Tele2 AB (publ)

Good morning everyone. Welcome to Teletubes report call for the first quarter of 2023. With me here in GISA today, I have Charlotte Hansen, our group CFO, Henrik De Groot, our chief commercial officer, and Stefan Trompers, our head of B2B. Please turn to slide two and I will take your highlights. I'm pleased to see Teletubes' overall growth in Q1 as it is of essence to keep growth momentum while building for the future. On the consumer side, we have taken actions to address the inflationary pressure and that will contribute to revenues as the year progresses. We are progressing well with our build out of real 5G, which we mean services delivered on over higher frequency bands with capacities well beyond the 4G networks. Marketing coverage based on low band gives a higher number, but the user experience is not the same. This line of thinking is a starting point for our realistic ambition of building the best 5G network in Sweden. Importantly, our IT transformation is progressing well. Once finalized, it will improve every step of the digital journey. I will go to market speed

and

not

least, also make sure that we are not only

able to increase our market speed, but also increase our market capacity. In our Q4 call, we said that improving working capital is one of our top priorities for this year. In Q1, we managed to stabilize it and we are back to a more predictable situation regarding supply chain and handset financing. Moreover, as of February, we are mostly using existing inventories for our 5G rollouts. So from a working capital perspective, the effect will come gradually as we invoice these installations to our Net4 Mobility joint venture. 2023 will be a year of significant investments to build for the future, but we continue to be very cap-ex efficient compared to the industry average. Our equity-free cash flow was strong in Q1. We generated 1.9 billion SEC, up some 200 million as compared to Q1 last year. Charlotte will discuss the details later on. Before digging into our financial performance, I would like to highlight some other important achievements and events during Q1. First, according to the Better Business CX Index based on mystery shopping, our two stores were ranked number one in service among the top 100 retailers in Sweden, not only within Telecom, but among all retailers. That is quite an achievement. Second, we were ranked number one in Sweden and among top 1% globally for gender equality by Equilib. Third, out of nearly 15,000 companies evaluated globally, Tele2 was one of only 2% to receive a top rating from CDP for our ambitious climate efforts. And finally, Tele2 turned 30 years in March. Forever the challenger that innovates and takes pride in the efforts our predecessors have made to build a great business. So please turn to page three for a summary of the first quarter. We're off to a good start this year, and our ambition of being a growing business based on consumer evaluation is as relevant as ever before. Like many other companies and industries, we are dealing with the secondary effects of supply chains, energy prices, inflation, and interest rates. This does take an extra effort, but the good news is that from where we stand now, predictability is improving, and that gives us the opportunity to devise the right mix of initiatives to continue delivering and moving towards our ambitions. During the first quarter, end-user service revenue grew by .6% organically, driven by the Baltics and Sweden B2B, whereas B2C remained stable. Underlined EBITDA declined with a minor 4% organically, driven by impressive 30% growth in the Baltics, whereas Sweden declined by 4% as summation savings and modest supply growth were offset by inflation pressures, including the weak Swedish corona and content costs. Energy costs were approximately 10 million high year over year in the first quarter. The content cost anomaly is a facing issue that will disappear as of Q3. Equity-free cash flow improved significantly year over year as working capital and normalized tax more and offset increased capex and interest. Sweden B2C saw positive net intake from mobile post-paid and fixed broadband. End-user service revenue remained stable as continued growth in all core services offset decline in legacy services. During the quarter, B2C has communicated broad-based back book price adjustments that will contribute to revenues going forward. In Sweden B2B, we saw continued solid and broad-based end-user service growth and solid net intake of mobile post-paid across segments. In the Baltics, we experienced yet another remarkable quarter, both in terms of top line and bottom line growth. We have also continued rollout of 5G services as quickly as possible across our Baltic markets. With that, let's move over to the Swedish consumer segment on slide 5. From an overall market perspective, competitiveness has been modest, but aggressive campaigning has persisted on the mobile side. Mobile post-paid saw continued net intake during a seasonally slow quarter, mostly driven by Comvik while Aspru declined slightly. In fixed broadband, we see continued good growth driven by volume and a stable Aspru development. In the digital TV, cable, and fiber business, we are slightly down on scribers, whereas Aspru continues to grow on the back of the new ViyaPlay infused packages and associated back book pricing. Turning to the next slide. Mobile end-user service revenue grew slightly driven by post-paid, which more than offset the decline in prepaid due to the registration requirement from February. In fixed broadband, end-user service revenues increased by 2% thanks to the growing customer base. Total end-user service revenue for digital TV remained flat in the quarter as the 2% growth in digital TV was offset by a continued decline in the legacy ETT TV business. And then let's jump to B2B on slide 7. We continue to execute on our strategy, and all segments are contributing to yet another solid end-user service revenue growth. Our growth areas continue to perform well and offset decline in legacy services. Mobile net intake amounted to 12,000 RGU's with continuous contributions across segments. Mobile Aspru remains stable. End-user service revenue increased by 5% in the quarter, including a positive one-off deal of 8 million related to fixed business. Adjusted for this, end-user service revenue grew by 4%. The macroeconomic situation, which we continually follow closely, is affecting some of our customer groups more than others, but so far without any significant impact on our business. And then let's move over to slide 8 for Sweden overview. Looking at the combined of the two Swedish operations, end-user service revenue increased 1%, driven by a solid performance within B2B. International roaming had a positive -over-year effect of 15 million. Underlying EBITDAO declined by 4% compared to last year, as inflation and company costs exceeded end-user service revenue and transformation benefits ahead of price increases. Cash conversion remained strong at 63%, however impacted by an increasing capex run rate as we are rolling out real 5G and remote PHY at a high pace. As planned, end communication. Let's then continue with the Baltics on slide 10. Across our Baltic market, the number of mobile post-paid customers continued to increase, whereas the number of prepaid customers fell in line with normal first quarter seasonality. We have continued to see organic Aspen growth across markets during the quarter, resulting from our more formal strategy, price adjustments, and to some extent prepaid to post-paid migration. And then looking at Baltics financials on the next page, Aspen volume growth in mobile post-paid led to organic end-user service revenue growth across markets, resulting in 12% end-user service revenue growth for the Baltics as a whole. Our strong top line, combined with successful cost control, has outpaced increased personnel costs and slightly increasing energy costs, leading to a 13% organic growth in underlying EBITDAO. We continue to see a high cash conversion, thanks to strong underlying EBITDAO, while impacted by a significantly increasing capex run rate due to ongoing 5G rollouts. With that, I hand over to Shell to go through the financial overview.

