Elisa Oyj Ord A

Good morning, everyone, and welcome to ELISA's fourth quarter 2025 conference call. I'm Vesa Sahivirt, the Head of Investor Relations. This is now a purely conference call. We don't have audience today here. So, we start with the presentations, and the team is here CEO Topi Manner, and now, as first time CFO, Kristian Pullola. And I think we are ready to start, so I give word to Topi, so please go ahead.

Thank you, Veza, and good day, everybody. Welcome to this Q4 ELISA earnings call. And let's get right down to business and go through the Q4 highlights. During Q4, our revenue increased by 1.5%. That was predominantly driven by mobile service revenue growth, but also related to growth of revenue in international software services. Mobile service revenue growth amounted to 2.4% and the telecom service revenue to 2.2%. And to telecom service revenue we include both mobile service revenue as well as fixed service revenue. In international software services part of the business, the Q4 total revenue growth was 11.3 percent. The comparable organic revenue was flat, predominantly driven by projects being postponed to 2026. Importantly, in this part of the business, the full year EBITDA was positive, as we stated at the start of the year. So in that sense, we delivered according to our plans. Looking at the total company, comparable EBITDA was at previous year's level, despite quite intense competition during Q4, leading to increased temporary sales cost. The amount of those sales costs was 5 to 6 million euros during the quarter. Comparable cash flow was very strong during Q4, especially driven by net working capital efficiency. Comparable cash flow grew by 37.6%. In Finland, postpaid churn was 23%, reflecting also Q4 being seasonally typically the highest in terms of churn. But then again, if you look at Q3, Q4 churn in total, that is a reflection of intense competition in mobile services on the market during those quarters. Postpaid subscriptions decreased by some 2,000 and then M2M and IoT subs grew by some 19,000 pieces. The fixed broadband subscription base increased by 6,000. So we are seeing a gradual pickup in those subscriptions, which is positive. And then importantly, during the quarter, we maintained our market share in consumer markets. post-paid subscriptions in Finland, as we stated in connection to our Q3 report. So in the intense competitive environment, we showed competitiveness by maintaining our market share. The transformation program that we launched in connection to the Q3 report proceeded well during the remainder of the year. We have been conducting the first phase of that transformation program leading to reducing 360 jobs in the company. And that means that majority of the cost savings that we are targeting has already come into force from 1st of January onwards. So we are well on our way of delivering according to the plan and realizing 40 million euros of cost savings on the back of the transformation program during the course of 2026. And then finally, our Board of Directors proposes a dividend of €2.40. And assuming that the AGM so decides, this would be a 12th consecutive year of continuously increasing dividend in ELISA. Looking into the numbers a little bit more deeply, as stated, revenue landed at 588 million euros during the quarter, and we saw 1.5% increase in that one. On top of the international software services and mobile services, we also saw equipment sales picking up a bit. In terms of EBITDA, the EBITDA for the quarter was impacted by the mentioned temporary sales cost. These costs would be related to the competitive situation in the sense that we have been having marketing costs like gift cards related to our mobile services business and also investing to promotional sales force, for example, in shopping malls, in fairs and these kinds of events, also in telemarketing. And when you look at the EBITDA margin on year-on-year basis, the impact of these temporary sales costs was approximately 1% unit, as stated amounting to some 5 to 6 million euros during the quarter. Mobile service revenue, 2.4% up. With continued 5G upselling, I will come back to that in a minute. And then when we look at the RPU development, the RPU grew 3% on year-on-year basis, also driven by the up-sales, but also the value-added services in the form of the security features that we have been introducing to the part of our customer base during the year. Now, when we look at what has happened on the market after Q4, we have seen in January some front book price increases taking place on the market. We were the first mover on that as a market leader. And this leads us to think that our operating environment will gradually improve during the first half of 26. Going into the segment specific reporting, consumer customer segment was impacted by the competition during the quarter. The temporary sales costs that I mentioned were impacting in full the consumer segment. And that is visible in the comparable EBITDA development for the segment, as well as the EBITDA margin for the segment. The revenue growth for the segment was 1.9%. In corporate customers, we saw some quarterly fluctuation in terms of revenue. But if we even that out, and especially if we look into EBITDA development, corporate customer segment developed in stable fashion, and