Tele2 AB (publ)

Welcome to the Tele2 Q2 2022 Interim Report. For the first part of this conference, participants will be in listen-only mode, so there's no need to mute your own individual lines. And afterwards, there'll be a question and answer session. Today, I am pleased to present Kiel Johnson, President and Group CEO, and Charlotte Hanson, CFO. I'll now hand the floor to Kiel.

Thank you very much, operator. Good morning, everyone, and welcome to Teletubbies' report call for the second quarter of 2022. With me, like the operator said, here in Kyrsta, I have Charlotte Hansen, our group CFO, and Henrik de Groot, our chief commercial officer. So let's just turn straight into slide two for our quarterly highlights. I'm very pleased to see that our efforts are paying off as we present the results for our second quarter. End-user service revenue grew by 3% for the group, and it's great to see that all countries are contributing to that growth. Although we see some pressure on the cost side, we are able to convert the strong end-user service revenue growth, coupled with the execution of the business transformation program, to an underlying EBITDA growth of 3% for the group. I'm happy to see that mobile postpaid within Sweden B2C shows a strong net intake this quarter, and at the same time, we were able to maintain our mobile post-bid ASPU on a similar level. In fixed broadband, we see continued strong growth, driven by volume, and within digital TV, cable and fiber, we show similar results as the previous quarter, ahead of the Viaplay deal, which we expect to come into effect during the second half. We continue to see an improvement within Sweden B2B and user service revenue, driven by mobiles. The improvements within mobile is across all of our different segments, and we are able to grow our business while stabilizing ASPU. We see some headwinds in the quarter from disruptions in our supply chain, which impacts the activity within solutions. In the Baltics, we experienced yet another quarter of fantastic performance, both in terms of top line and bottom line. Here we see higher costs from electricity than in Sweden, but we are still able to mitigate this through strong top line growth. Spectrum auctions are ongoing in Estonia and Lithuania, and we have already concluded the spectrum auctions in Latvia with successful results. But let's then move over to the Swedish consumer segment on slide four. Mobile Postpaid saw strong net intake in a quarter driven by FMC bundling and continued strong performance for Comvict. Despite the strong net intake in Postpaid, we managed to keep the ASPR level stable. In fixed broadband, we see continued strong performance with good volume growth. In digital TV, cable, and fiber, we see continued contribution from Tele2 Play Plus, which helps us to grow the ASCO in the quarter. However, the overall customer base continues to decline, which reduces end-user service revenue growth. Turning to slide 5. Mobile postpaid end-user service revenue grew by 2% in the quarter, driven by both prepaid and postpaid. We see continued end-user service revenue growth in fixed broadband of 2%, primarily driven by a larger customer base. Total end-user service revenue for digital TV declined by 3% in the quarter, primarily driven by continued decline in the legacy DDT TV, the terrestrial TV. due to a declining customer base. Let's then continue with B2B on the next slide. Mobile net intake continued to be strong in the quarter, driven by new contracts within both the SME and large segments with 23,000 new mobile RGU's. The mobile ASPU in absolute numbers continue to be on similar levels as previous quarters, driven by the volume mix within SME and the profitability focus within large, private and public. Continued mobile volume growth 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 to slide 7 for an overview of Sweden. End-user service revenue was plus 1% in Sweden, driven by Sweden B2B. Underlying EBITDA increased by 2% in the quarter compared to last year, driven by slight end-user service revenue growth and contribution from the business transformation program. We continue to see strong cash conversion of 66% as continued underlying EBITDA growth offsets higher capex levels. Now let's move to Baltics on slide 9. We see similar trends to previous quarters in the Baltics, with strong volume and outflow growth across all markets. Roaming continues to come back in a meaningful way, and we are able to monetize data through our more-for-more strategy. Turning to page 10, this outflow and volume growth led to an end-user service revenue growth for all markets, and we saw the Baltics grow by 12%. The end-user service revenue growth in a quarter was able to offset the increased pressure from rising inflation rates, and underlying EBITDA grew by 10%. 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. So with that, I'd like to hand it over to Charlotte, who will go through the financial overview.

Thank you, Kjell, and good morning, everyone. Please turn to page 12 in the presentation. Strong end-user service revenue growth in the vortex and Sweden B2B, coupled with continued execution of the business transformation program, resulted in underlying EBITDA growth of 3%. We continue to see pressure on margins stemming from rising inflation rates, primarily from higher electricity costs in the vortex. Results from associated companies and JVs do no longer include results from the now-divested T-Mobile Netherlands, which is why we see a decrease compared to Q2 2021. Income tax significantly decreased compared to Q2 2021, as income tax last year included the release of a provision yielding a positive non-cash effect of 350 million SEK. Net profit from discontinued operations included a settled dispute from previously divested operations of 226 million SEK, which is why we see a significant step down compared to last year in Q2. Let's continue with the cash flow on slide 13. CapEx paid was higher in Q2 2022 compared to last year, as we had two spectrum payments in this quarter, one related to our network joint venture, Netformability, and one related to the second payment from the 700 MHz spectrum in auction in Latvia. At the same time, we have seen an increase in network capex, driven by the rollout of 5G. Changes in working capital was negative in the quarter, driven by higher inventory levels, primarily stemming from network equipment and handsets, while at the same time, we temporarily see less impact from external handset financing in the quarter. Taxes paid increased in Q2 2022 compared to last year, driven by improved operational performance in 2021 compared to 2020. And we continue to see strong equity-free cash flow generation with 750 million SEC in the quarter, yielding an equity-free cash flow from continuing operations of 5.3 billion SEC in the last 12 months. Please move to slide 14 to go through the capital structure. At the end of the quarter, we saw economic net debt increase to 24.9 billion SEK, as cash generation from our operations and proceeds from T-Mobile Netherlands did not fully offset the two dividend payments in May. Leverage remains in the lower part of the target range of 2.523, ahead of the second tranche of the ordinary dividend in October. Please turn to slide 15 where we will update you on the progress of the Business Transformation Program. During the quarter, we continued to execute on the Business Transformation Program and made improvements primarily within our combined IT and tech organization. This led to an annual run rate of 650 million SEC by the end of the quarter. The P&L effect of this was 155 million SEC in the quarter, with a net effect of 75 million SEC compared to Q2 2021. We have now also finalized the migration of the Tele2 brand to the new IT stack, and we are now preparing for the next phase of the program, which is to migrate the remaining brands. With that, I hand over to Shell to go through our key priorities going forward.