Tele2 AB (publ)

Good day and thank you for standing by and welcome to Tele2Q2 Interim Report 2023. At this time all participants are in a list and only mode. After the speaker presentation there will be a question and answer session. To ask a question you will need to press star 1 1 on your telephone. I will now end the conference over to the CEO Shell Jensen. Please go ahead sir.

Thank you, operator, and good morning, everyone. Welcome to Tele2's report call for the second quarter of 23. With me here in Kyrsta today, I have Charlotte Hansson, our group CFO, and Henrik de Groot, our chief commercial officer. Can I please ask you to turn to slide two for some highlights? So by now, you're all aware that growth is an absolute necessity for any company to be successful over time. regardless if it's operating in a mature market with fierce competition. I'm therefore very pleased to see the strong growth we delivered in Q2, despite challenging macro conditions. Once again, our colleagues in the Baltics delivered fantastic numbers. Swedish B2B uphold their momentum and the big tanker that is Swedish B2C, that for years was heading in the wrong direction, has now turned around, calibrated the compass and is getting ready to accelerate. It is, however, a stormy ocean to navigate. Inflation, interest rates and general uncertainties are affecting us all in one way or the other. Companies exposed to retail will have a challenging year ahead. Yet, as CEO of Teletoo, I'm optimistic about our ability to maintain a good balance between investments and continued healthy shareholder remuneration. As you might have noticed, our strong cash generation in the first half of the year largely cover the first tranche of the dividend despite high investment levels. We go into these uncertain times with a strong balance sheet and a high pace of development in our IT transformation and 5G rollout and have a very good opportunity to invest to ensure a strengthened C2 long term. One example of that is the digital customer journey where the telco industry is still behind many other industries. It is becoming increasingly important for us to get less dependent on third-party retail, and instead welcome new and care for existing customers in our own digital universe. It's more efficient and reduces charge. Customers reaching us digitally are more loyal and more satisfied. It is also a cornerstone in our strategy to build a real FMC category in the market, where we compete with value and service over unsustainable discounts. Tele2 has unique capabilities to lead this category, including our mobile, broadband, and aggregated TV and streaming services. But it requires our services to be highly reliable and a customer journey easy to understand, and that's the way we're heading at speed right now. While running as fast as we can to reach our targets, I'm happy that we in parallel managed to do it in a sustainable way. In May, the Financial Times ranked Teletubbies as Europe's number one climate leader, something we're very proud of. Before jumping into our financial and operational performance in Q2, I'd like to highlight that we today update some of our guidance parameters for 2023 and for our midterm ambitions. This is based on our proven ability to grow over time and the opportunity we see from investing in our capabilities during times of uncertainty. We are confident about our ability to combine 5G and spectrum investments with preserved healthy leverage and dividend levels. Charlotte will soon walk you through the details of the guidance changes. And with that, please turn to page three for a summary of the second quarter. End-user service revenue grew by close to 4% organically, driven by the Baltics and Sweden B2B. Underlying EBITDA was largely unchanged organically, mostly due to timing as we observe and expect gradual improvement supported by further effects from ongoing back book pricing and from abating headwinds from content and energy. Equity free cash flow improved significantly here but driven positive working capital. Sweden B2C saw solid net intake for mobile postpaid and fixed broadband. End user service revenue grew slightly thanks to strong growth in core connectivity offset by decline in legacy services. Backbook pricing has contributed to revenues in Q2 and will contribute more in the coming quarters as we approach full run rates. Sweden B2B delivered continued solid and broad-based end-user service growth, as well as solid net intake of mobile postmates. And our Baltic operations experienced yet another excellent quarter, both in terms of top-line and bottom-line growth. We have also continued rollout of 5G services at a high pace across our markets. Let's then move to the Swedish consumer segment on slide 5. The quarter has been characterized by continued pricing activity in the market, primarily on mobile family offerings and in the broadband value chain. The slower consumer demand on handsets continued, both in the operator cluster and third-party retail. Mobile PostPaid saw strong net intake with healthy support from Tele2 Unlimited, including the family proposition. In fixed broadband, we saw continued solid RGU growth driven by FMC and lower churn, alongside healthy ASPU growth supported by pricing. In the digital TV, cable, and fiber business, we are marginally down on RGUs and marginally up on ASPU. And then moving to slide six, please. Mobile end-user service revenue grew slightly, driven by improving post-pay growth, which more than offset the first full quarter with prepaid registration. In fixed broadband, end-user service revenue growth accelerated to 5%, thanks to both volume and OSPI growth. End-user service revenue for digital TV declined slightly, with stable sales in cable and fiber, and continued decline in the legacy DTT business. The new BioPlay-infused packages continue to contribute positively to both subsegments. And then let's move to B2B, slide 7. We continue to hold on to our overall strategy, and all business segments are contributing to the solid end-user service revenue growth of 5%. Our core services that have fueled growth for a long time continue to do so also in this quarter, offsetting further decline in legacy services. Mobile net intake amounted to 11,000 RGUs. The Q2 ASBU was stable year over year, excluding a minor positive one-off, which, however, has been offset by a similar negative one-off elsewhere in B2B. Our solutions business posted healthy revenue growth despite remaining supply chain issues. The macroeconomic situation, which we continue to monitor closely, is affecting some of our customer groups more than others, but so far, without significant impact on our business. And then we move to slide eight for Sweden overview. End-user service revenue growth for the combined Swedish operations increased to 2%, driven by a strong performance in B2B and improving performance to C. International roaming had a positive year-over-year effect of 7 million as compared to 15 million in Q1. Underlying EBITDA fell by 5% as inflation and content costs exceeded end-user service revenue and transformation benefits ahead of more back-book pricing effects and annualizing content costs in the coming quarters. Cash conversion remains strong at 51%, impacted by an increasing capex run rate as we are rolling out real 5G and remote PHY at a high pace. And then moving to the Baltic, slide 10, Across our Baltic markets, the number of mobile postpaid customers continued to increase, and so did all prepaid customer bases this quarter. We have continued to see organic ASPU growth across markets during Q2, resulting from our more-for-more strategy, price adjustments, and, to some extent, prepaid to postpaid migration. And in Baltic financials, slide 11, ASPU and volume growth in mobile postpaid led to organic end-user service revenue growth across markets, resulting in 12% end-user service revenue growth for the Baltics overall. Our strong top line, combined with successful cost control, has outpaced increasing personnel costs and slightly increasing energy costs, leading to an outstanding 15% organic growth in underlying EBITDA. We continue to see a very high cash conversion, thanks to strong underlying EBITDA, while impacted by significantly increasing CapEx run rate due to ongoing 5G rollouts. And with that, I hand over to Charlotte for the financial overview.

