Tele2 AB (publ)

Good day and thank you for standing by. Welcome to the Tele2Q1 Interim Report 2025 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To answer your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Jean-Marc Arien, President and Group CEO. Please go ahead.

Thank you and good morning and welcome to Teletous Report School for the first quarter of 2025. With me here in Chista today, I have Peter Landgren, our Group CFO and for Sweden, Peter Charmak, our chief B2C officer, and Stefan Trampus, our chief B2B officer. Please turn to slide two for a brief recap on our transformation plans and progress so far. 2025, as you know, is a transformation year for Tele2. Our objective is to build a faster, simpler, and more agile Tele2 by coming back to Tele2's original challenger culture. And I'm happy to present you today the progresses we have made over the first quarter of 2025 to simplify our organization, control our costs, and prioritize our investments. We have reduced our workforce by more than 450 positions at the group level by the 15th of April. We have reopened and renegotiated 20% of our largest contracts. We have implemented a new cost governance to scrutinize and challenge all our expenses. And we have now a new leadership team in place. And even more importantly, our cultural shift, especially our cost consciousness focus is strongly supported internally. And I want to take this opportunity to thank all Tele2 employees who actively contribute to get us back to the original Tele2. Please turn to slide three for some financial highlights. I'm happy to report that our Q1 equity cash flow has been improved already by the first steps of our ambitious transformation program with the additional support of some one-offs. And user service revenue grew by 1% in Q1, driven by the Baltics' excellent performance. We are facing some headwind on the top line in Sweden, where our revenue growth has been burdened mainly by the migration of Boxer off the terrestrial network with a higher revenue impact than expected. On the other hand, we have had a solid start to underlying EBITDA with a 6% growth in the quarter, largely due to the speed of our transformation. The first workforce reduction has been implemented earlier than expected. In the Baltics, most of the restructuring has been executed in January and February. In Sweden, we have registered some early workforce savings already in Q1 due to consultant and voluntary leads. Nevertheless, it's important to remember that the ongoing workforce reduction that will be executed during this year has only a limited impact in Q1. Equity free cash flow amounted to 2 billion Swedish crowns, supported by some temporary items that we will detail later. In a nutshell, so far so good, but we are only at the beginning of our journey. The largest part for transformation work is still ahead of us, and we keep focusing on operational optimization. Meanwhile, we reiterate all the components of our full year of guidance. And let me add two comments on the development of the company. During our transformation, we continue investing to improve our customers' experience. Our Netformability 5G network, whose rollout will be complete by year end, already offers the largest broadband reach in Sweden. The strengthening of our distribution channel plays a key role in our transformation, and we recently completed the revamping of Tele2.se, and we also opened four new stores in Sweden, including in Stockholm. In terms of sustainability, we are proud that our climate A rating with CDP was reaffirmed once again. We were also ranked number one in Sweden and among the top 40 companies worldwide in equity, gender, security ranking. Please move to page four for more details on our results. As I said, end-user service revenue grew by 1% organically in Q1, mostly driven by the Baltics, whereas organic underlying EBITDA grew by 6%, driven by sharp cost control across all operations and the top-line growth in the Baltics. Our strong equity cash flow included a few items subject to reversals, namely working capital and capex timing, in addition to a tax refund. Peter will walk you through the details in a moment. Our leverage stands at 2.2 times ahead of the proposed first dividend payment. In Sweden, consumer and user service revenue declined by 1% as our growth in core connectivity was upset by a significant decline in Boxer TV following the decommissioning of terrestrial distribution at the beginning of the year. In Sweden business, end-user service grew by 1% alongside with continued solid mobile RGU growth. Underlying EBITDA in Sweden grew by 3% thanks to ongoing cost optimization efforts. The Baltic grew end-user service revenue by 7% with strong growth in all markets. Underlying EBITDA grew by a massive 15%. The turnaround in Estonia continued to produce good results also in this quarter. Let's move to slide six for more details on Swedish consumers. Mobile end-user service grew by 1%, risen by 3% in post-paid, partly offset by continued decline in prepaid. Fixed broadband grew end-user service revenue by 5%, mainly due to solid ASPU growth. While Teletubbies TV remained largely stable, end-user service revenue for DTV declined by 10%. largely driven by Boxer TV migration. For full year 2025, we now anticipate Boxer revenue to be roughly 225 million below 24, with a slightly negative year-on-year impact on EBITDA. Looking forward to the rest of the year, we count on our recently launched TV Hub 2.0 service and the revision of our content portfolio to improve the profitability of our TV business. Let's look at the consumer KPIs on slide seven. Mobile postpaid RGU declined slightly in this seasonally low quarter, in which we also executed price adjustments, similar to Q4, as we declined by 1% year-on-year, driven by increasing IFRS 15 fair value adjustment due to family discount and an increase in the customer base with handset installment plans. Excluding the fair value effect, ASPU grew by 1%. For Q2-Q4, we expect the price increase is introduced in March to drive postpaid ASPU up again. Fixed Broadband added 1,000 RGUs in Q1, whereas ASPU grew by a solid 5% due to price adjustments. Our TV business lost 25,000 RGUs in the quarter, entirely related to Boxer in this first quarter, distribution. And during the last few weeks, we have negotiated some content contracts, including a new partnership regarding Global Streaming Service Max. And we launched a new flexible TV package offer with upgraded TV experience with TV Hub 2.0, making our entertainment proposition even more attractive for streamers and court cutters. Please move to slide eight for Sweden business. In Q1, Sweden business reported 1% end-user service growth. Growth across our IoT and large segments was partly offset by the micro-segment, which is particularly sensitive to economic conditions. Mobile grew by 1% driven by our IoT business and solid RGU growth in SME and public, however, partly offset by an IoT-related network outage. Mobile ISPU was mainly impacted by a change in consumer mix year on year. Solutions grew by 2%, whereas fixed declined by 3% as a result of the continued stabilization following the copper closure. Tele2 IoT was once again recognized in 2025, Gartner's magic quadrant for managed IoT connectivity service worldwide, ranking among the top 15 in the world and the top 10 in Europe. Please move to slide 9 for Sweden Financial. To summarize, our Swedish end-user service revenue was flat in Q1 as growth in business was upset by the slight decline in consumer. Underlying EBITDA grew by 3% thanks to sharp cost control and ongoing renegotiation of large contracts. The cash conversion has improved to 60% over the last 12 months. And let's move to Baltic financials on slide 11. I want to underline the excellent performance of our Baltic operations, which have delivered very strong top and bottom line growth in Q1. In the Baltics, total end-user service revenue continued to grow at a healthy 7% in Q1, with solid performance across markets, supported by previous and recent price adjustments. All markets grew underlying EBITDA by double digits in Q1, leading to 15% growth for the Baltics as a whole. In addition to top-line growth, strict cost control and workforce reduction have contributed to this excellent result. Cash conversion increased to a strong 76% during the last 12 months, affecting increasing EBITDA margin. Let's move to slide 12 for Baltic operating KPIs. All markets delivered positive postpaid net intakes in the quarter, with a special kudos for Tele2 Estonia turnaround. It is important to note that the prepaid base in Lithuania was impacted in Q1 by the introduction of prepaid SIM registration. As a result of this registration, the drop of 138,000 prepaid RGUs is due to churn of inactive users, prepaid to postpaid migration, and significantly lower gross intakes in the market. Blended organic ASPU increased by 7% with healthy growth rates in all markets, driven by more formal strategy, price adjustment, and continued prepaid to postpaid migration. With that, I hand over to Peter, who will go through the financial overview.

