Elisa Oyj Ord A

Good morning everyone and welcome to ELISA's fourth quarter 2024 analyst meeting and conference call. I'm Vesa Sahivirta, head of industry relations. Now I can say that we have a very familiar team here, CEO Topi Manner and CFO Jari Kinnunen. We have also some audience here in our headquarters. We start with a presentation followed by Q&A. And first we take questions from the floor and then from the conference call lines. And then we're ready to start. So I give word to Topi, please go ahead.

Thank you, Vesa. And yes, good day, everybody here in the room, as well as participating remotely and welcome to this ELISA Q4 earnings call. Let's get right down to business and Look at the Q4 24 highlights. During the quarter, our revenue increased to 2.9%. Of the quarters during 24, full year of 24, this was the best quarter in terms of revenue growth. Driven by strong growth in our ideas, part of the business, and also increase in mobile service revenue. The comparable EBITDA was up 3.3% during the quarter, mobile service revenue up 4.1%, and as stated for international digital services, Q4 was very strong. During the quarter, our revenue increased on year-on-year basis when compared with Q4 23, with 77% supported by M&A. organic growth on year-on-year basis for Q4 was 27%. And with that, we were able to deliver double digit organic growth for the full year in the IDS part of the business, as we have been indicating during the course of the year. In Finland, postpaid churn increased to 20%. In Estonia, churn was clearly lower. It was around 10%. Postpaid subscriptions increased by 12,400. We saw some increase in fixed broadband subscription base and on the overall, the 5G up sales and the overall 5G momentum continues. At this point of time, our network covers 95-96% of the population in Finland. And now our board of directors is proposing to AGM a dividend of €2.35 per share. And this, assuming that it will be approved by the AGM, this would be the 11th consecutive year of increasing dividend in ELISA. So looking at the Q4 numbers in a bit more detail, the revenue during the quarter was 580 million euros. And as stated, this was the best quarter in terms of growth during the year. And on the overall, in the ideas part of the business, also to some extent, In the home market corporate business, we started to see some pickup toward the end of the year, especially in December. And as stated in IDS, the revenue growth was very strong. EBITDA landed at 198 million euros, EBITDA percentage being stable when compared to Q4 23. Mobile service revenue was mentioned 4.1% in terms of growth. And then when we look at the RPU development, that was plus 5%, very much driven by 5G upsells. And that 5G category of the market has been pretty much intact during the quarter. So whenever we upsell from 4G to 5G, the average billing increase is more than three euros per subscription. And that number has stayed constant between the quarters. We did see during the October, November, and especially during the Black Friday weeks, quite intense campaigning related to 4G subscriptions. And that is reflected in the churn number on the Finnish market. However, now at the start of the year, when we look at the competitive situation, things are a bit different. bit calmer. What we need to remember is that seasonally, fourth quarter is always the quarter when churn level is the highest typically. So then looking at the business segment by segment, in consumer customers, EBITDA growth continued with 2.4%. And in the corporate customers, we saw strong revenue growth, almost 7%. and strong EBITDA growth with plus five percent and a little bit more. This was largely driven by the strong quarter in IDS, but I mean, we started to see sort of a pickup in corporate segment during the summer. And that has now materialized. But the shape of the curve during the fall was a little bit different than we anticipated at first. Q3 was slower because we saw some deals being moved from Q3 to Q4. And now we saw the pickup during Q4. And the order intake during Q4 was also encouraging, meaning that there's a quite good starting point for this year when it comes to the corporate segment and especially IDS. So then looking at the full year numbers, what is notable is that with the sort of good continuous improvement practice that we have in ELISA, our EBITDA as well as EBIT hit the all time high during 2024. So for the full year, we saw 4% comparable EBITDA growth. Revenue was close to 2.2 billion euros with 0.5% increase. EBITDA percentage on full year basis increased with a little bit more than 1% unit from the previous year. And earnings per share, comparable earnings per share, was 2 euros 35 cents. capex to sales ratio was 13%. As we had indicated during the year, we saw some temporary good business cases for justifying a little bit more capex spending, and therefore the 13% capex to sales ratio was materialized according to our plans going forward For 25, we will be coming back to the level of 12% in terms of capex to sales. With mobile service revenue, we passed the 1 billion euro mark, and the full year churn was 16.8%. which is pretty average if we take the sort of long history of mobile churn average for, let's say, past 10 years. So in ELISA, we continue to consistently, determinedly execute our strategy, increasing mobile and fixed service revenues. Now, we saw, for example, the fixed service, the fiber revenues and fiber take-up are gradually starting to increase. We expect that to continue going forward. We started to see clear momentum building in ID as part of the business with digital service revenues. And then during quarter in the difficult operating environment that we had, especially in Finland and Estonia in terms of the macroeconomic development, we did some progressive cost efficiency measures. We have our practice of continuous improvement in terms of efficiency and productivity. We accelerated some of those initiatives