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.

Thank you very much, Charlotte. And then please turn over to slide 17. where we go through the business transformation program. So far, we have reached an annualized run rate of 500 million, with savings of 115 million affecting the P&L in the quarter, and 355 million for the full year. And we are now entering the last stages of the transformation program. These last stages include three major operational improvements within the business. Decommissioning the 3G network, improve efficiency within our consolidated IT and technology organizations, and decommissioning our remaining IT stacks once we have migrated all customers. Firstly, the close down of SUNAP, which we have already started, will increase the efficiency within our mobile network and reduce the amount of sites that we have as we consolidate towers and move frequencies into one company, Net4Mobility. Secondly, when Tele2 and ComHem merged, we realized certain synergies within the technology department by merging the fixed and mobile network organizations into one, When Jogesh joined the company, we further consolidated the technology and the IT department into one organization in order to improve collaboration within that organization, but also with the commercial units. From this, we expect to realize further synergies. And thirdly, we have so far already decommissioned two of our IT systems, and in 2022, we will carry out the major IT migration elements, which will yield the largest cost savings and vastly improve operational efficiencies. When we consolidated the Tele2 and Comhem brand, we created a new IT stack on which new FMC customers are put. Now, the job is to migrate existing customers onto that IT stack as we currently operate the different brands on different IT stacks. With all customers on one IT stack, we will vastly reduce the internal complexity, simplify the product portfolio, and reduce the time the customers spend with customer service. This is, of course, not an easy job. We have already started migrating our first customers with successful results. However, in order to secure quality in all these complex projects and enable stable commercial momentum, we will extend the deadline from end of 2022 to end of Q2 2023. This is purely a matter of timing in order to optimize our ways to deliver on our midterm ambitions. We're still confident that we will achieve the target of at least 1 billion SEK in the annualized run-right savings by the end of the period. At the same time, we are able to guide on mid-single-digit growth in underlying EBITDA despite less contribution in 2002 from cost savings, which I will talk about on the next slide, demonstrating the long-term growth journey that we have embarked upon. This is about saving costs, but it's also about building sustainable growth, and we need to balance those two things. So moving to slide 18, I'm happy to announce that we can now guide for the full year in accordance with our mid-term guidance. We expect low single-digit growth in end-user service revenue and mid-single-digit growth in underlying EBITDA for 2022 compared to 2021. We expect CAPEX, excluding spectrum and leases, to be in the higher end of our range of 2.8 to 3.3 billion SECs. driven by investment primarily in our mobile network as we ramp up the 5G rollout in Sweden and the Baltics, but also investment in the fixed network through remote PHY. For end-user service, we expect to continue the momentum that we had since Q2 2021 by making all countries contribute to the growth as we leverage the continued performance in the Baltics and return to growth in Sweden. We expect Sweden B2B to continue the positive momentum that we have seen during the second half of 2021. This does not mean that we will grow Sweden B2B every quarter during the year, but our aim is to stabilize and grow the business for the full year. In Sweden Consumer, we expect the momentum in mobile post-brand and fixed broadband to persist through our more-for-more strategy. We also expect to see continued momentum in the Baltics to provide support for the entire group. The end-user service revenue growth will filter down to underlying EBITDA, and we will continue to execute on the business transformation program. The program remains back and loaded in the year, and we expect to reach the majority of the remaining annual run rate in 2022. As I pointed out, during the first half of 2021, commercial activity and advertisement were significantly reduced significantly. during that part of the year, and we have now focused on bringing sustainable growth back in the second half. And this leads to some investment in the market. This, coupled with the facing of the business transformation program, will result in year-on-year underlying EBITDA trends to be more favorable from the summer of 2022, as we will continue to invest during the year. We'll today also reiterate our mid-term guidance, similar to our guidance for 2022. In this guidance, we aim for sustainable growth for the group with continued contribution for all countries, while the business transformation program will continue to give tailwind to underlying EBITDA up until the first half of 2024. For CAPEX, we expect to be in the high end of our guidance during the peak of the 5G rollout, and we will gradually reduce CAPEX spending as we complete the 5G rollout and improve the operational efficiency through the business transformation program. So then please turn to the next slide for the key priorities going forward. In Sweden, we will continue to ramp up 5G investments in order to increase customer satisfaction, which will support our more-for-more strategy within the mobile business. Similarly, on the fixed side, we see the upgrade with remote fires and opportunity to increase capacity and speed in order to maintain reliable growth in our broadband business. We will continue executing on the business transformation program to deliver at least 1 billion SEK of savings by the end of Q2 2023. In Sweden Consumer, we will continue to balance value and volume in order to build sustainable growth while gearing up our capabilities to address the 1.3 million non-FMC households. We will also continue to build our premium brand in order to increase customer satisfaction that we can monetize through reduced charge or price adjustments on the back of product improvement. In Sweden B2B, we will continue the turnaround that we have started during the second half of the year by executing on our new granular approach with clearly defined segments. In the Baltics, we will continue to build on the performance that we've seen and execute on our mobile-centric convergence strategy through more-for-more offers in order to make sure that we can sustain the growth. With the 5G auctions now concluded in Latvia, we will start to ramp up the 5G rollout while preparing for the auctions in Lithuania and Estonia. At the same time, we will continue to develop and explore FMC capabilities. And lastly, we aim to close the T-Mobile Netherlands transaction soon, in which we intend to distribute all proceeds to our shareholders once the transaction is closed and we have received the proceeds. Teletu is a growth company at heart. and we are witnessing positive results from our strategic initiatives, which demonstrates the viability of our way forward. I am confident in our ability to succeed and deliver on our 2022 and mid-term guidance, and excited to continue building sustainable growth. And with that, I'd like to hand it over to the operators so we can do a Q&A.