Thank you, Jean-Marc, and good morning, everyone. Please turn to page 14. First, a few comments on the group P&L for the quarter. Total revenue remained unchanged, while end-user service revenue grew by 1% organically, driven by the Baltics. Underlying EBITDA grew 7% and underlying EBITDA after lease grew by 6%, driven by the end-user service revenue growth in the Baltics and sharp cost control across the group. Items affecting comparability increased by 100 million year-on-year to 287 million SEC in Q1. largely related to redundancy costs connected to the workforce reductions concluded mid-April. Net financial items decreased somewhat year-on-year due to lower average interest rates on our outstanding debt, down from 3.2% in Q1 2024 to 2.9% this year. In Q1, we had a debt mix of 60% fixed rates and 40% floating rates. Let's move to the cash flow on slide 15. Amortization of lease liabilities decreased by around 50 million, mainly due to a 90 million reclass from working capital. Adjusted for that, our ongoing network expansion continued to increase amortization levels year on year. CapEx paid decreased by around 160 million due to lower investments. Changes in working capital were mainly impacted by elevated redundancy provisions related to the workforce reductions and a seasonal decrease in equipment receivables. Net financial items paid decreased slightly due to lower financing costs for our outstanding debt. Taxes paid and received decreased by around 200 million thanks to a tax refund of around 280 million this quarter. Last year included settlements of taxes paid of 93 million related to previous years. All in all, equity-free cash flow added up to 2 billion SEK in Q1, an improvement of 730 million year-on-year. It's certainly a very good start to the year. However, with support from the tax runoff, temporary tailwind from working capital, and somewhat low capex intensity. Equity-free cash flow per share over the last 12 months reached around 7.4 per share. Let's move to slide 16 for our capital structure. End of Q1, economic net debt amounted to 24 billion, some 2.2 billion below full year 2024, thanks to the cash generated in the business now in Q1. Our leverage ended at 2.2 times underlying EBITDA of the lease, which is below the lower end of our target range of 2.5 to 3.0, ahead of the proposed dividend payment a few weeks from now. Adjusted for that dividend, the formal average would have been 2.4. And with that, I hand over to Jean-Marc for some comments on our 2025 guidance. Thank you, Peter.