Thank you, Shell, and good morning, everyone. Please turn to page 13 in the presentation, and I'll start off with a few comments on the group results. In Q1, total revenue grew by 3% organically, whereas end-user service revenue grew by 4%, as previously mentioned, driven by the Baltics and Sweden B2B. Our underlying EBITDAO grew by 1% organically, and the strong organic growth in the Baltics and the continued transformation savings were offset by general inflation pressure and higher content costs. Associated companies and joint ventures show a decrease compared to Q1 2022, as it no longer includes results from the divested T-Mobile Netherlands. Interest in other financial items decreased somewhat to 213 million sec compared to Q1 2022. The highest financing costs for outstanding desks were more than offset by lower costs for other financial items, as Q1 2022 was impacted by the exchange rate losses from hedges related to the T-Mobile Netherlands transaction. So let's look at the cash flow on slide 14. Capita paid was higher in Q1 compared to last year, mainly due to higher network investments. Working capital ended slightly positive this quarter, mostly due to lower inventory levels, and we continue to have working capital as one of our top priorities for this year. And, as we said in Q4, we expect this to take a few quarters to come back to a more normalized level. Taxes paid declined year on year, mainly as last year was negatively impacted by timing of final tax payments related to 2020. All in all, our equity-free cash flow for Q1 ended at a strong 1.1 billion sec, some 200 million sec above last year's level. Over the last 12 months, we have generated 3.7 billion sec of equity-free cash flow from continuing operations, corresponding to 5.3 sec per share. Please move to slide 15 to go through the capital structure. At the end of March, economic net debt amounted to 24.6 billion sec, representing a reduction of 1.1 billion compared to year-end 2022, and that was explained by our strong cash flow in Q1. Leverage stood at the 2.4 times at the end of March, which is slightly below the lower end of our target range of 2.5 to 3. However, for former adjusted for the first tranche of the proposed ordinary dividend, leverage would have been 2.7 times. As mentioned in the full year results, the board has proposed an ordinary dividend of 6.8 sec per share for 2022 to be paid in two tranches of 3.4 sec each in May and October this year. Let's go to slide 16 for an update of the progress of the Business Transformation Program. During Q1, we continued to execute on the final stages of the Business Transformation Program and made improvements primarily within networks and legacy IT. This led to an annual run rate savings of 925 million sec by the end of March. The P&L effect of this was 215 million sec in the quarter, with a net effect of 75 million sec compared to Q1 2022. We are continuing our effort to complete the program to achieve the 1 billion of run rate savings by Q2 as previously communicated. And with that, I will hand over to Shell to go through our key priorities going forward.

Thank you very much, Charlotte. And thank you for correcting my slight mistake in the very beginning of my presentation. I misread the number for Ektifikash, so I said 1.9. The correct number is of course 1.1, which still is an increase of 200 million compared to the first quarter of last year. So apologies for misreading that. In summary, our main objective is to keep our sustainable growth momentum. In order to do that, we need to continue building 5G at pace, finalize our digital transformation and get back to the typical streamlined TELETU Operating Model after the external shocks that we went through in 2021 and 2022. These things are falling into place this year. When it comes to 5G, we are building for the future by rolling out real 5G and remote 5. This leads to higher absolute capex levels, but the TELETU continues to be very capital efficient at the capex to sales level. When it comes to sustainability, I mentioned a couple of impressive recognitions in my initial remarks, which again demonstrates our leadership in this field. Among our many ongoing activities to make the world a better place, we will, for instance, continue to expand our circular economic solutions to meet increasing customer demands. So with that, I'll hand it over to you for your questions so we can get the focus on the things that are particularly of interest to each and every one of you. So operator, please.

