Tele2 AB (publ)

Good morning everyone and welcome to Teletoo's report call for the first quarter of 2022. With me here in Kista I have Charlotte Hansson our group CFO, Henrik de Kroot our chief commercial officer and Stefan Trampus our head of B2B. But before we go into the results for the first quarter I'd like to say a couple of words about the war in Ukraine that has had a profound impact on society as a whole and for the people here at Teletoo. The war has caused major uncertainty and stress for all of us and we are participating in efforts to help some of the people that are suffering from the atrocities by temporarily offering customers in Sweden, Baltics and Ukraine free calls and text messages to and from Ukraine and free roaming for customers located in the Ukraine. And then I'd like to turn your attention to the results of the quarter moving to slide two. I'm really happy to see a great start to 2022 both in terms of end user service revenue and underlying EBITDA growth. End user service revenue grew by 3% for the group driven by both the Baltics and Sweden B2B. It is especially encouraging to see the impressive dynamics within Sweden B2B that now is able to grow with 3% in end user service revenue. The strong end user service revenue growth together with continued growth within Sweden wholesale and execution of the business transformation program in Sweden resulted in underlying EBITDA growth of 6% for the group. As we previously have announced we are happy to see the T-Mobile Netherlands transaction finalized and with the proposed extraordinary dividend from the cash proceeds and the proposed ordinary dividend we are able to offer our shareholders a significant dividend yield for 2022. I'm also happy to see the new strategic partnership together with Viya Play that we announced in the quarter. Through this agreement we are able to modernize our TV proposition and prove that our aggregator model which historically has been successful in the linear world also works in a streaming world. Within fixed broadband we see continued strong performance both from an ASPU and volume perspective and in a TV segment Tele2Play Plus continues to provide promising results ahead of the new TV propositions. We continue to see an improvement within Sweden B2B end user service revenue driven by the mobile and solution segments. Within the mobile segment we see the improvement coming from both a volume and ASPU perspective which is very promising. Even though we have not seen any material impact on supply chain issues in this quarter we prepare for different scenarios and continue to monitor the situation. In the Baltics we experienced yet another quarter of fantastic performance both in terms of end user service revenue and underlying EBITDA. Here we see more pressure from a cost perspective than in Sweden especially in terms of electricity costs which offsets some underlying EBITDA growth. We also in the quarter further improved our spectrum portfolio by acquiring spectrum in Latvia in the 1500 MHz band. Let's then move over to the Swedish consumer segment on slide 4. Mobile Postpates saw lackluster net intake as competitors ran intense campaigns and high commission in external retail during the quarter while some COVID-19 restrictions still hampered market activity. Mobile ASPUs saw a slight decline in the quarter partly driven by a 10 million negative one-off in the quarter. Six broadband continues to show good performance both from an ASPU and a volume perspective and we see that the price adjustments that we did last year are continuing to have a positive effect on the base. In digital TV, cable and fiber we see continued contribution from Tele2Play Plus which helps to grow the ASPU in the quarter. However, the overall customer base continues to decline which hampers end user service revenue growth. Moving to slide 5. Mobile Postpate end user service revenue was flat in the quarter as slight ASPU decline was compensated by slight volume growth. We see continued end user service revenue growth in a fixed broadband of 4% 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. Then let's continue with Sweden B2B on next slide. The mobile net intake continued to be strong in the quarter driven by new contracts both within SME and large segments. The mobile ASPU trend continues to show improvements with a slight decline of just 1%. Continued mobile volume growth and strong growth in the solution business was able to fully offset the decline in the legacy fixed business resulting in Sweden B2B growing end user service revenue by 3% in the quarter. And then let's turn for an overview of Sweden. End user service revenue was flat in Sweden as growth in Sweden B2B was offset by continued decline in the legacy services within Sweden consumer. Underlying EBITDA increased by 5% in the quarter compared to last year driven by slight end user service revenue growth, Sweden wholesale and contribution from the business transformation program. We should note that the mechanics of our negotiations with NEMP led to some cost avoidance in Q1 and that costs related to this contract will apply going forward when we use more content to upsell and promote growth in the TV business. Overall we continue to see growth strong cash conversion of 65% of continued underlying EBITDA growth offsets higher capex levels. And then let's move to the Baltics. We are happy that similar to previous quarters we continue to see strong volume and ASPU growth in all markets as roaming is starting to come back in a meaningful way and we are able to monetize data through our more for more strategy. In Estonia we were able to successfully execute on our customer acquisition campaigns which yielded a good net intake for the quarter. And then moving on this ASPU and volume growth led to a strong end user service revenue growth for all markets and we saw the Baltics grow by 13%. The end user service revenue growth in the quarter was able to offset the increased pressure from rising inflation rates which resulted in underlying EBITDA growth of 8%. We continue to see a high cash conversion for the Baltics due to the strong performance and relatively low capex levels prior to the nationwide 5G rollouts. And with that I'd like to hand over to Charlotte who will go through the financial overview.

