Tele2 AB (publ)

b2c.com for the fourth quarter and full year 2024. With me here in Chista today, I have Charlotte Hanson, our Group CFO, Henrik de Groot, our B2C Chief Commercial Officer, and Stefan Trampus, who heads our B2B business in Sweden. We have extended this call with up to 30 minutes, as this is my first results call with Teletubbies. and as we have some important development to share after the usual review of the quarterly and full year results. Please turn to slide two for some highlights. In a nutshell, our Q4 results, and that as expected, given suffer comes in Sweden consumer due to the phasing of pricing and the finalization for Voxel TV integration away from digital terrestrial technology, a slight growth improvement in Sweden business and continued solid growth performance from our Baltic operations. For the full year, we grew end-user service revenue by 3% and underlying EBITDA by 2%, whereas CapEx 2 sales ended just below 14%. Consequently, we delivered on all guidance parameters provided at the beginning of the year. On the other hand, We generated $4.4 billion of equity-free cash flow in 2024, which is 7% less than in 2023. Our guiding principle is that the ordinary dividend must be covered by the equity-free cash flow generation. As funding costs remain expensive, we must remain vigilant on the balance sheet. In line with Teletubbies' financial policy, the Board proposes to distribute 100% of the 2024 equity free cash flow through an ordinary dividend of 6.35 crowns per share to be paid in two tranches in May and in October. Looking forward, we see 2025 as a transition and a transformation year. We have engaged into a deep transformation to improve Teletubbies' profitability through stricter prioritization, reinforced cost discipline, in a simplified organization and operating model, which also enables a solid and ambitious 2025 guidance. Sadly, this transformation will also materialize in a reduction of around 15% of our total workforce, depending on unions' negotiations. We expect the acceleration of our underlying EBITDA growth will translate into a higher equity fricassure in 2025. We will talk more about this in a few minutes. In the meantime, please move to page three for a summary of our first quarter. In Q4, our end-user service revenue grew by 2% organically, driven by the Baltics and Sweden business, whereas organic and underlying EBITDA grew by 1%, largely driven by end-user service revenue in the Baltics. We generated 800 million of equity free cash flow in the quarter and 4.4 billion in 2024, leading to a 2.5% times leverage following the payout of the second dividend tranche in October. In Sweden consumer, end-user service revenue remained globally stable, as the decline in Boxer TV due to the migration was offset by solid growth in connectivity, with strong NetApps in mobile postpaid and continued strong ASPU growth in fixed broadband. In Sweden business, end-user service revenue grew by 3%, marking a slight improvement as compared to the previous two quarters, Mobile grew by 4%, and fixed continued to stabilize. The Baltics grew end-user service revenue by 7%, with growth in all markets. And Berline Big Dell grew almost as fast at 6%, and we are particularly proud of our Estonian team, which successfully accelerated top-line growth and turned into a BDA growth this quarter. Let's move to Swedish consumer on slide 5. Mobile end-user service revenue grew by 1%, driven by 2% in post-paid, partly offset by decline in prepaid. Fixed broadband grew end-user service revenue by 6%, due to a strong house pool. End-user service revenue for digital TV declined by 6%, driven by the final phase of the migration of box-show TV, away from legacy digital terrestrial TV. Meanwhile, our 32 DTV business remains largely stable. The upper part of the right-hand chart illustrates how we gradually have migrated BoxRTV DTV revenue from terrestrial to cable and IP-based. As DTV was shut down from 1st of January this year, there will be no terrestrial revenue anymore as from Q1 2025. For full year 2025, We anticipate box show revenue roughly 200 million below 2024, with neutral impact on EBDA. In the short term, the line of business would have become cash negative due to the continuous decline of the customer base. In the long run, immigration to more flexible and richer TV solutions will bring positive effects in both customer experience and profitability. Let's look at consumer KPIs on slide six. We had a strong 50,000 postpaid RGOs in the quarter, driven by both brands, including mobile broadband, which has benefited from the Boxer migration. ASPU declined by 1% year-on-year, driven by increasing IFRS 15 fair value adjustments due to the increase of the customer base with handset installment plans, excluding the fair value effect. Grew by 1%, impacted by RGU growth in family and mobile broadband, and less favorable comparison with Q4 2023. Fixed broadband added 4,000 RGUs in Q4, driven by both fixed mobile conversion and single-play. SPU grew by a strong 8%, mostly due to last-year price adjustments. Our 22 DTV cable and fiber business added 7,000 RGUs in the quarter, supported by the Disney Plus Lounge, and migration from Boxer. The lower chart shows the proportion of Boxer TV customers that have migrated away from terrestrial. By year end, only 7% of the migrated base had not activated their Wi-Fi-based TV hub yet. QM 2025 will be the first quarter without terrestrial distribution. Now that this business is gone, we intend to merge the reporting of our two business lines from Q1. Please move to slide 7 for Swedish business. While the Swedish business sector continues to be affected by economic headwinds, we remain optimistic about gradual improvement over the year. In Q4, Sweden's business reported 3% end-user service revenue growth, reflecting a slight improvement compared to the previous couple of quarters. Mobile grew by 4%, driven by our IoT business and by solid RGU growth, mainly in SMEs and public. Mobile ASPU was impacted by this year-on-year evolution in our customer mix. Our solutions business grew by 3%, whereas fixed continued to stabilize following the closure of the copper business in Q2. Please move to slide 8 for Sweden's financials. End-user service revenue grew by 1% in Q4, driven by business, whereas consumer remained flattish due to phasing of pricing and box remuneration effects. And underlying EBITDA remained stable, largely due to the slow end-user service revenue growth. The cash conversion of 58% is reflecting 15% capex to sale in Sweden, during the last 12 months. Let's move to the Baltic financials on slide 10. Total end-user service revenue continued to grow at a healthy 7% in Q4 in the Baltics, with solid performance across markets, and with Estonia accelerating following successful price adjustment during Q4. And the line EBITDA grew by 6%, driven by end-user service revenue growth, and with all markets around mid-single-digit growth rates. Following several quarters of EBITDA decline, Estonia finally returned to growth in Q4. Cash conversion remained strong at 73% during the last 12 months, reflecting 10% capex to sales due to ongoing 5G rollouts. Let's move to slide 11 for EBITDA. Baltic operations. The number of Baltic mobile post-paid customers continued to increase slightly, this time driven by positive net ads in Latvia. Lithuania was burdened by a cleanup of 16,000 post-paid ad use. Blended organic ASPU increased by 4%, with growth in all markets with Estonia at 9% and Latvia at 6%. This is due to price adjustment, the more formal strategy, and continued prepaid to postpone migration. With that, I hand over to Charlotte, who will go through the financial overview.

