Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the Tele2 fourth quarter interim report 2021 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you will need to press star and 1 on your telephone keypad. Please be advised that today's conference is being recorded. If you require any further assistance over the phone, please press star 0. I would now like to hand the conference over to our speaker today, Charles Jonsson, CEO. Please go ahead.

Yes, thank you, operator, and good morning, everyone. Thank you for bearing with us. We seem to have a little bit of technical issues with the operator system, but here we are. So welcome to the Teletubbies report call for the fourth quarter and the full year of 2021. Today, I'm very happy that in front of me, I have Charlotte Hanson, our new group CFO, sitting here in Chista. And of course, with me here, Henrik de Groot, our chief commercial officer, and Stefan Trampus, our head of B2B. So today, we will walk you through the results of the quarter and the full year, the progress that we made in 2021, and the outlook for 2022 and beyond. And we'll do a Q&A at the end of it. 2021 was yet another year with impressive results for the group, and I would like to start by highlighting the achievements and strategic initiatives that we've taken. So moving to slide two. So despite a challenging year with headwinds stemming from the COVID-19 pandemic, we were able to lift and deliver on our guidance for 2021 by growing end-user service revenue by 1% and underlying EBITDA by 5%. This was done by continued strong performance in the Baltics as we were able to achieve both ASPU and volume growth while maneuvering through an unpredictable pandemic. In speed and B2B, we were able to reach stabilization in Q3 and we see yet another strong quarter today. In Sweden Consumer, we continued our more-for-more strategy and saw strong performance within mobile postpaid and fixed broadband, while we were able to mitigate the decline in digital TV. At the same time, we executed on our business transformation program, which ended the year with an annual run rate of 500 million SEK in line with our target. During the year, we took a major step in our FMC strategy by creating the new premium Tele2 brand through the consolidation of two of the most iconic brands in Sweden. And with that, we concluded the first phase of our FMC strategy. I'm very happy to see the results in Sweden B2B that Stefan and his team has delivered during the year. When we presented a new B2B strategy on Capital Markets Day, I was optimistic and excited, but it pleases me to now say that they have over-delivered on my expectations for the second half of the year in 2021. This improvement is not merely done through our new SME mobile portfolio, but we see improvement across all segments, as we are now able to show the second consecutive quarter of growth for a business that was declining by high single digits a year ago. In September, we announced the sale of our stake in T-Mobile Netherlands, which was the last step in consolidating our international footprint. I'm very impressed by the results the team has shown there during the last years. and the value that they have created, and we were able to achieve a very good valuation for the company. We expect the transaction to be completed soon, and once it is done, we intend to distribute all of the proceeds to our shareholders. Tele2 is a strong cash-generative company, and as I said during the Capital Markets Day, one of our mid-term targets is to have the best industry shareholder return. With the equity-free cash flow that we have generated this year, or rather last year, The board intends to increase the ordinary dividend by 12.5% to 6 kroner, 75 euro per share. This puts us comfortably within our leverage range, and as we generate more cash and grow our underlying EBITDA throughout the year, you should expect us to relever the balance sheet to remain around the midpoint over time and distribute that cash to our shareholders. And with that, please move to slide three. We started 2021 by witnessing negative impacts on the pandemic, with the primary headwind being lower international roaming revenue. However, during the year, we've seen roaming gradually returning, and we are now experiencing a tailwind, albeit at a lower level than before the pandemic. At the same time, we've been able to build a solid foundation for growth throughout the year, which we have seen tangible results for since Q2 2021. In this quarter, we see a continuation of this, and we were able to grow end-user service revenue by 2%, both including and excluding roaming, adding up to a 1% growth for the whole of 2021. In Q4, we decided to take our foot off the gas a bit in terms of commercial spending. Since I became CEO of this company, you have heard me talk about the importance of balancing value and volume in the consumer business in order to achieve sustainable growth in the long term. During the first half of 2021, we focused on monetizing the increased demand for data by our customers by executing on our more for more strategy. In the second half, as societies opened and market activity picked up, we shifted focus to invest more in the market. As Q4 normally is a quarter driven by high activity through campaigns, we decided to take a more active part in the market compared to the year before. This hampered some