Thank you, dear participants. As a reminder to ask a question, you need to press star 1-1 on your telephone keypad and wait for a name to be announced. To withdraw your question, please press star 1-1 again. Please stand by, we will compile the Q&A and this will take a few moments. Now we're going to take up a first question. And the first question comes from Andrew Lee from Goldman Sachs. Your line is open. Please ask your question.

Good morning, everyone. I just had a question. It doesn't feel long since you gave your guidance for the full year anyway, but just wanted to add a couple of questions on how things may have evolved since then. So first question was just on your views on how the Swedish consumer pricing environment has developed versus your expectations when you set guidance. It seems fairly encouraging, the size and scale of Telyus Pricerizers and also Telonor raising its Vita brand mobile prices. But keen to get your take on that. And then secondly, obviously you direct guided directionally that you'd have some even dar headwinds early on in the year. But nonetheless, even dar missed consensus. So just wanted to get your sense of how the cost inflation you're experiencing compares to what you anticipated when you set guidance. And specifically you set you suggested the range of even dar growth guidance for the full year was predicated on where energy prices averaged out. I if they stay low, then you can hit the higher end of guidance. Is that still the case or are there more factors to take into account now? Thank you.

I will start and probably Henry could also fill in on special pricing. So looking at our EBITDA, we are very clear that we will have a stronger EBITDA in the second half and in the first half. We are in a little bit of a facing thing here at Telyu. If you look at last year, we spent a big effort to introduce an innovation in the Swedish market where we combined linear and streaming to the Viaplay agreement. That took a lot of effort on our side and some of many of our TV customers were affected by that. Now, since many of them also are broadband customers, we didn't want to rock the boat too much. So in a way, we did a bit less on pricing last year than we would have liked to do not to do have too many initiatives at once. This year, we will be back to the normal pricing routine and it has already started. And then the other effect that we actually had a unusually low content cost in the first and second quarter of last year, which is something we have been very open about, and that's normalized. So when we come back after the summer, we will back into the right facing again and it will be more like for like. So we are very confident about the EBITDA guiding for the year for sure. And we see the opportunity to do pricing. I would agree with some of the observations you are making there, but I'd stop at saying that we are very confident about the EBITDA guidance and then on the pricing, I will hand it over to Hendrik to fill more in.

Thank you. Yes, Andrew on consumer pricing. What we've seen is the overall consumer climate and confidence index stabilized after quite a significant drop in the last year helped, of course, also by some waiting energy prices and stabilization there. And we see in the telecoms market clearly that we have good buoyancy in terms of moving to pricing and also noted by yourself in terms of the price announcement that have already been made. In February, we have implemented the answer financing for you, which, of course, you could also see as a pricing move. So that's already effective. So February, the price announcements that we've that we normally do, we have already done in Q4 and Q1. On all of our products, and they will take take they will be implemented and be in the numbers in Q2 and Q3. And quite a bit of it will be in the second quarter. And to what Shell was saying in terms of the normality of cycles, just I want to repeat that also said a couple of times we had a bit of an unusual year last year in terms of the regular more for more pricing approach where we had IT transformation and new portfolio launch on mobile, which sort of kept our pricing ability. You know, lower than regular. And also we have had the via play move, which kept our pricing ability on the broadband side a bit lower than regular. This all will be compensated. And, you know, for this year, we see a price movement, which is quite significant than it first last year. So to take effect from the same quarter.

Thank you. Can I just follow up on that or just give you some from the cost inflation side? Just is cost inflation taken any different direction than you expected at the start of the year? You know, also conscious that CapEx and the courses was high and this will see a phasing effect there. But is there any cost? Inflation surprises or meaningful cost inflation surprises so far that you've seen versus when you set guidance?

Broadly, I think they are in line with expectations. I think, you know, fairness, the way to agreement that Sweden came in slightly above, but not very much above. So slightly above maybe what we had thought, but within

the range of

expectations

for most

people. The other elements. Yes, of course, there are combinations of inflation and the weak Swedish Krona, which to some extent we see when we do installations with foreign crews for for five year old now. So that plays into that one. So that's something we are spending quite a bit of energy on. And then, of course, the general inflation is something that we just need to absorb through the pricing moves to do. So there's nothing unusual about that. The numbers, of course, are a little bit higher in Sweden as elsewhere for temporarily, at least for inflation. Thank you.