Thank you, Jean-Marc, and good morning, everyone. It's time to page 13. So first a few comments on the group P&L for the fourth quarter. Total revenue grew by 1% organically, whereas end-user service revenue grew by 2% organically, driven by the Bostex and Sweden business. Underlying EBITDA grew by 2%, both in SEC terms and organically, and underlying EBITDA grew by 1% organically, mainly driven by end-user service revenue growth. In Q4, we have a $6 million headwind from energy year-on-year, leading to a full-year headwind of $42 million, mainly explained by the $35 million of electricity support in 2023. Then a few comments regarding full-year P&L items this week. with significant changes, which are highlighted on this slide. Items affecting comparability increased by around 125 million year-on-year, and was mainly driven by restructuring costs related to the statutory execution program, and more specifically redundancy costs. DNA declined by around 205 million year-on-year, mainly because the surplus value of the TDC acquisition has been fully amortized since Q4 2023. Net financial items increased by $180 million year-on-year, partly due to higher financial costs for outstanding debt, and partly due to a $77 million other financial gain related to bond repurchase in Q2 2023. By Q4, we had a debt mix of 60% fixed rates and 40% floating rates. Then our income taxes increased by around $70 million year-on-year, partly due to a Pillar 2 top-up tax related to Lithuania. So let's move to the cash flow on slide 14. Let's focus on the highlighted full-year cash flow items. Motorization of lease liabilities increased by $190 million, mainly due to our network expansion, as well as a $90 million reclassification to working capital in Q4 2024. CapEx paid decreased by around 80 million due to a spectrum payment in Sweden of around 370 million in Q4 2023, partly offset by higher network investments. Net financial items paid increased by 205 million due to timing of coupon payments following previous bond refinancing and higher interest rates. Taxes paid increased by around 155 million, mainly due to timing of payments, with tax refunds of around 195 million in 2023, as compared to around 95 million in 2024. All in all, our equity-free cash flow for full-year 2024 ended at 4.4 billion, corresponding to 6.3 kroner per share and some 7% below the level in 2023. Let's move to slide 15 for our capital structure. By year-end, economic net debt amounted to $26.2 billion, some $0.6 billion above for year 2023, as the payout of the ordinary dividend exceeded the cash generated in the business. Our leverage ended at 2.5 times, which is in the lower end of our target range of 2.5 to 3 times. Let's move to slide 16. So we conclude 2024 by noting that we have delivered on all three guidance parameters we provided at the beginning of the year. In this context, we should also mention our Baltic colleagues, which once again have contributed substantially to our group performance. And with that, I hand over to Sean Mark for some comments about our operational milestones in 2024 and our plans ahead.

