4%. EBS growth 2.4% to 0.50 euro cents. In Estonia, strong revenue growth, 9% or 5 million, as mentioned, impacted by this approximately 7 million deal relating to licenses and equipment. The negative revenue impact from interconnection, also in Estonia there was interconnection price change, beginning of the year and mobile equipment sales also lower than year before. Overall, general economy situation in Estonia is still somewhat challenging, and for example, inflation rate, although decreasing, is still higher than in Finland or other European countries. And Epida nevertheless continued to develop positively 1% growth. In mobile subscriptions, postpaid was slightly decreasing, 2,100. Prepaid, 400. Increased churn was somewhat higher, 11.9% from Q1. Then moving to CAPEX, reported CAPEX in Q2 was 84 million, excluding licenses and lease agreements and acquisitions. 81 million, which is the guided CAPEX, and it is higher at 15% from the revenues. There are quarterly variations, and for the whole year, the capex guidance, 12-13% from revenues is intact. Main investments continue to be in 5G network, extending coverage, and in fixed site continuing fiber investments and IT investments. Comparable gas flow was 94 million. Somewhat lower than a year ago. Positive change coming from higher EPIDA and lower license fee payments. Negative impact from higher CAPEX and interest, and although net working capital change was positive, but it was less positive than a year ago, so impacting slightly negative to cash flow. First half cash flow 180 million, slightly higher than a year ago, EPIDA and lower license fee payments as well as networking capital change impacting positively and CAPEX and higher interest having a negative impact. EPIDA operating cash flow conversion was 58% in Q2. Then moving to capital structure and solid capital structure, as well as financial position, continuing net debt in line with the target 1.8 times equity ratio. 35% decreasing from Q1 as a result of dividend decision in Q2 and equity ratio then improving in coming quarters after that. Return ratios continue at a good level, return on equity 30.7% and return on investments 18.7%. And in terms of debt maturities, there is no major maturities in the near term. Next, fixed interest loan maturity is 2026, and average interest expense is currently at 2.6%. And now I give the word to Vesa, please.

Thank you, Jari. And now we move on to Q&A part and we take first question from audience. Sami, please.

Okay. Thank you. Sami Sargames, Danske Bank. I have four questions. We'll take this one by one. Starting from the corporate segment, do you have visibility on further improvement entering second half of the year? or should we remain cautious as you benefited from this large deal in Estonia during the second quarter?

I mean, if we look at the sort of overall development of the economy, both on our home markets, but worldwide, you know, I think that we are starting to see some first early signals of improvement. And when we sort of decompose our B2B segment in IDS part of the business, we have seen you know, the projects picking up speed, thereby, you know, us being able to account for the revenue that we have had in our order backlog in terms of the deliveries. And of course, you know, also the order intake is improving, namely sales is improving. So improving, gradually improving outlook in that part of the business. Then if we look at Look at the connectivity business for B2B. I stated the phenomenon there is that now the large companies are starting to convert their subscriptions to 5G. We also see some activity level improvement in terms of them investing to corporate networks. IT services in terms of, let's say, AI and automation related IT services and cybersecurity services. Our sales funnel is improving a bit. So in this sense, I mean, there are always bigger deals that come and go. And also the bigger deals are part of our normal course of business. We will have them every now and then. But underlying it all, there is a first signal of improving activity level.

Okay, thanks. And then continuing on IDS, how good visibility do you have on the second half? Is it mostly about delivery execution or do you actually need more orders from customers in order to reach the double digit organic growth target for the full year?

I mean, if we average things out a bit for the IDS business, the typical sales cycle is, let's say, six months. So we have a good degree of visibility for the revenue for the remainder of the year. So much of the sales is in the pocket. So to speak, of course, there's always a bit of timing risk in terms of how the individual projects will be proceeding and how we can account for revenue. And then certainly, especially for the Q4, we still have some sales to be done. But we reiterate our target of double digit organic growth for ideas during the course of the year, as we have been stating before.

Yeah. Thanks. And then continuing on MSR growth, is it still going to decrease the growth rate going into third quarter? I think that's when comparables will be sort of They will be more demanding as you implemented these pricing changes than related to fixed service numbers.

