Tele2 AB (publ)

Thank you very much, and good morning, everyone. Welcome to the Q1 report call of Teletubbies. With me here in the room, I have Mikael Larsson, our CFO, and Samuel Scott, our Chief Commercial Officer. Today, we'll walk you through the results for the quarter, followed by a Q&A session where we can address your questions. Let me start by saying that over the past 12 months, Teletubbies has dealt with significant uncertainty in our markets caused by the pandemic as well as regulatory and predictability by defending underlying EBITDA, and we've been able to continue distributing cash to our shareholders while maintaining a strong balance sheet. While the pandemic continues to impact our business, the future is more predictable, meaning that we can now turn our focus back towards achieving growth later in the year and make the investments necessary to prepare the company for the future and achieve our mid-term guidance. Moving to slide two, The end-user service revenue declined by 1% and a quarter on the group level, primarily caused by headwinds from the pandemic, including lower international roaming revenue. We continue to see the underlying business perform well, and we see that excluding the negative headwinds stemming from the pandemic, end-user service revenue would have been roughly flat year on year. Strong performance in the Baltics. Execution of the business transformation program in Sweden and lower commercial spending led to an underlying EBITDA growth of 6%, partly helped by easier comparisons compared to last year, as bad debt provisions of roughly 35 million SEK were taken in Q1 2020. As previously reported, SEDE2 acquired 100 MHz in the Swedish 3.5 GHz spectrum auction through NETFROM Mobility during the quarter, which lays the foundation for the nationwide rollout of 5G in Sweden. We are now in full planning and execution mode, and we expect the peak of the rollout to be in 2022 and 2023. We now also have more clarity of the business going forward. As a result, the board intends to call for an extraordinary general meeting in June to propose an extraordinary dividend of 3 kronor per share to be paid in July 2021. This is yet another sign of the resilience in our business model and the potential trajectory of the company going forward. In Sweden, consumer, we see the strength of our value-led strategy as price adjustments on the back of our more-to-more strategy continues to deliver solid end-user service revenue in our mobile post-paid and fixed broadband segments, further asserting our premium position. In the quarter, we took the next step by executing front- and back-book price adjustments on our convict brand, and we will continue to execute all our more for more strategy in our premium brands during 2021. However, this was offset by headwinds stemming from the pandemic and continued decline in legacy services, resulting in Sweden consumer declining this quarter. In Sweden, the B2B market remains competitive within all segments, and while we saw positive net intake both in the large and small segments, End-user service revenue remains under pressure by loss of roaming revenues, continued decline in legacy services, and price pressure. We launched new product portfolios, including new price plans in small in January, in order to boost sales. The first indication shows promising results, but it's still early days, and we will continue monitoring this going forward. In the Baltics, there were nationwide restrictions in society during the quarter, which created less activity in the markets and lower international roaming revenues. Despite this, we saw strong momentum during the quarter, delivering strong top-line growth through ASPE growth and higher equipment sales, which filtered through to underlying EBITDA. So let's move over to the Swedish consumer segment. During the quarter, the Swedish government imposed restrictions to mitigate the spread of the COVID-19 virus, which negatively affected the activity in the physical channels, resulting in a negative net intake in mobile postbates. Mobile postbate ASPU was roughly flat, as roaming took about 1.5 percentage points off the ASPU growth, which would otherwise have been positive on back of the price adjustments made last year. Strong volume growth last year led to a 2% growth in mobile postpaid end-user service revenue. The price adjustments made in the comic brand are still too early to impact the financials, and we estimate the effect to start in Q2 with a full effect in the second half of 2021. TIX program, which has showed steady growth quarter after quarter, continued to do so with a 5% growth driven by ASPU and net intake. In TV, we see continuous recovery in end-user service revenue on the back of actual improvements from the previously dire situation in Q2 and Q3 last year, when live sport events were not broadcasted. The business is still impacted by the churn that occurred during these quarters, where we see promising signs of stabilization over the next few quarters as this effect recedes. Total end-user service revenue declined by 2%, as growth in mobile postbid and fixed broadband was offset by the COVID-19 headwinds. Let's continue with Sweden B2B on the next slide. Mobile net intake was positive in the quarter, driven by positive development in the small segment and new contracts within the large segment. The market remains tough with price pressure in addition to the headwinds caused by the pandemic, overall resulting in a declining mobile output year on year. Together with a continued decline in primarily legacy fixed services, end-user service revenue continued to decline in the quarter. We continue our efforts to set the Swedish B2B business on a path to civilization. In the large segment, we launched several new products, and we continue to see positive uptake in handsets and accessories. In the small segment, we ramped up digital sales capabilities and continued the customer migration to the target IT architecture for both fixed and mobile services. So please turn to slide 6 for an overview of Sweden. End-user service revenue declined in Sweden by 3%, driven by continued price pressure within B2B and headwinds related to the COVID-19 pandemic. Underlying EBITDA increased 4%, as headwinds from the pandemic were offset by continued execution of the business transformation program. Temporarily lower commercial spend, and bad debt provision of approximately 35 million SEK in Q1 2020. We continue to see strong cash conversion of 66%, despite increased capex related to the 5G rollout in Sweden and IT investments related to the business transformation program. Let's take a look at the Baltics on slide 8. Net intake was positive in the quarter for the Baltics, driven by positive trends in Latvia. Despite the lockdown in Lithuania, we saw strong ASPU growth due to continued monetization of data through our more-for-more strategy. In Estonia and Latvia, we continue to see positive ASPU growth despite headwinds from the pandemic, negatively affecting roaming revenue. Please turn to the next slide. We are happy to see continued strong end-user service revenue growth in the quarter of 8% in the Baltics despite hundreds of the pandemic. Higher end-user service revenue and equipment sales together with budget provisions in Q1 2020 led to an underlying EBITDA growth of 17% on an organic basis. Strong growth in underlying EBITDA together with low capital intensity as we are in between investment cycles led to an 82% cash conversion. With that, I would like to hand over to Michael.