Thank you, dear participants. We will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star and one on your telephone keypad and wait for them to be announced. If you wish to cancel your request, please the hash key. Once again, please press star and one if you wish to ask a question. The first question comes from the line of Andrew Lee from Goldman Sachs. Please ask your question.

Yeah, good morning everyone. I just had a couple of questions focusing on around the cost base of your business because I guess that's where the greatest investor focus is today. So just firstly on the cost quarter and that you highlight will continue into the first half of 2022 in terms of sales and marketing costs. Is that purely phasing or do you think there's a sign there that the cost to compete has gone up in the market? And then second question, just around your midterm cost cutting, which you have pushed back by six months, which one of your peers, KPN, did yesterday as well. Just wanted to try and understand, has cost cutting or cost efficiencies become harder? Or has COVID changed the scope of that cost reduction? Trying to understand a little bit more why the delay. And the key reason for the question really there is, We're trying to think about whether you can continue to create further efficiencies further out in the middle of 2023 and we're trying to understand how much scope there is for long-term greater efficiencies in the company. Thank you.

Let me start and then I would invite maybe one or two colleagues there. Let me take the second one first on the mid-term cost-cutting. If we were single-mindedly focused on cutting costs, we could have done the transformation program by the end of 2022. But what you see is in the second half of 2021, we're actually able to get back to meaningful growth in Sweden. And I really would like for Stefan and Henrik to not have too many freeze periods where they are limited in their approach. quite confident that that brings more value, especially in the medium term, getting the business back to growth rather than fast-forwarding this cost-cutting program. To deliver on this, we will definitely do it. There is no doubt about that. But from a value perspective, I think the sequencing that we are putting now, where we are taking the loss of the big migrations in the first quarter of 2023, is a better one for our overall business. And we talk a lot about the sales and marketing cost. And of course, this is just a sign of the market becoming more normal again. So we have comparisons where they were very low levels. You saw we had a huge uptick in our EBITDA in the first part of 21. And then of course, since we are very, very transparent in the way we go to market and operate with you, I could have made a bridge to you easily that would take us back to the... consensus of 3.7 by pointing out individual elements related to an IFRS adjustment we've done, the electricity cost in the Baltics, and some exchange losses. And we'll be back at what the consensus was. But this is how we are. We are maybe a little bit too brutally honest with ourselves. So let's not overdo the sales and marketing. I don't know, Henrik, do you want to add a few comments to that?

