Elisa Oyj Ord A

Good morning everyone and welcome to ELISA's third quarter 2024 interim report analyst meeting and conference call. I'm Vesa Sahivirta, head of investor relations and here together with me is now very familiar team, CEO Topi Manner and CFO Jari Kinnunen. We have also some audience here. We start this meeting with presentation followed by Q&A and first we take questions from the audience. I think we are ready to start, so I give word to Topi. Please, go ahead.

Thank you, Vesa. Good day everybody, both here in the room as well as to those of you who are joining remotely. Thank you for putting the time aside to join this earnings call. Let's dive right into the slides and look at the highlights of our Q3 at ELISA. Our revenue during the quarter decreased by 2% and that was mainly due to the net impact of acquisitions and disposals. Also lower equipment sales contributed as consumers are prolonging the interval of changing their devices. And then the regulated revenue related to the interconnection as well as corporate numbers contributed to this. Sum up all of those, it boils down to 14 million euros in terms of revenue. Eliminating that would have meant that the revenue would have increased with a couple of decimals. Our high margin services revenue continued to grow during the quarter, and together with the efficiency measures that we have been doing, that meant that our EBITDA was up by 4%, basically in line with the EBITDA development that we have been seeing during the previous quarters. Mobile service revenue increased by 4.8%, so we continue to see mid single digit growth in mobile service revenue. International digital services revenue increased to 25%, supported by Bolton M&A. The organic growth in ideas amounted to 7% on year-on-year basis during the quarter. In Finland, the churn increased to 16.8%. Whereas in Estonia, the churn decreased a bit and was below 10%. We continue to see increase in fixed broadband subscription base that increased by some 8000 subscriptions. Good momentum in 5G continues. The up sales trend continues. we are today upgrading our EBITDA outlook for the year. So when we look into the numbers, I pretty much covered the revenue part already. So the business disposals, regulated revenue and equipment sales will need to be taken into consideration. Overall, the macroeconomic development during the quarter remained very subdued. So even though the interest rates have now started to decrease and inflation numbers have come down, we are not yet seeing that in material fashion contributing to the demand that we have on the consumer or the corporate services. The increases in revenue are coming from the high margin quality items in terms of revenue, namely from mobile and fixed services and IDS. In terms of EBITDA development, the EBITDA margin improved to 38.4%. Q3 seasonally always is the highest in terms of EBITDA margin, but when we compare to same quarter last year, there's almost 2% units of increase in this one. And that is coming from the mix impact of the business. So mobile services definitely contributing the business disposals and also the efficiency improvements that we have been doing. ARPU increased with 5% and in the 5G category, the up sales continues to be intact. And, you know, whenever we upgrade a customer from 4G to 5G, we get an average monthly billing increase of some three euros. And that part of the subscription landscape has been intact. As previously, we have been having some active campaigning in the 4G space, so the competition there remains keen and especially during the course of the summer in July, in August, we saw some sporadic irrational behavior by some of our competitors and we are keeping a close look at this and our long-term approach remains the same as it has been, so we will be keeping our long-term market share in terms of mobile subscriptions. When we look at the business segment by segment, given the mentioned issues related to revenue in consumer customers, the revenue decreased with 1%. That was especially driven by equipment sales and the discontinuation of the Viaplay cooperation. EBITDA percentage in consumer business increased to 43%, which is a good number, a strong number in historical comparison. And the overall consumer segment EBITDA increased with 4%. In terms of corporate customers, we did see the macro situation impact the revenue a bit. Corporate customers rationalizing especially their IT spend and their connectivity spend. So that impacted a bit. But it impacted especially in the low margin end of our product range. So the positive momentum in terms of profitability development in the B2B segment that we started to see in Q2 continued in Q3. And then the EBITDA for the B2B segment was up 3%. And that was especially driven by the mix impact, when the EBITDA percentage for the B2B segment increased to 31%. from 26 during the previous quarter. We continue to be very focused in executing our strategy. Increase mobile and fixed service revenues, key part of our strategy, and as stated, the 5G up sales continues. We are very active in the fiber. built at this point of time. In growing digital service businesses, we do see medium term growth opportunities. We see that in international digital services, in our software arm of the business, where we also just recently announced an acquisition of Sedapta Group, an Italian software company, where we have been a minority shareholder for three years. So we know the company well. We also see growth opportunities going forward in corporate IT and cyber security and in home related digital services in the consumer part of the business. And we, as ever, we continue to be very focused in continuous improvement in terms of efficiency and quality. We have been taking steps on that one during the course of the year, and we are increasingly seeing the benefits of AI and automation in various parts of our customer servicing. elements of the organization by taking new AI tools into use. So as stated, the 5G up-sales continues to be intact. So if we look at the high speeds, namely above 200 megabit speeds, our penetration currently stands at 56%. And the trend of... high-speed up-sales continues as we have seen it continuing during the past