So, following the first quarter, we remain confident in our capacity to execute our transformation. and our ability to deliver on our 2025 guidance, which we reiterate on all parameters. We target low single digit organic growth on end user services revenue, including around one percentage point drag from Boxer. As said in Q4, Swedish consumer has executed back book adjustment in Q1 with the majority realized in March. The Baltics will continue to benefit from pricing going forward, both recent and those implemented from summer last year. We are well on track to deliver on our mid-to-high single-digit organic growth and underlying EBITDA. Following workforce reductions in the Baltic and in Sweden, we have reduced more than 450 positions of the 600 to 700 full-time equivalents that are planned for the year. In 2025, our capex-to-cell ratio will be in the range of 13% during this final year of intense 5G network rollout. We continue to expect a mid-term range of 10% to 12% from 2026 onwards. And I hand back to Peter for some additional comments regarding 2025 before we open up for Q&A.

Thank you, Jean-Marc. A few comments on the P&L for 2025. Regarding one-off items, we currently assume around 500 million of restructuring costs this year, of which 288 million was reported in Q1. On savings from workforce reductions, please remember that roughly 80% of our workforce costs impact OPEX, while the remaining share impacts CAPEX. Also, I repeat what Jean-Marc just said about the boxer effect. For the full year 2025, we currently anticipate Boxer revenue roughly 225 million below 2024 levels and with a somewhat negative year-on-year impact on underlying EBITDA. And then a few indications on the cash flow for 2025. In Q1, we'll pay the final roughly 370 million for the Swedish Spectrum licenses that we secured in 2023. on changes in working capital. Despite the positive development in Q1, we still don't plan for any major impact on a full year basis. And on the timing of financial items paid, last year's facing between the quarters is indicative also to the 2025 facing with higher payments in Q2 and especially Q4. And let's finish with some words on taxes. the full year 2025 we currently estimate net tax payments of around 1 billion including the 280 million refund we received in Q1. Looking forward our normalized P&L tax should be in general around the 20 percent of profit after financial items. Our annual taxes paid should be Over time, some 300 million higher than our normalized P&L tax, referring to non-tax deductible amortization of surplus values from acquisitions. And with that, I hand over to the operator for Q&A.

Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To restore your question, Please press star 1 and 1 again.

Please come back when we compile the Q&A roster. We will now take the first question.

From the line of Andrew Lee from Goldman Sachs, please go ahead.

Yeah. Good morning, everyone. Thank you. I had two questions. Firstly, on the Swedish end user service revenue growth outlook, and then secondly, just on your cost cutting. So on Sweden, you saw a negative inflection in the first quarter, which you laid out was partly driven by Boxer headwinds and the IoT outage in business. But you obviously kept the low single-digit guide for FY25. Could you just give us a bit more clarity just on what gives you the confidence in this? Maybe talk through the building blocks to improving the Swedish end-user service revenue growth through to the end of the year. And maybe include some commentary on the Swedish consumer pricing environment. You obviously commented on your own price rises. On the cost-cutting... Any help you can give us in terms of understanding the amount of drop-through cost savings from your headcount reductions you've made in Q1 or already in Q2 would be really helpful. If you can't give specific numbers around that, maybe on a broader basis, if you could just help us understand the amount of cost savings that are dropping through from the headcount reductions or anything that's getting in the way of those cost savings making it through to the bottom line. Thank you.

Thank you for your question. I believe that Peter is the right person to answer your first one about the evolution of consumer revenue in Sweden in the rest of the year. And Peter will take over the second question about the cost cutting. So, Peter?

Now, Jay, if you look at the first quarter, we have seen a decline in boxing in particular. That was a little bit larger than we planned. But we have still seen a healthy growth in the core connectivity, which is mobile and broadband. Going forward, too, our pricing is always front-loaded. We have executed a pricing in March that went through. And therefore, from quarter two and onwards, you will start seeing an impact We have executed pricing on broadband and mobile on about 80% of the base. There's a little tail to remain for the rest of the year due to bindings. And we will likely do the pricing on entertainment, meaning on TV, largely in quarter. So you will see from next quarter the impact of the pricing, and you can do the comparison. Now, to your point about um the market dynamics i think it's uh still got net positive we see we see pricing across across the brains uh both uh both on the front books and on the back box it's these numbers are this time lower than whatever in previous years that's due to also lower inflation in the country um but we see you know there's quite a significant productivity now on the market including sales in activity in external retail, which is something that all the operators learning could have you going forward.

Okay, and Peter on the cost-cutting?

Yes, thanks for that question. I would say like this that first I think we should remember that some savings that has already been materialized in If you want, as Jean-Marc pointed out, from consultancy leaves and voluntary leaves, so some help already there. Then from mid-April, we will see the benefits, reap the benefits in the financials of the more than 450 positions that Jean-Marc mentioned, about 100 of them roughly in the Baltics and the rest in Sweden. then from mid-April we'll see those benefits and maybe just keep in mind that we also have the salary increases in Sweden coming in from mid-April that's worth to note.