Thank you, Charlotte. Considering the decrease of 7% of equity-free cash flow in 2024, the mixed outcome of Q4 Swedish results and the transformation ahead, and in line with Teletubbies' financial policy, the Board proposes to distribute 100% of our 4.4 billion crowns equity-free cash flow to a more than rate dividend of 6.35 crowns per share. It is now time to look forward and say a few words about how we have started transforming Tele2 to make it a more agile and stronger company. Please turn to slide 70. Tele2 delivered an impressive migration roadmap in 2024, paving the way for a deeper transformation. We finalized the swap of our 5G network. On TV side, we completed the phase-out of our legacy Taivo platform, and the migration of BoxRTV customers. We accelerated the reduction of IT stacks and delivered several critical digital enablers. And in the meantime, we continued expanding our fixed broadband footprint. Please turn to slide 18. Despite strong competition in macroeconomic situation, we see a growth potential ahead across all segments supported by mobile energy growth in Sweden and in the Baltics in H2 2024. On Sweden consumer, the growth will continue being driven by the attractiveness of our offers. That will more than offset the box or top line impact. On Sweden business, the growth will be driven by IoT, SMEs, and AEs, despite the economic context. Already before the finalization of the 5G rollout, Tele2 has the best 5G availability in Sweden, according to OpenSignal, supporting customer experience and loyalty. And in the Baltics, the solid growth and excellent cash conversion will continue in 2025, driven by number one and number two positions in Lithuania and Latvia and the turnaround in Estonia. These perspectives give us confidence in our capacity to grow our top line, continuing on our current pricing policy. We therefore have no need, no intention to trigger a new price war in Sweden. Please turn to slide 19. Saying that, our main priority is about to improve the profitability of our business, which we believe could be higher. We see two areas of improvement. First, Teletubbies' legacy and the successive integration of Comhan, TDC, and other companies have created a lot of complexity in our organization. Second, some geographies, Estonia, for instance, and some of our Swedish business activities show a lower profitability than others. We have therefore introduced a radical transformation to improve our efficiency with two priorities in mind, simplify our operating model and our organization, and rejuvenate some parts of 32's smart change and cost-saving culture. Our deep transformation plan includes an extensive cost optimization already in motion with the systematic challenge of all our expenses and the renegotiation of all our contracts. It also includes, unfortunately, a reduction of around 15% of our total group workforce, corresponding to between 600 and 700 full-time equivalents, subject to union negotiation. Please turn to slide 20. Let me give you more color on our transformation plan. By the end of 2025, we will have simplified drastically our operating model in our organization, getting rid of the complexity inherited from legacy and integration. We will improve the profitability of all parts of our business, on Sweden B2C by focusing on customer loyalty and cross-selling, on Sweden B2B by assessing our services portfolio and automate our delivery, in the Baltics by making Tele2 Estonia cash-contributive and increasing centralization. Additionally, we will concentrate our investment on the building of our network, securing our 5G run-out, which waits for more than one-third of our total capex, preparing for 2G, 3G closure, and depriorizing all non-commissive capex. Please turn to slide 21 for our 2025 guidance. We are confident in the outcome of our transformation, which enables us to issue a solid 2025 guidance. In 2025, we will deliver a low single-digit organic growth on end-user services revenue, partly impacted by the 200 crowns boxer DTT impact on top line with no ABDA impact. When it comes to Swedish consumer pricing, we executed front book and back book adjustment in the beginning of January, in line with last year. And just like last year, the largest part of the pricing effect will be realized in March. In 2025, we will deliver mid-to-high single-digit organic growth and underlying EBITDA, thanks to the outcome of our deep transformation. When it comes to EBITDA, the workforce reduction will be executed over the coming 12 months, implying a back-end loaded growth profile for this year with no significant impact in Q1. In 2025, our capex-to-sales ratio will be in the range of 13%, as it will be as it will be the final year of intense network rollouts. In a mid-term perspective, we continue expecting our CapEx-to-Sell ratio to go under 12%. Our new operating model and simple organization will give us the resilience and flexibility we need to remain in control of our future, and I'm very pleased to see the engagement and commitment from all my colleagues to create a new Tele2 Simple and agile, built with our Challenger heritage as a foundation. 2025 will be a year full of challenges, but as well an ambitious one, and I'm certain that our new Tele2 will be soon fit enough to deliver more value to our shareholders. I hand back to Charlotte for some additional comments regarding 2025 before we open it for Q&A.

Thank you, Jean-Marc. A few comments on the P&L for 2025. Regarding one-off items, our ambitious transformation will obviously generate restructuring costs, such as severance payments and other types of customary one-offs, including those arising from the continuation of the statutory execution program. We do not quantify the magnitude of such costs at this stage, partly due to union negotiations, but intend to do so in relation to the Q1 results in April. Regarding savings from workforce reduction, please be aware that roughly 80% of our workforce costs impact OPEX, whereas the remaining share impact CAPEX. Regarding financing costs, based on our debt mix with 40% floating rate by Q4, every one percentage point rate change in underlying market rates will impact our annualized financial expenses on loans with floating rates by around 110 million. And then a few details regarding the cash flow for 2025. In Q4 2025, we will pay the final roughly 370 million for the Swedish spectrum that was acquired in 2023. Regarding working capital, we expect continued movement between quarters, but we do not expect any major impact on the full year basis. Regarding the timing of financial items paid, last year's breakdown between the first and second half of the year may be indicative to 2025 phasing, possibly with Q4 even more back-end loaded. And with that, I hand over to the operator for Q&A.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take our first question. Please stand by. And the first question comes from the line of Andrew Liu from Goldman Sachs. Please go ahead. Your line is now open.

Good morning, everyone, and welcome, Jean-Marc. I had two questions. Lots going on in the presentation. Thanks for your clarity on Swedish pricing and cost-cutting. Two questions. We're trying to understand the impact of Boxer in 2025, but really to understand what your view on the Swedish structural growth outlook is. Obviously your end user service revenue growth guidance for 2025 is now low single digit from low to mid single digit previously in the midterm guide. So once we get out of this Boxer hangover, how do you think about Swedish structural growth outlook and the key drivers for that? into 2026 and beyond. And then secondly, I'd just like to talk around your CapEx outlook and the dividend. Your previous management had been saying that CapEx intends to come back into the 10% to 12% levels post-2025. Obviously, you've got a slightly lower CapEx for sales for this year than people were anticipating. I wondered if you can still anticipate capex intensity coming down and how that impacted your dividend decision for this year. Thank you.

We will start with a few comments on the boxer impact. So let me first reiterate what we were explaining. The options we had ahead of us regarding venture was to either wait for the customer base to continue declining and become a loss-making business plan in 2025-2026 due to the fixed cost of transmission, or to anticipate the move and migrate the customer base with, of course, some chain impact, but at least to secure the largest part of the customer base on future-proof technologies such as cable and IP. That's what we did. So, as I explained, in 2025, we will have no revenue anymore from Boxer TV. The difference compared to 2024 will be $200 million, but of course this amount doesn't take into account the continuous decline of the customer base, so probably the revenue would have been lower. Anyhow, because the expense saved by terminating this line of business, the impact in 2025 will be to say the least, neutral on the BBA and probably positive. Saying that, we see on the other line of business some, I would say, stability in the growth of the market. I don't know if And I can elaborate on that on the consumer side. But I would say that what we see on mobile and fixed in 2025 is consistent with the development we've seen in 2024. We don't see any major disruption. There is a kind of stabilization of the market ahead. Do you want to make any additional comments?