Thank you. Now we're going to take our next question. Stand by. And the next question comes from Land of Andrejka Basick from UBS. Your line is open. Please ask your question.

Hi everyone. Good morning and thank you for the presentation. I had one follow up question on the cost side specifically on content and then in the morning working capital. So in terms of the content cost, I'd just like to understand that, please, the mechanism of the pricing from via play to you having been increased. And then how how do you pass that on to the consumer? Do you do that? Is it mandatory? Is it something that comes with a lag? If you could explain that mechanism, please, because obviously you highlighted that the price increases on TV last year were quite material and it may be difficult to do the same again this year. So I'm just curious how you're basically offsetting that. And then you shall mention that this is an anomaly in terms of cost. I would just like to understand that comment in terms of why costs were significantly lower last year. Why why there are normally one queue and two queue? Because I guess the cost base started to kick in when you started offering these or selling these products, which was kind of mid last year. So is there anything that's just different relative to last year, for example, in terms of the content costs in particular? So that's one question, please. And then the second one, just following up on the working capital comments from Charlotte. So we see you outlined very helpfully at the full year results, the free sources of kind of working capital drag and how they should unwind as time goes. I'm just curious about the two that you've got more, I guess, control over in terms of the inventories that you already touched upon and then the net formability agreement that should also improve your working capital. So if you can give us an update on those two and potentially where you expect these items to land for the for the full year. Thank you very much.

I guess we can all chip in on this. I can start a little bit with the content. I think it's important to remember to remember that when we set up this, this was the first time this kind of arrangement had been set up in Sweden. It was an innovation and we spent quite a bit of time with Viya Play in a relationship built on on a huge amount of trust. So we actually had a unusually low content cost in the first two quarters, which was built into the agreement would be then paid back in again. So the content cost you saw in Q3 and four is comparable to the content cost you were seeing going forward. And the way we do rev shares, what was unusual was that while we were setting this agreement, putting this agreement into place, there was a time when we had sort of almost a grace period. And that is something that causes this one of anomaly Q1 Q2 this year. And maybe Hendrik, maybe I'm not precise enough on this, Hendrik, if you want to add something to it.

Yeah, Andre. So I was saying the first of all, the cost, you know, the cost is has been now fully materialized basically in the numbers. But of course, on a year on year comparison, you will you will see it coming together from the third and fourth quarter, the second half of the year onward. The way the cost structure and I think I've also said talked about that before, the way the cost structure is built, that there is no there's no fixed cost in there. So, you know, we have a variable cost towards the numbers of consumers. And and of course, the way we've implemented that with the price rise, it makes sure that we do these that we run this business, of course, at the margin. And that has been sort of implemented. It is fair to say that, of course, a lot of the pricing of that has happened throughout last year, but not all of it. So we still have a little bit of a long tail and some customers in in binding promotions that when they come out throughout the year, they will be priced. But the majority of the pricing move for this year will sit on the mobile and broadband categories. I hope that sort of answers your question.

Maybe we'll just click follow up, because there was a recent price increase from via play to you on like a wholesale basis. So how is that going to be offset? Is that like a mandatory pass through so that you cannot like margin squeeze them? Or what is the.

No, that's not what's happening here. We have. So there's no price increase. Q1 Q2 this year versus Q3 Q4 last year. The main thing is that actually we had a lower cost to via play Q1 Q2 of last year. So there's nothing happening specifically specifically in Q1 Q2 compared to what we did in the second half last year. So just so you don't think that there is a price increase from via play from January 1st. This is not what is happening here. And then on your working capital, just quickly from my side, yes, we are we are working

on

improving it and there is still scope for improvement. I would also caution in the full transparency that working capital level we had at the end of 2021 was exceptionally low because we had almost no handsets. We were not we have not really started with a 5G. So so let's let's understand that what we are working towards in a good operating mode is to get down from where we were, but not all the way to that point. Because that basically would mean that we run the business without almost any stock at all.

And I think I can add to that as well, because the things that we pointed out to Q4 were three different areas that we said that we were going to work specifically on. And that was the inventory that could be divided into devices and also the next mobility 5G rollout. And we can see that we are making progress in this in both these areas. And the third one was the handsets financing. And you might recall that in Q4 we actually stopped the invoicing of that because we were renegotiating our terms with the bank. And we also communicated that we did that successfully. And then we started the handset financing invoicing at the beginning of this year.

So

that is something an impact that will come gradually during the during the next 36 months. And that's still five.

So two and a half years to go

for

those answers.

Thank

you very much.

Thank you. Now we're going to take our next question. And the next question comes from the line of Andreas Jolson from Danske Bank. Your line is open. Please ask your question.