Thank you can I just add just one quick follow-up question on your commentary on Petter's commentary around these Swedish growth so given the March price rise that you highlighted Should we expect already in the second quarter that we're back at low single-digit Swedish end-user service revenue growth, or will it take time for that to come through throughout the year?

Yeah, I would recommend that you put what Peter said in the perspective of, first, the reality of the market, and second, the reality for accounting rules. let's not forget that we need to transform the revenue growth into IFRS 15 revenue and EBITDA, and that, of course, has an impact, especially in a market where handsets are binded and subsidized by the operators. And the second point is, of course, that when we adjust the prices, and, of course, it comes in different forms depending on the segments, We as well, and it's not only Tele2, but the operators balance the price increases with promotions and incentives, for instance, to buy a family bundle and so on. So, yes, we see a positive trend. In a nutshell, I believe that the most positive observation that we can make on the Swedish market is that Customers have now accepted that telecommunication price should slightly increase year after year to reflect on the overall cost of living increase the salary increase and so on which is good Telecommunication service cannot be an exception in in an overall economy where all the prices are increasing but the translation of the price adjustment into revenue and EBDA growth is, I would say, always more complex than it looked like because of the promotion impact. And of course, this market remains a very vivid market, and the IFRS transformation, I would say. Thank you.

Thank you. We will now take the next question from the line of Andreas Joelsson from Carnegie Investment Bank. Please go ahead.

Good morning, everyone. Just one question from me. When you go through an exercise like you have done now and looking through the costs and the processes and the organization, the experience is that you might find additional things that you can do that you didn't think of initially. So just curious how these last couple of months have made you view the potential on costs and capex in the company over time and potentially also how you can use what you have found to turn the service revenue growth pace over time. I'm not talking about short term here, but your view of those impacts that you can do on the company. Thanks.

You're totally right. I believe that here I speak on behalf of the entire global leadership team in Tele2. You know, this first phase of the transformation of the company was driven across all the divisions in all the areas of the business in Sweden and in the Baltics. So it was a kind of overall simplification of our organization. with the systematic challenge of all our costs and systematic reopening of our largest contracts. And of course, this has brought some results. But you're perfectly right. And we knew that when we started the transformation. This exercise has opened our eyes as well. on some areas where there are still more complexity that we would like to see. And this will be, of course, the focus for second and third step of the transformation. And here we are going to analyze deeper some areas in order to see what we can do to improve. For instance, on the B2B, we have done a lot of things to simplify our portfolio. Maybe Stefan wants to say something about that to give you an example of how we proceed.

Yeah. Hello, Andreas. So in the B2B business, what we're doing is to improve both capabilities, but also some profitability elements. And one area that we are looking into is portfolio updates. where we're working on prioritizing services that support volume in the connectivity business. We're also prioritizing services and products that have volume and economics of scale. Also that provides the sufficient profitability and the margin that we see that we want to have long term. And of course also proves that it has a good sales potential on the long term. And I would say the last thing to mention in regards to the portfolio, what we will acknowledge looking forward is that we will have product services that have a low impact on the workload. So that's things that we're doing on the portfolio. Maybe I can also elaborate a little bit other aspects of what we're doing. We're looking at IT modernization, which I was talking about during the last call that we had for Q4, where we're doubling down on modernization of our IT infrastructure, where we become more efficient in our way of working. We will have better customer experience with with the modernization that we're doing, where we will increase quality, efficiency, et cetera. And of course, this will also allow us to grow more profitable when we handle our products more efficiently. But it will also mean that we will focus on some products and be able to grow in a better way. So a couple of things that we're doing.

And this is only for B2B, of course, just as an example. Very good. Thank you.

Thank you.

We will now take the next question from the line of Stefan Garfin from DNV. Please go ahead.

Yes, hello. A couple of questions relating to the personnel reductions. So you mentioned 100 persons in the Baltics. Is that sort of the final number for the Baltics, and could you provide a split per market? Secondly, with the remaining reductions in Sweden, will that primarily happen in Q2, or when should we expect those to happen?

uh i'll have one follow-up questions after but we can take this first okay uh thank you for your question peter is going to to answer these two questions yes uh so we'll not uh provide a more deep split than that roughly 100 in in the baltics and the rest in in is what we can share and uh looking forward the timing on that is something that uh that we'll not talk about right now. We take a step back and see how this will progress going forward, and then we'll come back with more information during the year.

But, you know, we partly answered this second question in the previous answer, meaning that what we are going to do as the next step is, of course, take the consequence of some of our specific simplification in some areas. And this, of course, will require deeper analysis and the work is ongoing, but not ready yet. You had a third question?

yes so this is perhaps just a clarification you mentioned that in Lithuania there was a deferral of cost until later can you quantify this impact and will this hit the q2 numbers yeah I can comment on that one yes it's about market timing in marketing spend where we had quite low spending in

in Q1, and it will come back later. We'll not give any specific numbers on that, but still on the line in the world to give it up.