Thank you, Kjell, and good morning, everyone. Please turn to page 13. First, a few comments on the group P&L. In Q2, our total revenue grew by 3% organically, while end-user service revenue grew by close to 4%, driven by the Baltics and Sweden B2B. Our underlying EBITDA grew by 3% in SEC terms, while 1% organically. On the other hand, underlying EBITDA was largely flat organically as end-user service revenue growth and cost savings related to the business transformation program were offset, mainly by inflationary pressure and content costs, the latter of which will largely annualize in Q3. In Q2, we had a modest 13 million headwind from energy year on year, despite the 10 million electricity support in Sweden. Looking ahead, we currently estimate some tailwind from energy costs during the second half of the year, in addition to expectations of another 25 million electricity support in Sweden. In Q2, we saw a revenue increase of 10 million from international roaming. However, this was clearly lower than the 20 to 30 million year-on-year increase we have seen in the previous several quarters. I would also like to comment on the net financial items, where we only see a modest increase year on year, despite higher interest rates. But this, in fact, includes the 77 million financial gain related to the bond buyback in the quarter. By Q2, we had a debt mix of 66% fixed rates and 34% floating rates. And with that follows that for every one percentage point rate hike by our central bank, Our annualized financial expenses increased by around 100 million. So please look at the cash flow on slide 14. CapEx paid was slightly higher in Q2 compared to last year due to higher network investments. Working capital continued to improve in Q2 and was mainly impacted by lower levels of equipment receivables as expected. We continue to have working capital as one of our priorities for the year. Net financial items paid increased due to high interest rates, both on loans and leases. All in all, our equity-free cash flow for Q2 ended at a strong 1.2 billion, some 400 million above last year's level. And over the last 12 months, we have generated 4.1 billion of equity-free cash flow, corresponding to a 5.9 krona per share. And please move to slide 15 for our capital structure. At the end of June, economic net debt amounted to 25.9 billion, representing a slight 0.2 billion increase compared to year-end 2022, as the first tranche of a dividend was largely covered by a strong cash flow. Leverage stood at 2.55 times at the end of June, which is slightly above and below our target range of 2.5 to 3 times. In May, we successfully issued a heavily oversubscribed €500 million bond maturing in 2029. We also repurchased €306 million worth of existing bond. The second tranche of the ordinary dividend will be paid in October. And let's move to slide 16. This will be the last update of our business transformation program, which now has been successfully completed. During Q2, we executed the final stages of optimizations within legacy IT and networks, which led to an annual run rate savings of just above $1 billion by the end of June, and in line with the target set some three years ago. The P&L effect of this was $240 million in the quarter, with a net effect of $85 million compared to Q2 2022. So please go to slide 17 for our 2023 financial guidance. Following the first half of 2023, which has generated close to 4% organic end-user service revenue growth and the CapEx run rate above our upper end of the 2.8 to 3.3 billion range, we find it prudent to update our 2023 financial guidance accordingly. Consequently, we adjust our guidance for end-user service revenue growth from low single-digit to low to mid-single-digit growth. while leaving our guidance for underlying EBITDA unchanged at low single duty growth due to timing and continued inflationary pressure. We also rephrase our CAPEX guidance to the more commonly used percentage of sales model and guide for less than 14% CAPEX of sales in 2023. Let's move to slide 18 for an update of our mid-term ambitions. First, in line with our standard practice, we will announce our 2024 financial guidance in relation to the full year 2023 results presentation. However, given the revisions of our 2023 guidance, we also make similar adjustments to our mid-term ambitions. So we adjust end-use of services revenue growth from low single-digit to low to mid-single-digit growth. whereas our mid-single-digit growth ambitions for underlying EBITDA remains unchanged. We then foresee capex sales in the range of 10 to 14%, with 2024 in the upper end of the range, followed by a gradual decline towards the lower end of the range during 2025 to 2026. And with that, I hand over to Shell to go through our key priorities going forward.

