Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the TELU2 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 one one on your telephone keypad and wait for your name to be advising. To withdraw a question, please press star one one 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, Cheryl Johnson. Please go ahead.

Thank you very much, operator. Good morning, everyone, and welcome to TELU2'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 Chief Star today, I have Charlotte Hansen, our Group CFO, Henrik De Vrood, 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 TELU2 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, SGI, 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 .5% capex to 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 sheets remained strong with leverage at the bottom end of our target range. Consequently, our board of directors proposes an ordinary dividend of six-thrower, 90 euro 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 -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 growth more than offset inflationary pressures. We had a solid equity-free cash flow this quarter, despite working capital impacts from seasonally high level of equipment funding. In Sweden B2C, we saw solid volume growth in mobile post-bates. End-user service revenue growth in connectivity was also solid, driven by fixed broadband at 8% and mobile post-bates at 5%. Sweden B2B delivered continued solid and broad-based end-user service revenue growth, supported by improving mobile aspects, 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. Vortex had another good quarter with strong after-driven end-user service revenue growth and good underlying EBITDA growth. Then let's look at Swedish consumers. Q4 was yet another quarter with solid volume growth in mobile post-bates, 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 RGU's. In fixed broadband, we saw stable RGU development in the quarter due to fewer campaigns and less discounts, whereas after-growth 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 after 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 post-bates, 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 DTG 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 corporate decommissioning has now approached 90% completion rate. Mobile net intake amounted to 3,000 RGUs in Q4, alongside continued ASPU 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 operations ended at 2%, driven by both B2C and B2B. Underlying EBITDAO 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 capacity sales of 15%. Let's continue with the Baltics on slide 10. The total number of Baltic mobile posted customers continued to increase by a quarter. Organic ASPU continued to grow at a healthy rate, largely driven by Lithuania and our -for-more strategy, price adjustments and -to-postpaid migration. And when looking at the Baltics financials, the ASPU growth combined with some volume growth in mobile postpaid led to 8% organic end-user service revenue growth for the Baltics as a whole, driven by Lithuania and Latvia. Underlying EBITDAO 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 EBITDAO, despite full year capacity sales of 10% due to ongoing 5G road-outs. 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 EBITDAO grew by 6% in SEC terms and close to 5% organically. The underlying EBITDAO 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 declined. 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 debt. And by year end, we had a debt 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 moved by around 90. 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 a 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 net formability related to our network modernization. Here we have made tangible progress in 2023, albeit 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 of 2.5 to three times. And with that, I hand over to Kjell to introduce the next phase of our strategy execution.