Okay, but if I look at the deviation versus consensus, it's around 40 million in Lithuania, and is the bulk of this explained by the furlough costs?

No, not the bulk of it. And besides that, it's difficult for us to comment on exactly the expectations externally. So it's a good underlying result as well in the . OK. Thank you.

Thank you.

Thank you. We will now take the next question from the line of Oscar Romfist from ABG Sander Collier. Please go ahead.

Thank you, good morning all and thanks for taking my questions. So just the first one on your EBITDA after leases guidance. So you obviously have still quite a wide range of mid to high single digit and I think you already obviously delivered 6.3% organic EBITDA growth in Q1 and then you haven't really seen the impact from all of the workforce reductions that will also support Q2 a little bit. Can you just talk a little bit about why you keep at the lower end of that? And, I mean, what impact are you sort of building into that if we would see a deceleration in the underlying EBITDA growth for the next coming quarter? Thanks.

I believe that, you know, the answer comes from... I would say a very straight and humble statement. So far, that's true that we have been fast in delivering the first results of our transformation. But to be honest, we have picked the lowest hanging fruit in the tree. And now we need to go a little bit higher to take to catch and collect the other fruits. So of course, we are very happy and very proud of what the teams have delivered in terms of cost efficiency, contractual negotiation. But of course, as well, the largest part of the transformation is still ahead of us. And that's why we are, of course, optimistic about our ability to deliver the guidance that we have committed on. But we still want to remain focused on the execution and the delivery. And when you mentioned the workforce reduction, yes, we have been able to execute the first tranche. But as we were commenting earlier, we now need to dig into more detailed analysis to understand how we can rapidly simplify and improve and optimize processes in specific areas. And that's why we believe that we need to remain a little bit careful because we know what we have done. and we are confident that we can deliver what we have committed on. But I don't want to give the impression to anybody that we consider it will be a walk in the park. And, of course, we are very happy to have delivered this first result, but as I was commenting in my letter in the quarterly report, you know, these past few weeks have been painful for the company and for a lot of our colleagues. So that's my only comment to your question. I believe that we are on a good path, but we are not there yet.

Perfect. Thank you very much. Then just the next question on the SBU trends, and I'm particularly looking at the fixed broadband in Swedish consumer and also the mobile ASPU in B2B. So first on the broadband ASPU, we can see that it's accelerating from around 9% a few quarters ago down to around 5%. As you mentioned, you've done some price increases that are going to take effect from March, but you obviously did that last year as well. So just if you could comment a little bit about the the levels of price increases compared to the next year, and just looking at the ASPU trend, if we could still see that declining, given that the price increases will be slightly lower this year than compared to last year. And also on the mobile ASPU in B2B has fallen quite sharply as well. I think the peak at around 7% is now down to minus 4%, and you highlight that it's impacted by a change in customer mix. But just given the trend, is this purely driven by customer mix, or is it something underlying with the pressure on the mobile last few? Thanks.

Hector is going to answer for B2C Sweden, and Stefan will complete on B2B.

I guess part of the answer is what I said before. So there will be, basically they have been executed largely in March, so there will be more effect visible to everyone in the coming quarters. And it's one that's true for both broadband and mobile. And the pricing levels, as I said, were a little, the pricing was a little smaller than what they were, whatever, in past years because generally the inflation has been low in the country and therefore the adjustments were lower.

All right. Thanks, Oskar, for the question on B2B. If we zoom out a little bit, I think we start off with the macroeconomics for Swedish companies. I mean, it has continued to be a tough market environment. And what we've seen for some time is that many customers are struggling with growth. And you can say that we see that in the reports that are coming from the companies as well, which means that they need to address their cost base. That's what they have done and it also has affected us. What we've seen now for some quarter is that in the smaller segments we have high bankruptcies with customers that we are churning with high ASPO. In the SME and the large segments we see that they are doing adjustments of the existing agreements due to the reduction of employees and clean-outs of subscriptions. We also see that they are downgrading to cheaper subscriptions in order to improve costs. So that's what we see on the private segment. On the other hand, on the public side, we have been successful with several new customers in the last couple of quarters. And these customers come with a lower ASBO, lower usage, et cetera. So what we're seeing is a change in both, I would say, product segment mix which is affecting both the app, but also the overall mobile revenue development.

Got it. Thank you very much.

Thank you. We will now take the next question. From the line of Eric Lindholm-Rogers-Dye from SEB, please go ahead.