Sure, Jean-Marc. I would say if you look structurally, we have that boxer that you just explained. The boxer, you know, migration onto DTV follows basically what we did with DTV a couple of years ago when we went to a renewed hybrid TV portfolio. You've seen since then that the DTV business line larger has been stabilized. Our expectation also is that past 25, this overall product line, therefore we have a way more stabilized outlook. And on connectivity, as you say, Jean-Marc, we have quite a stable market outlook, also competitive context that we can navigate in, balancing out value and volume. And that's what we do. So I think the outlook there is quite okay, actually. And we've just gone through I think a bit more a difficult macro on the consumer side that we've seen with the device market being down, but we do expect also some recovery there. So I'll tell you, Outlook is pretty okay for our overall connectivity services.

And really having the CapEx trend, we are gazing on 13%, around 13% CapEx to sales ratio for 2025. which is lower than in 2024 due to the, first, the end of the haul-out of our 5G network, but as well due to the repriorization of a number of investments. We have drastically reviewed a portfolio of projects in order to select the most impacting one for the customers and focus on one. We are slowing down a little bit the run-out of fixed upgrades in some areas because it doesn't bring any specific value to the customers. We are revisiting entirely the process for the development of our products and services. But we, of course, don't touch on... the 5G rollout investment, which represents one-third of our capex, and which is the most impactful for the customers. On the mid-term, I mentioned as well that our ambition or expectation is still to go below the 12%, between 10% and 12%, as we previously indicated to the market. This is not a guidance. This is an indication. But this is still our mission. Thank you.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Andrej Kabrejcik from UBS. Please go ahead. Your line is now open.

Hi. Good morning, everyone. I wish you all the best. Thank you for the extra time that you have decided to give us today. A couple of questions for me.

Andrej, we are trying to hear you. Okay. Are we? Yes.

Okay, apologies. We are losing you again.

Hello? Yeah, that's okay. Yeah, so you've spoken a lot about the strategic initiatives around the cost-cutting for the year to come. I just wanted to focus a bit more on the kind of growth areas, so strategic priorities basically for service revenue growth, which has been kind of on the growth rate coming down over the past couple of quarters. So if you're looking at the business, obviously we're – We have to deal with the effects of the shutdown of the legacy TV unit, but then going forward, besides this, what are some of the strategic priorities that you are looking at when it comes to accelerating the service revenue growth in basically all of the units, right? So mobile, broadband, and TV. So that's a wider question for you. And then just around the dividend, please. So can you confirm that there will be no extraordinary dividend even later to come on top of the 635 that you've And, you know, just in terms of your net debt to EBITDA policy, I know there is no change for now, but is there a scenario in which, you know, your company has been guiding to be very close to 2.5 net debt to EBITDA? I guess you guys are keeping some headroom for a potential Fiber M&A, as previous management was talking with respect to both the bolts. and the core market, Sweden, but how you think about leverage in general going forward and the potential change to the leverage ratio as well. Thank you very much.

Okay, thank you for your question. I believe that we partly answered your first question in the previous seminar. I just want to reiterate that we guide for the end-user service revenue. I would say on a reasonable growth makes you, of course, computing the negative impact of the bookstore migration and the loss of corresponding revenue. But for the rest, we see the growth continuing at the same pace as was seen in 24 due to the stabilization of the market. So the main focus next year, this year, will be definitely to deliver this low single-digit growth and user service revenue amongst all the product lines and all the geographies that, of course, improve the profitability thanks to the cost-cutting and the cost-optimization program and the transformation that we have initiated in the company. So I don't know if there is any other answer you can provide, Hendrik.

Yeah. I'll give you some more color on those growth drivers, Andre. So as we've been sort of talking about, you know, we've seen that with the introduction of our hardware portfolio to Teletubbies on the mobile side, we've really, you know, found some strong foundations. So we will see that we will continue on the strength of combining Teletubbies on 5G with hardware. That's also, you know, the hardware bundling is continuing. There's also a fair value effect in the numbers as we've been, On the broadband side, we clearly see that with the expanding footprint and hopefully also regulation coming in, that we can grow quite a bit more on our SDU footprint that we've also talked about before. We see a lot happening also in the appetite of customers going to higher speeds. This year, basically with the pricing effort that has also continued a growth driver, we We are introducing new portfolios across the board on mobile and on broadband. We're moving the base speed on broadband from 100 megabits to 250. It's still driving a lot of customer value whilst we're doing that. On TV, we talked about the stable portfolio going forward, post the Boxer, you know, sort of year-on-year implications that we'll see in 25. And on mobile, we also believe that with mobile broadband and FWA on 5G, we can really drive quite a lot of growth. And last but not least, in all of this, as also Jean-Marc highlighted, you know, the focus is on our customer base, on loyalty and cross-selling and driving FMC penetration. that hopefully gives you a bit more color.

And Stéphane, maybe you want to add something on B2B? Yeah, sure. Hello, André. Well, in B2B, I think the profile will be very similar to what we've seen previously. We expect mobile goals to continue. And also the solution side driven by the networking area. And on the fixed side, I mean, you've seen that our trajectory has improved the last couple of quarters. We've been having a decline on the fixed side before we did the company commissioning. But now we see that improving, and I would say it's the best quarter in regards to And then, of course, it's very important how the business climate will develop during the year. I mean, we have two years of recession that has impacted our ability to drive growth. I'm still happy with, you know, the 14 consecutive quarter of growth at B2B. Yeah, the profile will be similar to what you've seen in the last period.