If we look at the first part of the year during Q1, we had still some impact of earlier made price changes in addition to the speed-based up sales that we are doing. During Q2, the impact of earlier made price changes basically was not there. So to a very large extent, it was only up sales that is visible in the MSR. in the Q2. Now, in Estonia during the Q2, we already conducted some price changes. that will be visible during the remainder of the year. And we have some price changes in the immediate pipeline. So we see that that will be topping off MSR a bit going forward. Still, the majority of it will come from the up sales. And we maintain our view that the MSR will experience mid-single digit growth going forward.

Thanks. And then finally, you've been acquiring several fiber assets during the past year. Can you comment on the rationale and are you planning to make further acquisitions? Is this a way to increase the fiber market exposure without touching the 12% CapEx2 sales? And then maybe finally, could you sort of disclose what's the typical price to book valuation in these transactions?

Yeah, if I take the first question and Jari, you can take the second one. I mean, in terms of the fiber market, our strategy is that we want to stay on the middle of the road. So on one hand, we want to make sure that we will be keeping our long term market share. also in terms of the fiber business. On the other hand, we want to steer clear from doing overinvestments on the market. And currently, we are and we have already ramped up our organic investments to fiber. And as we speak, we are building fiber more than ever. But we are topping that off with these small bolt-ons on those regions where we see possibility in Finland. And on the overall, if you look at the fiber market, I'm comfortable in terms of where we are positioned. So in our own network area, We are clearly very, very competitive in the fiber business and we are not losing our market position. And then we are very much focusing on the fiber sales and the cross sales on top of the fiber connection. That is important for us to meet our financial targets and also to improve customer stickiness.

If I continue with that pricing point of the question. So, unfortunately, we are not disclosing the numbers also for competition reasons. From the total, let's say, balance sheet point of view or financing point of view, these are fairly small acquisitions and they are comparable to doing the investments

ourselves so it is also accelerating our go-to marketing in fiber so i'm reading this so that price to book is not materially about one um no comment okay thanks i don't have any further questions thank you and congrats

Thank you Sami. And now we don't have any further questions from audience. So let's go to the conference call lines and the first question, please.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad The next question comes from Andrew Lee from Goldman Sachs. Please go ahead.

Good morning, everyone. Actually, good afternoon, your time. And congrats to Beza. That's quite the achievement. I had two questions just on your top line growth rates. The first question is just on mobile service revenue growth and why it wasn't a little bit better this quarter. So if we strip out the product shifts, I think the underlying mobile service revenue growth was about 3.7-ish percent, which is the lowest it's been for a while, when there had been some comments that there would be a lag between last year's price rises and consequent revenue growth. Can you help us understand why underlying growth trends were over a percentage point worse than we saw in the first quarter? I mean, KPIs were good. RP trends were good. Comments were a little tougher, but only by 50 bps. So, yeah, it helps us understand why we saw that kind of slight slowdown in growth and what you expect the cadence of mobile service revenue growth to be through the rest of the year. Second question was just on fixed revenue growth. You delivered plus 5% in the quarter and That's first a negative number in the first quarter and three to four percent in the second half of last year. I know there are quite a lot of kind of inorganic elements or non-underlying elements going on there. So can you just help us understand what the underlying growth was in fixed and what are the drivers of that underlying improvement? Thank you.

Yeah. Hi, Andrew. This is Tobi speaking. So yet again, if I take the first one and you take, Jari, the second one. So in terms of the MSR momentum, as stated during Q1, we still enjoyed the tail effect of earlier made price increases. So that was clearly one element. impacting the comparison between the quarters. During this quarter, there was not that kind of sort of price increase element, but toward the end of the quarter, we already made some price changes in Estonia that will be bearing fruit during the remainder of the year. And as mentioned, we are about to conduct some price changes that will also be supportive of the MSR development going forward. And then if we look at the MSR segment by segment, I mean, now if you look at RPU numbers, the RPU numbers are, you know, broadly on the same ballpark, both on B2C segment and B2B segment, where the B2B RPU has been improving a bit lately. And now As I mentioned, we start to see especially the large companies migrating increasingly to 5G. So that is another element that can be supportive of MSR going forward, coming from the source that has not been there previously. So I think that these are all the dynamics that you will need to take into account. if I even things out, there is quarterly fluctuation, but when we look at the trends, you know, beyond the quarters, we are on track with our earlier soft guidance of seeing mid single digit growth in MSR.