Yeah, thank you very much, Charlotte. And I'd like to use the opportunity to take a little bit longer perspective. As you may remember, I have been here for a little bit more than three years. And over these last three years, we have spent a lot of time working on integrating different parts of the business. Historically, of course, we consist of Teletoo, Komvik, Komhem, Boxer, and those with a long memory will remember that we all, so many years ago, bought the TTC operations in Sweden. All of these brands typically have their own stack and their own billing. And over the last two to three years, we've made a huge effort to consolidate these assets, these legacy platforms into two, one for consumer and one for B2B. And internally, we call that the legacy consolidation. The good thing now is that this spring, when we put these things together, we will start freeing up capacity to what we internally refer to as the development opportunity where we will be more focused on developing customer experience, new -to-market, digital channels. And all of these things lead to improvements in the way we interact with customers into improvements in our cost base. And of course, the focus on value is also substantial change that we have been through the last few years. Historically, quite a lot of focus on volume, now more on value. And you're starting to see it in the numbers. We're also starting to see it in the customer loyalty. So I feel that we are now at, we're turning the page on a new chapter for Tela2. And we can look into the strategy execution program on the next page. I would like to highlight, this is all about creating customer value. This is about creating great digital channels. We already do a lot of the customer interaction in convict digitally. We want to be doing more of that in the Tela2 brand. And we of course, want to help Stefan in running B2B with the best tools available. And that is a primary target for us going forward. Self-service is of course, an important part of the customer's interactions with us. We want to dedicate more time and effort to developing these solutions. And as we always say, we are well on the way with building a great 5G network, where we for regulatory reasons, basically have to replace everything. That we have in net for mobility. And that will be done by the end of this year. And next year, we will replace soon up with our own new network. And after that, we will be down to demand driven investments, which will be lower costs and lower capex. And then when we talk about strategy execution programs, they typically are labeled cost programs. I would like to emphasize that at Tela2 now, the SCP as we call it, is a value led program, which has cost savings as a consequence. But we're going to follow up these cost savings that we have identified meticulously over the next three years. And we're going to save those 600 million. And they will be saved in a fairly equal way over the years, actually maybe a bit more than a third in the first year. So this is all about reshaping customer journeys. It's about optimizing our go-to markets. And of course, as an effect, we're going to realize these cost savings that we have identified. Which leads us over to the guiding section, where we for 2024 uphold a similar growth level at three to 4%. We'll be growing one to 3% on EBITDA. And we expect the capex of sales to remain unchanged at 13 to 14%. This is a reflection of the heavy network investments and also intensified customer centric transformation, which comes with some upfront costs. For 2024, we can also say that we currently estimate an energy cost headwind around 90 million year over year, of which 35 million relates to the energy support received in 2023. So this is in the numbers. We expect a slower Q1 with roughly flattish organic underlying EBITDA year over year. This is due to factors as yearly indexations of optics items and the fact that we are in between two cost savings programs. Some of the facing of the expansion cost, of course, comes in due to good sales last year. However, we are executing front end loaded price increases, which should contribute meaningfully from the latter part of Q1 and even more, of course, throughout Q2. So expect a better Q2 than Q1. Our midterm outlook is unchanged for low to mid single digit organic end user revenue growth, mid single digit organic underlying EBITDA growth, as we will benefit from new levels of efficiency and value creation from the strategy execution program. In 2025, we expect 13 to 14% cap-bakes to sales, driven by the final stage of the major 5G expansion in Sweden, as we have to shut down the SUNAP 3G joint venture by the end of the year. The spectrum that is allocated to SUNAP will by that time be moved to net mobility. So we'd have to execute that change during 25 from a regulatory point of view. From 26, we expect and we are fully committed to cap-bakes to sales that comes down to a historical level of 10 to 12%, as our network will return to being completely demand driven. So with that, I'll hand it over to the operator for Q&A.

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 a question, please press star 1-1 again. To ensure everyone has the opportunity to ask a question today, please limit yourself just to one question. Please stand by, we'll compile the Q&A in a moment. We'll start at this moment. And now we're going to take our first question. And it comes from Andrew Lee from Goldman Sachs. Your line is open, please ask your question.

Hi, good morning everyone. I had a question just around the EBITDA growth compared to the end user service revenue growth. So I guess investors this morning were positively surprised by the end user service revenue growth. You're aiming for or guiding in 2024, but were negatively surprised, certainly relative to that, with the underlying EBITDA growth. Cheryl, you went through a couple of the headwinds to EBITDA just a couple of minutes ago. You mentioned energy cost headwinds of 90 million amongst other things and some yearly indexations of cost savings. But I wondered if you could break down the cost headwinds a bit more clearly in 2024, because it's obviously quite anomalous for a fixed cost telco to have such poor operational gearing. And then maybe if I could just ask a follow-up, we're just trying to understand how your midterm outlook of mid single digit EBITDA growth balances with that low EBITDA growth in 2024. Is your mid single digit midterm outlook what you hope to get to in the midterm, or do you still think you can average mid single digit growth in the medium term? Thank you.