Thank you very much, Charlotte. So then please turn to slide 19 and our key priorities. So in summary, our main objective remains to keep up our growth momentum, which in turn requires us to continue building 5G and remote PHY at face and to finalize the digital transformation, including our digital customer journeys. Our efficient cash flow profile and strong balance sheet allows for healthy shareholder remuneration while investing. We will also continue leading in sustainability as suggested by several recent impressive recognitions. And with that, I hand it over to the operator for Q&A.

Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star 1 1 on your telephone. We are now taking the first question. Please stand by. The first question from Andrew Lee from Goldman Sachs. Please go ahead. Your line is open.

Thank you. Good morning, everyone. I had two questions. First was just on your EBITDA growth trajectory. Obviously, you're guiding to still low single digit this year of growth and mid single digit in the mid term. But what we saw in the second quarter was stripping out that energy support that your Swedish EBITDA growth was down 4.8% year on year and your group EBITDA growth was zero. So could you just talk us through the building blocks to the inflection of growth in Swedish EBITDA that you threw this year and maybe talk to why you're confident in the sustainability of mid-single-digit growth given weaker trends, as expected, but weaker trends in the second quarter? And then the second question obviously relates to CapEx. So you've raised your capex today. It's obviously a broad range that you've been explicit that you're going to head towards the upper end in 2023 and 2024. But how confident are you now that you've kind of set out your stall on capex and that we shouldn't expect an uplift or risk to the upside on your kind of low end of the range guidance into 2025 and hitting in 2026. How do you reassure investors that this is a kitchen thinking of your capex spend and not one of many capex rises? Thank you.

Thank you, Andrew. Good questions. I will start. Charlotte will probably want to support in here. Let me start on the EBITDA. I think you're right and prudent to strip out the energy support. At the same time, we also have a slight headwind. So they are quite equal in their numbers. And if you take the full of it, it's actually slightly negative. And we expect that to improve. But that's not the key issue. The key issue is, of course, that the underlying business should generate an increase in EBITDA. And we have talked about the facing of also content costs. We will have less of an effect in the third quarter and no year-over-year effect in the fourth quarter. So that is going to be helpful to us. We're starting to see some benefits from the price increases. So June, for example, was already significantly better. So this is coming in step by step throughout the year. And that is why we also are confident about delivering EBITDA growth this year. But we have not upgraded EBITDA guidance for a year. So growth, we will get back to the growth later in this year. I would also like to say when you talk about the midterm, it is an ambition. It is a quite high ambition level, given the circumstances we see around us on EBITDA. It's going to take a lot of hard work. to get towards that kind of number. But that is the ambition we set ahead of ourselves. But for this year, we're confident about delivering a positive EBITDA growth when we summarize in February. When it comes to the CapEx, I think this is an opportunity for us at Teletubbe to invest because we are in the lower range of our debt leverage. We do see that we generate good cash flow. We have worked hard on working capital, stabilized and improved. And of course, the underlying business with an EBITDA growth that we expect to see coming in the second half will have a relever effect. So we think we are on solid ground when it comes to using this situation that we see around us as a way to strengthen our position versus competition. Some of the items you will find in our capex are non-recurring. I think we have talked about a couple of times before that in our 5G rollout, there are what we call flat rates. It's just a cost estimated for building out the 5G base station, which typically is heavier than the 4G base station. Those costs are higher than initially thought some time ago. The moment we wind down the build-out of 5G, that cost will no longer exist. And that is to the tune of 250 million plus per year. So when we then take down the volume on the 5G upgrade, then, of course, these numbers will disappear from our capex. And, of course, the main build-out period is the next 18 to 24 months. So that, I hope, was an answer to your question and one of the reasons why we will see CapEx improving, especially as a percentage. Let me remind you, Andrew, and you know the business very, very well, that the CapEx range that we are entering into now is also a very good range compared to most telcos that you would see in Europe.