Thank you, Charles, and good morning, everyone. Please turn to page 11 in the presentation. As in previous quarters, we have taken this slide to illustrate each revenue line, excluding roaming. Please keep in mind that there are non-roaming-related effects from the pandemic and FX rates affecting the numbers as well. As we are not out of the pandemic yet, Outbound roaming revenue dropped by 63% compared to Q1 previous year, equal to 47 million SEK, with the majority of the impact in Sweden B2C and B2B. Within Sweden B2C, mobile postpaid and broadband continues to perform well by growing 3% and 5% respectively, driven by both volume growth and price adjustments in previous years. Total end-user service revenue in Sweden B2C declined by 1% in the quarter, excluding roaming, as growth in mobile post base and fixed broadband was offset by decline in legacy services and non-roaming-related pandemic headwinds. In Sweden B2B, end-user service revenue, excluding roaming, declined by 4%, driven by continued price pressure in the market, and declined in fixed legacy services. In the Baltics, we saw continued strong momentum, resulting in 10% growth in end-user service revenue, excluding roaming, driven by higher ASPU on the back of our more-for-more strategy. For the group, this led to slight end-user service revenue decline of 0.2% in the quarter, excluding roaming. Please turn to slide 12 for a walkthrough of the group results. Underlying EBITDA increased by 6% organically, driven by continued strong development in the Baltics, execution of the business transformation program in Sweden, temporarily lower commercial spend in Sweden prior to the consolidation of our two premium brands, as well as bad debt provisions made in Q1 last year. Items' effect and comparability increased year-on-year, and this was primarily driven by restructuring costs related to the business transformation program in Sweden. The increase in operating profit was mainly explained by growth in underlying EBITDA. Let's continue by looking at cash flow on slide 13. CapEx paid increased year-on-year, as it includes a SEK 333 million payment for the 100 MHz that Teletubbe bought through our joint venture, Netform Mobility, together with Telenor, in the high-frequency spectrum auction in January this year. Taxes paid decreased compared to Q1 2020, as it includes repaid preliminary tax in Sweden in this quarter. Despite increased capex levels, we continue to deliver strong equity-free cash flow in the quarter of 820 million SEK. And over the last 12 months, our continuing operations have generated 4.3 billion SEC of equity-free cash flow, or roughly 6.3 SEC per share. Please move to slide 14 for an overview of the capital structure. Leverage decreased due to cash generation in the quarter, and we are now in the bottom end of the target range of 2.5 to 3 times ahead of dividend payouts. As Shell mentioned previously, the board has now proposed an extraordinary dividend of three SEC per share on top of the already proposed six SEC per share in ordinary dividend. This results in a proposed total dividend of nine SEC per share to be paid during 2021. Even with this level of shareholder remuneration, we are confident that leverage will remain within our target range. as we continue to generate cash and grow underlying EBITDA in line with our guidance for 2021 and beyond. Let's continue with slide 15, where we'll show an update of the business transformation program. We saw roughly 70 million SEK in cost reductions affecting the P&L in this quarter. This includes effects from the reductions already achieved in 2020, as well as continued execution during Q1. mainly within our now-merged technology and IT departments. We reached an annualized run rate of 300 million in the end of Q1 2021, up from 250 million at the end of last year. We remain committed to reach roughly half of the target of at least $1 billion in savings out of our business transformation program by the end of this year, although back-end loaded within the year. And with that, I will hand over to hand back to yourself for some concluding remarks.

Thank you, Mikael. Please turn to slide 17 for our key priorities going forward. With the future being more predictable and a solid plan in place, it is now time to execute and invest in growth. In the coming quarters, we will execute on the necessary initiatives that will ensure success in the post-pandemic world. This includes investments that are essential for delivering a great service. secure our premium position in the market, and support our more-for-more strategy. In Sweden B2C, we will consolidate our two premium brands in the second quarter of 2021. This will enable us to take the next step in our brand optimization journey and unlock the full potential of FMC in the Swedish consumer market. This, however, is just the first step in a longer journey which involves migrating to an IT architecture that enables both significant cost reduction over time and more commercial flexibility. While Sweden B2B still faces structural headwinds caused by external factors and historical inefficiencies, we see initial indicators of improvement in both the small and large segments as a result of our efforts to transform the business. We will continue our efforts to take market share in the small and medium segment while defending our position in the large segment. and focus on profitability. And the Baltics will build on the current momentum and execute our mobile-centric convergence strategy while preparing for a nationwide rollout of 5G once the spectrum auctions are concluded. We will also further develop our FMC opportunities by looking at our own and third-party infrastructure capabilities. We will continue executing on the business transformation program to deliver at least one billion SEK of savings by the end of 2022. One of the key steps in this transformation was the consolidation between tech and IT, which was executed in the beginning of the quarter. This has laid the foundation for a more end-to-end oriented organization that is essential not only from a CapEx and OpEx optimization perspective, but also serving our customer better by having a holistic, harmonized, IT and network landscape. While we are planning and executing on the 5G build-out, we will continue to improve our already efficient infrastructure portfolio setup and explore new ways to optimize the value chain. With a strong quarterly performance and underlying EBITDA growth, it is now time to invest in growth in order for us to reach end-user service revenue growth and deliver on our 2021 and mid-term guidance. With that, I'll hand it over to the operator for a Q&A.