And if I continue with the fixed services, So these acquisitions earlier this year, they are not impacting to fixed service revenue, but there was this large deal that was discussed earlier in Estonian numbers that is in fixed services relating to software licenses and equipment approximately seven million. So every now and then these kind of larger deals happen and now in this quarter this was maybe somewhat bigger deal.

Thank you. And what was driving the underlying improvement in fixed revenue growth? Stripping out that Estonian impact?

Of course, in fixed services overall, there are several different service revenues and in corporate segment, corporate networks or private networks type of services, cyber security type of services which are growing especially in cyber overall security services are growing quite nicely and that is impacting.

So the fixed network revenue increases the underlying bit very much comes back to the earlier comments made around the P2P segment.

Thank you. Very helpful.

The next question comes from Andrej Kabacek from UBS. Please go ahead.

I've got a question on information. So maybe one follow-up or further follow-up on mobile service revenue. So if I understood correctly, you mentioned that the mid-single-digit kind of growth rate is something that you're confident, not just about, you know, not just for this year, but about, or for the mid-term as well. And if we go back over the past couple of years, even though it's been higher than, say, you know, 4%, that maybe some of the recent commentary would suggest, then it was driven by several things, including a lot of, you know, 4G repricing. So just going forward, you seem to indicate that today, the vast majority of the growth that we're seeing in mobile service revenues is coming from 5G. So just to understand, if we go into the mid-term, as you say, mid-single-digit growth, so it sounds like you're very bullish on just 5G monetization in general, which would be a bit different from other markets. Or is there any other driver, including like a return of maybe 4G back into pricing, that that should support the mid-single-digit growth on mobile service revenues? And I'll ask the second question later.

Yeah, thank you for the question. There was slightly weak lines, so it might be that... that we have missed some aspects of your question. So if that happens, please just repeat the question so that we can address it appropriately. But with respect to the MSR, as stated, if we start with the competitive landscape, we see that the competitive landscape is largely intact. If we look at the average monthly billing increase that we are getting when customers are transitioning from 4G to 5G, that is 3 euros per month, and that's delta. remained intact during the Q2. So that tells a lot about the 5G and the sustainable source of growth that the 5G upselling presents to us also going forward with the track of 5G penetration increasing in trend-like fashion and even with the slight uptick now during Q2. In 4G category, we see competition and we do see campaigning. So, you know, the market remains keen, competition remains keen in that part of the market. Then what we need to remember that in Finland there is a VAT change that will be affecting a wide range of services, including connectivity services, and that VAT increase is 1.5%. So that price change we are conducting as from 1st of September onwards. And we are introducing the increased VAT to our prices as such. That will be changing our sort of psychological pricing a bit if we take a little bit longer term perspective into things. Summing all things up, we see that 5G up sales continues to be the main source of sustainable growth in terms of MSR. And then there will be a bit of price impact also for the backlog going forward. And the interesting new phenomenon is the large companies especially starting increasingly to migrate to 5G, which is supportive to B2B MSR growth.

Thank you, and apologies for my weak line, so I'll try to be a bit more clear. So the second question I had was maybe on another comment that you had maybe for the midterm in terms of improving profitability of the core business. So, obviously, we have a lot of top-line effects this year that improve the margin mechanically. But then, you know, inflation is easing off. Some of the recent efficiencies last quarter were mentioned that were maybe larger than expected. So, just are we entering a period of, say, higher operating leverage at ELISA than we've seen over the past, say, two or three years? That is sustainable for, again, the midterms.

Yes, as I said earlier, our fourth quarter in a row, we accelerated the EPIDA growth percentage, year-on-year percentage. We improved the margin almost 1% point. Now in this quarter, we made restructuring in Q1. And we, of course, we continue with efficiency measures and productivity improvement measures. And same time, as also discussed in this call already a couple of times, service revenues, both mobile service revenues as well as fixed service and digital services are expected to grow. IDS targeting to grow a set, double did it for the whole year and second half expected to be better than the first half in IDS. All these are of course contributing to to earnings and as you said, operating leverage has improved and we continue to work that also going forward.