during the year, and we will continue to do so during 2025, especially leveraging AI in our processes. So costs and productivity together with revenue growth are a focus in terms of strategy. Migration to higher speeds continues. So the 5G upsells continues the linear trend that we have been seeing in the past. And when we look at the speeds above 200 megabits, the penetration for those speeds is now 58%, and during the quarter, there was a 2% unit increase in that penetration. What is perhaps noteworthy is that the smartphone penetration, the 5G devices penetration in our home market increased to 65%, so there's a marked increase. increase during the year in that penetration. And this, of course, is an important enabler for our continued 5G upsells. As mentioned, the average billing increase for 5G upgrades is over €3, and that figure has been constant between the quarters. All of our New subscriptions today are 5G standalone subscriptions, what we call 5G+. And that means that through the new sales, the penetration of 5G plus subscriptions is picking up every day. We continue to be a technology leader. There was a number of technology firsts during the quarter. For example, together with Nokia, we trialed 100 gigabit speeds for production fiber as the first one in Europe. So that was definitely a good development and good to see. We also were the first operator in Europe to test Cloud RAN, an important development and stepping stone toward a 6G age. And then also on the backbone network, we deployed new and higher speeds. So technology leadership remains to be important element of our strategy. Then moving into IDS, as we discussed already, the revenue growth for quarter supported by M&A, especially the setup acquisition from November, was as high as 77% for the quarter. The organic growth for the quarter was 27%. So the year pretty much landed as we expected. The organic growth was double digit, as we had indicated during the year. The shape of the curve was a little bit different than we originally anticipated. We anticipated sort of more stepwise linear increase during the quarter. But with strong Q4, the year ended up according to our expectations. SEDAPTA has now been integrated. That has proceeded according to plan. And what is noteworthy is that during November and especially December, our order intake in the IDS business has been clearly positive. We have been winning also new customers basically in all geographies. And that is good. In Polistar part of the business, we did some cost-efficiency measures, improving the profitability posture of that business. And all of these measures are now building the momentum for ideas, and that is indeed encouraging. If we look at the IDS business and we simplify a bit, especially with setup acquisition, we now see that we have the products. And what we need to do is that we need to increase our geographical footprint. And with that, grow organically. We have a good customer base. We of course will acquire new customers, but what we will be especially doing is that we will be doing land and expand with our existing customers, and that will be supportive to organic growth. And with that, we expect that organic growth in ID as part of the business for 2025 will be, again, double-digit growth. And on top of that comes the growth from M&A. Profitability in this part of the business will improve. So for IDS, we expect for a full year of 25 positive EBITDA numbers. So that soft guidance marks an improvement of what we have been stating previously. Previously, we have been stating that we would, in IDS part of the business, expect to see positive EBITDA numbers from Q4 2025 onwards. And now we are expecting positive EBITDA for the full year of 2025. Still, the quarters will be different within IDS, and there's more seasonality between the quarters in IDS business than there would be in the rest of ELISA business. Also good steps forward in developing the domestic home market digital services in entertaining video services. We formed a new sales agreement partnership with Disney+. And that has been welcomed by our customers, the sales of streaming services. through ELISA Entertainment, the aggregator service is increasing. We also, for the third time, we organized ELISA Masters eSports event, and that attracted quite a large international audience. In terms of IT and security services, we formed a new strategic collaboration with Microsoft, In building AI and hybrid cloud, this was the first of the kind in Finland. So developing customer solutions and also improving our employee competencies together and with that improving our competitiveness on the market. In the cybersecurity space, we saw a lot of activity around new customer acquisitions and we won good customer relationships with big Finnish customers, indicating that we truly are competitive with those services. What is perhaps notable is that we recently announced that we will be recruiting, during the course of next 12 months, up to 100 AI and software experts in Finland and in Estonia. We are changing a bit our way of working. We go for more stable teams and we do some insourcing in the process of this. So it's a sizable recruitment. But what is important to note that this will be EBITDA positive right from the start. Because what we will be doing is that we will be going into AI efficiencies. with these people and at the same time we will be reducing the usage of external services and with that this will be EBITDA positive. In our societies in Finland and Estonia Digital security is a big theme right now, given what we have seen in terms of hybrid operations on the Baltic Sea, given the cybersecurity risks increasing in the society. No matter whether we talk about consumers, whether we talk about corporate customers or public sector customers, these needs are increasing and they are also providing business opportunities for us. One example is the pickup of mobile ID service. banking sector experienced cyber