No, appreciated. Thanks, Jo. Just one quick follow-up. The CapEx is very much front-end loaded. How are you thinking about the dividend? Because your dividend is a payout of free cash flow basis, and obviously you know you're going through peak CapEx at the moment. Does that incentivize you to push the limits of that payout ratio to continue to pay investors during this period, or should we expect a slowdown or reduction in the dividend to reflect this CapEx trend?

With all the information we have today, Andrew, we are confident that we can prepare the ground so that the board can make a decision in February that could uphold a level that you have become familiar with, subject to all kinds of things in this world. But with what we know today, we are confident about that.

Thank you. That's really helpful. Thank you.

Thank you for your question. We are now taking the next question. And the next question from Andrej Kavicek from UBS. Please go ahead. Your line is open.

Hi, everyone. Thank you for the presentation. I had two questions as well. One, probably a simpler one in terms of working capital. So last year, you highlighted you had roughly a $1.2 billion drag in terms of free elements and year to date you're about plus 200 consensus for say this year and next year is just 300. So can you give us an update in terms of this 1.2 billion? I think it should be quite mechanical in terms of unwind over 23, 24 and 25. How confident are you that it's 1.2 billion that you highlighted as a drag last year? would be kind of, you know, unwound over the three-year period still, and therefore is there, you know, upsides to the consensus, assuming roughly just $300 million, and any, of course, color on this year would be helpful. That's one question. And then second question, a follow-up on CapEx, please. So I think implicitly there's like a 20% to 30%, increase in terms of absolute figures for CapEx for this year and next year at least. You've already mentioned, I guess, higher than expected costs with respect to the 5G base stations. We know there is inflation as well, but I was wondering if there are other elements such as, for example, a new transformation project where you're highlighting continued efficiencies going forward. Is there perhaps also some investment into managing your lease exposure, which clearly you've had quite a lot of and something that's weighing down on EBITDA? Therefore, would you be, for example, investing more into your own fiber, which in turn would kind of bring down lease costs going forward and therefore enable the kind of mid-single-digit growth on EBITDAO? in the coming years. If you could maybe just give us more color on where the increase in CapEx comes from exactly, that would be very helpful. Thank you.

Yeah, I think the good news is that when we talk about CapEx, this is voluntary in terms of, except from the flat rates that I mentioned and the numbers, it is an opportunity-driven approach where we see that finally we can build one network, one 5G network, no more SUNAB with Telia, and basically have all the G's lined up in a row and deliver on them in the most efficient way. So we think that doing this at pace is clearly strategically advantageous for us when we're going to build a premium position and a convergent position. We can of course take that down if we felt that that was the right thing to do and I take down like Apex. That doesn't make sense to us at this stage because we can afford the rollout. And there is no change to our strategy in terms of building more fiber compared to leasing as we have done now. So you should not expect any major change to numbers coming from that. On the working capital, we will not unwind the entire 1.2. Some of that was due to very low holdings of inventory coming out of COVID, handsets and these kinds of things. But we will definitely unwind the things that were put on our balance sheet in terms of handsets that we are financing ourselves rather than selling through factoring. So that's, of course, rolling in, and of course, the general improvement of working capital. But we will not unwind 1.2. If we can get closer to half of that, that would already be a very good job done. So that's what we're basing our plan.

Okay, thank you. half of that roughly. And then in terms of just a quick follow-up, please, in terms of working up. So you would say that the increase that you're basically guiding for is largely due to just an acceleration of existing plans plus the fact that some of these network elements are more expensive than expected plus inflation within kind of, I guess, vendor expenses. Yes.

It's not so much vendors. So this is not recurring software costs. This is the installation cost that is a bit higher. And we talked about before, I think we're more explicit about the numbers now. So that means that it's absolutely not recurring. It has nothing to do with software and it's nothing we should take back in terms of our vendors. And that is why also that as an element of CAPEX disappears immediately. It's not only 5G. It is also remote PHY. We are building remote PHY now at almost three times higher pace than we did two years ago. This means that we have fewer node splits out in the Covax networks. We have more fibers directly into the buildings. And we have the splitter inside the building, which gives more reliability and a better user experience. So these things are preparing us for a much stronger convergent position. Mobile is super important. broadband is important, the TV part is important. So putting this together through investing in mobile and remote PHY, PHY gives us strength in terms of delivering our business already for the next couple of years.

Thank you very much. Thank you for your question. We are now taking the next question. And the next question from Stefan Gassen from DMB. Please go ahead. Your line is open.

Yes, hello. Thanks for taking my questions. Yeah, I would like to come back a little bit to CapEx. You have given some explanations, but I mean, that Suna was about a close down was known. Building one network on all Gs should have been known. So what is actually new here? You mentioned the flat rate for building outside the base stations. You mentioned increased speed on remote PHY. other explanations please. Then you talk about more back book pricing effects in Sweden in second half. Can you please provide some more details on this?