the EBITDA margin actually increased with 1% unit on year-on-year basis to 63 million euros. In international software services, the profitability picked up during the quarter and landed at 4 million euros in terms of EBITDA. On the back of that, as stated, the full year EBITDA for that segment was positive. And then the EBITDA margin for Q4 standalone was 9%. Reflecting that we are taking steps gradually to improve the profitability of that business as the scale of the business grows. Just shortly looking into Estonia. In Estonia during the quarter, the revenue increased by 3%. In EBITDA, we also saw some quarterly fluctuation. In EBITDA, that was largely flat in Estonia. But then especially looking into the full year development in Estonia, EBITDA increased by 5%. So above... the company average of ELISA and therefore we can conclude that the market was performing well and job well done in Estonia. And at the same time, in connection to the Q4 results, we are wrapping up the full year of 2025. And it was a record year in terms of comparable EBITDA development and in terms of revenue as well as cash flow. I think that the high point was that we increased our cash flow during the year with 15%. Revenue increased 3%. Comparable EBITDA increased 3.2%. And in the intense competitive environment, we kept our base of mobile subs largely intact. Post-pain churn during the year was 20.3%, increasing 3.5% in comparison to previous years. This is a reflection of a competitive situation, but at the same time, this is clearly something that we would want to improve for 2026. And now, as stated, In the first weeks of the year, we have been seeing positive signals on the market related to this. Our strategy, faster profitable growth is on track and we stay the course. We have our four growth pillars, 5G and fiber. telecom service revenue in effect, home services, corporate IT and cyber, international software services enabled by simplicity and productivity that we are especially tackling with the transformation program that we have been introducing. When executing the strategy during the year, we will be putting more focus on customer centricity, And AI-enabled growth as well as AI-enabled productivity. And steps are being taken on all of those fronts as we speak. So the bottom line being we stay the course. We focus on implementing the strategy. During the quarter and at the end of the year, we reached a milestone related to 5G penetration, now hitting the 50% mark in 5G penetration. And with that, we are now disclosing a bit new information to you in this presentation. Previously, we have been discussing about high speed penetration of mobile services, namely above 200 megabit speeds, including all of our 5G subscriptions, but also some 4G subscriptions. And now this graph is only about 5G subscriptions. As we can see, the 5G smartphone penetration in the market has been increasing to 74%. And as stated, our 5G subscription penetration now hit the 50% mark at the end of the year. And it is a nice linear trend over the years from one quarter to another that we also expect to continue from here on. onwards. What is worthwhile to mention is that 5G standalone subscriptions are today already a significant part of all of our 5G subscriptions and the number of those subscriptions are is growing steadily. We also have the highest customer NPS score for the 5G standalone users. And that is basically signifying that we are already quite well into taking next steps in terms of network technology, providing value to our customers and also being able to monetize that value. In other part of telecom services in the fiber business, the strong revenue growth continues and then clearly is picking up. We are also transforming to modern technologies in there and ramping down the ADSL technology. Then just quickly taking a look at the domestic services a little bit from customer and product perspective. In terms of home services during the quarter, we launched Elisa Entertainment Sound, bringing home theater quality to our entertainment services. This has been well received by customers and it is clearly boosting the sales of entertainment services. Another development on the product front was that we launched licensed home security services, Elisa Kotiturva service to customers. It is early days for this product, but clearly the reception from customers has been upbeat. In corporate IT and cyber part of the business, we launched a new feature to customers, who's calling feature. Basically, technologically, we were the first one to be able to crack the code and be able to deliver this information to customers without a separate app being used. So this is a nice feature that the customers seem to appreciate and the penetration is growing as we speak. On the same space, we also won a European Crime Prevention Award for our scam call prevention solution. In Finland, this has effectively meant that On a yearly basis we are preventing three million scam calls on the market, effectively erasing this category of fraud altogether in the market and protecting vulnerable groups like elderly people. And this is a nice innovation having societal significance, also something where we have patents and where we can help other telcos in Europe to do similar kind of crime prevention in their