Thank you, Andrew. Yeah, so we're clearly planning for moving to mid single digit later in the period, as we are guiding for. And obviously we see mid single digit coming in in Q4 2023. Now the task is of course to make sure that we do that throughout a full year, and without having this quarterly variations that we see. I think it's partly down to the model that we have in many other telcos with more for more, where you have some roll off, and then you start doing it again next year, that gives you a slower start to the year. We want to even out that thing. And of course we do still have the cost increases from inflation in the OPEC space coming in in the early part of this year. We see that that should abate over time. So it's just a transition into making sure that we can do pricing at the time that corresponds to other cost increases in the business. And of course we will be benefiting from the improvements we do in the program. The program is not only about saving costs in terms of internal costs, it's also about spending less money on the external retail and commissions. And we have moved more over to a subsidized model where we see more customer loyalty, or we have customers in binding, which gives us a chance to have longer customer relationships. So it's a quite fundamental retake on the model. Teletoo, the brand Teletoo, did not use, for example, -to-binding before. And there's something that we've actually spent some time to reintroduce from an IT perspective. We see very positive effects of it. We see the majority of our sales are in some sort of binding. And of course the base is increasingly becoming bound to us. And we see churn coming down. On the cost side, beyond that, we do have a program here that will lead to some reduced internal costs. That is something I'd like to maybe also speak a bit more about at a later point in time. There are internal processes that we should go through in a proper way before we communicate too much around it. But the plans are very clear and robust in terms of what we're gonna achieve.

Yeah, actually, can I just, well, just a quick follow-up. So you're talking about energy cost headwinds and then cost indexation for inflation. Given you're saying that you're gonna get a third of your 600 million savings in 2024, or a bit more, that cost inflation sounds like it's quite high. What exactly is going on there with your cost inflate, your OPEX inflation? How big is the OPEX inflation? Or what kind of is the absolute headwind you're anticipating? It sounds like it's gonna be high.

Andrew, I think it's an important qualification here. When I say we're gonna realize a third or more, then I talked about the exit run rate. So of course it would come gradually throughout the year in different parts of the business. So the full year effect, of course, will be less. But we will carry it with us into next year.

Thank you. And just on that inflation, so what exactly are these inflation headwinds you're assuming? It sounds like it's quite a high degree of inflation to get to that one, three percent. Well, if you

look at a couple of practical things, for example, when you adjust salaries, you have a carryover into next year. This year, the agreement with the unions in Sweden is for an increase of around 3.3 percent. So that comes on top when it's pure labor costs. And then of course, yet it's clear that some parts of the equipment that we have been buying, I'm not talking about network equipment, but other things that, I'm not talking about 5G equipment, but other things that are coming into our network have had price increases due to the currency that had significantly weakened and the general inflation. So that's what we are compensating for in the business. And we are well underway with that. We see that we are going to be able to do that as well. It just comes in some steps.

Okay, thank you, Jo.

Thank you. Now we're going to take our next question. Just give us a moment. And the next question comes from Oscar Ronquist from ABG Sundelkolle. Your line is open. Please ask your question.

Thank you. Good morning, everyone. And thanks for taking my questions. So just on the 2025 CAPEX outlook, you mentioned a 3G network closing. I assume that was already somewhat expected when you put out your previous CAPEX guidance this summer. So just wanted to check if you could elaborate on what has changed between then and now, which have caused a different outlook for 2025. And also if you could expand on a mix, please, if the higher 2025 CAPEX is purely on the mobile network investments. Thank you.

I think we just probably need to do, we should have done an even better job at communicating because I think we have been clear that in 2024, we are swapping everything in net for mobility. In 2025, we need to replace SUNOV because basically SUNOV as a company will have no spectrum from the 1st of January, 2026. But I do see and understand that people had put in an expectation of CAPEX coming down towards the end of 2025 and then we need to communicate better. But if you look at it in a grand scheme of things, it means that this job is done a little bit faster. It means that we can be more careful in our demand driven CAPEX in 26 and coming down to 10 to 12% is a very low number that you will not find almost anywhere else in Europe. So I think we're getting our CAPEX story completely and firmly into place within the guidance that we have delivered now. Even at the peak CAPEX, we are probably two to three percentage points lower than many of our competitors. But point taken, if people had the impression that there would be a lower CAPEX than what we've said now, then our communication should be better.