Thank you very much.

The next question comes from Oskar Ronkvist from ABG Sundal Collier. Please go ahead.

Thank you. Hi all and thanks for taking my questions. So just the first one I was just going to ask about was the 5G standalone as a differentiator both on the corporate and the consumer side. If you have any sort of early indication how it has been met by customers so far and any specific areas where they can utilize this. So I think I asked last quarter about the corporate business and what the potential areas could be there, but also on the consumer side, do you see any sort of exceptional interest in the slicing, for instance, and how you're able to monetize that? Thanks.

Yeah, as stated, we have just recently introduced 5G standalone, i.e. 5G+, to our new subs for consumers and corporates. And it is still relatively fresh. So first indications are encouraging. If we compare our sort of pricing of the subs with the 5G plus functionality to 5G offering of the competitors, we are differentiating positively. And there's a touch of price premium that we are enjoying for the moment on that one. But that's stated early days. When we look at the early signals of customer satisfaction in terms of the 5G+, the better quality network, the resilience, better speeds, better energy consumption, some weak signals of improvement during the quarter in terms of customer NPS. for all of our clientele, we hit yet another all-time high in terms of NPS. So that is an accumulation of many things related to customer service, but the offering around 5G standalone is one contributing factor. And then when it comes to your question of the slicing capability in particular, I think that we have introduced our first slicing products, Elisa Omaka is the fixed wireless access, and they have been on the market for a while. And there is some consumer pickup, but there we don't have any sort of bigger conclusions to share at this point of time. We are keenly observing the slicing capability and considering what kind of product development we can do with that functionality.

Perfect. Thank you very much. My next question will be just on the revenue to EBITDA impact or sort of the margin impact from some effects that we see in the quarters. First of all, just the equipment sales. I see is continuously very soft looking at the year-over-year effect. I know it's very low EBITDA margins, but can you elaborate a little bit on the EBITDA contribution from the equipment sales so we can get the underlying effect from the weakness and also from the large B2B deal in Estonia, I think it was 7 million, right, on revenue. So just those two factors, if you have any sort of color on the EBITDA impact. Thanks.

Yeah. So, like you said, equipment sales margin or EBITDA margin is low. It is positive, but it is low, clearly below 10%. Regarding this bigger deal, customer deal in Estonia, around seven million. It's also, because it's equipment and licensed resale, so it is low margin and so therefore, let's say contribution to total group margin is is negative rather than positive.

Got it. Thank you. That was all.

The next question comes from Titus Cron from Bank of America. Please go ahead.

Good day, everyone. Thank you very much for taking my questions. I've just got a couple of kind of follow-up small clarifications, if that's fine, three in total. The first one is just on the VAT you mentioned starting in September. Will you fully pass on the VAT charge to existing and new customers? Then the second question would be just if there could be any indication on the restructuring impact you had in Q2 and what you could expect for Q3 and Q4 onwards on your EBITDA. And maybe a last, a bit more fundamental question. I think in the past, at least your CapEx or CapEx to sales has always been a bit more H2 weighted compared to H1. Is there any fundamental reason behind this and why would it be different this year if we look at your guidance? Thank you so much.

Yeah. VAT, yes, we will pass that to the prices. In full. So that's the first one. The restructuring impact that we did in Q1 in quarters, this quarter and coming quarters, it's in the range of one to two million improvement. Regarding... What was the third one? Sorry. CAPEX. Yeah, so... As also said earlier, so really quarters vary and there are various reasons why they vary. Our full year guidance this 12 to 13 percent is valid and that's how we are managing the CAPEX so that we are maintaining this 12 to 13 percent from sales.

One of the reasons for a bit higher capex during Q2 is the fiber built. In the Nordics, the fiber is basically built during the summer, given given the climate. So that is happening as of now. And in similar fashion, we are doing some sort of additional investments to our network to cater for the needs of our customers in terms of connectivity during the summertime when the mobility of customers is a little bit different than during the rest rest of the year. But as stated, this will be evening out during the course of the summer, and to Jari's point, we will be sticking to our CAPEX guidance at the end.