Thank you Shell and good morning everyone. Please turn to page 12 in presentation. Strong end user service revenue and growth of Sweden wholesale coupled with continued execution of the business automation program resulted in solid underlying EBITDA. However this was partly offset by headwinds stemming from rising inflation rates primarily in the Baltics. In total underlying EBITDA increased by 6% in the quarter. Depreciation and amortization continues to be higher on the quarterly basis compared to last year as we started amortizing the Comhem brand in May 2021 when we consolidated the old Teletoo and Comhem brands into the new Teletoo brands. Results from associated companies and joint ventures increased significantly in the quarter compared to last year as we saw a 1.6 billion SEC impact from the capital gain from the T-Mobile Netherlands investment which was completed in the quarter. Effect losses from hedges connected to T-Mobile Netherlands transactions was the primary reason as to why we saw net interest and other financial items increasing by roughly 100 million SEC in Q1 2022 compared to Q1 2021. So let's continue with the cash flow on slide 13. CapEx paid was lower in the quarter compared to last year as we had a spectrum payment in Sweden related to the 3.5 GHz spectrum auction of 333 million SEC in Q1 last year. And changes in working capital was negative in the quarter primarily driven by timing of accounts payable. Taxes paid increased in Q1 2022 compared to last year as did a final tax payment related to the fiscal year of 2020 in the quarter. We continue to see strong equity free cash flow with 900 million SEC generated in the quarter yielding an equity free cash flow from continuing operations of 5.9 billion SEC in the last 12 months. Please move to slide 14 for the capital structure. At the end of the quarter we saw economic net debt decreased to 14.3 billion SEC driven by the cash proceeds received from the Team Mobile Netherlands transaction and cash generated in the quarter which resulted in a leverage of 1.5. We expect to pay out the cash proceeds from the Team Mobile Netherlands and the first charge of the ordinary dividends in May once our shareholders have voted for the two propositions. If we adjust for these two payments leverage would have been 2.6. Please turn to slide 15 where we will update you on the progress of the business transformation program. During the quarter we made significant progress within the business transformation program. We have started migrating the first batches of customers on the TELU2 brand onto the new IT stack. So far this has been going smoothly and we expect it to be done later in the year upon when we will start migrating customers from Convic and Boxer onto the new IT stack. We also continue to make optimizations within the organization primarily in the technology and IT organization. The annual run rate of the business transformation program was 600 million SEC by end of Q1. The P&L effect of this was 140 million SEC with a net effect of 70 million SEC compared to Q1 2021. With that I will hand over to Kjell.

Thank you Charlotte and then please turn to slide 16 for a summary of the key priorities going forward. In Sweden we have now finished the golden clusters and have started the wider 5G rollouts. Similarly on the fixed side we will try to further ramp up the speed on our remote fly project in order to gain the benefits from this investment as soon as possible. Both of these projects are key for us in order to increase customer satisfaction which will support our more for more strategy for years to come. We will continue executing on the business transformation program to deliver at least 1 billion SEC 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 churn or price adjustments on the back of product improvements. During 2021 a lot of focus went into stabilizing the B2B business in Sweden and now that we have achieved that we will turn our focus towards TV business which has historically been the second drag on Swedish end-user service revenue growth. The agreement with Viya Play is a key part in this strategy and now we have a more competitive offer out in the market. We will start migrating linear customers onto our new TV propositions during Q2 and we will launch our streaming propositions later in the year. In Sweden B2B we will continue the turnaround that we started during the second half 2021 by executing on our new granular approach with clearly defined segments. Going forward our ambition is to grow in the business for the full year but as in any business it usually does not develop in a straight line and fluctuations should always be expected but we are witnessing a very important and sustainable shift within B2B. 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 and more offers in order to make sure that we can sustain the growth. With the 5G auctions now concluded in Latvia we'll start to ramp up the 5G rollout while preparing for the auctions in Lithuania and Estonia which we expect to occur this year. At the same time we will continue to develop explore FMC capabilities. During the quarter we signed a wholesale agreement with Baltcom in Latvia which means that we now have FMC capabilities in all countries. We've had a really good start to the year with low single digit end user service revenue and mid single digit growth in underlying EBITDA in the quarter. When we presented the recent Q4 results I said that Teletoo is a growth company at heart and that we are witnessing the positive results from our strategic initiatives. With yet not a quarter completed I'm even more certain that we can reach the goals that we've set for ourselves and with that I'd like to turn it over for some questions please.

Thank you. Ladies and gentlemen if you do wish to ask a question please press 0 followed by the 1 on your telephone keypad. Our first question comes from Andrew Lee from Goldman Sachs. Please go ahead your line is now open.

Good morning everyone. I just had a question on your Swedish consumer growth acceleration outlook. You seem pretty confident on that but I wonder if you could talk us through the key drivers on what will accelerate your Swedish consumer revenues from the flat delivery that you delivered in Q1 and then and particularly within that I just wondered if you could talk about the two components of price rises whether that will be your price rises can be more this year than last year to provide a boost to growth and then same on upselling. Do you think your scope to upsell customers to high speeds at a high price is greater than it was a year ago? Thank you.