quarters. At present time, the smartphone penetration in our markets is 60-61%. And we do see 5G sales picking up in the corporate space, especially now recently with some larger corporate customers. During the quarter, our 5G population coverage reached 95%, so work on increasing the penetration continues. As mentioned, the average billing increase in 5G upgrades continues to be over 3 euros, and that picture is intact. We have a differentiating product currently with 5G standalone capability being embedded in our subscription plans. We call it 5G plus and we have accelerated growth in those subscriptions. So that is good to see. In the fiber space, we continue to be active in building fiber, investing in fiber. We have recently bought some individual assets, fiber assets. During the summer, we bought Kaizenet in the eastern part of Finland. And currently, the market is pretty fragmented in fiber space, and we see that being... ripe for consolidation and we are ready to buy individual fiber assets if we find attractive opportunities in that part of the market. In terms of our international software business ideas, the highlight of the quarter really was the acquisition of Sedapta. As stated, we know this company well. We have been a minority shareholder for three years. And now with the deal of little more than 60 million euros, we acquired the rest of the share capital in this company. So Sedapta is an industrial software company based in Italy, having a strong foothold, especially in the Italian market. It has been established in 2014. So 10 years of age has been growing rapidly during that time. It is a profitable business. has some 500 employees, especially in Italy, but also in Germany, France, UK. and a strong product offering. And with that product offering, we see intriguing prospects for growth, especially in Europe with geographical expansion going from the current markets and penetrating further the current markets into new countries in Europe and thereby leveraging that that product offering with the customer base that we have in the other parts of IDS and also with the resources that ELISA will be bringing to the SEDAPTA business. So a significant step forward, the SEDAPTA acquisition for our IDS business and scaling of our IDS business. In the business in itself, during the quarter, the revenue increased, as stated, with 25%, supported by the Bolton acquisition. Despite of the soft macro environment, especially in industries globally and in Europe... we saw a 7% year-on-year growth and our order intake continues to grow as expected. When we look at our order book, When we look at the timing of the projects that our customers are carrying out, we expect to see a strong quarter in IDS for Q4. And that is why we reiterate the expectation that we will be seeing double-digit organic growth for IDS during the course of full year 24. As stated in our industrial part of the business, in the industrial automation, the highlight of the quarter really was the acquisition of Sedapta. In the PolyStar business, that is directed toward telcos, we had some very good customer wins, especially in Europe and in APAC. So that was good to see. And then we have a customer experience assurance product where we have had multi-country deals for some big telcos in Europe. And some of those deals were successfully renewed during the quarter. So that was also encouraging to see. When we move over to the domestic digital services, perhaps one anecdote is worthwhile to share. We are continuously doing all kinds of innovation in terms of our product and with Elisa Viihde, namely Elisa Entertaining Services, we introduced a new codec, a new data compression functionality, and with that we were able to decrease the amount of data transferred for this service with 30%. So I think that this is a good example of the continuous productivity improvement that we are doing. And this of course translates to better customer experience. But in the world where the data consumption is increasing rapidly and People are building data centers all the time, consuming more and more energy. These kind of innovations, data compression innovations also will be having a distinct sustainability angle in them. So a good example in the work we are doing in the sort of borderline of innovation and sustainability. In our domestic digital services in the entertainment business, we also launched the 42nd Original Series, celebrated the 10th anniversary of ELISA Entertainment Original Series with a new launch called Valhalla Project that has been very well received by customers and already now gaining international interest. When we look into the IT and cybersecurity in our whole market of Finland and Estonia, we are increasingly embedding AI solutions to our service offering in terms of IT. Cybersecurity in all shapes and forms is a hot topic. I guess, in societies at large, definitely here at our whole market. And we have great capabilities in terms of cybersecurity at this point of time. We have been winning bigger customer deals in terms of cybersecurity. For example, The Finnish Post, which is one of the biggest logistical companies in the Nordics and one of the biggest employers in Finland, recently transferred their cybersecurity to be handled by us. We have very, very high customer satisfaction in the cybersecurity base. NPS being, you know, as high as above 90 points. So I think that that is a telling story of our competitiveness in this category of services. In terms of sustainability, we are taking continuous steps forward in terms of improving our standing with key ESG metrics. For example, making good strides in improving the energy efficiency of our business. And as stated, today we are improving our EBITDA outlook for the year. So the EBITDA guidance has been that we expect it to be for the full year on the same level or slightly higher. And now we let go of the same level, so we expect it to be slightly higher than it was in 2023. as we have seen during the quarters of this year. So I think that that pretty much wraps up the solid development that we have been seeing during the Q3. And now I will hand over to Jari, who will go through his slides, and then we take the questions after that. So thank you.