Brilliant. Thank you very much.

The next question comes from Nick Lyle from Bernstein. Please go ahead.

Good afternoon, everybody. Just a couple of very quick ones, please. On the Estonian corporate contract, the £7 million that you have mentioned, how much of that was booked in fixed, please? Was that all in the fixed business? Because that's obviously the difference between growth or decline for fixed. So could you help us with the amount booked and also what the underlying performance in fixed is, please? And then just a very simple one on working cap. A big inflow again in the second quarter. Is that expected to reverse into the second half, please? Thank you.

Yeah, 7 million is in the fixed revenue. And sorry, we didn't hear the second one.

Sorry, just to check on that first area, of the big Estonian one-off, was there a similar one-off at this point last year or anything else that we should think, or is that a straight knock 7 million off to get the underlying growth rate in fixed? How would you expect us to deal with that, please?

It's more of the latter one, so that there wasn't in last year similar deal.

Perfect. And the second question was just simply on working cap. What was the inflow this quarter in working cap? Do you expect that to reverse into second half? Could you just explain what it is, please? Thank you.

Yeah, we had positive change, 15 million, coming from all lines of networking capital. Receivables, sales receivables were lower, accounts payables higher. Change in inventories, slightly positive. Well, we continue to work on efficiencies also relating to working capital and, for example, inventories are something that we are looking to be more efficient and we are not happy at the current level.

Okay, thanks very much.

The next question comes from Jacob Bluestone from BNP Paribas Exane. Please go ahead.

Hi. Jacob here from BNP. I've got two fairly quick clarification questions. Firstly, on your broadband net ads, you reported about just under 1,000 broadband ads, but you also mentioned that the acquisition of the fiber companies included 6,000 new customers. So just to be clear, is the like-for-like growth in your net ads 1,000 or minus 5? And then secondly, on your post-paid net ads, if I look at finished post-paid net ads excluding machine-to-machine, they went from about minus 20,000 to minus 2. So just to understand what drove that improvement, I think in previous quarters you've talked about things like zero ARPU customers and data only customers with low ARPUs. So you can maybe just help us understand what's actually going on with your paying smartphone customers. Thank you.

Yeah, the broadband or the acquisition of the fiber networks happened in July. So these additions are coming in the subscription numbers in Q3, so they were not in Q2 numbers yet. Regarding mobile net ads, yes, the situation improved in Q2 compared to Q1. We had Well, one could say somewhat more internal focus in Q1 as we were doing this restructuring during that quarter and more focused on the marketing and sales in Q2. The thing that you mentioned is low usage subscriptions. They are still something that are reducing and impacting to numbers, but I said in Q2, the change was much better than in Q1. And of course, we continue to take care that we are not losing in terms of subscription market shares. Thank you.

The next question comes from C.I. Hefrom City. Please go ahead.

Hello. Good afternoon. Thank you very much for taking my questions. I have two, please. And both questions are mobile. I just want to circle back to some of your open remarks and saying that you see there are some pick up in terms of when it comes to 4G campaign in the market. which seems quite consistent across Europe that we see low end of market competition pick up. I'm just wondering how cautious that you are that the current campaign would not lead to the market return to what we saw two years ago when it comes to 4G and promotional tariffs. And you also mentioned that you are looking at some price increases in Finland. I'm just wondering if you can just elaborate of what type of price increase do you expect are more mass market price increases, or that all you will stick with your cohort-based price increase strategy that you did in the past? And my second question is on corporates. I think corporate mobile Apple has been growing 4 percent for the second consecutive quarters. And in the past, the growth was quite muted. And I was wondering, given that you see the corporate starting adopting 5G, should we think that this should be the reasonable run rate that we should think about the development of COFERIC mobile ARPU going forward. Thank you.