I'm going to start and then hand over to Hendrik. So it's of course more granular so we see an overall okay performance in the fixed area and we've talked a lot about how we have strengthened the basics now for our TV position so we can actually move TV from having had relatively big negative numbers on linear to now stabilizing that business so that all other things equal will be helpful and then I would say this quarter was a bit disturbed by one of the players using massive commissions and quite strong offers out in the unlimited space. We think that's a temporary move from that player and we have basically focused on value rather than volume here. We think that's going to stabilize and that's going to help us to promote growth.

Hendrik. Yeah thanks Joel. Andrew just add a couple of more color points to it. So I think if I look at the outlook a couple of considerations here to take along. First of all macro environment. We do feel that we're getting more solidly out of the pandemic which we did have and we found ourselves still in Sweden in general in January and February. We've seen that March was much more buoyant so I think that will certainly help us throughout the rest of the year if that sort of remains introductory. Secondly we do feel that also if you look typically at our quarterly profiles that as we move into Q2, Q3 and Q4 in that sense we have seasonality picking up again that will certainly on the mobile side have its effect on for example the variable revenues and to Shell's point in terms of the competitive nature of things we do play for value in this market and of course we're also looking at the careful balance with volume but we consciously decided to stay the course this quarter. You do see though in the context of the market that we need to look at the channels and what we need to do also in the second quarter to move forward which we're doing. And then I would also want to say that last points that as we move into this quarter we will see some effects right from price adjustments and from roll off of Q4 campaigns all coming into you know all playing out into the regular base and that's based on a strong and I think continued outlook and sustainable outlook on broadband and the effects of moving the TV proposition in the second quarter onto its new packages during the period May to July and certainly will help you know gaining that momentum on the consumer business as we go along.

Thank you. Can I just ask one follow-up? So you obviously mentioned the large commissions used by a certain player during Q1. We also saw Telia raise mobile pricing across its main brands. Overall what's your perception of the market, or how much price rise it will afford you to be able to make it is the market a greater platform presenting a greater platform for price rises this year versus a year ago or two years ago or less of a platform for price rises?

I would say the way we look at it Andrew is that you know in the end we do feel there's always momentum for certain price adjustments. I wouldn't say the current inflationary environment you know gives us an additional opportunity as such but because at the same time the customers may get used to inflationary pressures they're also getting more conscious about their spend so I think it's always a balance game and we do that in the context of course of competitive environment because if you adjust your pricing on the one hand but on the other hand go very aggressive on your offers and discounting then you still end up with a zero-sum game. So yes we're looking at you know the potential of price adjustments like we do every year and we've already implemented some of these on the broadband base in the first quarter as you may have noted.

Thank you.

Thank you. The next question comes from Ulrich Ratter from Jeffreys. Please go ahead your line is open.

Yeah thanks very much. I wanted to ask two questions please. The first one is on your inflation commentary which focuses very much on the Baltics. If you take this one step up to the loop level would you say that this is starting to put some pressure on guidance or does the guidance essentially bake in more or less what you are seeing in terms of actual inflation development or is there a picture you know as an alternative where you can adjust plans near term to adjust whatever inflationary pressure is higher than you expected maybe at the time of issuing the first place. That would be my first question. The second question is on the B2B comment. Obviously you had a very strong Q1 now and you're highlighting that this isn't going to be a straight line. Could you talk a little bit about which areas the volatility could come in and where maybe Q1 was unusually strong compared to what you would expect for the rest of the year. Thank you very much.

So maybe Charlotte on inflation and then Stefan on B2B.

Yeah so on inflation when it comes to Sweden to start with there we don't see that much of inflation as up to day. Of course we are conscious and we are following this closely all the time and see if are changes that we will make and can make going forward. But we also have when it comes to wages for example then that is pretty much in control. The way the system we have here in Sweden with the union

negotiations

that we have here. But when it comes to the inflation in Baltics of course that is double digit so that is quite substantial. And we also have the electricity prices and in Baltics if you look at historical they've also been very good at compensating for this when it comes to price rises which they are doing on a continuous basis. And we see that that's how we're going to deal with this going forward as well. And I just like to make one more comment when it comes to Sweden and the energy and the electricity costs. We have actually hedged our costs so pretty much during 2022 and after that of course we will probably see a bigger impact of it.

Perfect thanks. Hello Alux and thanks for your question. And in regards to the B2B then and the fluctuations that Kjell was talking about I would say there's two things. One is about the nature of the business and the second one is some risk that we see or some concerns in regards to semiconductors. We see that some of our vendors have had problems during Q1 on deliveries in regards to some equipment and that may continue both in the networking area but also in the handset area and that could affect both some mobile post paid sales in the B2B arena and also in regards to our solutions business basically where we are dependent on equipment. So that is sort of a risk part. The other part that I started off with the nature of the business. I mean we are dependent on that our customers want to engage in different projects especially in the solutions area. So that is the area that I think I would like to highlight and depending on how the customers want to buy their services and how they want to build their solutions we could time to time get more equipment sales and time to time we can get more solutions business going forward. So those are the two basic topics areas in regards to fluctuations that Kjell was talking about.

Thank you very much.

Thank you. The next question comes from Andreas Jolton from Vanske Bank. Please go ahead. Your line is open.