Thanks a lot. And good morning, everyone. Two questions from my side. First of all, on the mobile ASPU in the consumer side, which is down slightly from from last year. And you still have had this unlimited offering, which comes at a quite high ARPU level or ASPU level. And you have stated that you've had good traction on that and you have some roaming coming back. So I just want to understand a little bit more why we don't see a larger year on year impact on the mobile ASPU in the consumer side. And secondly, just to follow up on TV. Obviously, the service revenue trends have improved, but you still are in sort of flat dish mode despite this innovative solution and offering that you have. What's the next step to turn the TV side into service revenue growth? Thanks.

I'll take the one, Andreas. So if you look at the mobile ASPU, then it has a flat dish character at the moment. And our mobile ASPU, of course, consists of a number of components. One, the postpaid and the prepaid side. And secondly, of course, the if you look into the mobile ASPU, we have two brands in the market, Teletoo and Comvic. I just want to be clear that when we are talking about the unlimited portfolio that we've launched and that has a good traction in terms of tier mix, we're talking about the Teletoo mobile part of our total mobile postpaid business, right? So in that sense, we're still seeing the same sort of traction that we were talking about before in the first quarter with a little bit of more careful consumers. We have seen that we have had slightly less volume, a lower volume on the unlimited tier mix. However, we're still 50 plus percent. So it's just a slightly lower tier mix number. And we've also seen that that has also been compounded a little bit by an inflow on the lower tiered part of the portfolio from the prepaid registration. As in particular senior, we've seen some seniors that found it still, although we've had a very easy digital journey, found it still quite cumbersome and opted for a pre to post move. And they would then come in on Teletoo on the lower tier. So that's a little bit of a composition of what's happening there. We've also seen at the same time, you know, a strong continuation on our convict growth and that's sort of how the composite numbers and then sort of adds up. So our unlimited portfolio is still absolutely doing what it should be doing in the market. On TV. The what we of course said is that we are aiming for stabilized portfolio with the via play move, which I think we're doing. And in particular on on DTC, you can see that we're we're actually generating even a low level of growth. What we of course still are facing is a declining DTT business and that will remain to be there. So the offset against that is for us to continue to, you know, to drive our momentum in our DTV business. And there will be, of course, a level of pricing coming in as we go on, you know, as we go forward. And secondly, as you know, we're working very much on an aggregation play via play, which has been a first step in that journey. So that's, you know, that's basically a continuation of the strategy we've sort of started with via play, basically.

Very clear. Thanks a lot.

Thank you. Now we're going to take the next question. Just give us a moment. And the next question comes from the line of Nick Lyle from Societe Generale. Your line is open. Please ask your question.

Hi there. Morning, everybody. Could I ask just going back to Andrea's point on the consumer mobile and please, you mentioned aggressive campaigning. Could you just help us with what you what you meant by that and whether it's it doesn't sound as if it's too material, but just sort of set our minds at rest there. And then secondly, on the the bank book price increases in broadband, please, could you give us a bit of detail on the scope of those? You know, how many subs that might affect and how quickly and what could give us an idea roughly of the boost to revenue over the next couple of quarters or some at least guide towards what you would what you might expect. Thank you.

I can take it. Yeah. Yeah. Nick, it's Hendrik.

So when we talk about what we've seen in the market, largely, you know, I think it's you know, we're quite happy what we've seen. Of course, Q4 was last year was sort of quite quite a busy quarter as it normally is with a lot of promotions and et cetera. And and this quarter we have gone to back to that normality and and a bit more. So I think we've seen good price announcements and moves from all of the operators in the market. I think we are seeing a very good stability on our fixed products in the market as well at large, but also in terms of consumer behavior, we've seen good tear makes development, et cetera. And where we do see still quite a level of what we call BTL below the line, I would say aggression. And to your point, it's very targeted. It's not ATL overall market driven is, you know, is basically through some channels. Right. So, for example, telemarketing, where there's a lot of. There's some level of calling going on with sort of quite aggressive offices could be, you know, sell off of devices. We've seen that device market is a little bit down from, you know, from from its normal beat. Right. Reminds 10 percent in Sweden in the first quarter on to total device sales. So maybe some stock sell loss that that will happen. We have seen a level of aggression or campaigning on family office and some deeper discounting on unlimited peers from some other operators. So that sort of is the composition of basically what we're you know, what we've been seeing. On on on on the sort of mobile campaigning on the broadband back book pricing. We have, as you know, a more for more approach that we the company has been working with for, you know, for the last number of years. And in the more for more approach, we typically don't take the total base because some of our customers, of course, are in binding contracts that we don't price. But we do have a substantial base and that becomes share the details of that that we will be pricing and we will also be pricing to a more significant level that we normally normally do to offset some of the inflationary pressures. And I would say the price adjustment will be 30 to 40 percent higher than we would normally

do. And I think, yes.

Thank you. Now we're going to take our next question. And the next question comes from land of Cabal Tiroya from Deutsche Bank. So the line is open. Please ask a question.