If I start from the last one, so yes, we see encouraging signals on corporate 5G sales, and the corporate has been picking up on the quarter. So there's a slightly improving outlook for that one going forward. I stated on the back of the overall economy, showing first signals of improvement, we see corporates starting to invest a bit in connectivity, in software, in IT services, and that is visible across the B2B segment when we look at the underlying development of things. And then with respect to price increases, I think that we largely exhausted what we have to say in this one. So toward the end of Q2, we did some price increases and we communicated some price increases in Estonia that will be visible going forward. In our immediate pipeline, we have some measures. We will be transferring the VAT change in Finland in full to our prices from 1st of September onwards. Other than that, we cannot comment on possible future price changes. And then, could you please remind me what was the first part of your question?

Yes, I'm just asking that I think you mentioned that you see some pickup in 4G campaign. I'm just wondering how do you see that developed and would that be how it potentially could impact the market dynamics and whether we could return to a more competitive landscape that we saw back in two years ago before the 4G price increase happened?

I mean, largely, we see that the competitive landscape has been staying the same during the course of the fall. We do see this 4G campaigning as mentioned, but no material shift. And basically, all of these factors boil down to our view that we will be seeing mid single digit growth in MSR going forward. So that is basically the bottom line of our commentary.

That's very clear. Thank you.

The next question comes from Adam Fox-Rumley from CellSide Analyst. Please go ahead.

Thank you. Hi, it's Adam from HSBC here. I appreciate you fitting me in. In your opening comments, right at the top of the call, you mentioned earnings improvements. Clearly, we're seeing that at EBITDA, but it's far less significant at EPS when we look at the first half, which looks largely to be down to financial expenses. So I wondered if you could just talk about your confidence in EPS growth this year, whether or not the recent refinancing has changed And then a very quick clarification on the points you were making around 5G standalone. What is, in device terms, what's needed for a standalone subscription? Should we effectively be expecting another adoption curve of standalone devices to sit below that 5G adoption curve? Thank you.

Well, if I start with the EPS and net financials. So there was in Q2 2 million increase in net financial expenses, including share of associate company. profits and that is mostly due to higher interest rates as we've been refinancing in the past fixed rate loans that have been at the lower rate. Now we do not have Short-term, any refinancing regarding lower fixed rate loans. Next ones are coming 2026. And the short-term commercial paper, loans or bank loans are already priced at the current interest rate level because they are at variable rates. So that's the situation. And for the coming quarters, as we said, I believe we said already earlier in Q1 that we expect two to three million this year, two to three million quarterly increase in net financial expenses. So that is unchanged.

And related to your question around 5G standalone, at this point of time, we will need to remember that there are only a couple of handfuls of devices on the market that can handle 5G standalone. And they are all Android phones as we speak. So iPhone does not have the 5G standalone functionality at this point of time. We would expect this to improve in terms of the device capability going forward. And that certainly will also improve the commercial feasibility of 5G standalone going forward. So we are really a front runner in this space, also vis-a-vis the device manufacturers. So therefore, it would be too early to say that it would need to be a category of its own. But it is an additional dimension that will be supportive of our increase in 5G penetration. Got it. Thanks very much.

The next question comes from Ajay Soni from JP Morgan. Please go ahead.

Hi there. Thanks for taking my questions. I've got a couple. Another one on 5G standalone, kind of address the hardware question just now. I was just wondering whether you think customers would actually pay for the service. I mean, I think it's priced at an extra €13 per month, which seems like a pretty significant premium. So, you know, just wondering how you plan to commercialise that, because it seems a pretty decent step up. And then another follow-up on the capex question, which you mentioned that fiber capex kind of happens more during summer. So does this phasing, or maybe the peak coming more in Q2, Q3, is that the kind of capex phasing we should expect in future years, assuming that your fiber rollout starts to step up a bit more? Thank you very much.

If I take the first question and Jari will take the second one. So I think that the price points that you are referring to with respect to 5G standalone relate to our really premium subscriptions that do have the 5G standalone functionality. But on top of that, they have very, very high speeds up to one gigabit. of speeds and those price points are there but those subscriptions are premium subscriptions so they would not be selling in large volumes. Now what we have been doing to our new subs offering is that we have incorporated the 5G standalone functionality to all of the speed tiers that we have. in consumer. So that means that there is a slight increase in price. I mean, let's say if we, for example, take a 300 megabit 5G subscription. So with 5G non-standalone, the price point was €32.99, and with 5G standalone functionality, it's €1 more. So this is how you should be looking at it, so across the speed tiers.