Thanks a lot and thanks for taking my question. I would like to dwell into the ViaPlay partnership a little bit more and your ambition of this especially in terms of where you see the main impact. Is it churn prevention or that you can add more customers or is it on price etc. And then also maybe on the cost side that you mentioned that you had some lower cost this quarter but that could come up again. Is that regardless of what is happening on the top line or will those costs come anyway? Yes

Andreas I am happy to sort of talk to you about our partnership and about ViaPlay. So a couple of things here. You mentioned to churn price and cost and what our objective is. And clearly as Kjell pointed out if you look at the Swedish business the TV side has been forming a drag for quite a while and I think we clearly also stated in capital markets already last year that we clearly intend to stabilize this business by basically driving quite a lot of innovation revitalization throughout the product line. In January we announced that we are rebranding our streaming offer in preparation of this and we are also following moves. And ViaPlay is in that sense a first quite substantial move. The key for us therefore is to basically stabilize our business not only on the DTV side as you can already see in our results today but across the whole category. So we should be able to offset the continued decline on DTV going forward with the move we can do here with ViaPlay. And basically if you look at the new packages that we've been announcing and you relate that to the old packages we have put a lot of value in these packages but at the same time we're rising our prices between you know 50 and 60 sec across the board on all these packages. And we do intend to roll all of our DTV linear base onto these packages in the period May, June and July that has already been announced and customers have been informed. So that will I believe drive quite an extent of stabilization and that to me is the first thing you know tick in the box. And the way the cost will develop, Andreas to give you a view, it will develop as the business and customers pick up the service so it's to a high degree variable. And what we expect going forward is more innovation to come because the world is moving on to streaming. But as you may have seen also with the Netflix announcement we see that there's maturity in the streaming business and we do believe that operators have a very well chosen position for you know for bundling and buying through buying your streaming package through an operator. And that I think will come much more to the forefront and I believe we will position that because the choice in the market is just too large for consumers with the number with the value with the with the S-FOD stacking you see and therefore the choices consumers are starting to make. So the combination of having Teletoo having an integrated streaming service that has a lot of continent value in it we believe is quite a nice proposition for the market.

Thanks a lot very good.

Thank you the next question comes from Andre Kabasik from UBS please go ahead your line is open.

Hi thank you for taking my questions. I maybe had a couple of follow-ups to the previous one. So first of all in terms of the C trends and specifically in terms of mobile service revenue you mentioned that you're confident that the competitors being makes more aggressive in terms of unlimited tariffs etc. will not do that for it's much longer. So just a question in terms of what makes you confident are you already seeing that receding? And then maybe on the play deal also in terms of the migration so what kind of reception use like because you as you mentioned you're increasing the prices quite significantly so is there also a risk that you might see elevated trend and people just not wanting to to pay for this maybe more premium offering that you're now basically imposing on the entire customer base if I'm not mistaken. Thank you.

Okay Andre I'll happy to take the question and thanks. So first of all on competition we do believe still that we have a in Sweden you know at large a rational market that is driving a balanced of value and volume in general. We do of course see these sort of temporary more tactical you know offensive plays and in a way sometimes they are done to make up for lost you know lost quarters beforehand and clearly if you look into last year you can see there has been some weaker performance with some of the players that you know probably now has been sort of tried to rectify to a certain extent. We are very careful to just you know not hop on you know on the first inclination because again ultimately we want to drive value into the Swedish market. And competitive activity in that sense has already been residing as well in terms of the offering and it's clearly just a quarterly activity that's what we can see for now. On the migrations yes of course there will be you know a part of the customer base that will probably scratch their heads by having to pay more for possibly content that they are you know out of themselves are looking for. What we expect though is that because there's so much value packaged in and we do see you know many many households in Sweden that have streaming. We would say the majority of customers and consumers are actually quite happy and first reactions are you know in that line and we do also we also feel that this will be very appealing to in particular the younger you know parts of our customer base and of the market. So we feel that there is a market between 20 and 40 that has years of age and families that has a lot of potential that we have not fully tapped into and we can much better tap into with an offering like this. Thank you very much.

And Andre I think the second question was in relation to how we can sustain the growth in in the B2B segment and first of all I mean we have a trend in the B2B market which is based on digitalization and improvement, improve efficiency, improve growth in our customers businesses etc. So that whole underlying trend that is happening is supporting our business and when we set out the strategy last year it was based on on that trend. We also set up a couple of growth areas how to build on that and I think we are well positioned to to be close to our customers and support them on this journey with all the expertise that we have. Secondly we have the segmented approach to the market I mean it's it's it brings different segments like the SME segment, SME media segment, the public, the key etc. So there are different segments where the growth is coming from and we have a segmented approach to that market. And then lastly the third leg in our in our strategy is really to to develop our our product offerings, develop our business models that we bring to the customers to support them on this journey. And I would say that it's it's all about and that has been the the case for the last couple of quarters. It's all about the execution and consistency on delivering on this strategy which has has proven to to be good and to be disciplined in in the execution of that strategy. And I think we we have the capabilities in place to further develop on this. So it's both you know an internal perspective but also an external perspective and we truly believe that we will see growth for the full year for for B2B.

Thank you.

Thank you. The next question comes from Peter Newton. Please go ahead it's from ABG.