All right, thank you very much,

Hel. Thank you. Now we're gonna take our next question. And the question comes from Andreas Jelsson from Carnegie, your line is open. Please ask your question.

Yes, good morning. Just a question on prices, a

general question basically because 2023 was a year when the sector as such probably had to look into prices more than usual. What's the key learnings from 2023 and into the future when it comes to pricing? And also just a clarification on the cost program. Is that a net target or is it a gross target?

Thanks. Right, I'll take that one, Andreas. It's Hendrik here. Around pricing, I'll hand over to Charlotte on your second part of the question. On pricing, we have implemented in 23 very much in line with what we've been saying earlier in the last year around cost development and some of the offsets of that. And I think what you asked for the key learnings, I think the key learnings are that in terms of if you want to successfully implement pricing, which I guess last year we've done quite well and you see the full effect in our Q4 numbers, that the customer base is quite relevant and resilient in terms of accepting pricing as long as the perception of the service is good and it's fair. And in that sense, we have been spreading the pricing quite a bit more than we have done in the previous years where we had a very much specific more for more pricing strategy where we took certain cohorts of customers. So we've been spreading out the pricing more fairly and I think in that way, it turned out to be also more sticky. And the key thing from that is it has sort of been an intermediate step to basically what we're implementing in 2024 and going forward, which I think we've also talked about last year is that we're basically moving a little bit away from more for more to as more like an annual pricing cycle. And in the annual pricing cycle, we will address all of our customer basis that have certain cohorts. And in the way we do the pricing, we take an orientation towards inflation development. So we're not hard coding into inflation, but we're taking orientation to inflation development. And that's basically what we are implementing from 2024 going forward. This is what this is the main avenue we will also look at. And with that, we're also changing our front book. So you can see, for example, our front book has the prices have been changed are our unlimited entry offers snap has gone from 399 to 429, and our family offer from 199 to 219. And in line with that, basically we're pricing all of the all the customer base for those customers that are not in binding. And that's basically, you know, on pricing. Yes, and over the show. To show up.

Yes. So when it comes to the savings of the 600 million, as you remember, we had a cost saving program that we ended end of June of 1 billion. And this will be a similar program that will be managing in the same way. So we will follow up in the same way. So it will also at the previous program, the gross saving program. And I think it's also worth repeating that it also comes on the back of different initiatives that we see that we can do and in the business. So it's not a pure cost saving program, but also very much value led as Sheldt mentioned earlier.

Thanks a lot.

Thank you. Now we're going to take our next question. And the question comes line of Stefan Gaufin from DNB. Your line is open, please ask a question.

Yes, I have a couple of follow up questions. First on pricing again, but more relating to the Baltics. So the Baltics has been the driver of growth over the last couple of years. A lot of that has been due to pricing. Do you still see room to drive growth through pricing in these markets? Or do you see a tougher environment due to macro? Secondly, could you repeat that? I'll take one to

begin with Stefan. So the answer to that is that we're very happy of course, with the growth we've seen in the Baltics. I started off saying here that now the growth picture and the profitability picture of Teletoo is more balanced. We now see Sweden coming back with a stronger performance, which I think is great because it's better balance. The Baltics came out of some years ago from a relatively low ARCO level, prices have been increased. We have seen throughout 2023 that some of them have been almost in recession. Still we've seen a good development. And I've been saying on these calls for many quarters that we're very happy with the performance in the Baltics. But of course we cannot expect them to run double digit growth forever in terms of top line and EBITDA. But I do see growth for continued decent growth in the Baltics. Little bit different from market to market. Overall, yes.

Yes, okay. And then just a question on the energy situation. Can you repeat on what you said for 2024? I guess starting 2022 you had some 150 million in energy headwind and then in 2023 you had energy tailwind of 55 million. So what should we expect for 2024?