respective markets. In terms of international services, software services, as I mentioned, some of our projects during the quarter were postponed to 2026. We did not lose any deals. We did not lose any customers. This is a timing issue. And therefore, at the end of the year, we had a record high backlog in international software services. The new sales was impacted during the year related to the tariff concerns. And that was very similar phenomenon that we have been seeing all across the software industry globally. During Q4, the order intake, however, picked up notably. And Q4 was a record quarter in terms of order intake for the software part of the business. And on that note, we won a big deal from Oredo Group, a big Middle Eastern telco, also reflecting that our product offering and our product strategy is very competitive on the marketplace as we speak. And we have been winning new customers in that telco vertical during the course of 25, which will be supportive of our revenue during 26. And this brings me to the outlook and guidance for 26. In terms of revenue, our guidance is that we see revenue being at the same level or slightly higher than in 2025. In terms of comparable EBITDA, we are introducing an EBITDA range from 815 million euros to 845 million euros. The midpoint there being 830 million euros. CAPEX, 12% of revenue. And then related to our outlook and guidance, we introduce certain assumptions. And these assumptions are that we expect our economic and operating environment to gradually improve during the year. And then secondly, we expect telecom service revenue growth being in the bracket from 1% to 3%, where mobile service revenue growth is the main part and main driver of telecom service revenue growth. In international software services, we expect an organic revenue growth to be above 10%. So I guess this covers my presentation, and now I will hand over to Christian before we go to the Q&A. Okay. Thank you, Topi.

As Topi said, the intense competition did negatively impact both growth as well as EBITDA in the quarter. We did especially see temporary sales costs increase during the quarter, partly as a result of increased kickbacks in the form of vouchers, for example. This decreased EBITDA margin by approximately one point. I want to highlight that these costs are temporary in nature and can be avoided if the market situation changes. Also, an additional note here. When it comes to the costs related to kickbacks, we have a conservative policy as we book these costs upfront, even if in most cases the costs relate to fixed-term contracts with a maturity of one year. When it comes to CAPEX, the strict discipline continued and our investments were focused into areas that further improve our technology leadership and allow us to continue to upsell both 5G and fiber. We are also making investments into IT systems to drive simplification and productivity longer term. Our fiber investments did ramp up, and as discussed earlier, these mainly take place through the JV structure we established during the first half of 2025, and thus the investments are visible through the increased IFRS 16 liabilities. Then into an area which is very important to me, cash flow. We continued strong cash flow momentum in Q4, delivering 38% growth compared to last year. For the full year, cash flow was up 15%, driven by good networking capital development, especially in inventories where the focus have been during the year. Also lower capex continued contributed positively while this was somewhat offset by higher cash outflows related to financial expenses. Going forward we will further focus on cash and cash flow and I do see possible areas of improvement in networking capital especially in accounts receivable and accounts payable going forward. Then a few words on capital structure and our returns. ELISA continues to have a solid capital structure and in the quarter we took proactive steps to refinance the maturities we have this year. Both the bond transaction as well as the increased loan from the Nordic Investment Bank further improves the maturity profile of our debt. ELISA continues to have industry-leading returns, both on equity as well as on investments. The proactive financing that we did during Q4 resulted in us having somewhat higher cash balances at the end of the year, which temporarily negatively impacted the return on investments. With the cash flow focus and the continued strict CAPEX discipline, we want to continue to produce industry-leading returns also in the future. And then finally, to shareholder remuneration. The board proposes to pay an increased dividend of 2.4 euros for the financial year 2025. The proposal is supported by the earnings development, the strong cash flow generation and the solid capital structure of ELISA. The dividend has been and continues to be our main distribution mechanism. By making payments quarterly going forward, we make the dividend even more continuous to our shareholders. Quarterly payments also give us the flexibility from a financing and a liquidity management point of view. We are committed on our dividend policy and we will continue our competitive shareholder remuneration. And as said earlier, you know, strong cash flow focus is a key enabler for this also going forward. With that, Vesa, over to you for Q&A.