Thank you very much. Thank you for the opportunity. You have talked about the the VIA play agreement and your expectations for that. Can I just ask more specifically how we should review content cost in the coming quarters? I assume there will be an increase in cost here related to the to the premium content. Could you give us any indications how we should think about that? Thank you.

Well Peter, thanks for the question and of course as Shell has also been eluding there will be as we roll out our new TV packages to our customers there will also be a reflection of that on our cost line. And you know we cannot share any any sort of inherent details here on the call but what I can of course tell you is which I've alluded to before that these costs are having a variable nature. Okay so they are very much linked to the customer usage and the customer volumes. And basically what we intend to do in the agreement is that we are basically repackaging and relaunching our linear offerings, our DTV offerings that have been announced already and and that we also intend to further strengthen our streaming offer that we will launch pretty soon actually but that's still to come. And in both elements you know the NAND agreement has a big role to play and in both elements of course there's the cost associated and you know the totalities of a variable nature.

Okay thank you. So in other words our strategy is the same. We are not making huge upfront content. The commitment is limited and it's like Hendrik says it is linked to the usage in the for by and large.

Okay thanks.

Thank you. The next question comes from Stefan from DNB. Please go ahead your line is open.

Yes hello a couple of questions. The first one relates to the pressure that we saw on consumer postpaid ARPU. This quarter you have stated that it was more activity from a competitor and I just wonder what is really driving the pressure on your ARPU. Have you been forced to lower prices in response to this competition and how long time should we see this pressure on the ARPU? Is that for a longer period of time? The second one relates to commercial spend. In Q4 you mentioned that it should be a higher commercial spend in Twitter in the first half and it seems that was not the case partly like due to the COVID situation but should we see this marketing spend is pushed into Q2 perhaps later in the year or how should we view the totality of marketing spend?

Okay Stefan it's Hendrik here. Happy to talk to you about that. Good questions. So first let me take the letter commercial spend. I think we addressed the content part of it but if you look at the commercial spend as in marketing and commercial costs then yes we indicated more investments as we would enter the year but we did find ourselves in a pandemic situation. We entered that of course second half December as you will recall and that had a quite a bit long tail. It stayed pretty much with us January and February and it has profound effects on consumer behavior and that's not the right time to press the metal let's say. And it's more the pandemic and macro situation than any competitive activity in itself that has led us to be a bit moderate on the commercial spend. Now that sort of going away now we do feel as I said on the call already from March onward and also now into April and into the second quarter that we of course can ramp up not just around TV and Viya play in our new portfolio but also around our broadband and our mobile business. So yes the commercial spend we definitely intend to carry on with the investment as we said late last year. On the ASPU the following, and ASPU is that's you know that competition and the nature of competition has a effect on it but at the same time you know if you look at it you need to look at the quarterly trajectory of ASPU development on the mobile side right because there's of course a level of seasonality that you continuously have in our business and typically of course we see that you know the Q2, Q3 are typically quarters where we have a lot of more variable spend that of course are also lifting the ARPU. At the same time we have the effect now of the pandemic residing so that we'll have an additional kick we believe as we go throughout the year. And then last but not least and quite importantly we typically see that our Q4s are quite active quarters in terms of trading. You've seen in our Q4 that we have sort of really had a big yeah quite a big push on the metal in Q4. And now some of that volume has come in at quite you know discounted prices but they will all roll off quite a bit already in the second quarter so that will all go into regular pricing. And then of course we have continued roll off on you know on the price adjustments that we did in Q1 also on the mobile side. Some of it is still stemmed from last year where customers that have been on 12 months are rolling off onto their regular pricing. So there's a more composite picture on the ARPU and hope you can see that.

Yeah so if I understand this correctly you are not really I mean if I look at the the post-paid ARPU consumer post-paid ARPU it was down around one percent year over year and that is despite some some positive tailwind from from roaming. But you are certain that you can return to to solid ARPU growth in the coming quarters.

Yes to just give an example just one illustration of what I just said for example last year if you look at a year on year basis last year we already had some price adjustments in the first quarter that we are not having you know this year in the first quarter. So that is already an effect you know of price adjustments in one quarter first another quarter but you know creates a delta right. So yes we're quite confident that we will you know see a pick up on the ARPU as we go through the year.

That's very clear thank you.

Thank you the next question comes from Nik Lao from Societe Generale. Please go ahead your line is open.

Hi there morning guys just a quick question please on the the business business. You mention large business specifically in the presentation today and I just wondered is that you a lot more hopeful now that you can maintain pricing in large businesses. There's nothing one-off in nature in the course that I'm assuming in terms of sign-up of subs or new contracts or whatever. Is this something that you think is sustainable now? And then and secondly just a little bit like Stefan's question just now but more specifically on the marketing budget for the second quarter. I mean you told us you were going to pull back on the marketing budget I think as you went sort of into through the first quarter. So is that going to be significant? Can you give us any idea of this sort of sec million amount that you might have to see sequentially first quarters or second quarter in terms of lifting the budgets back up? Is it is it big like it was back in Covid and really quite substantial marketing budget rises you're going to have to see in the consumer Swedish business as well. Thank you.