Thank you. The second part I will leave with Henrik. On the first part, so you heard me quantifying The number on this fact rate goes to a 250 million plus per year. It depends a bit on the volume to be between 250 and 300. So that's a big part of it. And again, non-recurring. So it disappears when we take down the production volume. And then it becomes a bit of a choice. You're absolutely right, of course, that we know about the SUNAB dismantling. That has moved a bit slower than we would ideally have hoped. But okay, it is what it is. We're going to try to keep a pace on that. So the main component around the flat rate is there. It becomes whether you want to throttle it when you have a good rollout speed. And we have come to the view that looking at the landscape around us, the competition, their plans, the communicative plans. it gives us an opportunity to build extra strength that we can invest in a time of uncertainty when maybe others will have to take it a little bit more easy. That's, of course, our judgment on that. In terms of the second part of your question, I'll leave it to Henrik.

Yes, Stefan. On the pricing situation as follows, you can see in the numbers that Most of the broadband pricing you'll find in the numbers so far, those were executed at the early parts of this year. Since we don't want to confront our customer base in one go with all of the pricing, it's a phased pricing throughout mainly Q2 and Q3. The mobile pricing, has started. Some of it is already in the numbers, but the majority will sort of flow into the numbers. Now, of course, you also need to get to a full quarters of it. So, you know, mobile pricing sits in the period May and September. So you will see in the fourth quarter a fully loaded, first fully loaded pricing quarter. So more mobile to flow in in Q3 and a full pricing quarter in Q4.

Can I just follow up? Do you have any other planned price initiatives for the Swedish market?

What do you mean, out of plan?

If you have more planned price initiatives to drive top-line growth in the Swedish market.

We have for this year, we have done quite a bit of pricing. And again, you will see much more of it coming in in the second half of this year. And that has basically captured all the customer base. The main thing on mobile, as we said before, is really to move the back book pricing onto the new front book for Tele2, the new unlimited front book. So that is happening in this period I've just been describing. We've also been looking at Combiq, since of course also on the lower end of the mobile spectrum, some price increases have been executed in the market. So there's also something you know, on that front coming in the second half of the year. On broadband, we have done quite extensive pricing already, and what you will see is on TV there have been some comments I've seen in some of the analysts' earlier reports that on TV we have not done that much pricing. That is true because, of course, we've done most of the pricing last year in terms of the Viaplay introduction, but we still also have a number of customers rolling out of you know binding period so there's a little bit of pricing coming out of that as well but that's it yeah we've basically been through most okay thank you yep thank you for your question we are now taking the next question

And the next question from Andreas Johnson from Daske Bank. Please go ahead. Your line is open.

Hello, everyone. Maybe sort of a question combining all of the other ones. We have seen ASPR levels coming up on mobile and broadband, as you said. But given this increased effort on investments and network quality, how confident are you that consumers especially will be willing to continue to pay more? Or do you see the investments as an opportunity to take market shares mainly. How do you see those two elements on back of these increased investments?

We can split this, Henrik and I. I think there are a couple of elements to it. One thing is we focus a lot on pricing for very good reasons and ASPU. It's also about delivering the quality so that people stay with us, see lower churn levels, higher reliability. And we have made big progress in terms of reliability over the last 18 to 24 months. we see a much stronger service delivery. And I think that's also a part of building the customer lifetime value here that we are talking much more about now than the volume that we talked about in the past. So it fits for that building block as well. But maybe, Henrik, you want to add something to this?

Yeah, I think it's a good question. and just to comment on it if you look at you know how sustainable are these price levels in the market of course they all are a factor of the the consumer confidence the anticipation of inflation and how price levels you know in general are developing and what we see against the background of the type of services we offer and also the type of bundling that we see with consumers and for now what we're seeing is actually quite a good acceptance of the market of these price increases and they fit of course in a more generic picture of inflation at the same time we also see the customer confidence index stabilizing over the last quarter but still on at a cautious level but pricing in general has been accepted And we see a quite low churn. That's one aspect of the market. The other aspect of the market, though, is that customers are becoming more mindful and are becoming more selective in terms of the choices they do make. And this you can see in two ways. One way you can see, if you look at the handset business and the devices in the market, they actually have been down in Sweden, but I guess across Europe, for the last two quarters by 15% to 20%. And also, of course, we have been affected by it as one of the players in the market. So customers have become more mindful about making these type of purchases. And I think if you look at brown goods, it's even lower level. But what you see as a consequence is that people are not buying something cheaper. People are waiting for a purchase cycle that still allows them to buy quality. So it's not going for the cheaper product per se. It is waiting until people can buy the quality product. And if I look at our tier mix, then we can see this across our fixed services, for example, we still see that 50 plus percent of all customers are buying the higher tier mix on TV services, on our broadband speeds, and also on unlimited. Most of the customers of our Tele2 Mobile choose unlimited packages still. People are buying quality, but they're very mindful of it. We need to be mindful, of course, with future pricing levels to keep supporting this mindset.