Yes, good morning and thank you for taking my questions. So I wanted to start on the Baltics, the start of the year in a very strong fashion here. Is this sort of the pace we should expect for the coming quarters or is there sort of more to come on the cost side also here going forward? And then I wanted to follow up with a Second question, there have been some renewed discussion recently about sort of a more supportive European Commission in regards to in-market consolidation. Can you give us your view here, perhaps? Would you welcome a further consolidation in Sweden? And what would Teletubbies' role be in such a consolidation? And also in the light of that, perhaps, how do you view your sort of net for mobility set up in the light of this?

thank you okay uh peter is going to take the the first question about the baltics and i will uh i will answer with him about uh consolidation yes hi eric thanks for for the questions on on the ball sticks i think we can see now in in q1 a quite strong top line growth with support from all markets and those solid customer intake on postpaid overtime and also those pricing activities different facing in each market but helping growth now in Q1. On top of that our Baltic colleagues are quite fast in executing on saving initiatives in an impressive way leading to this growth of 15% year-on-year organically. I don't think you can count on And that should be even more. It's a great quarter with 15% growth, and we can count on such a great delivery every quarter. But a good start of the year in the world.

And to answer your second question about the consolidation, I will not elaborate more than I used to do in previous exchanges with all of you. First, we are focusing on the execution of our transformation plan, and this is all that matters for us in the short term. Second, in Sweden, if a consolidation is on the table, we will, of course, pay special attention to the consequences on the competitiveness in the market and which remedies have to be granted to the remaining players in order to keep the the competitiveness of the market that the level it is today saying that I don't believe that the consolidation would be Would happen anytime soon will happen anytime soon in in Sweden and But I may be wrong. And regarding net for mobility, we are working with Telenor on the completion of the for 5G network. As I said, the of the network is promising, extremely promising. So we have already today the largest 5G broadband reach in Sweden when the rollout is not complete yet. So this is, of course, a key investment for us to deliver this quality of network. Then, of course, we need to prepare for the future because after the end of the rollout, We'll need to make sure that NetFormability will not only deliver the best network quality in Sweden, but as well the most cost efficient quality. But that's, I would say, is more for 2026. Perfect.

Thank you.

Thank you. We will now take the next question. From the line of Fredrik Lithell from Handelsbanken, please go ahead.

Thank you very much and thank you for taking my questions as well. I have two of which the first one is really a follow-up on both Jan-Marc, your comment about renegotiating large contracts and then also Stefan that you commented on your B2B segment there that you're looking to focus more on product and services with low impact on the workload. would you consider sort of leaving some partial revenues behind in order to improve your efficiency or as part of improving your efficiency in the organization in general, and maybe also in Stefan in the B2B world would be interesting to hear. The second question is really just housekeeping, networking capital, you had a positive effect from the redundancy provisions in Q1, should we expect that sort of to continue Q2 or was that the bigger chunk that came in and thereby it will start to reverse in Q2 or should we expect it to reverse from Q3? Thank you.

Okay, I will let Peter answer the second part of your question. Let me take with Stefan the first one. Definitely in the overall renegotiation of all our contracts, We focus on the profitable growth rather than revenue without profitability. So that I would say equally important when it comes to all the areas we are scrutinizing. So one good example of that is the decision we made about Boxer. Of course, it impacts our revenue and marginally our EBITDA in 2025 for a very small amount, but it's a necessary move, and we made the decision, the conscious decision, to decommission the terrestrial distribution because it was becoming loss-making, and we knew that, of course, we would be impacted on the revenue side. We have made such a bold move as well, not alone, together with other operators, to announce years in advance the decommissioning of the switch off of 2G and 3G in the country because we know that the technology will go to an end. And it's extremely important that we keep in mind the gross margin of every single activity. We have renegotiated a number of content contracts, for instance, in order to increase the profitability of our content distribution. And B2B is no exception. Stefan, you may answer the question on B2B.

To elaborate more on that, Fredrik. Yes, I mean, what we're doing is reviewing the portfolio which means that we will sunset some services and products this is something we've done in the past as you might recall last year we closed down the copper services that we had in order for modernizing our portfolio we have a broad portfolio we have long contracts with our customers which have led to that we have ending up with a really broad portfolio. And this is something we are working on. We will sunset some services products by end of the year. We will simplify the portfolio. But on the same time, we are doing, as I was referring to, we're doing IT modernization and also automation initiatives. And those, we will become more efficient on handling some of our products and services, which means that we will be able to grow profitably with some of the products that we have today. So yes, you will see a change in regards to portfolio, but then it won't be sort of a revolution as such.

No, it's an evolution.

Evolution.

Very clear.

Thank you.

yes on your question on on working capital and specifically several provisions the majority of those provisions will start in april april meaning then that it's great working capital as you as you were indicating okay that's perfect thank you very clear thank you we will now take the next question

From the line of Joshua Mills from BNP Paribas Exxon, please go ahead.

Hi, guys. Thanks for taking the questions. Both of mine were on the B2B trends on slide 8, if that's possible. The first one was just regarding the IoT-related network outage. Could you give a bit more color about what happened with that and whether the issue is fully resolved, or we should expect to see any spillover effect into the second quarter? And then the second question is just around the pricing strategy in B2B on the standalone contracts. I think you gave some useful color on the consumer price increases you're pushing through. How are you doing this on the B2B side? And if there's any more color you can give about the timing of the B2B price increases as well. Thanks very much.

Okay. Of course, Stephan is going to answer both questions.