So I can actually take that. And you said that we did have a tailwind in 2023 of the 55 that you mentioned. And so our expectations for next year is a headwind of approximately 90. And then 35 of that was then related to the government support that we had in 2023.

We should expect a headwind in 2024? Yeah, that's what we said. Yeah, but can you explain why given the prices that we see in the market? Why should it be a headwind?

It's a combination of both volume and prices. And this is what we put in our budget. And I think it's divided equally between Sweden and the Baltics. That's what we see and what the calculations that we made from the budget.

Okay, thank you.

Thank you. Now we're gonna take our next question. Just give us a moment. And the question comes from Nik Lyle from Societe Generale. Your line is open, please ask your question.

Thank you. Morning everybody. It was a quick one, please. Firstly, Cheryl, you've mentioned the IT migration as of spring. Could you just remind us what that enables you to do? Is it just cost cutting and digitalization? Or do you think you'll be able to do a lot more in terms of bundling on certain brands as well? Will that change the way you can actually launch brands in the market? And then secondly, in the statement, you mentioned specifically in your spiel on Sweden that activity was higher in the fourth quarter. Could you just describe what you meant by that? And has that continued into the first quarter as well, please? Thank you.

Yeah, so like I tried to explain previously, we basically consist of a number of different legacy brands. Tele2, Comvic, Comhem, Boxer, TDC, with all of them with systems that some of them were old and some of them were reasonably good. But whenever we wanted to do product launches or we wanna upgrade or change things, we would have to work in multiple systems at the same time. And of course, it's very, very inefficient. And then of course, we have the world around us, the cybersecurity threats and all these things. So basically what we have done is a quite massive consolidation of IT systems. And what that gives us is the opportunity to be faster in terms of our development plans, because we don't have to replicate in two or three systems before we can launch, for example, an FMC product. So it gives us higher reliability, it's easier to operate and frees up some capacity for development for our -to-market, something that Henrik and Stefan definitely want so that they can be at the top of their game also going forward. And we've spent a lot of time on that the last two, three years to get that job done. And many telcos are not there at all and may not be there for many years. I think it's a very significant event and that's why I devoted some attention to it. The comment I made on the overflow from last year is basically that we have very good post-paid sales. And of course, when you work with external retail, you carry with you some of that, the commissions and these things in your books for some time for duration of the contract and these things. But we are happy to take that with us because it brings customers in and decent barcodes in the tele-tube brand. So it's a positive. Okay, thank you.

Thank you. Now we're going to take our next question. And the next question comes Lan of AJ Sony from JP Morgan. Your line is open, please ask your question.

Hi there, thanks for taking my question. So just, I wanted to ask about the 2024 capex guidance. So you obviously got a couple of buckets such as the mobile equipment replacement, your 5G rollout. So do you think 2024 ends up being towards the high end of your range? And just want to understand what risks do you see that might end up higher than the 14% guidance? For example, inflationary pressures or FX headwinds. It'd be good to just understand that a bit more. Thank you.

You mean the higher end of the 13 to the 14% range?

Yes, that's why I meant, yeah.

Well, I think variations between one percentage point, that is, you know, if you have a special winter or a special summer or something like that, that's kind of the 5G rollout in these things. So we will end up within that range. And I, but I cannot give you a decimal point where we would be within the range.

Excellent, but do you see any, what do you see the pressures are going to be? Being up towards the higher end of that range? For example, inflationary costs or FX, are those pressures you're seeing? Is there anything else that we should be aware of?

There are a couple of things here that is volume driven. Of course, how many base stations we swap, we need to swap all the base stations. So we have planned to do that. And then we will do limited, very limited rollout. So those are the volume parameters on the 5G. In terms of remote PHY upgrades, that is something that we largely can steer and throttle. This year, we will do more remote PHY than we ever did before 2023, but we will not be maxing the potential there. And that is a way of steering this. In other areas, if we have costs increases coming up, that will be more of an complex issue. And we have, we have planned for that. The capex guidance 13 to 14 is something that we will come in, we will come within there. The worst thing that could happen would be that we will be too slow and come below 13, because we really wanna get it done now with the regulatory rollouts.