of the underlying EBITDA growth in the quarter, but creates value for the long term as we balance the value and volume in our customer base. This, coupled with FX headwinds in Sweden and increased inflation, particularly in the Baltics, resulted in an underlying EBITDA growth of 1.3% in the quarter. Since this was in line with our plans and clearly communicated, we are able to land spot on without our guidance for the year as underlying EBITDA grew by 5%. As a result, we saw strong cash generation during 2021, with equity-free cash flow growing double digits to 5.8 billion for the year. In Sweden Consumer, we see continued strong performance in broadband and mobile postpaid and user service revenue on the back of our more-for-more strategy. With investments in the market, we were able to see strong net intake in mobile postpaid, resulting in the customer base growing year-over-year. The renamed Tele2 Play Plus continues to show solid performance, and we also launched our first SLIN offer now in January, further future-proofing our role as a player both in linear and OTT universe within the TV business. Sweden B2B saw the second consecutive quarter of growth driven by mobile volume growth, solutions and slight tailwind in roaming. The mobile volume growth is driven by all segments. Activity within the solution space continues to peak up despite some challenges in the supply chain. The Baltics continue to perform well, driven by both volume and as-do growth in Lithuania and Latvia, resulting in strong end-user service revenue development. During the quarter, we saw some elevated costs driven by increased commercial spending in order to sustain the growth, but also through higher inflation rates, primarily impacting energy costs. On a positive note, in Latvia, we were able to secure spectrum in the 700 megahertz auction and at fair prices, which now enables us to start a full rollout of 5G within the country. So let's move over to Sweden consumer on slide five. During the quarter, we saw strong mobile postpaid net intake, and as a result, we were able to grow the customer base compared to last year. Postpaid ASPU increased by 2%, driven by price adjustments made previously in the year and slight tailwind from roaming. Price adjustments made earlier in the year continued to impact the fixed broadband ASPU, which grew by 1%. We saw a stronger quarter in terms of new sales within fixed broadband. However, this was offset by higher churn in the base as an effect of historically high sales periods in which customers are now rolling off, resulting in somewhat lower net intake. In digital TV, cable and fiber, we see continued contribution from the Tele2Play Plus, which helped ASPU grow by 3% in the quarter. We continue to see a negative intake, which hampers end-user service revenue growth. Moving on, on slide six, ASPU and volume growth in mobile postpaid led to an end-user service revenue growth of 2% for mobile postpaid and 1% for total mobile. We see continued end-user service revenue growth in fixed broadband of 3%, driven by both ASPU and volume growth. Total end-user service revenue for digital TV declined by 4% in the quarter, primarily driven by continued decline in the legacy DTT TV service due to a declining customer base. And moving on to B2B, next page. Mobile net intake continued to be strong in the quarter, driven by new contracts, both within SME and large segments. The mobile asset declined in the quarter by 4%, but we clearly see improvements from the levels witnessed at the end of last year. Continued mobile volume growth and strong growth in the solutions business was able to fully offset the decline in the legacy fixed business, resulting in Sweden B2B growing end-user service revenue for the second consecutive quarter with 1%. Now let's turn to page 8 for a Sweden overview. End-user service revenue was flat in Sweden, as growth in Sweden B2B was offset by a continued decline in the legacy services within Sweden Consumer. Underlying EBITDA was flat compared to Q4 2020, as a contribution from the business transformation program was offset by FX headwinds and increased commercial spending in a quarter within Sweden Consumer. We continue to see strong cash conversion of 64%, but at slightly lower levels. compared to previous quarters as we ramp up networks investments related to the 5G rollout. Then moving to Baltics, page 10. In the Baltics, we continue to see strong volume and ASPR growth in Lithuania and Latvia as we are able to monetize data through our more-for-more strategy and a slight tailwind from roaming. In Estonia, we also see strong ASPR growth driven by price adjustments, while volume growth was hampered by promotional activity from competitors leading to elevated churn in the quarter. Moving on. Naturally, this ASPU and volume growth resulted in strong end-user service revenue in the quarter, and we saw growth of 14% for the Baltics. Underlying EBITDA grew by 7% in the quarter, as the strong end-user service revenue growth was partly offset by slight pressure from rising inflation rates, primarily impacting energy costs and higher commercial spend in Lithuania and Estonia. And I would add also an adjustment, an accounting adjustment related to handsets. But with that, I'd like to hand over to Charlotte, who will take us through the financial overview. So welcome, Charlotte, and I hand it over to you.