Yeah. On the IoT part, this was an isolated event, a network outage that we had in Q1. And it will not flow into Q2 or Q3, et cetera. So we took that hit in Q1. So that's clear. On the pricing perspective, we have as most of us know, a broad portfolio, lots of different segments, and the contract setups look really different. Many of our large customers have overlapping contracts, subcontracts, from a time perspective. So it's a fragmented contractual setup. But in the private segment, we have indexes in those contracts. And we have different kind of index clauses that we utilize for doing price increases. It's labor indexes, it's KPI indexes, etc. So this is something that we are yearly, conducting price increases on and addressing these contracts. On the public segment, it's far less opportunities to do index increases. And that's because we come from an environment where we had low inflationary in Sweden. And when these contracts were set up, the setup of that, and that is a general thing, is very few contracts with the possibility of index increases on the public segment. So as a general comment, I hope that explains a little bit how it looks like for B2B.

That's very helpful. And maybe just on the timing of those price increases, have you already actioned some in Q1, or is it more of a trend that comes through in the second, third quarters of the year?

I would say the majority of this will be on the first half of this year. We've done already some in the beginning of the year. Some will come into effect in Q2. So depending a little bit on the timing when the contract expires and depending on what product line it is. But the majority in the first half of the year. And I will also say that the KPI index this year is quite low. It's a low single digit. It's 1.6%. So unfortunately, the inflation, the KPI was not high this year.

Got it. Thank you.

Thank you. We will now take the next question from the line of Andrej Kaversek from UBS. Please go ahead.

Good morning, everyone. Thank you for the presentation and also thank you for the improving granularity around various accounts within your guidance. I think that is a well appreciated change in communication. I've got two questions, please. I'll go one by one. So the first one is just on the tax refunds. I believe this is the third year in a row where we have got a tax refund. If you could just please elaborate or clarify around the nature of these, where these are coming from, and if you expect these going forward. I know you, Peter, said that we should be thinking about cash taxes higher over time. So does that suggest that even in the coming years, there would be some kind of mitigating impacts in the form of refunds, for example, 26, 27, and so forth?

Okay, that's for Peter. It's his favorite topic.

Yeah, it's my favorite topic. Thank you, André, for that. So looking at the tax refunds, the nature of it is that we're paying, especially in Sweden, then preliminary taxes during the year, and then we conclude the year, and then there might be settlements. And for a couple of years, we have, as you indicate, paid a little bit too much in preliminary taxes and And we have had refunds with different timing and different amounts. Going forward, I don't think you should count on such big settlements. That's not how we want it to be designed. But it's of course highly dependent also on our performance. The better results we do, the less refunds we'll get. That's why we also try to indicate how you should think around long-term tax levels. Hopefully that answers.

Yes, Peter, thank you. And then my second question, I know we already touched upon on this call on the fixed broadband growth trend. So I was wondering more on the cost side there, because obviously in the past, I think there has been a lot of pressure on margins from open city network fees and generally wholesale costs for the fiber network. At the same time, you are clearly deciding to kind of say maybe investing less into your current footprint and maybe outsource more. So I was wondering, number one, what has been the inflation thus far in the cause base for the kind of parts of the network that you're renting out compared to previous years? And then just going forward, how to think about the, you know, the, or if you could maybe just give us some insight into how you're thinking around the I guess, you know, CapEx versus OpEx debates in areas where you're deciding to potentially, you know, as opposed to previously upgrading the network to now outsourcing more of it. Thank you very much.

I would say on a general note, we believe that the regulation of the networks, especially in the on the SDU side is taking too long. We are waiting impatiently for PTS decision in this remit because at the end of the day, it impacts the customers negatively. And that's true that on the wholesale side, the situation in Sweden is not only complicated but in for a large remit unfair because we depend on the local decision of the infrastructure owners and this has to be regulated if we want to give access to broadband fixed broadband to all the customers so this is a message that we of course pass to the to the regulation authorities and we will, of course, stand on the side of our customers in order to accelerate this regulation. Saying that, of course, in general, we have a very pragmatic approach when it comes to delivering our fixed broadband services. We want, of course, to use our own network, which provides an excellent quality. We made a decision to change our approach for the RFI upgrade of these networks. I already commented that at the beginning of the year when we disclosed our full year results. because we don't see the benefit for the customer of a systematic upgrade to RFI, but we continue doing it reactively everywhere we see a need to improve the capacity of the network. And when, of course, it's easier for the customer to get access to our service via an existing infrastructure not operated by Tele2, We are keen to use it, but here, of course, we come back to the comment I was making about the wholesale price. We need to have a fair regulation for the wholesale price, not only for SDUs, but as well in some areas for MDUs. Peter, you want to?

Yeah, no, so on the SDU in particular, right, so we want to provide the services, but today we are forced to buy the entire lines of the Bizteam Access products, and we are waiting for unbundling of the loops. So yes, there's some small effects involved whenever we unbundle loop work for the customers, but it comes with, it should come with the saving of the cogs, and we are just waiting for BTS to actually announce this and put it in motion. But we are ready, and we are committed to it as we grow.