Yeah, that makes sense.

Thanks very much.

Thank you. Now we're gonna take our next question. And it comes from Lan of CEHER from CT. If your line is open, please ask your question.

Hello, thank you very much for taking my questions. My question is really on the free cash flow. I think in your opening remark, you suggest that the net worth capital is going to be stable year on year. But I think in the past, you're talking about positive contributions. Just wondering why the change? And if possible, can you walk through, how should we think about equity free cash flow in the next two development for 2024? And maybe just a leading to that is that now you're seems to focus on paying 100% of your free cash flow into shareholder reviews shareholder remunerations. But now we're so leverage that 2.5 times and just want to understand your recent thinking about dividends going forward. Thank you.

I have to admit that I didn't quite understand said was something changed. I don't know what has changed.

The networking capital, I think in the past, the networking capital is supposed to be positive for 2023, 2024 and 2025. Just wondering why you're now expecting a flat development.

Yeah, I can start on that. I mean clearly we, if you look at our post-break business in Sweden, we increased our number of post-break subscribers by 80,000 and of course is linked to our binding and that's a very, very positive development. But it does bind some working capital. With respect to the balance sheet, my view on that is clear. Even with the capex that we planned for this year, all other things equal, excluding any other events that we are, you know, M&A or things like that, but operationally we expect to be at the lower end of that range also end of this year. So we are in a solid position, but we think it's prudent what we have done now to propose so that the board has proposed an increase in the framework that we have. Do you want to add something maybe on working capital?

I think that we, of course, we are continuing working on the working capital. That's one of the priorities, as I mentioned. But I think that we are, what we're saying is that we are seeing it, to expect to see it be more neutral for the year. And as you know, this is a small variation and it's quite difficult to foresee, but we are confident that we are keeping it neutral for the next year, or for this year. Thank you very much.

Thank you. Now we're going to take our next question. Maurice Patrick from Barclays. Your line is open. Please ask your question.

Yeah, good morning and thank you guys for the presentation and hosting the Q&A. From my side, it's a fairly basic question. Sorry for it. But in terms of the number of sites you have in Sweden or radio sites you have in Sweden, you obviously have sites with Telenor on a JV, also inside Sunab with its own sites. But I'm curious to understand a bit around as Sunab has turned off, you seem to make reference to migrating frequencies to the Telenor joint venture. Do you think you'll need to roll out more physical sites to replace the Sunab ones, or is it more a question of just migrating more from one network to the other one? I'm just curious to understand that need for more sites, whether it's coverage, whether it's capacity, densification, whether it's more around migrating frequencies would be very helpful. Thank you very much.

Yes. So currently, the spectrum that Sunab operates on is available until the end of 2025. There was an auction in September last year, I think it was, where that spectrum was re-auctioned and that will then come into place 1st of January 2026. NetFormability bought back that spectrum, or part of that spectrum, in that auction and will have to operate those frequency bands as of the 1st of January 2026. Sunab as an entity will of course then not be delivering services in Sweden. And the coverage that Sunab has today will have to be replaced by NetFormability. In itself, this actually gives an opportunity to optimize the network because there will be one -to-end network planning. And if you go back to our capital market, say in 2021, Jorgers outlined how the initial 4G, 5G network, or the initial network that we built after Sunab was closed down, will actually have a few fewer base stations than the combined NetFormability and Sunab because we can put this all together. But yes, in 2025, the rollout we're going to do is to make sure that we cover those coverage holes that otherwise would have been when Sunab is shut off at the end of 2025.

OK, so there should be an expectation you will actually roll out brand new sites on new towers and locations in 2025?