All right thanks Nick. Stefan here. Thanks for your questions and let's start off in regards to the B2B questions and I would say then if you look at where we get the intake in the B2B business and then Shel was mentioning the large business but if you look at the intake is coming from basically all segments but it's good to see that we also see that coming in the large segment and the intake is coming both on new customers that we acquire but it also comes from existing customers expanding their business with us and we also seen that the discipline that we have created in regards to deals and then margin requirements we have on the deals are yielding results you've seen that on the mobile asper where we've been flat now for three quarters in a row and that is a testimony to the actions that we're taking in order to to safeguard margins so in general it's not a big customer that has yielded these results in the mobile revenues it's generally from from all of the segments and I would also add that we had really good development in regards to our churn actually better than than our expectations for Q1 so that is the answer on on large business or your questions on B2B hope that answers your questions Nick

yes thanks yeah on the on the consumer on the marketing budget as well is that yeah yeah yeah yeah just

want to answer that one for you Nick so on the marketing budget yes we will increase first is Q1 again Q1 is is a choice is is is a result of the pandemic not of us wanted to spend less and then secondly first is -on-year you know we'll be in in the range of last year but the thing you need to take into account there last year we still had two brands we were supporting with comem and tele 2 and of course you know we did rebrand and we had all you know some of these business transformation efficiencies so on an underlying basis you know it will probably it will translate into a bit of a higher let's say spend I would say you know first is Q2 where we were spending on two brands but on an absolute level it will be same type of level I would I would think

great okay and then is there any can you give us any idea of the sequential rise I mean it was it was a big slash in the marketing budget for the first quarter just because of those two months where you had a little activity or was it is it reasonably insignificant in terms of sort of EBITDA and other numbers

um you know in terms of the total EBITDA of the company uh you know it it is pretty significant I would say but you know it's it's still in terms of market momentum it is it is you know it is it is still that something that makes the difference ultimately

okay thanks very

much thank you the next question comes from Titus Krant from Bank of America please go ahead your line is open

good morning everyone and thank you for taking my questions I have just two topics to touch on if I may the first one would be follow up on the Baltics you already mentioned the inflation and pressures there and just I was wondering more about the timing of the impact on on EBITDA I mean energy has already felt I assume you haven't had much of it but also can you talk a bit on the timing of the wage inflation in the Baltics given that you currently still have quite a strong EBITDA growth this quarter to what extent is sustainable and have you already felt the full impact on the inflation in the Q1 or is the drought increasing over the remainder of the year and the second question would be on the wholesale growth which you've flagged as one of the main drivers of the EBITDA growth this quarter as well um could you maybe provide some more color on the outlook particularly as we had now I think four quarters of double digit revenue growth in the segment how should we think about it going forward is there any specific effect that could annualize and how should we think about it for the next couple of quarters thank you

okay thank you this is the on the Baltics yeah we do have some level of hedging in the Baltics but still we are impacted by the prices for power for electricity going up and that's of course all reflected in in our numbers and there is more wage inflation in the Baltics than there is in Sweden Sweden has collective bargaining generally so it's a quite predictable system in in in the Baltics there is an even more fierce uh fight for talent we are pretty good at retaining people and an attractive employer so that helps but there is some level of wage inflation and and I think it's a it's a it's a strong sign that during this time of relatively high inflation I think Estonia had the inflation in Europe a couple of months ago only it was just for a specific month that was recorded that we are able to offset all of that and still grow our EBITDA and of course at some point these these turns these trends will start abating and then the the underlying strength of the business the application of the more for more strategy which has given us growth will then be helpful to drive cash conversion but clearly you are touching on issues that are more of an of a an issue for us in the Baltics than maybe in Sweden when it comes to roaming so some of this is related to uh sorry to wholesale some of this is related to roaming and we are also extracting good very good value from delivering ATP wholesale services which is a rapidly growing market and of course that's that's helpful to to our business

okay thanks so that's likely to kind of continue in a similar range of the next quarter so maybe a little bit lower but nothing material changing

yeah I think you will continue to see volume expansion within ATP for some time and of course the the the level of growth the relative level of growth will probably slow down

okay but very clear thank you very much

thank you the next question comes from Steve O'Comb from Rebent please go ahead your line is open

yeah yeah good good morning guys I'll I'll go for three questions if I can I just want to first come back to the NENT deal um can you give us an idea of the cohort of customers in your linear base that already take by a play and I guess for those customers they'll end up spending less but will you book the revenues gross so that'll look like service revenue growth but the customer will actually be paying less um that's the first question second is on on the sort of addressable market you added another 50 000 I think homes this quarter um the broadband base didn't really grow can you just give us a sense of you know how much more growth you've got in terms of open city what's going forward and whether you think there's a lag effect in growing the broadband base or whether we should just assume that penetration across that footprint continues to decline I think it's that about 100 basis points the last couple of years and then finally just coming back to the Baltics I mean it and and and following up on the last question so I thought was a very good one I mean do you see any sort of I think we're sort of talking about inflation very much a two-dimensional way at the moment price energy stuff like that but you know do you see any growing risks that you know Baltics consumers begin to resist price rises because of the rise of energy and their food costs I mean Lithuanian inflation I think was 16 percent in April um and you know will that could that have a much bigger impact on EBITDA you know going forward or are you very much in the view this is kind of transitory and the pricing will stick forever um because it just feels like the Baltics inflation is running a little bit out of control it's sort of moved from nice high inflation to worrying inflation you see what I mean thanks

