Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the Tele2 Q3 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 one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, press star one and one 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, Sheryl Jansson, President and Group CEO. Please go ahead.

Thank you very much, operator, and good morning, everyone. Thank you for taking the time to join us, and welcome to this report call for the third quarter of 24. With me here in Kista today, I have Sheryl Jansson, our Group CFO, Stefan Trampus, our head of B2B, and Henrik de Groot, our chief commercial officer. And they will soon present an update on the Swedish consumer business and B2B, which is why we have extended today's call up to 20 minutes. Let's move to page two. I'm glad to report another solid quarter with goods and user service revenue growth of 3%, marking the 14th consecutive quarter of growth. and with all business lines growing, whereas underlying EBITDA grew by 2%. We continue to generate solid cash flow, leading to a financial leverage of 2.3 times, which is below our target range. In September, Seller 2 announced the first Disney Plus bundle offering in Sweden. New DTV customers will have this award-winning entertainment included from day one, whereas it will be made available to existing customers over time. Once again, we were ranked as one of Sweden's most gender-equal companies by Albright. And earlier this year, we were ranked as Sweden's second most gender-equal company by Exoliv. And as you all know, I will be leaving the company after having had the privilege of leading T2 for the past four years. Together, we have achieved a great deal over these years. We have returned to growth in all major areas. We delivered strong cash flows. And we have taken our sustainability performance to new highs. And of course, all based on the Tele2 challenger culture. Last week, our board appointed Jean-Marc Arion as Tele2's new CEO. Jean-Marc is currently the CEO of Polish telecom operator Play, and he also serves on Tele2's board. So let's move to page three and look at the quarter. End-user service revenue grew by 3% organically, supported by growth across operations. Organic underlying EBITDA grew by 2%, mainly driven by end-user service revenue growth. Excluding the energy support in Sweden last year, growth would have been 3%, hence in line with the end-user service revenue growth. We generated 1.1 billion of equity-free cash flow in a quarter, leading to a low 2.3 times leverage ahead of the dividend distribution last year. In Sweden B2C, End-user service revenue grew by 1%, led by fixed broadband and mobile postbates, partly offset by elevated legacy headwinds. In addition, we have previously flagged for tougher comps in the second half, as we executed price adjustments earlier this year than the previous year. Sweden B2B grew end-user service revenue by 2%, hence a strong achievement given the prevailing macro headwinds out there. We continue to look forward to improving performance within a few quarters. The Baltics grew end-user service revenue by 7% with growth in all markets. Underlying EBITDA grew almost as fast at 6%. And in Q3, we saw sequential revenue growth acceleration in Latvia and Estonia driven by pricing. And then let's move to Swedish B2C. We added 20,000 post-bid RGU's in the quarter with positive numbers from both Tele2 and Compage. After it grew by 1% year over year, which is obviously lower than the previous couple of quarters, the main difference is tougher comparable due to early pricing this year, whereas it was later last year. Fixed broadband returned a positive net intake with 4,000 RGU's in the third quarter, driven by both single-play and FMC. ASPU grew by a strong 8%, mostly due to price adjustments. Digital TV, cable, and fiber added 4,000 RGUs in the quarter, partly supported by the Disney Plus launch towards the end of the quarter. The ASPU growth came from a combination of pricing and the cleanup of RGUs in Q1. Moving on to slide six. Mobile end-user service revenue grew by 2%. driven by 3% in postpaid, partly offset by continued decline in prepaid. Fixed broadband grew end-user service revenue by 7% due to the strong aspect. End-user service revenue for DTV declined by 4%, driven by an increasing decline rate in our legacy DTT business due to the ongoing migration, while cable and fiber remained largely stable. And then let's go to B2B, slide 7. While Swedish companies have continued to be affected by economic headwinds, we look forward to gradual improvement over the next year. Given the circumstances, we continue to perform well, with a 2% end-user service revenue growth in the quarter. Mobile grew by 4%, driven by our IoT business, RGU-based, and Aspen. Our solutions business grew by 2%, where our fixed continued to stabilize following the closure of the copper business in the second quarter. And then we will move to slide eight for a view of Sweden as a whole. End-user service revenue growth for the total Swedish operations ended at 2%. Underlying EBITDA growth was 1% driven by the end-user service revenue growth, partly offset by the energy headwind from the 25 million support we received last year. Adjusted for that, EBITDA growth would have been 2%. The cash conversion of 58% is reflecting 15% capex to sales in Sweden during the last 12 months. And then let's move to the Baltics. The number of Baltic mobile postpaid customers continue to increase, driven by Lithuania and Latvia. Blended organic Aspil increased by 3%, with growth in all markets. This is due to the more-for-more strategy, continued prepaid-to-postpaid migration, and, not least, price adjustments. which have supported sequential ASPU upticks in Latvia and Estonia in this quarter. And then looking at Baltic Financials, slide 11. The ASPU growth combined with volume growth in all markets led to 7% organic end-user service revenue growth for the Baltics as a whole, and with sequential improvement in Latvia and Estonia. Underlying EBITDA grew by 6%, driven by 7% in both Latvia and Lithuania. Cash conversion remains strong at 73% during the last 12 months, reflecting 10% capital sales due to ongoing 5G rollouts. And with that, I hand it over to Charlotte, who will take us through the financial overview.

Thank you, Kjell. And good morning, everyone. So now we're on the page 13. First, a few comments on the group P&L. In Q3, both total revenue and end-user service revenue grew by 3% organically, supported by growth across operations. Underlying EBITDA grew by 2%, both in sector and organically. And underlying EBITDA grew by 2% organically, driven by end-user service revenue growth and savings from the strategy execution program, partly offset by energy headwinds. In Q3, we had a 17 million headwind from energy, mainly explained by the 25 million of electricity support we received last year. As you can see on the slide, DNA declined by around 80 million year on year, which is due to reduced regular depreciation and because the surplus value of the TDC acquisition has been fully amortized. Then our income taxes increased by around 50 million year on year, mainly due to a Pillar 2 top-up tax, relating to Lithuania. For those who are not familiar with Pillar 2, this top-up ensures that we fulfill our obligation to have an effective tax rate of at least 15% in every country. By Q3, we had a debt mix of 59% fixed rates and 41% floating rates. 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. So let's move to the cash flow on slide 14. CapEx remained high also in Q3 due to continued intense network investments and cash CapEx increased due to timing of payments. Changes in working capital were negative in Q3, mainly impacted by a decrease in liabilities following a temporary increase in the previous quarter. Our ambition to keep working capital cash flow neutral in 2024 remains unchanged. Taxes paid increased mainly as this quarter included approximately 130 million SEK of withholding tax payment, while the corresponding payment last year was made in the second quarter. All in all, our equity-free cash flow for Q3 ended at 1.1 billion hence around 800 million lower than last year's level, largely due to the aforementioned reasons. Over the last 12 months, we have generated 4.1 billion of equity-free cash flow, corresponding to 5.9 krona per share. So let's move to slide 15 for our capital structure. By Q3, economic net debt amounted to 24.6 billion, some 1.1 billion below the level year end, as the cash generation exceeded the first tranche of the dividend. Our leverage ended at 2.3 times, which is below our target range of 2.5 to 3 times, ahead of the second dividend tranche, which was paid last week. Adjusted for that, pro forma leverage would have been 2.55 times. And with that, I hand over to Shell for an update on our strategy execution.