Yes, Shell. Pleased to. Hey, Andrew. Hi. Thanks for the question. So on the sales and marketing cost, as Shell was saying, we, of course, need to look at where we are in the fourth quarter against early in the year, also from a return to normality point of view. And that, of course, brings you, in general, to a little bit of a normalized level also on your marketing and sales cost. And then Within that, the fourth quarter is typically a very high trading season. We do a lot of the promotions, a lot of the handset and device sales. And actually, we've performed quite nicely in the quarter, I would say, particularly on the mobile postpaid side. And then on your question, how will that translate into next year? I would say, as long as we get out of, let's say, back to normality and out of COVID, you will see, of course, a normalized run rate again. But within that, the fourth quarter is a higher cost quarter. And I also would like to point out that a lot of that commercial cost is driven by acquisition costs and not as much as marketing costs, which I saw in some of the commentaries. Because we've, of course, also been able to get some, you know, transformation savings onto our marketing spend by moving to one brand. So there's a lot more related cost to volumes. Yeah.

Thanks very much. Can I just follow up on the longer term? What you're seeing in the company in the moment, does that give you confidence that there's further costs or efficiencies to go after post the midterm plan or do we then rely on operational gearing to drive the growth forward?

Yeah, that's also why we are reiterating our midterm guidance. There are I think we can say that there are cost savings, there are cash savings. The Swedish model has also quite a lot of capitalized expenses for consultants. That's a bit unique to Sweden. So at the end of the day, I do see a scope for improvements beyond the program that we have now defined in terms of reduction of cash spending in the company. Hello?

Excuse me, Andrew, have you finished with your questions?

I think you dropped out. He might have dropped out. Sorry about that. We're having some problems with the webcast, everyone. Well, let's go to Ulrich then. I think we can go to the next question operator.

Thank you. The next question comes from the line of Ulrich Rase from Jefferies. Please ask your question.

Thank you. I have two questions, please. The first one, bit of a follow-up on the earlier one. Just to clarify, when you talk about the phasing of commercial events with regard to the BTS change, is that the customer migrations or is it other commercial events that you're referring to? And also, is this plan informed by anything you see in the market, actions by competitors or competitive levels overall in the market, or is it simply going back to the drawing board, you know, putting together all the plans and sort of deciding this is better to sort of shift it out by six months. Is it more internal or external? That's the first question. And then the second question is, you mentioned during your prepared remarks that there was sort of a bit of a wave of contract expiries in the fourth quarter due to, you know, I suppose high sales in prior fourth quarters and then these contracts sort of expired and created higher churns. How do you see that? Generally, you would hope not to see high churn when contracts expire. Was this sort of a normal rate and just a higher underlying contract expiry? Or was there a reason why more people, percentage-wise, of these expiring contracts decided to leave Teletubbies or ask for better terms? Thank you.

I will do the first one and Henrik will do the second one. So you're basically asking me why do we shift it six months? I actually see that as a signal of strength in the business. If we were not succeeding in the go-to-market, then we would redouble the efforts or costs to try to compensate. The thing here is that I see that both Stefan and now Henrik have the opportunity to build sustainable growth, and then it's easier to let them have a little bit of maneuvering space in the go-to-market. So it's a decision that we have made internally based on how we think we can get the most value out of the approach. So if we see the opportunity like we do now to have sustainable growth, it makes sense to give them a little bit more space and don't be bogged down by too many freeze periods. So overall, I think this is good news.