So that's why we are confident in guiding low single-digit growth for service revenue despite the negative impact of Boxer migration. Réanine, a comment on the dividend. I just want to... clarify that I made a comment about the ordinary dividend, the ordinary dividend in 2024, paid in 2024 in two tranches, in May and October, reflects on the equity free cash flow generated in 2024 that we distribute 100% according to our financial policy. And as well, as I mentioned in my introduction, We expect that the transformation plan and the aggressive guidance on EBITDA will translate into equity cash flow in the future, and we will see how it develops. But this is not a question for today, and it's not a question for the management of the company, but for the board of Teletubbies. I don't know if you want to comment.

Well, I can do that. What we're saying is that we don't make any changes to the financial policy. It's still part of the financial policy, and as you also pointed out, we have been in the lower end of the range of 2.5 to 3 times for some time now, and that's a level where we feel also comfortable. And as we also said before, it will give us some optionality going forward as well.

No optionality comes from the mistakes.

Thank you very much.

Thank you. Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Andreas Jolson from Carnegie. Please go ahead. Your line is now open.

Good morning, everyone. Let's turn from the top line then to the cost side. You mentioned several reasons why costs should come down, but can you give some more flavor other than simplifying the operational model and reduce complexity? it would be interesting to have a little bit more detail on what you plan to do. And also, secondly, it's a quite broad range on the EBITDA growth outlook. Let's say it's between 5% and 9%. What would it take to end up in the lower end, respectively the upper end of that guidance for 2025? Thanks.

Okay, so let me start with, I would say, the biggest bulk of our transformation, which is the workforce reduction. So the workforce reduction has been already implemented in the Baltics, first in Estonia and second in Latvia in mid-January. We are in the process of... We have launched the process of negotiations with the unions for the plans in Sweden. Of course, nothing will be done before we conclude these negotiations. But we expect the first wave of workforce reduction to take place before the summer. And as I told you, as I mentioned earlier, The ambition is to reduce the workforce by the equivalent of 600 to 700 full-time equivalent in all the categories of the company, but of course with a special focus on support functions and back offices. We don't expect to... to impact the front line because, of course, this front line makes a difference in Tele2. We are perceived by our customers as the friendly experts, and we want to develop this specificity. By the way, in the meantime, we are reducing our workforce. We're going to open new stores in 2025. That's for the workforce production, which of course will represent a huge part of the transformation program. But of course this transformation will aim at simplifying the organization and the processes in the company. So I can give you some examples, but of course very high level. I'm not sure that I can enter into many details. But, of course, we are reviewing, for instance, the complex process we are in to develop our products and services. We want to be more agile, have less intermediaries between the business owners and the developers. And we have as well challenged the number of people involved in the process. all the support functions, not only in Sweden, but as well in the Baltics, where we have encouraged our colleagues in the Baltics to mutualize a number of functions between the three countries. So I mentioned as well that one of our intentions was to improve the profitability of some of our line of businesses. So that implies, for instance, the restructuring of the Estonian operation where basically we had to make some drastic decisions in order to make the structure lean enough in order to turn Tele2 Estonia into a cash contributive operation. We have as well some similar approach in other parts of our business. I don't want to enter in too many details but There are some parts of our business which are less profitable than others because we are mixing connectivity with other services. So this is, of course, as well something that we have addressed and that we will continue addressing all over 2025. And last but not least, it's not only about the processes and the simplification for organization, but as well about We have decided to come back to the original Teletubbies culture, which had the caste consciousness as part of its value. This is something that we have reintroduced in our day-to-day. We have implemented very strict programs to review and validate all the purchase orders. All kinds of expenses have been challenged and we are reopening systematically all our contracts and we have started new negotiations with all the vendors in all the categories of expenses that we have in the company. So this is a systematic approach, but of course it creates a new dynamic in the company as well. And I can tell you that our Tele2 colleagues are quite excited to get back to the original Tele2. So that's, of course, how we want to rejuvenate the original Tele2 culture. It's about being open to change, being smart in the way we buy, and make everybody in the company proud of saving costs.

Thank you. We will now take our next question.

Please stand by. And the next question comes from the line of Stefan Goffin from D&B. Please go ahead, your line is now open.

Yes, hello. continue a bit on the cost side. So you mentioned that the reductions have already been finalized in the Baltics, so can you provide some details on that, preferably per market, but otherwise for the Baltics in total? Secondly, there was a cost program for Sweden with the ambition to reduce the cost with SEK 600 million, which had already started this year. Does the new cost program replace that, or is that still ongoing and the new cost program come on top of that? Thank you. Thank you for your question.

I'm a little bit reluctant to give you more details about the plans that have been implemented in the Baltics, but you can, of course, consider that the cuts have been significant in proportion of the headcount in Estonia. Of course, we haven't touched on the to the sales force in the shops, but we had to reduce the workforce in the headquarters quite significantly. Regarding Latvia and Lithuania, it's more about the mutualization of some support function, not to encourage them to avoid duplication between countries, wherever it could make sense. So, all in all, I can tell you that so far we have... already delivered, I would say, a significant percentage of the total workforce reduction that we are planning for 2025. And, of course, the impact of these workforce reductions in the Baltics will be seen in Q2. They are executed currently in Q1. But, of course, the largest part of the workforce reduction will be from Sweden, where we have the largest number of employees. This is subject to negotiation with the unions. But we are quite advanced now, and we have notified our intention to the authorities, and we have engaged in the discussion with the unions. We want to be very transparent on that. a meeting with all employees where we are going to discuss in detail the plan. So that's for the workforce reduction. And of course we will give you more details in our quarterly reports, but for the time being. I cannot give you more details. Regarding the SEP program, I will let Charlotte to give you some comments about what we have delivered so far. But to answer your question globally, the SEP optimization program continues, of course, delivering its savings. But the new ambition that we have put forward for 2025, our transformation plan goes further. So it's, of course, something that we build on top of the SAP ambition. Charlotte, do you want to comment on that?

