Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the Tele2 Key2 Interim Report 2024 webcast and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Cheryl Johnson, President and Group CEO. Please go ahead, sir.

Thank you very much, Sharon, and good morning, everyone. Welcome to this Tele2 report call for the second quarter of 24. With me here in Kista, I have the usual suspects, Charlotte Hansson, our Group CFO, Henrik de Kroot, our Chief Commercial Officer, and Stefan Trampus, who runs B2B. So let's then turn to slide two for the highlights. I would say I'm pleased that our good performance in the beginning of the year has continued in the second quarter. We grew end-user service revenue by 4% in the quarter, marking 13 consecutive quarters of organic top-line growth. And underlying EBITDA grew by 3%, supported by earlier price adjustments in Sweden B2C. We also continued to deliver a solid cash flow that kept our financial leverage below our target range at 2.44 times. Our strategy execution reached an important milestone in the quarter as we finally migrated Comvict into our modern mass market IT environment. By that, we have transformed our previously fragmented environment into only two IT stacks in Sweden. And I'm moving full speed ahead on our digitalization journey towards superior customer experience. Last but not least, we were again recognized for our hard sustainability work as Time Magazine named Tele2 Sweden's most sustainable company and 37th globally, while Financial Times named Tele2 Sweden's climate leader and the second in Europe of all industries. So please move to page three. End-user service revenue grew by 4% organically, driven by continued solid performance in Sweden B2C by the Baltics. Organic underlying EBITDA grew by 3%, driven by end-user service revenue growth, as EBITDA growth improved sequentially in Sweden. Q2 was another solid quarter in terms of equity-free cash flow, and during the first half year, we fully covered the first dividend tranche. In Sweden B2C, end-user service revenue grew by a healthy 4%, with continued strong growth in both fixed broadband and mobile postbates. However, as we executed price adjustments earlier this year than the previous, we will meet some tougher outcomes in the second half. Sweden B2B grew end-user service revenue by 2%, hence slower than previously, yet fine given the slow overall economy with record number of bankruptcies. However, we look forward to improving performance, hopefully within a few quarters. The Baltics grew end-user service revenue by 6%, and underlying EBITDA by 4%. While the second quarter was largely driven by Lithuania, we estimated more broad-based performance in the second half due to ongoing pricing activities. And then let's move to Swedish B2C on slide five. Mobile postpaid ASPU increased by 4%, mainly driven by pricing. We added 6,000 postpaid RGUs in the quarter with positive numbers from both Tele2 and Combi. In fixed broadband, Aspio grew by a strong 9%, mostly due to price adjustments. The number of RGUs declined by 3,000 in the quarter driven by single-play, while the FMC base continued to grow. Digital TV, cable, and fiber saw some RGU net ads in the quarter. The Aspio growth came from a combination of pricing and the cleanup of RGUs that we did in Q1. Move slide six. Mobile end-user service revenue grew by 5%, driven by 7% in post-paid, partly offset by continued decline in prepaid, albeit less than previous quarters, as the SIM registration requirement has now fully annualized. Fixed broadband once again grew end-user service revenue by an impressive 9%, thanks to the strong Aspen. End-user service revenue for digital TV declined by a marginal 1% due to continued decline in the legacy DTT business, whereas cable and fiber grew slightly. And then let's move to B2B. Economic headwinds have continued to impact Swedish companies, which in turn also has affected us as customers scale down or delay some purchases. On this basis, we consider our performance with 2% end-user service revenue growth to be good. Mobile continues to be the growth driver with 6% end-user service growth. This time, mainly driven by our fast-growing IoT business. Mobile PostBait saw solid RGU NetApp, partly due to a new public sector customer, alongside continued Asda growth. Our solutions business was stable, while FIX continues to stabilize as we have now finalized the closure of the copper business. Then let's move to the overview of Sweden. End-user service revenue growth for the total Swedish operation remained at 5% driven by B2C. Underlying EBITDA growth increased to 3% driven by the end-user service revenue growth. The cash conversion of 57% is reflecting 15% CapEx sales in Sweden during the last 12 months. And then let's move to Baltics. The number of Baltic mobile postage customers continued to increase in all markets during the quarter. Blended organic ASPU grew by 3%, driven by Lithuania's 7% due to the more-for-more strategy, price adjustments, and prepaid to postal migration. And then let's look at Baltic's financials. ASPU growth continued with some volume growth in mobile postpaid, led to 6% organic end-user service revenue growth for the Baltics as a whole. Whereas underlying EBITDA growth grew by 4%, driven by Lithuania. As indicated in my CEO letter, we see Latvia getting back to growth following introduction of price adjustments during second quarter, after having been in between pricing cycles in the first half of the year. Cash conversion remains strong at 74% during the last 12 months, reflecting a 10% capex to sales ratio due to ongoing 5G rollouts. With that, I hand over to Charlotte, who will go through the financial overview.

Thank you, Cheryl, and good morning, everyone. Please turn to page 13. So first, a few comments on the group P&L. In Q2, total revenue grew by 1% organically, whereas end-user service revenue grew by 4% organically. The deviation is mainly explained by lower equipment revenue. Underlying EBITDA grew by 3%, both in SEC terms and organically. And underlying EBITDA grew by 3% organically, driven mainly by the solid end-user service revenue growth, exceeding significant cost inflation and continued margin pressure from product exchanges. In Q2, we had an 8 million headwind from energy year-on-year, mainly explained by the 10 million of electricity support received last year. And as a reminder, we also received 25 million of electricity support in Q3 last year. As you can see on the slide, DNA declined by around 85 million year-on-year, most of which because the surplus value of the TDC acquisition has been fully amortized. Then our net financial items increased by around 115 million year-on-year, mainly due to a financial gain related to bond repurchase last year, and partly due to high financing costs for outstanding debt. By Q2, we had a debt mix of 59% fixed rates and 41% floating rates. And with that follows that for every one percentage point rate change in underlying market rates, our annualized financial expenses on loans with floating rates moved by around 110 million. Following successful refinancing through bonds and a loan from the European Investment Bank during the first half of the year, Our next maturity is in June 2025. And now let's move to the cash flows on slide 14. CapEx remained high also in Q2 due to continued intense network investments. And changes in working capital were positive in Q2, mainly impacted by a temporary increase in liabilities. However, despite the positive development in Q2, our ambition to keep working capital cash flow neutral in 2024 remains unchanged. Taxes paid declined year on year, as last year included some 125 million of withholding tax payments in Latvia, while the corresponding payment this year is expected in Q3. All in all, our equity-free cash flow for Q2 ended at 1.2 billion, and in line with last year's level. Over the last 12 months, we have generated 4.9 billion of equity-free cash flow, corresponding to 7.1 krona per share, and consequently, slightly above our current dividend level. So let's move to slide 15 for our capital structure. By Q2, economic net debt amounted to 25.7 billion, largely in line with year end, as the first charge of our dividend was fully covered by our strong cash flow. Our leverage ended at 2.4 times, which is below our target range of 2.5 to 3 times, and reflects our strong balance sheet. And with that, I hand over to Shell for an update on our strategy execution.