Thanks a lot. Maybe a follow-up on the leverage side. Given the macro environment, given where interest rates are, how comfortable are you to increase the leverage and also the total cost of debt at this point in time?

Our leverage is almost flat year over year. We are 252 versus 255. It's down to one step behind the decimal point. So we see good cash flow generation. We see good control of working capital. We see that we're moving in the right direction. And I've been doing this for quite a few years now. We have levers. We have levers. several levers in a business like this. I've been through the 2008-2009 situation and some of the learnings from there are nice to have. You see a little bit of uncertainty in the world around you. We are quite comfortable about where we are today. Perfect. Thanks.

Thank you for your question. We are now taking the next question. And the next question from Nick Eliol from Societe Generale. Please go ahead. Your line is open.

Thanks very much. Morning, everybody. It was just two follow-ups, please, Shell, on the existing questions. Just back on the question of how fast CapEx comes down, please. I mean, $4.1 billion seems to be the top of the range on the new guidance, and you're saying about $0.3 billion to cut off. So that could still leave you well in the middle of the range in 2025-26. Could you be a little bit more explicit? Do you expect to get back to 10%, 11% by 2025, 2026? How fast does this work and what's the long run cap extra sales of the company now? Has that changed significantly? And the second one was on the dividend discussions with the board. How do you convince the board? And this is a bit related to Andreas' question a second ago, but how do you convince the board to be happy when you're producing 4.1 billion cash flow over 12 months and you've got a 4.9 billion dividend dividend? And CapEx is about to go up. I mean, what sort of parameters are going to come into play here? And how do you make them confident that you can cover this? Thanks very much.

So now you automatically assume that it was going to be exactly 14% when we say up to 14%. And that is, of course, your estimation. So, yeah, and you deduct the number that I have given you, which makes logical sense. And of course, we're not going to build 5G forever, and we're not going to keep on pushing all things at the same time forever. So once we get the main build-out of 5G behind us, and we have done a big job on remote PHY, then of course these levels will be coming down. So that's going to be helpful to us. We are growing our revenues, so As a percentage of our revenues, it, by definition, goes down. And as we are growing our EBITDA, which we definitely plan to do, we have the re-lever effect, which is also helpful to this. And you can see how, over the last few months, we have refinanced 2,000 euro, a refinancing based on the Teletubbies-Comhem deal a couple of years ago. That is now done. We know what interest rates we're going to pay on that fixed rate refinancing. So a lot of things have come into place and that gives us the confidence to move the situation a little bit more on our front foot. We have every opportunity to move levers if and when we should like to do so at any point in the future and I think that is something that has been important for the board to know when they ask questions about this. And then of course they the board will consider in February where we are on this. Our job is to make sure that they have an opportunity to continue rewarding our shareholders in the same way that they have gotten used to.

Okay, thanks very much.

Thank you for your question. We are now taking the next question. Please stand by. And the next question from Peter Nelson from ABG. Please go ahead. Your line is up.

Thank you very much. Good morning. Just a question on, well, Andrea has partly preempted me, but my question is, how do you plan to monetize 5G? As you said, it is a laborious effort to turn Swedish consumer trends back to positive growth. That seems to be a a tendency in the market. How do you think you plan to monetize 5G and to what extent do you think 5G can be a driver for renewed growth in your revenues in Sweden? Thank you.

I think that Henrik and his team have set the tone in the Swedish market on how pricing should be done. And of course we exist in a market where people make their own decisions. But given the situation we have around us, I think there will be the need for other players also to focus on value. It should be relatively clear and obvious. But Henrik, you have launched the 5G pricing plan, which basically was the best one in the market. It's partially being copied, but that's the direction of going.

Yeah, it clearly is, Peter. You know, I think what we're constantly striving for is to deliver quality in customer experience and in underlying product in a society that is still at high speed digitalizing. And so we see that demand is there from consumers. And we see, of course, also with the new portfolio, as I said, you know, we have a very good uptake on the unlimited price plans. And we see that continues. But we also want to, on your question of monetizing 5G, you also need to look, put it into the context, which Shell has been talking about, about the conversion play we want to do. So it's 5G in the context of a digital society where we put the household and the family at the center, where we want to have our customers be fully connected have a long-term relationship with us and and move out of you know the characteristic of this market it has been here in Sweden for a long time which is you know high level of discounted rotation in the market that is honestly not satisfying anyone on the long term and I think that's where the benefit lies and I think you know next to 5G you know we were also first out with you know value loading our entertainment portfolio we will be later out this year also with some new innovations on the broadband market. And we can see already the market has a tendency to go to these higher speeds. So the demand is there. And you need to look at 5G, at least what we do in the context of the household, a convergent play where everyone can be fully connected.