Yes. Since the SAP is something that we've been talking about quite a lot in the past, and it's still an important part of our journey and our improvements going forward. The main things that we can see that have generated so far is, of course, the reorganizations that were already in place last year in 2024. We've also done quite a lot when it comes to the network optimization and also the close down of the CIMNA was also an important part. I would say out of the 600, we delivered so far about 250 million out of that. But looking ahead, this is, of course, an important part of our journey ahead, but we're not going to follow up this strategy execution program on the cost side, per se, because this is now part of a larger initiative. And I wouldn't call that a program, but we're now guiding on the improved EBITDA, and that's what we're going to track going forward. Not a program as such, but there are a lot of initiatives that we will, of course, come back to you guys later on the phone to see how we are progressing on a quarterly basis. Okay. Perfect.

Thank you.

Thank you. We will now go to our next question. Please stand by. And the next question comes in the line of Joshua Mills from BNP Paribas Exxon. Please go ahead. Your line is now open.

Thanks, Tim. Two questions from me, one on the cost-cutting and then the follow-up on Boxer. So on the cost-cutting, could you perhaps help us by quantifying the size of personnel costs within the Teletubbies Cost Act today just to help us with our modeling going forward? And then when we think about the impact of the cost savings, are you expecting the bulk of those to come in 2025, or will they be spread over several years? Could there be a tailwind in 2026 as well? And then the second question on Boxer, I think you gave some helpful detail about the headwind for 2025, 200 million lower service revenue impact. Are you also expecting to see that kind of impact or continuing impact going into 2026 and 2027, or do you expect that by the end of this year you'll have seen the majority of the organic customer losses having come through already? Thanks.

Okay, thank you for your questions. I'm not sure that we, I'm pretty certain that we cannot give you all the details that you expect about the workforce reduction plan. Let me just give you maybe a more precise indication about the timing. I already commented on the timing in the Baltics. So as we speak, The plans are in motion in Estonia, Lithuania, and Latvia. And, of course, we'll start seeing the impact on the labor OPEX and party on the CAPEX as well in Q2 this year. But for the largest part of the workforce production in Sweden, due to the time we need the negotiations with the union, the impact on our P&L will not be seen before Q3. But, of course, what we are focusing is on the run rate and we have, of course, taken into account this timing in our ABDA guidance. And that's, I would say, what I can share with you at this stage. Regarding the Brexit effect, Henrik, do you want to give more details?

Yes, so we expect largely that this is this year's effect on the 200 million, because that's the true migration effect. Going forward, we expect, therefore, the combined DTV product line to have the profile that we've seen over the past, which is a level of stabilization. What we still need to, in particular, see with regards to the box of customer segment and that behavior, is whether they will completely stabilize. What I'm referring to, if you look at the customers, they are typically a specific customer segment with a little bit of an older age group. So we need to see whether it completely stabilizes or to a very large degree is stabilizing over the longer term, but certainly a stabilized effect after 2025.

Thank you. We will now go to our next question. Please stand by. And the next question comes from the line of C here from Citi. Please go ahead. Your line is now open.

Hello, hi, good morning. Thank you for taking my questions. I have a couple, please. And the first one, just going back on the top line, I think in your opening remarks, you mentioned that you want to rejuvenate the challenger status for Taylor 2. I think for some of us, it means a faster growth when it comes to top line or customer base or market share. When you listened to your comments earlier, it seems that the structural growth in Sweden this year would be consistent with what's the lever that we saw in 2024. I guess my question is, going forward, what do you think about the levers that could potentially drive service revenue or growth acceleration in Sweden? And my second question is really on the guidance. On the 2025 guidance, I was wondering if you could just elaborate on the phasing. I mean, is there any reason or one of, if we should consider that the first half might not have too much growth in Sweden? And maybe I can follow up is why you decided to to remove the target for this time.

Thank you. Okay, thank you for your question. Let me clarify something about the revival or intention to revive or rejuvenate the original 32 culture. We believe that this company was created based on a challenger mindset and promise. And that's what makes Tele2 different and impactful as well. Because something, in my view, very important that I've understood arriving in Tele2 is that in Sweden, but as well in the Baltics, everybody knows that if they pay reasonable prices for their telecommunication services, It's thanks to Tele2 at a certain point in the history of our market, whether there are Tele2 customers or not. So what we've done to democratize the prices in Tele2 has been done, and today we don't see any reason to start a new market. price war or whatever price aggressivity anymore. The prices have reached a reasonable level in all our geographies, and when we speak about rejuvenating the spirit of 32, the original spirit of 32, it's more about the culture, the mindset of our people. It's about unleashing the creativity of our employees, because I believe that 32 people are not standard employees that you can find in the same people that you can find in other operators. They are very special, they are creative, they want to unleash their potential, and this is simply what we intend when we speak about rejuvenating the Tele2 culture. It's definitely not about copying the original Tele2, who 20 years ago came with aggressive prices. This part of the job is done, and we are not going to restart this price war anymore. So, regarding the guidance and the phasing, yes, of course, we will see the impact of the transformation increasing in Q2, Q3, Q4, but maybe, Charlotte, you want to... answer more precisely to this question.

