Tele2 AB (publ)

Good morning, everyone. Welcome to Tele2's report call for the first quarter of 2023. With me here in GISA today, I have Charlotte Hansen, our group CFO, Henrik Deschrot, our chief commercial officer, and Stefan Trampus, our head of B2B. Please turn to slide two, and then we'll take the highlights. I'm pleased to see Tele2's 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 would 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, our go-to-market speed, and not least, also be crucial to our next-step FMC ambitions. 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 through our Net4Mobility joint venture. 2023 will be a year of significant investments to build for the future, but we continue to be very CapEx 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'd like to highlight some other important achievements and events during Q1. First, according to the Better Business index, based on mystery shopping, our two stores were ranked number one in service among the top 100 retailers in Sweden, not only within Telekom, 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 3.6% organically, driven by the Baltics and Sweden B2B, whereas B2C remained stable. Underlying EBITDA declined with a minor 0.4% organically, given by impressive 30% growth in the Baltics, whereas Sweden declined by 4% at transformation savings and modest top-line 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 than offset increased capex and interest. Sweden B2C saw positive net intake for mobile postpaid 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 backbook 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 five. From an overall market perspective, competitiveness has been modest, but aggressive campaigning has persisted on the mobile side. Mobile postplates saw continued net intake during a seasonally slow quarter, mostly driven by PlumVic, while Aspu declined slightly. In fixed broadband, we see continued good growth, driven by volume and a stable Aspu development. In the digital TV, cable, and fiber business, We are slightly down on subscribers, whereas ASPR continues to grow on the back of the new Viaplay-infused packages and associated backdoor pricing. Turn to the next slide. Mobile end-user service revenue grew slightly driven by postbates, 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 a 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 seven. 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 RGUs with continued contributions across segments. Mobile AFTU remained stable. End-user service revenue increased by 5% in a 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 continue to 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 eight for Sweden overview. Looking at the combined Swedish operations, end-user service revenue increased 1%, driven by solid performance within B2B. International roaming had a positive year-over-year effect of 15 million. Underlying EBITDA declined by 4% compared to last year, as inflation and content costs exceeded end-user service revenue and transformation benefits ahead of price increases. Cash conversion remained strong at 63%, however, impacted by an increase in CapEx run rate, as we are rolling out real 5G and remote PHY at a high pace. Let's then continue with the Baltics on slide 10. Across our Baltic markets, the number of mobile postpaid customers continued to increase, whereas the number of prepaid customers fell in line with normal first quarter seasonality. We have continued to see organic aspect growth across markets during the quarter, resulting from our more-for-more strategy, price adjustments, and to some extent, prepaid to postpaid migration. And then looking at Baltic's financials on the next page, Aspen volume growth in mobile phosphate 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 EBITDA. We continue to see a high cash conversion thanks to strong underlying EBITDA while impacted by a significantly increasing CapEx run rate due to ongoing 5G rollouts. With that, I hand over to Charlotte, who will go through the financial overview.

Thank you, Shell, and good morning, everyone. Please turn to the page setting 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 vortex and Sweden B2B. Our underlying EBITDA grew by 1% organically. The strong organic growth in the vortex 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 and other financial items decreased somewhat to SEK 213 million compared to Q1 2022. The highest financing costs for outstanding debts 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. capex 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 SEK, from 200 million SEK above last year's level. Over the last 12 months, we have generated 3.7 billion SEK of equity-free cash flow from continuing operations, corresponding to 5.3 SEK per share. This moves slide 15 to go through the capital structure. At the end of March, economic net debt amounted to 24.6 billion SEK, 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, pro forma 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 SEK per share for 2022 to be paid in two tranches of 3.4 SEK each in May and October this year. So let's go to slide 16 for an update of the progress of the Business Transformation Program. During Q1, we continue 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 SEK by the end of March. The P&L effect of this was 215 million SEK in the quarter with a net effect of 75 million SEK compared to Q1 2022. We are now continuing our efforts 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 activity cash flow. 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 tele2 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 5G. This leads to higher absolute CapEx levels, but Teletubbies 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 economy 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.