Thank you, Kjell, and good morning, everyone. Before we dig into the group financials, I'd like to give a quick take on my first impressions of Tele2. During my first weeks here, I can see that in the last couple of years, Tele2 has built a solid foundation to become a leading telco in the Nordic and the Baltic region. This includes investing in developing an organization that can create sustainable growth, best industry shareholder return, and lead in sustainability. The group leadership team that I've joined includes several individuals with a long expertise of the telco industry, both domestic and international. And after working in several different companies outside of the telco industry, I believe I can contribute with an outside perspective in order to improve and excel the already fantastic results that we have seen and which we will continue to achieve going forward. It's our job now to show that we can deliver on our midterm ambitions and illustrate that we are a growing company. Please turn to page 13 in the presentation. As in previous quarter, we have created this slide to show the revenue breakdown of our segments, excluding roaming, to illustrate that we are a company that is growing despite the tailwind from roaming. Like Shell said, consumer postpaid continues to perform well as price adjustments made previously during the year and volume growth contributes to the end-user service revenue growth. Total Sweden consumer end-user service revenue declined by 0.6% in the quarter, excluding roaming, as growth in mobile postpaid and fixed broadband was offset by decline in legacy services. In Sweden B2B, we see continued strong momentum in mobile and solutions, offset by decline in fixed legacy services, and total end-user service revenue remains stable, despite roaming being excluded. In the Baltics, the strong performance continues, resulting in 13% growth, primarily driven by higher ASPU and volume growth in Lithuania and Latvia. For the group, this led to an end-user service revenue growth of 2.3% in the quarter excluding roaming. We now see that roaming revenue is starting to come back in a material way as outbound roaming increased by 25 million sec in the quarter compared to Q4 2020. However, this is still not close to the roaming levels that we saw prior to the pandemic. Please turn to slide 14 for the group results. Underlying EBITDA grew by 1% organically in the quarter, driven by end-user service revenue growth and contribution from the business transformation program. However, this was partly offset by higher commercial spending, primarily in Sweden, but also in Lithuania and Estonia, and FX headwinds in Sweden. We also see higher inflation rates impacting the costs, primarily through higher energy costs. Items affecting comparability of minus 117 million in the quarter, primarily stemming from restructuring costs taken in the quarter, which relates to the continued execution of the business transformation program in Sweden. The decrease in net profit for continuing operations compared to Q4 2020 was primarily driven by the close down of the operation in Luxembourg. which had a positive impact on the results by roughly 3.3 billion SEC in Q4 2020, but with no impact on equity. There's also higher amortization of the Comhem brand compared to last year, following the brand merger in Q2 2021. So let's continue with the cash flow on slide 15. CapEx pay decreased to 971 million SEK in the quarter, driven by higher network investments related to 5G in Sweden. Working capital was strong in the quarter as we saw three separate items that had a positive impact. Firstly, we settled the receivable in the quarter of roughly 325 million SEK. Secondly, the timing of an account payable was favorable in the quarter, but we expect to see the opposite effect in Q1 2022. Thirdly, we see continued contribution from external handset financing in the vortex. Taxes paid declined compared to Q4 2020, primarily driven by preliminary tax in Sweden for the year 2020, which was repaid in the quarter. All of this led to a quarter with remarkably strong cash generation of 1.8 billion SEK in equity-free cash flow. For 2021, our continuing operations have thus generated 5.8 billion SEK or 8.3 SEK per share. Please move to slide 16 to go through the capital structure. Economic net debt rose by 0.2 billion SEK in the quarter as we paid out the second tranche of the ordinary dividend of 2.1 billion SEK. However, this was largely offset by the strong cash generation in the quarter. At the end of the year, leverage was 2.5, which is still in the lower end of the target range of 2.5 and 3. With a proposed 2.5% increase in ordinary dividend for the financial year of 2021, we will comfortably be within our range and we remain committed to maintaining leverage around the midpoint of 2.5 and 3 over time. and re-level the balance sheet as we grow our underlying EBITDA in order to distribute excess cash to our shareholders. In addition to the ordinary dividend, we also intend to distribute the full proceeds from T-Mobile Net Balance transaction as soon as the transaction is closed and we have received the cash proceeds. With that, I will hand over to Shell.