Thank you for saying the questions and I have to please. So firstly, are you putting through increase price increases in the B2B back book? And how does that compare to what you may have done last year? And then secondly, given the moving parts with contents, price action and wages as well, would you be able to comment at all on when you think you can return back to stable EBITDA domestically? Should we view that as Q2 or more Q3? Thank you. I

will take hello, Kevin. Thanks for your questions on the B2B part. So we are constantly evaluating if we need to do any adjustments in order to save product margins. And I think we're working on the broad scale of different things. Pricing is one of them, but also optimization of our portfolio as well as we do migrations from old services to new services, et cetera. But looking on the pricing part, we can do certain things instantly. Of course, just like in the B2C market, some of our customers are in contracts, so we can't do all at once. But when possible, we do it. And if we look what we've done in Q1, for instance, we have done several pricing increases across the board on different products. Of course, the B2B portfolio and the contract set up is a much complexer thing and a larger broader portfolio with lots of moving parts. But we have price increase, fixed voice subscriptions, data net services, handsets, ATP, service agreements on UC and also on our hybrid solutions, hybrid cloud solutions based on index clauses that we have in a contract. So this is something that we're doing constantly and validating. And I think one part of the good traction that we have on the end user service is this methodology that we have.

And when it comes to your question on the EBITDA, like I said, we are very confident about delivering on the guidance on EBITDA. And we do expect that the Swedish EBITDA numbers will look better later in the year, but we don't guide all specific EBITDA for components of the group.

That's very clear. Thank you very much.

Thank you. Now we're going to take our next question. Just give us a moment. And the next question comes from a line of Titus Krann from Bank of America. Your line is open. Please ask your question.

Good morning, everyone. Thanks a lot for the presentation, for answering our questions and taking mine as well. Just a very, very quick follow up and then to real questions, if I may. The follow up is just on the comment on the 10 million SEC energy headwind that you had this quarter. Does it apply to the full group or is it just on three, the 10 million? And then just on my question on the Baltic very briefly, just because EBITDA trends in Lithuania and that way have been quite strong, but Estonia is much more difficult, which rather appears consistent with also softer result for Elisa yesterday. And maybe could you help us understand what is the main driver of difference within the Baltics? Are those cost headwinds higher on a structural basis in Estonia? And then just on a very different note, you published quite encouraging press release earlier this week highlighting the potential to reduce energy consumption in mobile networks by I think 30 to 40 percent with the help of AI. And I believe that's quite a topical subject, of course. Could you maybe elaborate a bit more on when you expect those technologies to actually be applied to your network at a larger scale and maybe staying as a subject of automation? Where do you see most opportunities for TELU to pursue that topic, those efficiencies and which parts you think are top of your agenda going ahead?

That was quite a few questions. Now, correct me if I'm wrong, Charlotte, but I think the energy impact was eight million. But OK, that's for the whole group. So it's basically not a big number. I can give a shot at the Lithuania-Estonia thing. I mean, clearly Lithuania, we are number one. We have much bigger scale. So in a relatively small operation, you are a bit more exposed to disruptions than you are in the bigger format. So that we see different impact in Lithuania and Estonia is basically normal. We are number one in Lithuania, number three in Estonia, strong number three, but still number three. So and also, of course, it would be natural that there is some correlation between the trend that Elisa sees in Estonia and the trend that we see. I don't think I would develop it very much more than that. And yeah, the release talks about a theoretical potential for saving energy. Clearly, when a mobile network, a typical mobile network is up and beaming, then it's at a quite high activity level all the time. Or it's not so that it accurately reflects the number of users who are busy on that cell. One of the advantages with 5G will be with our with our new systems is that they have a better ability to work with differentiated loads. In 4G, you don't necessarily don't really have that. But what you can do is that you can through software try to optimize this partially. So what this does is if you look in the grand scheme of things, consumers will be using more data as we progress. And of course, that gives us a little bit of a cushion. So it reduces the growth that would otherwise happen. So that the usage of power per byte will, of course, then go down. I don't know if that was clear.

Yes, very clear. Thanks for answering all three questions. Sorry for that, but very, very clear and very helpful. Thank you. OK, thank you.

Thank you. Now we're going to take our next question. And the question comes from a line of Peter Nielsen from ABG. Your line is open. Please ask your question.

Thank you very much for the opportunity to two questions. Please. Firstly, what do you think? I mean, the Swedish consumer market in general and for the two has been slogging for some time. What do you think will help the market sort of to reignite growth? Is that exclusively the price increases which you have talked about sort of comprehensively here today? And then secondly, just a question of clarification on the content cost. When you speak about higher content costs, you speak about the ability. Is that the only source of higher content costs? Just to be clear. Thank you very much.