Yeah, sure. Ulrik, just thanks for your questions. So first of all, just to confirm a couple of things. First of all, from a commercial point of view in the consumer market, we're really executing on a value strategy, right? So we're trying to, you know, to drive value into the market. And of course, with that also increase the overall value in the market for, you know, for the industry. And with that, we're in a regular cycle that is recovering, coming out of COVID, with typically the fourth quarter being a very high trading season with you know, some, you know, additional commercial spend just from the quarter itself. If we look into, take this forward, then what you can expect is that we, you know, in 22, we'll be able, as we recover from COVID, although we still have some weakness in, you know, the end of January and in January as we speak, we will be able to get to a better sustainable commercial rate, but not at the level of Q4, not the high level of Q4, because that's a seasonality, and not at the low levels we've seen earlier in 21, but we were very much focused on EBITDA in the midst of COVID. Then in terms of what happens with the customer base, we've seen that, you know, and I think your question particularly pertains to broadband and our net intake of... of 1K versus a normal rate of, you know, a mid-single-digit rate. And I think we've sort of been guiding that. What happens in this quarter in particular around broadband is, you know, that we had a pretty decent sales rate, although we've had some impact, you know, from COVID on some of the channels that has sort of given a little bit of softening. But in particular, we've seen for this quarter that we've had campaigns that we've had over the last two years, a 24-month campaign and a 12-month campaign, that have both rolled out, sort of ended in this quarter. And typically, if we roll off a campaign, this always comes with a level of churn. So because we've had now two sort of these campaigns all happening in this quarter, we've seen some you know, additional take-up on churn, and that's sort of the key driver for the rate. And that is not a continued trending. That is very much, you know, a particular event in the fourth quarter. And I would say underlying our broadband, you know, traction is still around sort of that mid-single-digit rate. And then lastly, what we typically do in terms of migrations, as we execute on more-for-more pricing strategies, we continuously move and upgrade customers to, of course, our new front book and, of course, also to our new product sets that we have. And if you mean migration in that sense, that's what we continue to do as part of more-for-more.

That's very helpful. Can I just clarify the very first question that I asked, Pete? These commercial events that you specifically talk about in the report as sort of the phasing of that and forming the delay to the BTS, what exactly are these commercial events? Is it the migration waves? Is that what it is or what is it?

Ah, yes. Okay. So, yeah, we probably could be more clear in our language. So it's basically what I'm trying to say is that let me take a historic perspective on this. My predecessor made a decision which I think was right at the time to focus on EBITDA and costs because of the uncertainties around COVID. Now we are at the end of this thing, and we have seen that we've been able to get meaningful growth back into all main lines of our business. Then it makes sense for me and the management team to focus on getting that growth going. And the commercial event that I mean that is that, for example, Henrik is planning a campaign in an important period of the year. We don't want him to be too restricted by constant freeze periods. So by sequencing the B2P program so that it fits well with our go-to-market, we are able to do both of these things. And that builds the most value for the business.

Makes perfect sense. Thank you very much. Thank you.

Thank you. The next question comes from the line of Andreas Joelsen from Danske Bank. Please ask your question.

Yes, good day to you all. A question on leverage. You have been at the lower end of the leverage for quite a few quarters now, as the slide showed. Is there anything that would change that view? Or if I'm being a little bit blunt, what is preventing the board from moving you to the mid of the range that you expressed? Thank you.

Yeah, I can start. You can take over if you want. We have had a very positive 2021 from a cash flow perspective. And a couple of things have come our way that has been really helpful. We expected it and it has happened. So you see a very high cash flow generation in the business. And we do remain committed to the policy. We will be reviewing this Last year we paid an extraordinary when we announced the second quarter. Of course, I cannot say anything about what we're going to do this year, but the board is very committed to our policy. So if we see that we will be, over time, trending significantly lower than what we have said, then that will be reviewed for sure. We have no desire as a management or as a board to hold back any significant amount compared to what you expect. And of course, one thing we are doing now is that we are handing out, when the deal closes in the Netherlands, the entire amount, despite the fact that, you know, from a ratings perspective, some of that revenue would have been calculated by S&P as future contributions. So that's a signal of strength from our side. But yes, we remain committed to the policy and we will be monitoring that.

Very clear. Thank you.

Thank you. The next question comes from a line of Peter Nielsen from ABG. Please ask your question.

Thanks very much. Morning, guys. Just a question related again to the transformation program, but the internal side of it. You've spoken about the market side. Please, Kel, on the IT migration transformation, et cetera, is this running according to plan, or are you seeing some issues here? that sort of moves this also slightly into the next year. That was my first question. And just second one, we are seeing a slight weakening of trends in the TV business. Could you give us any indication or qualitative comments on how do you view the TV business moving into this year? Thank you very much.