And still in Sweden, our services as a share of wallet are at a relatively moderate level compared to many other countries.

Absolutely. And I think, you know, and next to that, we, of course, for that part of the market that only wants to be truly mobile and efficiently connected, we have Combiq in the market, which is, you know, it's a straightforward brand and people love it. And, you know, that's also doing a great job.

So mainly there's a quality of service parameter at the high end of the market. Is that what you're saying?

Yes, and I think, you know, things that people really are willing to pay for, which is, you know, ease of use and unlimited is something that people always like. You know, you don't have to trouble free. You don't need to worry about anything. You can just connect and be connected and do the things you want to do. And that's the same also for the household with, you know, the broadband connectivity that, you know, the marketer, number of years ago was at 100 megabits, we're all talking towards higher speeds and towards one gig and that's where we're heading. And the market is moving in Sweden quite fast into that domain.

Are you seeing any exciting trends in the B2B market on demand for 5G?

I think we're seeing... Pretty much the same level, the same trajectories, honestly, because, you know, everyone that works in B2B is also a consumer in the end, right? So, you know, the whole anticipation of the market is moving that way and also with our unlimited BBC type of uptake and trajectory. Thank you very much.

Sure. Thank you for your question. We are now taking the next question. Please stand by. The next question from Keval Kiroya from Deutsche Bank. Please go ahead. Your line is open.

Thank you very much. I've got two questions, please. So firstly on CapEx, if we reflect back to the 2021 CMV when you already had the 3.5 gigahertz spectrum, can you talk about exactly how your network strategies changed versus what you had planned then? I guess I'm trying to work out to what degree the CapEx change is higher cost versus a change in what you're planning to deliver on the network. And then secondly, when we think about the capex trending down towards the lower end of the 10% to 14% range, when we look at your telco peers across Europe, none of them are towards that 10%, 11% number, even if we exclude those, even if we only look at those not doing Fiber. So what gives you the confidence that you can move back towards the lower end of that 10% to 14% range from post-2024? Thank you.

Yeah, and I think those two questions hang well together. The structure, of course, is changing. The Swedish setup where we have network mobility for 2G and 4G with Telenor, and we have 3G with Sunab, which is basically together with Telia, and of course, Telenor and Hutch have 3GIS for their 3G. And what we want to do, of course, is to get out of multiple network constructions. So we want to close down soon enough that we run and operate together with Telia, which reduces costs, but also makes it operationally more efficient. That's why we are keen to put everything together into one network through network mobility. And that's where we're headed. And the sooner we can do it, the faster we can have a top reliable network with the lowest operating costs and seeing it holistically as one network. The efficiency of the combined market position that we have in the market, the two players, gives us a relatively unique position in Europe at TEL2. There is hardly anyone else that has a more efficient, a capital efficient setup than the one we have. And you have seen it over time. We have been down those levels before in between the different generations. And we have every opportunity to getting back to the lower part of that range once the main build-out of 5G and remote PHY is done. I'm not saying we're going to be at 10% in 2025 or 2026, because even when we take down the 5G rollout, we'll probably be building remote PHY for another two years. That's a much smaller number than the 5G rollout. And we will be investing into our IT infrastructure, but we'll definitely have probably the most capital efficient structure among telcos in Europe. Thank you.

Thank you for your question. We are now taking the next question. And the next question goes to Laehee from Citi. Please go ahead.

Hello. Thank you very much for taking my questions. I just have a couple of very quick questions. And the first one is on the Swedish B2B. Obviously, it has shown quite strong growth for a number of quarters. Just wondering if you can talk us through what you see in the competition site and also how sustainable you think this level of growth can continue going forward. And my second question is on the EBITDA outlook. You have kept the mid-single-digit growth target for the mid-term, but now you have already come to the end of the transformation plan. I was wondering if you could update the market regarding how you think about the cost-cutting opportunities, and if possible, you can quantify it for the next two to three years. And my final question is, I'm not sure how much you can talk about it, but it's very interesting to hear you say that you want to build the leading 5G network. And I was wondering... how happy you are with your current Spectrum holding at the moment. And given that there is an upcoming Spectrum auction in Sweden, do you feel that this could provide you potentially opportunities to further enrich your current holdings? Thank you very much.