thanks Steve I'll start on the Baltics and then maybe Hendrik will go back on the via plan broadband part um so so clearly for segments of the population in the Baltics you will get into a situation where you start prioritizing your spend harder than you've done before when we speak to uh customers and we speak to our people and in the three different markets there we don't we don't detect any hesitation around the the value that is provided by our mobile offerings so there is a there is a quite strong good demand so it hasn't popped up as as a big issue um you know in the future if we see these trends going for a long long time that could of course be a factor um but as well as of now and where we see things it is not a major issue for us

but isn't there a slight risk that's that's shell that's slightly backward looking because you know energy prices have only just doubled tripled food prices are only just going up by 20 percent you know it feels that's all quite backward looking perspective at the moment

well you we could argue back and forth what is backward and not backward but that is what the feedback is from the market today or last week so okay yeah i i can see that you could have a an argument that is still early days and i would respect that argument um but from what we hear at this point uh it is not a major issue i think we will have to be a bit cautious of course and i think we all understand that to have massive double-digit growth is not going to go on forever so so there's i'm not trying to say that everything is going to be continuing exactly as it is today

okay thanks

okay and steve just on your two other questions broadband and on on then let me start with broadband first the uh we believe the overall market uh you know that has been growing at seven eight percent of last number of years will at some point of course start to tail off a little bit but still have you know a good uh you know mid single digit growth number within uh we of course you've seen that we've been able to grow our business around four percent we do believe that in that range you know we can sustain that still for a while but in the context of you know overall growth um starting to to to tail off a little bit over over the next period i would say i would say so that's i would i would say our outlook on on broadband and we feel quite okay there

just on the address for marketing you added 50,000 new homes in the quarter i mean how much longer do you think you can do that in terms of increasing your address to the market by accessing open city networks and the like

well there's still there's still uh you know there's still a lot of of network and universe that we can that we can access um it may not be through our own hfc but it may it would then be of course through you know fiber out there which we're quite well interconnected with this question of how far we want to reach out and we certainly have not fully um you know um how to call it fully executed on on that opportunity at at this stage so that's that's still you know room to grow uh there is of course a different level of uh you know marginality to it and that's of course why we also need to tread carefully there in the right balance but there's clearly more room there to to grow into for us um on the on the nand side revenue growth we don't share you know details of what customers have in terms of their their subscriptions uh Viyaplay of course is is a popular service in a way but still has a lot of room to grow and we uh you know we believe that the uh the balance of upside far outweighs you know maybe a small set of small number of customers that feel that they are you know paying for it now and now they can get into a package and and that therefore would be a revenue loss for us in a way we're also bundling uh the service as part of you know linear tv and of teler to play plus um which you know gives them that additional value uh to come in as well and and some of them already pay as as part of teler to play plus today so all in all there will be you know a very small number maybe um but you know in the big scheme of things that's that will not be significant

but just to be clear if i currently pay for you know linear tv from you and Viyaplay separately and then it's bundled together at a cheaper price presumably with a wholesale discount you would then book the whole revenue growth so it will look like revenue growth for the consumer they actually end up paying less for that cohort of customers

well yes if a customer today has Viyaplay you know from nand right directly consumer so it just bypasses us in that sense and it now becomes a buy through then obviously that's revenue um revenue for us incremental revenue for us in the package yeah and monitor okay yep

thank you

thank you the next question comes from Avelash Mahapatra from Burmburg please go ahead your line is open

yeah good morning and thanks for taking my questions i just wanted to come back again sorry just to this uh to the Viyaplay agreement and just to follow up on the question earlier just to confirm um you know so for a customer who already has the uh Viyaplay package and they now get it through you the revenue that you book that would would that be the sort of old plus the market price of the Viyaplay offer or would it just be the increased bill you know whatever the new bill is well i i think it would be the latter but if you could just confirm that that would be helpful um and secondly just to um uh follow up um i mean you um sort of indicated that the ultimate sort of goal here the main goal here is to turn the tv revenues back to stability which is obviously quite a big swing uh compared to the 4% decline at the moment and and clearly the way you're doing it is by hard bundling uh this product and raising prices uh and you've also sort of mentioned that you don't think churn will be a big issue but you know what happens say and if you raise prices now and if in a year's time let's say a customer wants to spin down will you sort of allow them to do that uh to a lower price point or would you be okay to just sort of let go of that customer if you will thank you

hey yeah avalosh happy to talk to you about your questions um so first of all on on how it works if if customers today have uh you know a uh s-fought service then this could be netflix or could be via play or could be disney plus or whatever um which actually is the issue in the market right there's there's there's too much stacking and too much individual payment in in the mind of the customer and they now get it packaged and buy it through us of course it would be like an s-fought cut right um and instead of court cut it would be an s-fought cut and and i believe that is some market trending that we hope we will start to see in a very mature and overcrowded s-fought market um and um in so the combination so for us it means you know it becomes our billing customer uh driving our revenue driving our ultimate margin marginality of it um and that's the bottom line for us right so um hopefully that answers your question on that one um and then just remind me of your second part of your question sorry