Let me do the first, and then the second one I will hand over to you. So on the migrations, we have actually started that process. So one of our main brands is moving to the new platform. And we haven't had any unexpected things there. Actually, it's been relatively smooth, I would say. These things are never super easy, but there hasn't been any kind of red or even orange flags coming up there. So again, you... Our reasoning for the choice we've made is exactly what you see is what you get. This is our thinking. We really want to make sure that we extract the most value from the market in this process. So we are very confident about the business transformation plan, both the number and, of course, now the timeline that we have set. And I think it's definitely the right thing to do in terms of a value creation perspective. Yeah.

Hey, Peter. On the TV or an entertainment business, just to give you sort of some insight there, in last year's Capital Markets Day, I think it was very clearly launched and stated that our aim is to stabilize and modernize our entertainment business to also contribute to driving value for the overall consumer business. And that's basically still our aim. So our aim is to stabilize this business and to make the necessary adjustments so that we can really move into streaming and get more solid fundamentals in the DTV business. What you see, if you look at the numbers on the line, you see at least the revenue level that are cable and fiber entertainment businesses is sort of starting to stabilize whilst we still have some decline on the legacy DTT side. And that is in part coming through from the uptake we're seeing on our streaming business which sits in the cable and fiber numbers. Again, we're still early on because since we've now just rebranded ComHandPlay Plus into Tell it to play. We're seeing some good growth momentum, and that's also where we're now launching linear streaming into the portfolio. This is, again, a first step into a continued modernization journey for our entertainment business that, again, in the end, should be able to stabilize the total TV line over time. Okay. Thank you very much, both.

Thank you. The next question comes from Stefan Gaufen from D&B. Please ask your question.

Yes, hello. I have a question on mobile ARPU. There was slightly weaker growth momentum on the ARPU side for both the consumer and the business mobile this quarter compared to Q3. I just wonder if that is a result of campaigning or if it's increased mobile competition or due to phasing of price increases. Just help me understand sort of the development on mobile ARPU.

Okay, Stefan will start and then Henrik.

Yeah. Hi Stefan, thanks for the question. And on B2B then, if you look at the comparison versus last year, it's true that we have a decline. But if you look on the long trend, we are decreasing that revenue or after decline that we've seen in the B2B segment. looking at the efforts that we're doing, keeping more disciplined around our pricing guidelines, focusing on value, and making sure that we take a responsible stance in the market. And we're challenging ourselves all the time to make sure that we get the right price from our B2B customers. we can see that it's actually resulting in improvements. If you compare it to the Q3 and Q4 ASPU, it's a flat development. And also if you look at the full-year ASPU, we're on the same level as we were in both Q3 and Q4. So I would say the strategy is yielding results. And of course, bringing in more SME customers within higher ASPU than the key and the public sector, it works in the right direction for us in B2B. I hope that answers the question, and then I'll hand over to Henrik.

Thank you, Stefan. Yes, Stefan and Stefan, actually. So I will focus on the consumer side on the post-bate ASPU, Stefan. And basically what you see from Q3 to Q4, is typically, you know, that in Q3, also this year, actually, still sort of in that lighter touch on COVID, we did have some good roaming revenues, as you may remember from our Q3 report. So, that typically drives a higher, you know, ASPO in the quarter, which then, of course, you know, coming out of the holiday season has an effect on the, you know, ASPO in the fourth quarter. Another thing is the main explanation. If you look At the underlying ASPU in the quarter versus last year, we've been growing by 2% and actually also versus full year, strengthening the ASPU development. And whilst you may think, well, from campaigning, there may be a little bit of a campaign low, softer ASPU coming into the mix, that of course, to an extent is true, but it doesn't have any effect on the overall customer base ASPU as such. So I would say, It's mainly in effect from a strong Q3 driven by typically roaming, and versus last year, we see a 2% growth in the quarter.

Okay, thank you. Good explanations from both of you. Thank you.

Thank you, Stefan. Thank you. The next question comes from Francesca Schultz from BNP Paribas Exane. Please ask your question.

Thank you. And I have one question, please, on wage inflation pressures. So how do you think of wage inflation risk in Sweden? And can you please remind us of the process for wage increase negotiations this year, when they'll take place, and what you're projecting for the increase? Thank you.