Thank you. If I may sneak in a quick follow-up on that. So just on the timing, because I've from my latest understanding is that the market definition process could be finished this year, but then the actual pricing regulation could only kick in much later. Is that your latest understanding of the situation as well?

I don't believe that we have a clearer or more precise view on the timing, and that's part of the problem.

Understood. Thank you very much.

Thank you. We will now take the next question from the line of Ajay Soni from JP Morgan. Please go ahead.

Hi, guys. Thanks for taking my question. Just two quick ones. The first one around the wage increases you're expecting in Q2. Have you announced what they will be this year for Sweden? Because I think last year they were just a touch above 3%. And then the second question is around your mid-term guidance. So what's holding you back from adding this back into the presentation? And do you have a timeline of when you expect to reinstate the mid-term guidance? Thank you. Peter?

Yes. Thanks for the questions, Ajay. On the salary increases, between 3.0 and 3.4% in Sweden from April, depending a little bit on how you count, but let's call it 3.4% in totality. And I would say on the midterm guidance, it's more that we're right now focused on this year of transformation. And once we're getting longer into this year and see where we stand, we can come back on this question.

It's much too early to say anything for the reason that I mentioned already. For the moment, we remain humbly focused on what is still to be delivered.

That's very helpful. Thank you.

Thank you. We will now take the next question from the line of Keval Kiroya from Deutsche Bank. Please go ahead.

Thank you.

We cannot hear you. Hello? Oh, we cannot hear you.

We will pass to the next question.

Coming from the line of from Citi, please go ahead.

Hello, good morning. Thank you for taking my questions. I have two questions, hopefully the quick ones. The first one is on the KPI trend in Sweden. It seems that the trend has moderated somewhat this quarter. Just wondering if you can elaborate what the key driver, are they just because of seasonality or because there is more focus in internal transformations? And looking forward, how should we think about the net-add trend going forward or whether there will be some more investment that you need to do to improve the trends? And the second question is really a clarification of the free cash flow movement. And just adding all the comments you made, Peter, on the tax and networking capital and also interest, It seems to me that there could be quite decent 15% to 20% increase in free cash flow for this year. I'm just wondering if that is the correct ballpark we should think of. Thank you.

Maybe, regarding the first part of your question, let me summarize what we already commented. The results on Sweden of course, our mixed results when it comes to the top line, because we see some positive trends on the core connectivity services, meaning on the B2C side, but on the B2B as well. That's true that we are very happy with the evolution of our postpaid revenue, fixed broadband revenue, plus 3%, plus 5%. In the meantime, postpaid revenue has been impacted by the decline of prepaid. Fixed broadband, we commented on that, has to be mitigated with the impact of Boxer. So that gives, I would say, a mixed picture on the Swedish side with, of course, what Stéphane commented on B2B with different Trends depending on the segment. I mean an impact of the economic Constraints on the small enterprises the micro enterprises Another picture on the development of large and public accounts. So all you know We we have delivered I would say a quite a mixed picture on the top line for Sweden but the most important is that we secured the delivery of the ABDL thanks to the first impact of our transformation plan and we hope that the trend will continue especially with the impact of the the workforce reduction in Q2, Q4. So that – saying that regarding the – Yeah, I have a question.

I think – thanks for the question, CJ. I think our intention with being a bit more transparent on the different components, one of the purposes that we can leave the math to you. I don't think we should elaborate on exactly where – but most of the components by our indication.

Thank you very much.

Thank you. We will now take a next question from the line of Felix Henriksen from Nordea. Please go ahead.

Hi. Thanks for taking my questions. I have a couple. Firstly, on the soft guidance on restructuring items, 500 million SEC for 2025, is that number applicable for both P&L as well as cash flow. And secondly, I mean, how should we think about the ideal balance sheet set up for you guys? You're, again, well below your leveraged target range and below even if we sort of include the first tranche of the dividend. So what is the reason for operating with such a conservative balance sheet as opposed to engaging in additional shareholder remuneration? Thank you.

Thanks, Felix, for the question. I'll start with the spectrum costs. I would say what the specific comment on it, you know, in fact, how it will impact cash, which is dependent on the nature of . And I can mention on the, I think we have a financial policy. Right now, as Jean-Marc has pointed out, it's early days. After the precision dividend, it will be at 2.4 per forma, and it tries to deliver first and then come back for the cash flow and see if we have any room for a move.

Exactly. Much too early to make any other comments and, of course, decisions.

Okay, thank you. I had a bit of a hard time on hearing the answers to the first question. The line is breaking out a bit.

Okay, sorry for that. What I said was that the 500 million in assumed restructuring costs for the full year is a P&L indication. And on cash flow, it depends a bit on the nature of those restructuring costs, how they end up. Got it.

Thank you.

I think it was the last question.

There is no more time for questions at this time.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Thank you. Thank you. Goodbye.