Well, price increases come in one shape or form. So, yes, they will be with us. They will be a part of it. But it's important to see the whole picture. This is not only about the headline number that we have out there. The industry has had a tendency to be very aggressive in trying to hold on to customers through save desks and different kinds of initiatives. And, of course, trying to be very smart below the line. I think we see some indications that the industry is learning that this is not a great way of creating value for us. We've been working on a more to more platform. We will probably evolve that. And you heard Stefan talking about within B2B. There's some indexation. I think probably we'll see a bit more of indexation going into B2C going forward. I think that can be a good tool. When it will be, that's a different discussion. So the components that we work with may be changing a bit over time. Want to add something, Hendrik? There's

a content

question. Yeah, I will take that afterwards.

Yeah, maybe just

a couple of things. So Peter, the pricing, as Michelle said, of course, is an element of the business model. And yes, we will be strongly looking at moving to a price indexation, which we believe is a fair way of approaching the consumer market. But more importantly, we are, of course, moving forward and onward. The level of digitalization of society and of consumers is increasing every day. The usage of mobile applications and also the intensity of the mobile applications, even with AI and virtual reality, is increasing and the need to be connected. And with that also comes the trajectory set in, for example, on the mobile side by moving to an increasingly unlimited portfolio and making it available to an increasing share of the market. So I think there's a lot that's just the start of a new chapter, as far as I'm concerned, in terms of what we will do with consumers and what innovations and changes we can bring.

And

the same actually is also for home connectivity, right? There's a lot happening in the home. It's a huge hub. And whereby, whereas we over the last period of time got used to speeds of 100 megabit to be sufficient to have a whole household fully connected, I feel that over the next period of time, we're moving to different speed levels and also different type of service levels across that. So we have a clear roadmap for ourselves to move the Swedish market to way more to the one gigabit benchmark. And some of the team exchanges are already happening as we speak. So yes, it is about pricing, but it's not only about pricing. It's a lot about innovation at the same time. And then you have to come.

Yeah, but you are the master of content.

Peter, just remind me of the content question.

The question was, when you speak about content cost, you directly obviously refer to ViaPlay. Is ViaPlay the only source of higher content cost or are you also seeing it elsewhere?

ViaPlay, of course, is, let's say, on a -on-year basis, is of course the big change in the portfolio, right? However, it is, of course, in the total content cost is one of those elements that, of course, also has a level of inflation built within in terms of the other content we have. So where we have contracts coming out of, you know, coming out of contract, we will have a level of, you know, price inflation in some categories of the content. So there is also price inflation, you know, in the content cost to an extent.

Yes. Yeah.

Okay. Thank you.

Thank you. Now we're going to take our next question. And the next question comes from a line of Frederick Letal from Handelsbank. And your line is open. Please ask your question.

Thank you very much for taking my questions as well. I just wanted to have a follow-up, shall we, when we talked about the ability to lower the energy consumption on the new 5G networks. Do you, have you sort of also taken into account the deep sleep modes in the new equipment or have you used that already before in the 4G networks? Would that be a differentiator when it comes to energy consumption? Would be a follow-up on that one. And then just a question I have then. CapEx, you came into the year with a fairly high level of CapEx, especially in Sweden. How should we see that going towards the end of the year on a -over-quarter basis? Should we see it falling a share of revenue as you come closer to peak levels of CapEx spending or would be good to know? Thank you.

Well, let me start with the last one. I have been very keen that we should move at speed with building 5G. Ideally, I probably would have wanted to build even more last year, but supply chain was what it was and I'm not going to repeat that whole story. So that's why we're coming into the year with a high CapEx number. It will be relatively high in the second quarter also, but of course we are in the process of clocking this so that it comes to a production level, say from the summer and onwards, that is compatible with where we want to be. But I'd rather have that issue than having a rollout that stutters and goes slowly. So that's where we are on that. And you should expect, of course, that we in the second half will then have a lower production volume, specifically on 5G, than we have seen now. I mean, at least as reflected in the financial books, you may know that what you see in our CapEx books does not necessarily reflect 100% where we stand technically, because you have site acquisition, civil works, installation, and then invoicing to network mobility. So it is a relatively complex web to have there, but we love to have it because it makes us CapEx efficient to share this cost. And then we take the extra work that that involves. Now on energy consumption, I am not the biggest expert on this, but I think we can say as the general rule that when 4G was developed, it wasn't really developed to have an advanced power fluctuation mechanism built into it. So what we're trying to do is an attempt to improve on that. 5G has been more developed to try to optimize energy. So let's be clear that whatever we now build of 5G, the consumption is growing relatively fast. So the usage per byte will go down, but our energy consumption over time will be going up.

OK, thank you.

Thank you. Now we're going to take our next question. And the next question comes from the line of Adam Fox-Rumley from HSBC. The line is open. Please ask a question.

Thank you very much. I have one follow up on that CapEx question actually, which was to ask about your level of comfort with the current mid-time guidance and the kind of step down once you've passed the peak and the unlimited portfolio that you're increasingly putting weight on, place more demands on medium term capacity planning, for example, or are you confident that the weight of the work is being done in the build out of the network and the network sites? And then the second question is a quick one. I wonder if you could just give us an update on the spectrum option. Are we still expecting that in September? Are you waiting for any more details from the PTS? Thank you very much.