Well, the wage inflation in Sweden is pretty much determined by the central negotiations. So I don't see anything dramatic coming out of that. Those numbers are usually quite responsible. We do see a bit more wage inflation in the Baltics. That kind of goes with the overall growth that we see in the business and the economy. So there is more inflationary pressure in the Baltics than in Sweden. Now the good thing about that is that the business in the Baltics is also pretty good at pricing their services. So I think the industry in general in Europe has struggled with focusing on these inflation adjustments of pricing. What BT is doing in the UK has maybe one way of doing it. We think our Baltic colleagues have been overall quite good at it. I think probably we could be even better at this in the Swedish market. But to be specific on your question, Sweden, wage pressures seem to be kind of under control because they are centrally managed, most of it. And the Baltics is also under control, but will have a higher level.

Thank you. So just on that, do you think that in Sweden it will be similar, the increase this year to last year? And have the negotiations taken place?

I think you can expect overall those agreements to end up in the area of maybe 2.5%.

Okay, thank you. Thank you. The next question comes from the line of Pontus Eriksson. Watchmeister from SCB, please ask a question.

Hi there. Thank you for taking the questions. On the marketplace, I focus on Sweden and in regards to everything spoken about before, the positioning in networks and your 5G position and the JV with Telenor. Can you describe to us just very top-down how important that is going forward in terms of having a good position in 5G and the perception in the market of fast and strong networks and investments in those? And are you aligned with Telenor in that space?

Pontus, I should really thank you for that question, because this is something I love to talk about. We have a quite unique position in European telecoms with our network cooperation with Telenor. So we run some part of Sweden on our own network, but most of it to Netformability. And that gives a great advantage, because we have the scale advantage, and we have also a very good spectrum position. So when the whole network 2G, 3G, 4G market consolidates into one 5G market, that is actually a net positive for us at Teletubbies. Because the combination of network mobility and our home networks will mean that in terms of base stations and spectrum, we will have the strongest position in the market. Because right now, we're operating with network corporations, with Sunab, with Telia, we have network mobility, we have our own When we consolidate all of this into one, with one network planning, we will have the biggest reach and we'll have a great Spectrum portfolio. So we can't wait to get through this because it will, if anything, strengthen our position towards both B2B and B2C consumers in the Swedish market.

Okay, thanks. And it's becoming more important towards the consumer, you feel? Or is it because in the beginning, you know, people weren't as aware, but now you feel that speed and efficiency is more of a divider in the marketplace?

Yeah, I think we have a good 4G network now. But the good news is that when we're moving over to the next technology and we can replan the network, we will be able to have better reach with fewer base stations because we're not sharing in multiple relationships here. So that whole planning... has a significant efficiency in it. Actually, I think Jogesh described that very well at our Capital Markets Day. So there is a clip out there that describes how that journey goes. So it's something that we are really looking forward to.

And maybe to add, Pontus, I think if I look at the typical consumer behavior and uptake on, for example, new phones and handsets, you see quite Quite a lot of the phones that we've been shipping also in the fourth quarter are 5G ready, and that's sort of making its way into the market quite quickly. So there's a natural uptake by the market.

Okay, thank you.

Thank you. The next question comes from the line of Adam Fox-Romley from HSBC. Please ask your question.

Thank you very much. Hello, everyone. I'm I wanted to ask a slightly general question about the way you're thinking on phasing of customer growth. From my perspective, today's results show the machine is kind of working. You can turn it on when you choose. That allows you to dip in and out of the market to optimize your return on spend. But are you saying from today that you prefer kind of maintaining business momentum, so it's better to have a slightly smoother approach to customer growth through the course of the year, or is it really just that you're kind of correcting for what was a very unusual first half last year? And then I wondered, slightly following up on that previous question, whether you're on a question on CapEx, you've begun the big ramp up in spend. I wondered if you could just say a few words about how that's going whether you're seeing any issues or any areas where you're ahead of plans, that kind of thing. Thank you.