And relating to capex, as mentioned earlier, so quarters are really different. And for the whole year, we are confident that we will be in line with 12-13% sales. guidance and there are these differences relating to fiber or mobile, 5G mobile network rollout in different quarters and different times of the year, but As I said, 12 to 13% for the whole year is valid. Okay, thank you.

The next question comes from Felix Henriksen from Nordea. Please go ahead.

Hi, thanks for taking my question. I have a couple of follow-up ones. Firstly, just on the corporate DARPU. I think back in your latest Capital Markets Day, you stated that the average billing increase from B2B 5G migration was about four euros as opposed to the average three euros as whole. Are you willing to reiterate that message? Is that still the case? And secondly, I think, Jari, you mentioned IDS as a positive contributor to operating leverage for the second half of the year if the growth there materializes. Can you confirm that IDS will indeed be a positive contributor to earnings and operational leverage for the second half of the year, especially in light of the fact that I think we understood that the business is still EBITDA negative for 2024? Thank you.

Yeah, if I start with the last one and Yes, as is the case with revenue, so it's second half weighted. Similar is with earnings, so there is during the year better EBITDA. in the second half compared to first half. So the answer to your question is yes in that sense. Regarding ARPU uplift, so this three year for the whole company level is what we are reiterating and confirming. So three-year-olds ARPO uplift when customers are moving to 5G. We are not making segment specifications on that.

Okay, fair enough. Thank you.

The next question comes from Osman from Burenberg. Please go ahead.

Hello, thank you for the opportunity. I just got three questions, please. The first one was just on mobile service revenues. I know in Q1, there was around 2.5 million of the kind of artificial boost to mobile service revenues because there was some reallocation of revenues from fixed into mobile in response to this special numbers regulation. I just wanted to kind of confirm if there's similar impact in Q2, or was that just a Q1 item? The second question was, you know, just looking at the EBITDA development by consumer and business. I guess, I mean, consumer seems, you know, fairly well on track to continue doing mid to high single digit EBITDA growth corporate, which has been a drag, seems to be coming around the corner. So, you know, consumers doing mid to high single digit and corporate is doing low single digit. I mean, at a group level, seems like, you know, you're well on track to be doing kind of something like mid single digit growth on EBITDA. Is that, is there any kind of, Is that the right way to think about it, or is it that it's too soon to pronounce kind of the cream of corporate EBITDA and the headwinds over the coming quarters? Any color on that would be helpful. And then just on the third one, on the fiber acquisition that you're doing, are there many other opportunities in the Finnish market, where you could potentially ramp up this activity in the coming quarters? Thank you.

Yes, regarding mobile service revenue and the impact from the corporate network regulation change and new products, roughly similar to Q1 in this quarter. And regarding EPIDA, so we have for the company level in the mid-term, financial targets higher than 3% EPIDA growth, and that is what we maintain currently as a target. And those things that you mentioned, they are there according to what we said regarding consumer and corporate customer segment slightly improving performance and sort of early indications also regarding latter part of the year. Fibre opportunities, of course, it is difficult to say when and if they are coming. If they are coming, then we take a careful look and a disciplined look on those, so that price and the value creation opportunity is good. There has been several other transactions in the past, apart from what we've been doing, and we have seen also value creation point of view, such transactions where we didn't participate and we would not participate.

But it just, you know, are you seeing activity in this space picking up, or is it just similar levels?

Yeah, probably there will be fiber assets on the market. Difficult to say what extent and and when, but it seems that there are some assets in different parts of the country that could be on sale in coming future, but as I said, when. That's hard to say.

And as stated, we have been now during the little bit more than, you know, past six months, we have been doing a couple of these minor asset deals on small asset deals on fiber. And of course, you know, that could be an indication of the overall market for asset deals becoming a bit more active. But we will need to live and we will need to learn.

Thank you.

Okay, it seems to be that we don't have further questions from the conference call lines. Thank you for that, and thank you for participating. Now we will go to the summer holidays, but my colleague Juha is here available for further discussions with you in the coming days if needed. But now, have a nice summer.

Thank you very much for your participation. Enjoy the summer.