yes so i saw it was slightly long now yeah

oh the down the down spin yeah sorry i got it the down spin yeah so of course we we offer customers choice and um if customers want to move to different packages the the more they're welcome to do so and the way we have designed the packages and that hopefully also will give you some confidence of you know our strategy to drive value into the market if you look at the package the way we design the packages is that the mid tier is a huge value package that has sports in that that's a huge amount of content and that is a you know that is a very very nice deal um whereas it may be the past we saw that a lot of the in the old packaging a lot of the volume set you know at the at the entry level we feel that with this we can get way more volume into the mid tier and actually from first results i think we can already build some initial confidence that i think we were hopefully getting that equation right so yes we allow of course customers to to to pick their choice but we do believe that we built a lot and a lot of you know value into the packages and in particular into the mid tier going forward and and you you mentioned that we we we tread light on on churn i think that's not fully what i said just want to make sure that we're well understood you know we we do believe price rises like of this kind are not taken lightly by everyone although we put a lot of value in we do expect of course some people not to like it and we do do expect a level of turn of this but at the same time we do also believe that there's a lot a big part of the market that we are now attractive too so in balance right this should give us an upside

that's helpful thank you for the color thanks yeah

thank you the last question comes from adam fox from if from hsbc please go ahead your line is open

um thank you very much i'll just have a couple please um i think you're closing remarks shell you mentioned um speeding up the remote fire build um i was just is that and you kind of linked it to improved customer perception um and so i just wondered whether or not that's something you you've just decided that you want to do as fast as possible or whether or not that is a response to some competitive other competitive element um secondly uh i'm wondering i think a couple of questions around the via play deal are kind of dancing around the the question really of can you just confirm that each customer comes with a net cash contribution effectively um you know we appreciate that there it's a wholesale deal and not retail retail margins but but i think that's what some of the questions are getting at and and then finally if i may i'd just be really interested to know in the context of the competitive environment in sweden how quickly you can change your tariffs i mean i assume that the billing system changes that you're making um you know enable you to move faster but if for example you feel like you do want to respond at some point later in the year you know can you change your mobile tariffs in a day does it take a week that would just be really interesting to hear thank you very much

yeah let me make a stab at that um adam um so remote five no it's not something that we came up with recently i've actually been pushing for more speed on remote five for for quite a long time and we're trying to ramp that up uh yogesh has been very busy with uh making sure that our migrations go smoothly which they do and of course getting the 5g show on track plus changing the entire full stack of our core so so there have been many things but we are pushing for speeding up remote five which is basically as you know putting fiber to the building all the way and that's going to be an improvement of the customer experience because we take away node splits it's going to simplify our networks and in terms of the capex involved here it is just not really move the needle that much so it's a it's a no regret move to do that even faster and that is something that we are pushing for now let me talk a bit about the via play here so we don't get to down here the via play deal is important for stabilizing the tv business from a service revenue perspective it also adds additional margin to us in terms of profitability at the beta level and particularly as we move into 2023 when we have got this thing going and running but it's also a strategic move that's important for us in terms of the ability to build a urgent offering so one of the key things we want to achieve by the journey we're on the transformation program is not only about saving a billion it is about preparing ourselves for the future so that we can in a much more you know easy way for our customer base combine our offerings seamlessly and and then we want to have a strong mobile deposition where we're going to build the 5g network in sweden together with our partner and that is a clear claim that we are making we want to make that happen we are upgrading our broadband with remote five which basically puts fiber into the building and we want to have a proposition in the on the tv side that has both the traditional linear element that we had where we've been the aggregator in the market we're moving that now into the streaming world becoming an aggregator earning a margin keeping our market relevance and looking at how the streaming market is developing we see now that it is no longer a super fast growing business it's becoming a mature business some of those who have been very very fond of themselves will probably want to be more cooperative and collaborative going forward and we are very very well positioned for that but that brings it all together in a way from the from a consumer's perspective for tele 2 that's the ambition and on the tariffs yes we of course we can change our tariff plans the fact that we are changing our our it stacks is not you know in a big way limiting us from making moves in the market so the thing that we are talking about the first quarter here we made a very conscious choice to educate the market that we are willing to look at value in while other people are moving a bit more short term on it that's okay but it doesn't stop us from responding if we feel that that is right and sometimes we definitely will do that sometimes we will do it hard in a short period of time just to teach the market that we can also be provoked.

Thank you very much.

I think we have a internal thing for all of our employees a little while I don't think we can take very many more questions but we don't have to stop right now we're okay

yes

all right but then if that was the last question then I'd really like to thank you all for for joining us for the session today I hope you see that we've had a good start to the year we have a lot of work to do as always to continue our improvement journey but it gives us confidence that this year we can deliver on what we have promised and that's a good feeling to have and thank you for all your good questions if they make us they make us think think one more time about how we conduct our business and that's very helpful.