Okay. So looking at our positioning in the market, I'm very happy to see that we have a much higher accuracy now than we had when I joined. And that is because a lot of people have worked hard on getting their data right. One of the reasons why Stefan is successful in B2B is that they do much better analysis now. B2B used to be very volume-driven. They go back in time. Now they are much more accurate about the customer needs. They have a much more interesting and relevant discussion with our large customers and solutions customers. And that is how they can provide value to these customer relationships. One of the things we want to get out of our business transformation program, beyond saving costs, is that Henrik, in cooperation with Jogesh, will work much more with big data, be much more accurate in our go-to markets. Tele2 has a history of being a very successful challenger, and that was great in a growing market and where you didn't have such a huge long tail. Now we are a converged FMC player who need to be much more accurate, and that level of accuracy has increased a lot. And what Henrik brings to the business here, he brings many things, but one of the things he brings is a deep understanding, not only of mobile markets, and not only of broadband markets, but also the TV side of the business. So the whole picture comes together. And for us to be more surgical in our approach between value and volume, we need more and bigger data. And that's what we're getting into place. That is one of the key things that is happening. And on the rollout, the 5G, it's moving ahead. we actually were able to do a little bit more towards the end of the year than we expected. So that momentum has really picked up. So we think a lot is going to be built out in 2022. And the main momentum will be done and finished by 2023, with, of course, some build-outs in 2024. And the guidance for our CapEx, you have it, will be at the upper end, clearly. But we have transparency on that. We have visibility on that. It's looking pretty good.

That's very helpful. Thank you. If I could just follow up on that first question. In terms of the staff requirement to become better and more capable with big data, is Tele2 seen as a place where that is a great career option to be able to have that opportunity?

I'll start, and then if you guys want to chip in, please. One of the things that I did after coming here was to move the big data resources out from being more of a staff function to being directly in the line of business. We have people here who are truly capable and they are actually quite motivated now because they are much closer to where it happens. They're much closer to the business. So they have really quite a lot of energy in putting into their work. And it seems like they're coming up with with a big value add. Do you want to add something, guys?

Well, from a B2B perspective, I would say that in the past, Intelli2, we have underinvested in the business intelligence side. That is something that we are changing and which we started already next year with the program in becoming more data-driven. and to Shell's point, in different manners of running the business. We will continue to do that also this year. And I think the cooperation that we have with the units within our technical organization, with the skill sets that they bring, cooperation between the commercial and technical parts, that will yield better control, better performance and execution going forward in all aspects. And not just commercial, I would say, but also from a customer experience perspective and a production perspective. So really, really looking forward to that.

Thanks very much. Well, maybe, Adam, just add to the, you know, from a consumer point of view, I think customer value management, you'll probably pick it up also. Other operators, it's really a way to go as you go into a converged strategy. That's where we still have a lot of opportunity and mileage to go. As Shell was alluding to earlier, the IT transformation is quite essential to get that done so that we can really not just have the data, but also act on it through, you know, how we build propositions, how we, you know, get the intelligence to the channels and et cetera. So, you know, we're in full motion of that. And there's clearly a lot of potential still to be, to come out of this as we go through 2022. Great. Thank you.

Thank you. And the last question comes from line of Abhilash Mohapatra from Berenberg Bank. Please ask a question.

Yes, good morning, and thank you for taking my question. I just wanted to come back to the comments that I'm driving, improve top-line growth in Sweden, please, in context of the guidance. In 2021, obviously, you know, group service revenue growth of 1%, but all of that was driven by the Baltics, with Sweden declining 0.5% and Q4 actually softening a bit. So just to confirm, within the 2022 guide, what are you assuming for Sweden, please? Looks like consensus. has around 1% growth for Sweden in both consumer and business. Is that something that you're comfortable with? Thank you.

Well, I can start. First of all, I think it's very important to see the trends over time here. So going from a quite significant negative trend in B2B to being a stable business was what we said we would do and we've done it. And then, of course, we want to take it from there. Stefan and I and others will work hard to deliver meaningful growth there also. And then, of course, we've seen volumes picking up a bit in consumers. So our ambition is that all the main lines of the business, meaning the Baltics, B2C Sweden, B2B Sweden, should be delivering to the overall growth momentum of the company. And then, of course, it will... It will vary over time where the biggest contribution comes from. Clearly, in the short term, it will be the Baltics. Anything you want to add?