Thank you, Topi, and good morning. Let's start with profit and loss. Revenue change was nine million negative, impacted by regulatory changes in the connection price reduced beginning of the year. Three million negative impact from that. equipment sales continued. Fairly similar trend what we have seen earlier quarter, so minus 5 million. Service total service revenues in corporate customer segment. We're down 4 million fixed services, negative impact from traditional voice, also macroeconomy impact visible in corporate numbers or corporate networks, local area networks as a result of reducing employees or office space with some customers. Also corporate service number change regulation beginning of the year impacted to fixed services in corporate segment. Positive change and growth in corporate segment continued in mobile service revenue and also in digital services both domestically and international digital services growing. Total service revenue in consumer segment was growing 4 million. Mobile services solid growth continuing very much driven by 5G negative impact from Viaplay cooperation ending end of last year Q3, so there's no impact on that in coming quarters anymore. Also in fixed services, traditional voice decreasing trend continued. In earnings in Epida, solid 3.7%, growth 7 million and margin improvement to 38.4%. Same with EBIT 3.6% growth to 136 million. Margin improved also to 25.4%. In financial expenses, there was an increase of 4 million. mainly due to higher interest relating to refinancing last year's September. EPS was at the same level at 63 euro cents. In Estonia, very much same trend, revenue impacted negatively by, Interconnection revenue as a result of price change, also equipment sales were down. However, service revenue growth, both mobile and fixed services, growing. Epida improved and increased by 4%. Cost efficiency measures and revenue mix chains contributing to that. Mobile postpaid base was slightly growing and prepaid growth was 3,000. And churn came down from previous quarter to 9.4%. Then, Looking at the CAPEX development, Q3 was higher, 93 million reported CAPEX, excluding licenses, lease agreements and acquisition. Guided CAPEX was 77 million and 14% from the revenues year-to-date CAPEX, so nine-month CAPEX is full in line with the guidance between 12 and 13 percent. And main CAPEX relate 5G to 5G and fiber network building as well as IT investments. Cash flow was growing and comparable cash flow, growth 4% to 111 million, positive impact from EPIDA, lower license fee payments and positive networking capital change and negative from higher capex. nine months capex comparable cash flow is 291 million two percent growth from previous year the same positive impacts EPIDA license fee payments lower as well as a networking capital positively developing, capex higher and taxes and interest higher, impacting negatively to the growth. Gas conversion continues to be high, operating gas flow conversion 63% in Q3. Then moving to balance sheet and capital structure in line with the targets net debt to EBITDA 1.7 times, equity ratio 38% and return ratios continue at good level, return on equity 30.5%, return on investments 19.2%. 3% and in terms of financing, currently on average interest expense to interest bearing debt is at 2.5%. And there will be a dividend payment in this month, so second tranche 1 euro 12 euro cents will be paid 13th of this month. And calculating these two transits together, total dividend 2 euros 20, 5 euro cents payout ratio 90, 5% and growth 4.7% against previous year, and then consecutive growth year with distributions underlying strong commitment to competitive shareholder remuneration. And now Vesa will continue.