Yes, in 2025 we'll do that because of course Sunab is a 3G network and that's not going to be very future-proof. So clearly we need to upgrade also the coverage and the technology for the coverage that Sunab has given us. So that is going to be done with new networks. OK, thanks so much indeed. Some of it overlaps but not everywhere. OK.

Thank you. Now we're going to take our next question. And the next question comes from Frederick Liesel from Handelsbanken. Your line is open, please ask your question.

Thank you, good morning. Thank you for taking my question as well, a detailed one. I was curious to learn more about the legislation on registering prepaid numbers in 2023. How far into that are you? How much of your base of prepaid have actually registered? And is there sort of a deadline for when this has to be completed or something like that would be interesting to hear. Thank you. I can take

that one, yeah. So Frederick, on prepaid the legislation basically went into effect very much early in 2023. And you know from, I remember either February or March, you know all new customers and existing customers that wanted to top up had to be registered. So basically the full base of prepaid customers is registered as we speak today. And you know on that process we've done a lot around digitalization. So a lot of the talk about how we deal with customers all fully digitalized and it's a very sort of easy customer journey. And of course what you're seeing basically in the numbers is you know on a year on year comparison a bit of a more difficult comparison. But as we go into this year it will sort of be compared to a registered base. More up on Apple.

Okay, perfect. Thank you.

Thank you. Now we're going to take our next question. Just give us a moment. And the next question, Councilman of Kevel Kiroya from Deutsche Bank. Your line is open. Please ask your question.

Thank you for taking the question. Q4, obviously a meaningful improvement in Swedish Huber dial growth to 3%. Do you see the Huber dial growth as sustainable for the full year 2024 for Sweden? And can you provide some comment on how we should think about B2B in 2024? Obviously it's been very strong in 2023. Thank you.

Starting with B2B.

Alright, Kevel. Stefan here. Thanks for your question on B2B. I would say that looking at 2022 and 2023 we had as you said strong performance overall. Coming from a couple of years of decline. Going into 2024 I would say that we expect similar developments that we've seen for the full year. Then it can vary among the quarters. Dependent on one of that we had in Q1 last year. We had a one off on fixed revenues. So the comps versus Q1 will be a little softer or harder. But overall you can expect a similar development that you see in 2023. Then the unknown is a little bit where the macroeconomics are going. And the cost pressure on customers etc. And how much they can invest. And I would say that is sort of the unknown for us. Let's see how that plays out. And I think the beginning of the year will be really significant for the full year. Hope that answers your question.

Yeah, and on the timing I mean we already touched upon that I think to some extent. In terms of the timing of the annual price adjustments. In terms of when all things are coming in. I think we actually touched on how that plays out throughout the quarters. Maybe just to add

on Joe. So as I was pointing out we do move to another, evolving our pricing strategy. Where with more for more pricing you will typically see a more back-ended coming to the full materiality. Like we see in Q4. You will probably see this coming a little bit more front-loaded as you were alluding to. For the full effect. Yes?

Thank you Kavala.

Sorry, just on that I was trying to work out whether Q4 we saw Sweden even though going 3% Is that kind of for the full year 2024? Would we also see this sustainable? I get that the timing effects around the price rises.

I don't think we are going into detailed guidance on the individual countries. We have never done that before. So our guidance is for the whole group. I think we will stay there. Okay, that's clear. Thank you.

Thank you. Now we are going to take our next question. And the question comes from the line of Zaheer Ramcharan from Redburn Atlantic. Your line is open. Please ask your question.

Hi, good morning everyone. Thank you very much for taking the questions. I just had a question on the phasing of the restructuring costs. I appreciate the colour on the exit rate for this year on the savings. But is there any detail on how those 600 million of restructuring costs phase between now and 2026? And then secondly, just quickly on the lease payments this quarter. Unusually I noticed they fell about 8%. They have been growing -6% in the previous two quarters. Is that just phasing and timing or is there something more structural change there? Thanks.

