Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the Tele2 Fourth Quarter Interim Report 2023 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad and wait for your name to be advising. To withdraw a question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Shell Johnson. Please go ahead.

Thank you very much, operator. Good morning, everyone, and welcome to Tele2's report call for the fourth quarter of 2023. We are very happy that you are taking the time with us this morning. And with me here in Shista today, I have Charlotte Hansen, our group CFO, Henrik Dithroth, our chief commercial officer, and Stefan Trampus, our head of B2B. So please turn to slide two for the highlights. 2023 turned out to be eventful in many ways. And if I were to single out a few specific events beyond the financial ones, I would mention the Financial Times ranking of 32 as the number one among Europe's climate leaders, as well as the top spot our B2B team recently achieved in the Swedish Quality Survey, SKEI, based on real customer experience. So while these achievements make us proud, we will of course continue our work on customer experience and sustainability going forward. I'm glad to report a strong end of 2023 as we grew organic underlying EBITDA by 4% in the fourth quarter, while maintaining solid end-user service revenue growth of 3%. For the full year, we grew end-user service revenue by 4% and underlying EBITDA by 2%, which combined with 13.5% CapEx sales ratio was in line with our 2023 guidance in a challenging year, largely characterized by inflation. Following strong equity-free cash flow during the year, our balance sheet remains strong with leverage at the bottom end of our target range. Consequently, our board of directors proposes an ordinary dividend of 6 kroner per share, an increase from 6.80 last year, to be paid in two tranches. in May and October. We're also launching a new strategy execution program, which covers the next three years. Through this program, we will, simply put, shift focus from fixing legacy IT towards our go-to-market efforts. Developing outstanding digital tools and channels aimed at radically improving customer experience and value. The program will also, as an effect, allow us to reduce 600 million of costs over the next three years. I will soon present this in more detail. Please move to page three. End-user service revenue grew by 3% organically, with solid performance across operations, including continued growth acceleration in B2C Sweden. Underlying EBITDA grew by 4%, mostly as end-user service revenue grew more than offset inflationary pressures. We had a solid equity-free cash flow this quarter, despite working capital impacts from seasonally high-level equipment funding. In Sweden B2C, we saw solid volume growth in mobile postbates. End-user service revenue growth in connectivity was also solid, driven by fixed broadband at 8% and mobile postbates at 5%. Sweden B2B delivered continued solid and broad-based end-user service revenue growth. supported by improving mobile ASPU. Our term also stood out as mentioned in the recent survey from the Swedish Quality Index with the most satisfied business customers in both broadband and mobile, which we are very proud of. Vaultix had another good quarter with strong ASPU-driven end-user service revenue growth and good underlying EBITDA growth. Then let's look at Swedish consumer. Q4 was yet another quarter with solid volume growth in mobile postpaid, driven by lower churn and strong sales of unlimited and family products. Mobile after increased slightly year over year, but grew more than 2% when excluding dilution from free broadband RGUs. In fixed broadband, we saw stable RGU development in the quarter due to fewer campaigns and less discounts, whereas aftergrowth was strong thanks to price adjustments and uptake of higher average speeds. Our digital TV, cable, and fiber business remained stable in terms of volume, whereas Afto was slightly down due to decline of legacy add-on products. Moving to slide six. Mobile end-user service revenue grew by 3%, driven by a continued acceleration in mobile postbates, which delivered a multi-year high end-user service revenue growth of 5%. In contrast, our prepaid business continued to contract in line with previous quarters, following the registration requirement since February 2023. With an impressive 8% end-user service revenue growth, fixed broadband also delivered a multi-year high, thanks to both ASPU and volume growth. End-user service revenue for digital TV declined by 3%, mostly driven by continued decline in the legacy DTT business. And now moving to B2B. We continue to execute on our successful B2B strategy, and all customer segments are contributing to the solid end-user service revenue growth of 2%, or 4% underlying when adjusted for a one-off deal in