attacks during the fall, especially in Finland, and thereby the dependency of society and consumers to bank ID has been sort of triggering consumers to seek alternatives. And mobile ID, mobile certificate, that product usage has increased with 60% during the year. So it's a significant pickup and sort of a breakthrough year for mobile ID service in Finland. We also have done a lot to block scam calls in our home market during the last couple of years, preventing as many as 23 million fraudulent calls. which is a sort of corporate social responsibility type of activity from us. We have also seen the DDoS attacks, cyber attacks, to increase significantly in our whole market. We have been able to prevent those, but this is a societal phenomenon, and as stated, underscores the importance of cybersecurity and those services within our societies. And then, of course, during the Christmas time, we saw two of our data cables being cut on the Gulf of Finland, a tanker called Eagle S, part of Russian shadow fleet, being suspected of that. And as a showcase of our resilience, That cut of those two data cables did not impact our telecom services at all, and we were also able to repair them very, very quickly in a matter of two weeks, which is a showcase of the network-related competence that we have in our company. So with all of these things, we are building sustainable society through digital security. And then we come to the outlook and guidance. As per usual, we would be guiding the revenue to be on same level or slightly higher for next year 25, and the comparable EBITDA to be same level or slightly higher for 25 as it was in 24. And related to capex, as I already mentioned, from 24 level of 13% to capex to sales ratio, we come back to 12% in terms of capex to sales, and that is perhaps noteworthy in the guidance. Okay, thank you. Now I will hand over to Jari, and then we, after that, come to questions. Thank you.

Thank you, and good morning from my side as well, and let's go through quickly key items in profit and loss. So Q4 was a continuation of solid good development and revenue growth accelerated to 2.0. 9% or 16 million and inside that 16 million. Negative change in both customer segments from interconnection and roaming as a result of interconnection price changes beginning of the year, that was 2 million. And also in equipment sales, both segments negative change, altogether 5 million change. Service revenues in corporate customer segment, very strong quarter and 70 million increase driven mostly by IDS, also mobile services, growing as well as domestic IT, domestic digital services, IT services growing and as negative impact has been a longer time from fixed voice services. Service revenues in consumer segment growth was 6 million both mobile and fixed services, growing and negative change in traditional fixed voice. In expenses side, we continued our cost efficiency measures, productivity improvement measures. As a result of that, there was one of restructuring charts relating to personal reductions of 6 million in personal expenses. Comparable EBITDA growth continued now 3.3% or 6 million to 197.6 million. EBIT change was positive 1.1% to 120. 5 million. In financial expenses, change was negative 6.6 million. Most of that change coming from one of costs related to impairment booking of loan receivable amounting to 5 million. Altogether, then, comparable EPS 58 euro cents. In Estonia, macroeconomy still, environment still challenging, and inflation numbers significantly higher than in Finland at 4%. impacting somewhat to customer demand, which is visible in equipment sales, decreased also negative impact for revenue coming from interconnection. Revenue decrease was 3 million or 5%. However, mobile service revenue continued to grow also in Estonia. Positive development in Epida continued 2% growth and margin improved to 31.2%. Minor changes in mobile subscription base, postpaid 200 and prepaid 400, negative change and churn continued at low level, was 10% in Q4. Q4 CAPEX was 92 million, and guided CAPEX excluding licenses, leases and acquisitions 80 million year ago 91 million and for the full year capex was 333 million and guided capex excluding licenses leases and acquisitions 295 million which is in line with the guidance third we gave at the beginning of the year, so 13% of the revenue. Main investments continue to be in 5G coverage increase, in fixed line fibre investments and IT investments. Comparable cash flow in Q4 was 66 million. 73 million year before, so minus 9% change, positive impact from lower capex and negative impact from higher interest costs and negative net working capital change. Although now in Q4, networking capital was negative, for the whole year, change was positive. For the full year, comparable cash flow was 357 million, minus 1% against the previous year, positive contribution from EPIDA and lower licenses, and negative impact from CAPEX taxes and interest. Epida operating cash flow conversion remains high and increased from previous year and was 58%. Balance sheet continues to be strong, and capital structure in line with medium term targets, net debt to EBITDA was 1.9 times, equity ratio 38.7%, and return ratios continue also at good level, return on equity 29%, return on investment 18.5%. In terms of interest bearing debt, currently average interest is at 2.4%. And today we announced both proposal to ATM regarding dividend 2.35 euro cents per share to be paid in two installments in April and October and as mentioned already by Topi so this is 11th consecutive growth year in distributions and now represents 4.4% growth against previous year. Payout ratio calculated from comparable EPS 100% and dividend yield at 5.6% against the share price end of last year. Additionally, There is proposal for authorization, max 5 million share buyback. All in all, underlining continuation of strong commitment to competitive shareholder remuneration. Now I give the word to Esa, please.