Yeah, that was quite a few questions. Let me make a go at it. Let me start with the B2B. which is now a success story and has been a success story for the last two years. It definitely was not in the past. And that is built upon the customer intimacy that has been developed. It's much more fact-based. It is dialogue-based. It is not contract and only contract and volume-based. And that is a strength that we have in that business. Now, if you take business to business and take a little bit longer outlook on that, I think there are interesting adjacencies for us to explore getting into. If you look at, for example, the cloud market in Sweden, it's much bigger than the telecom market. So there are areas where we, with the kind of customer intimacy we have now, can start exploring. I don't think they're going to build massive growth in 2023 or 2024, but it is definitely an opportunity we're looking into. For the team, our growth agenda in B2B has legs that we think will carry us well into the midterm. Of course, there can be some of our customers who will have a harder time because of the macroeconomic environment, and we respect that. But overall, we're quite positive and optimistic on the growth profile for B2B. And then, of course, you talk about EBITDA and the mid-term ambition, which I underline as an ambition, and it's a tough ambition that will involve a lot of hard work. And coming out of the business transformation program, the next level of reducing costs, there are two components, at least here. One is to get more value out of existing customers and new customers. The other one is, of course, to do this in a more efficient way. The next stage is to reduce what we call group into the world, the word expansion cost, which is the cost for third-party retails and others, commissions, which is quite substantial money. And the second one is, of course, how we take care of our customers in terms of our customer care and other costs. I've been talking since I came here about the need for getting all the brands onto one platform, having one development cycle for them, and, of course, becoming a more digital operator. And we are at the tail end of that. By end of this year or latest mid first quarter next year, we plan to have them all on the same platform. So then we can start building better and more interesting digital journeys for our customer base. Because let's face it, they are generally not good enough in the telecom industry. We need to build those. And that's going to be a multi-year project where we're going to build the best convergent player in the Swedish market on the back of a great 5G network and the remote FI investment. So this is a story that has legs actually for several years ahead. And going digital is the next level of cutting costs for us. Then you get into spectrum. We have a good spectrum portfolio. We're going to work to have a good spectrum portfolio going forward. It's a very sensitive topic for me to talk about, given that there is an auction coming in September. And I should be very, very careful what I say in public around that. So we are in a good position, and I expect that we have lots of spectrum in the Baltics and Sweden already that is with us for the longer term. And I expect that when we summarize the year, we will also be in a good position. But there are external factors there, and there are limitations to what I should be talking about. So I unfortunately have to leave it at that for this point.

Thank you very much.

Thank you for your question. We are now taking the next question. The next question from Adam Fox from HSBC. Please go ahead. Your line is up.

Great. Thank you very much. I've just got one which is kind of still related to CapEx, I'm afraid. You're spending more money now over the next couple of years. You've got the Spectrum Auction that you just discussed kind of to come later in the year. I'd just like to hear you talk about how you're going to measure the results of all that collective spend. I mean, are you thinking about return on capital within the business? Would you be prepared to guide the market on how you expect return on capital to evolve over time? Thank you.

So, the guide on the things that we have agreed with our board, and that's all publicly and well-known, And of course, if we have a dialogue with the board at some point about the change on these things, then of course, we will announce it to you. Obviously, it's very important that we can deliver a good return on capital employed or cash return on gross investment or whatever you prefer to measure. But for the time being, we have felt that the combination of growth, profitability, and of course, CapEx, and then of course, the resulting dividend gives a good picture of how the company is developed. And we understand perfectly that we are a business where most of our investors are very keen to uphold a good dividend, sustainable dividend, and that is something that the management spends a lot of time working on making happen.

Could I just ask one extra question, which is just on the network build-out and how it's going to change Is there any degree to which you're building more sites in the plan now than you have been before? Or is it genuinely just building kind of more rapidly than has been anticipated previously?

Well, we're finished with everything. Sunab, network mobility, getting it all into place. As a matter of fact, we will have fewer sites than the combination of all of these networks would be. the past and that is a part of the efficiency that we will reap from getting it all together so we can have one uniform network for whatever technology we use and we can put them together. So that is a part of the efficiency we expect to reap if I understood your question correctly.

I had a little noise on my side. Thank you for your question. I will hand back the conference over for closing remarks.

Thank you very much for spending the time with us to take a discussion in very interesting times. I know that we at Teletubbies are very happy that we have steered through the last year or two in a way that takes us into this uncertainty with a strong balance sheet, a good cash flow generation, and that we see improvements in several areas of the business. We have stabilized the TV business. Henrik and his team did a great job on that last year. Now we're moving on to monetizing that. We have stabilized B2B over the last two years, made it into a growth story that we are very proud of. So some of the fundamentals are really getting there. Now we see an opportunity to strengthen our position, disperse at least some of our competition in the Swedish market by investing into our capabilities, whether that is 5G or it is remote PHY or it is our IT transformation. We are doing this in a very measured and controlled way. We have a very strong look towards our balance sheets and our dividend expectations. while we're doing this. I've been through a couple of financial crises internationally in this industry. We have seen what levers there are. We think we have multiple ways of navigating the landscape that we'll be developing ahead of ourselves. And we're quite confident that we're going to find the right mix also going forward. So thank you very much for your attention and have a great day. And that concludes the conference for today.

Thank you for participating. You may hold this connect.