So the answer to question number two is yes and yes. And there will be more information coming later. So the regulator will be coming with more information around that. We expect it to happen. We expect to participate. And that's pretty much what we can say at this point. And on CapEx, I just want to be clear that we clearly will be at the top end of expectations on CapEx. I think it is a good thing. I'd rather get the installations done this year and next year to build the best 5G network in Sweden. We are building, as you know, in the higher spectrum. So when we talk about our coverage, we are talking about coverage based on high spectrum and the kind of download speeds that you expect from 5G. We will, of course, also be using 700, which is a great thing for coverage and gives good speeds, but not the kind of thing, the speed that people have been thinking about in their minds when they think about 5G. So CapEx will be at a high level. I think it's a good thing. And in terms of where we are, if you look at it from a CapEx's sales perspective, we are in a good spot compared to pretty much anyone in Europe. I think that's a good way to look at it.

OK, thanks very much.

Thank you. Now we're going to take our first, our last question. And the last question comes from Lan of CEHER from Citi. Your line is open. Please ask your question.

Hello. Hi. Good morning. Thank you for taking my questions. I have two questions on mobile and one clarification, please. And the first question is, you mentioned that you have done price changes in consumers across the board. Just wondering if you can remind us what you have done on the consumer mobile side, apart from the handset financing. It seems that you haven't raised prices on convict brands for some time. I was wondering that given that your competitors are raising low and challenging brand prices, whether that's giving yourself a confidence that you can also think about pricing strategies with convicts. And the second question is on the B2B side. B2B mobile has been growing about 10 percent for the last four quarters. It seems to be supported by the base growth. But the Q1, we see a slight moderation in the app. So, if you can talk about the market competition in the B2B mobile and whether this Q1 is just simply a seasonality thing. And finally, the clarification is on the wage inflation. Could you remind us once you agree with the union, is that a one year or two year agreement on the inflation? Thank you.

So take the last one first. Yes, there is collective bargaining and there are also there are also there's also collective bargaining at the industry level after the central agreement has come into place. In Sweden, they placed a lot of attention to this mark, as they call it. And that one has been set now for four point one percent this year and three point three next year, if I remember correctly. And that's a very strong indicator of where things probably will end up. There's negotiation to be done, but it's it's pretty much like that. And it's effective from first of April. So then you have it basically for for the spreadsheet, approximately where these things will land. So we do have clarity on this. Maybe we you had two questions, one on B2C and one on B2B. Who wants to start?

Yeah, I can take this for your question on the B2B volume development. I mean, we are continuously trying to find the balance between the value and volume. And I think you can see that happening in the mobile revenue growth. And if you look at the RU growth, it varies a little bit between the quarters during the last two years. It has been between ten thousand and thirty two thousand if you look quarter by quarter. And it's really our large deals that can swing this up and down between the quarters. And especially in this quarter, we had two unusual events and that was we moved to larger deliveries that were intended for Q1, and we also had a clean up of some legacy subscriptions. So I guess that for this, I would say we would be in on par with the average for the last three quarters. Hope that answers your question.

And then on the consumer side, mobile pricing, as we've been discussing. Yes, we are putting that pricing into play last year. As you know, it was indeed a year that we didn't do that much pricing one because we had the IT mediation and new portfolio introduction on on tele to mobile and also on convict. We were just running out of a pricing move that we had done in twenty twenty one. So, yes, twenty twenty two was sort of seasonably low, let's say in terms of pricing so that there is room for pricing. And that is in our consideration to happen in the second and third quarter.

Thank you. Thank you. Dear speakers, there are no further questions, and I would like now to to hand the conference over to show you and send for any closing remarks. Please go ahead.

Thank you very much, Operator. So and thank you to all of you for taking the time to listen to us and to ask us questions and have this discussion together. I'd like to just briefly say that I'm very pleased that we are able to keep the growth momentum. I think it's absolutely fundamental for this industry to be able to keep the growth momentum so that we can be take the relevance that we have in the market out into our P&L also. For that purpose, it is important to build 5G relatively fast. I'd like to do it relatively fast. We have X amount of base stations in our sort of model network that we're going to build to that for mobility. And most of that we want to get done this year, next year and some of it, of course, in twenty five. And that is an investment into the future. And I reiterate that we have an absolutely realistic ambition of building the best 5G network in Sweden. That's kind of the ambition level. And lastly, since numbers and profit are, of course, very important, we will be finished with this facing issue that we have now related to how we importantly restructured our TV business last year. So when we come back from the summer holiday, we will be in correct facing again. So give us this quarter and the next and then we will be into a it will be easier to see like for like year over year in terms of where we are. And we expect a stronger EBITDA in the second half than in the first half. So with that, thank you very much for your attention and have a great day.