solutions in Q4 of 2022. Our copper decommissioning has now approached 90% completion rate. Mobile net intake amounted to 3,000 RGUs in Q4, alongside continued ASPR improvements. The macroeconomic situation continues to affect some of our customer groups more than others, however, with moderate impact on our overall business. And then let's move to an overview of Sweden. End-user service revenue growth for a total Swedish operation ended at 2%, driven by both B2C and B2B. Underlying EBITDA turned to 3% growth, mostly as higher end-user service revenue exceeded inflationary pressures and continued margin pressure from product mix changes as legacy services are declining. The cash conversion of 58% is reflecting full-year CapEx sales of 15%. Let's continue with the Baltics on slide 10. The total number of Baltic mobile post-it customers continued to increase in a quarter. Organic OSPU continued to grow at a healthy rate, largely driven by Lithuania, and our more-for-more strategy, price adjustments and prepaid to post-paid migration. And when looking at the Baltic's financials, the Asper growth combined with some volume growth in mobile post-paid led to 8% organic end-user service revenue growth for the Baltics as a whole, driven by Lithuania and Latvia. Underlying EBITDA also grew at 8% organically, as end-user service revenue and somewhat lower energy costs exceeded inflationary pressures. Cash conversion remains at excellent levels and reached 74% by year end thanks to strong underlying EBITDA despite full year capital sales of 10% due to ongoing 5G rollouts. With that I hand it over to Charlotte who will go through the financial overview.

Thank you Kjell and good morning everyone. Please turn to page 13. So first a few comments on the group P&L. In Q4, total revenue grew by 2% organically, whereas end-user service revenue grew slightly more than 3% organically. In Q4, we had a revenue increase of 13 million from international roaming year-on-year, hence roughly in line with the contributions in the previous couple of quarters. Underlying EBITDA grew by 6% in SEC terms and close to 5% organically. The underlying EBITDA grew slightly more than 4% organically, mostly as the end-user service revenue grows more than offset inflationary pressure and continued margin pressure from product mix changes as legacy services decline. In Q4, we had 11 million tail width from energy year on year. As you can see on the slide, our net financial items increased by 80 million year on year due to high financing costs for outstanding debts And by year end, we had a death mix of 66% fixed rates and 34% floating rates. With that follows, for every one percentage point rate change by our central bank, our annualized financial expenses on loans with floating rates move by around 19. And during 2024, we have some 4 billion SEC maturing, of which the majority is fixed and matures during the first half of the year. Then finally, the income tax was decreased due to higher taxable profits and increased due to higher taxable profits. And because last year was positively impacted by tax reductions related to investments made during the pandemic. And let's move to the cash flow. CapEx paid increased in Q4 compared to last year due to continued high CapEx levels and the first charge of the recently acquired spectrum in Sweden. Changes in working capital were negative in Q4 as expected, mainly driven by seasonally high levels of equipment funding, leading to modest positive working capital for full year 2023. With that said, one of our focus areas a year ago was to reduce our inventory levels. which we have achieved following a reduction of some 400 million. Another focus area was to improve the invoicing process towards Net4Mobility related to our network modernization. Here we have made tangible progress in 2023, although partly offset by new investments as we continue our 5G rollout. Working capital remains a priority for us also going forward, and our ambition is to keep working capital cash flow neutral in 2024. Net financial items paid increased due to higher interest rates both on loans and leases and coupon timing. Taxes paid declined predominantly due to tax refund related to year 2022. All in all, our equity free cash flow for Q4 ended at 0.5 billion, slightly above last year's level. And over the last 12 months, we have generated 4.7 billion of equity-free cash flow, corresponding to 6.8 krona per share, and consequently, in line with the dividend payments during the year. So let's move to slide 15 for our capital structure. By year end, economic net debt amounted to 25.6 billion, hence unchanged compared to year end 2022, Our leverage ended at 2.5 times, which is in the lower end of our target range, 2.5 to 3 times. And with that, I hand over to Shell to introduce the next phase of our strategy execution.