Well, when it comes to the phasing of this restructuring costs, it's nothing that we have guided on. But I think that we expect it to be quite evenly spread for the time being anyway. And then you said something about leasing payments. Phasing of the payments?

Yeah.

Not sure about that.

So while we're looking into that, you should expect that we will... Yeah,

it's probably just phasing, I would say. Nothing else.

Okay, great. Thank you very much.

Thank you. Now we're going to take our next question. And the question comes from Usman Qazi from Berenbeck. Your line is open. Please ask your question.

Hi, thank you very much for the opportunity. I just had a question on the working capital commentary around it being neutral. I just wanted to understand if this is favoritism or something else. Because obviously I can understand that growing post-paid volume on handset financing absorbs working capital, but you can offset that with factoring receivables as well. So in this assumption of flat, are you assuming that you do any factoring? Or could they be upset if you go about it with true factoring of receivables? Thank you.

We do factoring, but there is a delay in terms of the coming. You have to send them the first invoice for the first month. And then only after that can you go into the factoring. So clearly we are using factoring for our handsets. Do you want to add something?

Is it that in 2024 there's a bit of a lag at factoring what we pick up and therefore we should expect something positive in 2025? Or is it that factoring is actually allowing you to achieve a neutral working capital?

I mean the factoring is according to the sales. And we had a little bit of a higher sales in Q4. So that's why we might see some of that increasing in the first quarter as these customers are then switching on their subscriptions. But I think that will be phased out by other customers. So we don't see any major impacts of that. And as I also mentioned previously, we are always working on our working capital or cash flow on all different parameters. We are still guiding on that.

Thank you, Ismail. Now we're going to take our next question. And the question comes to the line of Victor Högberg from Ganske Bank. Your line is open. Please ask your question.

Good morning. So we have to follow up on the pricing and your ambitions for the Baltics for the year. Sweden, we've already seen some hikes. What should we call it? The index linking strategy. Will that roll out over every market? Or any details you could give us on that would be appreciated. Thank you.

Actually, the Baltics in general, they do a little bit different from country to country. But in general, they have a very well functioning system around this. Especially when they have customers in contracts. They have a methodology for approaching them at certain intervals of the customer relationship and then offering them renewal handsets and different ways of re-establishing. So that happens more throughout the year. It's not a one time event only that happens in that space. And I think ultimately we'll probably do more of that also in the Swedish market a little bit down the road.

Thank you. Now we're going to take our last question for today. Just give us a moment. And the question comes from Adam Fox-Rumley from HSBC. Your line is open. Please ask a question.

Thank you very much. I had a quick one on the balance sheet please. You've been at the low end of your guidance range for a while. Have you got any thoughts on does that guidance range need to be adjusted? Is there any way that it could be adjusted? Does the board need to think about anything there? Or would you recommend the board change it to TOLO? Are you still happy with it?

Thanks. I think it has served us well to have a strong balance sheet. During the turmoil we've seen the last couple of years. I think the board of course has every right and opportunity to think through what they think is the right approach for the future. But I don't want to signal any kind of change at this point of time. I think it's a fair question. But I think it would have been a bit risky if we had been laying much higher up in the range two years ago than we did. Now we've been able to navigate through the turmoil with the ability to make the right decisions for the future not having to optimize to make sure that we can come through the next couple of quarters without getting into issues with our leverage.

Thank you.

Well, at that point operator I think we say thank you to everyone for taking the time to have this discussion with us this morning. We're coming out of 23 with a strong TELO2 that has done a lot of the preparations we need to do on strengthening our platforms. We are well underway on the 5G. We have visibility and clarity on when we will return to a historically normal CAPEX level again with our plans in place. We see a balanced TELO2 with a stronger performance overall in Sweden. We see a strong post-paid momentum and broadband momentum in B2C in Sweden. Our balance sheet is of course at the lower end. We are increasing our dividend again. Overall we still have lots of work to do because we are in position to make the right decisions for the future. With that I'd like to just thank you for your attention. Thank you for your questions and hope you will have a nice day.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.