Well, I don't think I can be very precise at this point of time, actually, but, of course, since we have now initiated some of the initiatives, like Sean Mark mentioned, and then also the redundancies, of course, is going to be a larger part of this, and this is now underway, and so the savings will come in gradually, and so we will see more during the second half of the year than in the first half of the year. And I also mentioned that we will have some restructuring costs. But since we are at this point of time, we can't really quantify them. But we will come back in relation to the Q1 results in April to be a bit more specific on this. Because as we already mentioned a couple of times, there are WTO negotiations and all the other initiatives that we are addressing right now, of course, it will have more of a long-term impact. So we will see, of course, an improvement in 2025, but then we'll also see a full year runway impact in 2026 as well.

Thank you very much. We will now take our next question.

Please stand by. And the next question comes from the line of Adam Fox-Rumley from HSBC. Please go ahead. Your line is now open.

Thank you very much. I had a couple, please. Could you first talk a little bit about the role and influence of Iliad now at Tele2? I mean, in particular, you mentioned the vendor negotiations. Are you in a position to leverage Iliad's European scale when you're talking to your partners and maybe any other contractors relationship. And then secondly, I'd like to come back to the issue of the leverage ratio, please. I mean, the range of two and a half to three times has been reiterated today at quite long standing. If my understanding is correct, 2.8 times is really the from you what your thoughts are there. I mean, why not take the opportunity to rebase it if you can't really go past 2.8 times so that the position with respect to dividend payouts in the future maybe is a little clearer. Thank you.

Okay, let's start with Iliad. So, yes, Iliad is our reference shareholder. Teletubbies, of course, an independent company listed in Stockholm. So, in a very pragmatic way, we have developed some best practices exchanges with Iliad. It's always, as you say, useful to use some benchmarks in order to better negotiate or to exchange best practices and develop So we have set up a service agreement with Iliad in order to allow us to do that. And, of course, we are leveraging Iliad's firepower and experience in many areas, and we are feeding them back with some experiences as well. So that's the point about Iliad and of course it will come very useful in order to execute our transformation plan. Regarding the leverage, I would say we commented on the leverage on the 1st of January.

Yes, so I can say a few words on that, and that's correct. We said in the past as well that we would not really see ourselves going past 2.8. But on the other hand, if there would be a temporary increase of the leverage ratio, that would be possible, but not for the long term. But it's really a board decision whether to change the leverage or not, so it's not really up to the management.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Felix Herrickson from Nordea. Please go ahead. Your line is now open.

Hi. Thanks for taking my question. I have a couple. Jean-Marc, you've been with the company now for some time, first on the board and now a couple months as the CEO. In general, how do you view their current business portfolio? Are there any opportunities for portfolio pruning or divestment of what you see as non-core businesses, or is the current business ideal?

And then, secondly... Can you rephrase your question? We were struggling to hear you properly. Hello? Sorry about that.

I hope you can hear me better now. So, basically, Jean-Marc, my question was that... After being some time with the company, how do you view, in general, the current business portfolio? Do you see any opportunities for portfolio pruning or advancements of non-core businesses, or is the current business footprint sort of ideal? And then my second question is related to the mid-term financial targets, which you haven't explicitly stated anymore in your quarterly report. How should we think about this? Will you sort of... provide us more color on their longer-term targets, and they'll look at a later stage this year. Thanks.

Okay, thank you for your question. When you're referring to the business portfolio, you're referring to the B2B or the business in general?

No, the entire business. The entire business. Sweden, Baltics, et cetera.

Yeah, I would say that what we have started doing shows that we are reviewing our portfolio services Of course, the decommissioning for obsolete terrestrial TV platform is a good example. It's a good example of our approach, meaning that once again we could have waited until the base would extinct, but we would have lost the customer and we would have been through a loss-making phase for this line of products, so we decided to anticipate, take the risk to wake up some customers, but at least to migrate early the vast majority of them in order to bring them a future-proof technology. We have, as well, other approaches to prune some services that are not profitable, but something that we do in other parts of our portfolio. On the B2B side, for instance, we have some product lines that are not profitable enough and that we are considering progressively pruning. So, yes, the cleaning and the renewing of our portfolio of services is part of our transformation. It's an essential part of our transformation. It's important that we focus on our core business, which is connectivity. and that we focus on what makes us special, which is the interaction with the customers. And the interaction starts with, of course, the excellence in terms of network. Regarding the mid-term financial targets, you're right to say that we didn't comment on that. I would say the best way to reach mid-term is to deliver on short-term first, And that's what we are doing. I would say that the focus of the company, the focus of the management of Teletubbies and my focus will be the delivery of our guidance in 2025, which implies the transformation of the company. And I would say that after that, we will have probably, let's say, in Q3, Q4, and Q3, more visibility on how we want to review our ambition in the mid-term. But, you know, let's take the short-term first. We have a lot of things to do this year. We confirmed, for instance, some of the indication that we have given, shared with the analyst about, for instance, the ambition to get to go under 12%, between 10% and 12% in the CapEx 2 sales. these kind of things, but for the rest, we want to deliver on our transformation first, and then we will revisit our mid-term targets.

Does it make sense? Makes sense. Thank you. Thank you.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Kival Kiroya from Deutsche Bank. Please go ahead. Your line is now open.

Thank you, and I've got two questions, please. So firstly, you've talked about the importance of the ordinary dividend being covered by free cash flow. I appreciate you don't guide on 25 free cash flow, but are you able to provide an account on how we should think about 25 free cash flow versus 24, also taking into account the restructuring costs? And then secondly, you've talked about reducing complexity to drag down costs. But are there any areas you think Tele2 should be spending more, either in systems or processes to allow future costs to be taken out or in other areas? Thank you very much.