No, I think you put it well. I mean, during the year, we set a strategy for B2B with specific cornerstones that we shared with you at the Capital Market Day. We are delivering on that strategy to the full extent, and that's our focus, and also to be consistent in regards to the strategy and these corridors with segmentation, being a digitalization partner, operational excellence, et cetera. And we set the ambition to make a major trend shift during 2021, which Shell just mentioned. I mean, we have delivered on that. And then we're on the path of having the ambition to be stabilizing the revenue growth that you saw in the last quarter. And hopefully that answers the ambition that we have. And going from minus seven in 2020 to that level that we see now with two consecutive quarters with positive growth. We're proud of that delivery, but we're not satisfied. We will push forward going into the future.

Okay.

Do we have Nick or we are... And the last question comes from the line of Nick Lyle from Sagan. Please ask your question.

All right. Thanks very much. Thanks for squeezing me in there. There was a quick question, please, just two things. I was looking at the end of 2021 survey. Could you just explain why that is or is not a true reflection of the network quality and should we be concerned about your ability to close the gap on Telia's mobile prices because of that? And then secondly, apologies if I missed something because I got cut off a couple of times. I take your point about the broadband campaigns annualizing, but if you were able to remove that, would we see in the numbers you making some headway by taking share from Telia because of their rises in broadband prices? Could you just explain the sort of background to the market on the fixed side, on the broadband side in particular, and what sort of share you might be taking X those end of campaigns, please?

So I'll do one, and maybe Henrik does two. Okay. So what you are highlighting is an opportunity for Tele2. We have a good network today, and then of course there will always be surveys. There have always been surveys as long as I've been in this industry. But what I tried to say on the previous question is that going into setting up the 5G networks, when we can have one network under our own control and not have multiple cooperations, The cooperation and net formability is tested over time. It works really well. We are in a good relationship with our partner there, with Telenor. So 5G brings an opportunity for us to capitalize on that gap that you are pointing out, because clearly we, moving forward with Tele2, becoming a converged player, a quality player, gives us the chance to lift Aspus over time. So when we come out end of 2023 and early 2024 with great coverage and great spectrum and a very strong 5G proposition, that gives us an opportunity to equalize some of that gap that you are pointing out. So it's a good opportunity for us.

And to Sheldon, and Nick, it will be an opportunity to carry on, you know, that growth momentum, I think, also through more and more on the mobile aspect for us, you know, as such. And then on the fixed, I'll just briefly comment on that. You know, underlying, I think we have still a good trend. Of course, you know, you need to look at the total market, of course, where we've gotten. If you look traditionally, first, where we are now, of course, you know, we do have a mature and quite penetrated market. However, the campaign momentum that I was alluding to is that of course you need campaigns to an extent to drive your net ads on the one hand. But in this quarter in particular, we've seen just the two of these sort of quite successful campaigns you know, coming out, rolling out, and that has been that specific effect. So, yes, you need campaigns to drive it. Of course, these need to be well sort of, you know, planned and scheduled that you don't have these sort of effects that we've seen in this quarter in particular, which we're doing as we go forward. And as we also execute on, you know, the FMC strategy, and we will be able to, as we have been alluding to, get more out of the customer base and customer value focus, we will also be able to address, you know, some of the churn levels and see some churn reduction. So a continuation on, you know, driving sort of campaigns that sort of are well planned in combination with really driving the FMC momentum throughout 2022, I think will give us a good underpinning for our broadband business going forward.

That's great. Thank you.

Thank you. Dear participants, thank you very much for all your questions today. I would like to hand the conference over to your speaker, Shell Jensen, for the closing remarks.

Thank you very much, everyone, for joining us this morning to go through the full year of 21 and our outlook for 22. I'm very happy that we could close the year on a relatively high note, with basically living up to the guidance increase that we gave you in July of last year. and that we are now sitting with a guidance that is higher than we had 12 months ago. We have increased our dividend by 12.5%, and we are recommitted to, of course, as we always are, to the dividend policy and the capital allocation. So things are looking good. We're going to deliver on our transformation program, and we're going to make sure that that does not interfere with our ability to drive growth momentum also in the Swedish market. So we're making these judgment calls, and I'm pretty positive about the outlook. So thanks for joining us today.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.