I'm not sure that I heard correctly your second question. Maybe because you say something that Tele2 should spend more.

You've talked about Teletubbies taking out costs, but as you've looked at the business, are there any areas where you think Teletubbies should actually be spending more? Yeah, yeah, definitely.

So... Ordinary dividend.

Yeah, the ordinary dividend... I can only reiterate what I already commented previously in the call. The board recommends a distribution of 100% for equity-free cash flow generated in 2024. Our financial policy implies that we distribute at least 80% of this equity-free cash flow Of course, we expect to increase the equity free cash flow in 2025, but it's much too early to decide which decision we will make in order to use it. This decision belongs to the board. And as mentioned by Charlotte, transformation will come with, of course, some positive impact on the ABDA, but as well some restructuring costs. Today we are focusing on the transformation plan, on the distribution of 2024, and on the delivery of our transformation program. And then the other question will come in due time. I want to say that it's not only about cost-cutting. It's about reinvesting. I believe that that's what we are doing. It's part of our transformation to reprioritize our investments. We have reviewed investment priorities in the perspective of the customers in order to focus on what can move the needle in terms of customer quality, customer satisfaction. And, of course, the first priority for investment is about quality. It's about the network, the 5G network. We are very proud today to have the highest 5G reachability in Sweden, and we will continue investing in our network. But we have as well decided to accelerate the investment in some areas. I briefly mentioned that on the B2B side, we wanted to automate the delivery of the service. This is an example of the project that we will focus our investment on. I don't know if Stéphane wants to say a word about that, but this will, of course, be critical for the development of our B2B activity.

Yeah, thanks, Jean-Marc. On the digitalization and automation program, we initiated that last year as part of the TAP program. But I would say that this year we're going to double down on it. We're going to level up our ambitions. Big efforts in the B2B units really go to digitalization and IT transformation of our platforms. But not only that, also we work on automation. So we've created a center of excellence for automation in regards to improve our processes, improve customer experience, and where you're working. And, of course, that is also part of the profitability initiatives that they've done. So I hope that gives some color on that part.

That's great. Thank you. Thank you.

Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now take our next question. Please stand by. And the next question comes from the line of Ulrich Wraith from Bernstein.

Please go ahead. Your line is now open.

Thank you very much. I have only one question. Jean-Marc, when you arrived and you sort of started to think about the priorities in terms of cost in particular, what process led you to decide that 15% of the workforce is the right number? I think in your prepared comments and also during the Q&A so far, you have referred to margin levels at the different businesses that you have. And there are structural differences between the different business units. So simply looking for the same margin everywhere is surely not what you're doing there. I think in the past, Teletoo and other operators have actually shared cost benchmarking run by the big consultants in Europe. So I don't exactly... I'd be very interested to understand better where that 15 is coming from. Is this a top-down goal because that's what you need to have the returns you want and you're sort of just trying to find the areas where you can cut that or is it more bottom-up or is it driven by benchmarking or any other consideration? Thank you very much.

Thank you. I like your question because... Yes, it's important that we clarify that 15% is a bottom-up calculation based on an internal analysis about where we could improve our efficiency and simplify our processes. Definitely not the result of a top-down objective initiated from a benchmark or the result of a consulting analysis for workforce. So it's the result of an internal exercise that we conducted when I joined the company with the leadership team. We asked ourselves where we could improve our processes and where we had, I would say, areas of improvement in terms of simplification. And we made a number of decisions which are brave decisions, meaning removing, for instance, some intermediaries, counting on the, I would say, the maturity and the experience of our employees, empowering them to make decisions and removing the people between them and what they have to do. And it's a little bit the driving principle of reorganization. It's about asking people to be as autonomous as they can, you know, deliver what we believe and they believe they have to deliver. But definitely this 15% is not the result of, I would say, a top-down calculation. It's the consequence of internal analysis. And I have to say that, speaking on behalf of the management team, that this is a collective target that we gave ourselves. So it's very important to mention it, and thank you for asking.

Thank you very much.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Victor Hogberg from Danske Bank. Please go ahead. Your line is now open.

Good morning. So I just want to rephrase the question of 15% FTE reduction. That's on par with what Telia has done. At least my impression is and was that Telia had more of a legacy organization that you have. I just want to make sure. I assume you've already thought this through well enough, but how do you get comfortable with this move not having an effect on growth ahead and the experience for your customers? Just some thoughts on it on the potential revenue side and the implications from the program. Thank you.

Yes, and it's important as well to reiterate that all 15% have nothing to do with Telia's 15%. It's a coincidence, but we didn't decide to copy Telia's target for, I would say, two major reasons. First, we are not Telia. And second, our organization is totally different, as you said. we don't have any group or corporate organization to cut. So, definitely, what we are doing is quite a detailed exercise impacting all divisions in the company. Well, we have changed the duplications and saying that, of course, we are not starting from the same of full-time employees either, meaning that, as we mentioned, this 15% workforce reduction will translate in the living of between 600 and 700 full-time equivalent people, consultants and employees. So, basically, that's it. You know, it's about the attention we paid to scrutinizing every single organization, department in 32 without impacting the front line. Once again, it's super important to consider that to remember, to remind ourselves that Teletoon's specific positioning on the market is related to this friendly expert posture that we want to, of course, develop. It makes a difference. But it doesn't mean that we are not accelerating the automation of a number of processes either, as mentioned by Stéphane. So in a nutshell, a lot of very concrete actions that we have decided and not a top-down approach and no reference to any other operator in the market. It's our own plan and it will be owned by the company and endorsed by the management.