Telia Company AB (publ)

Good morning, everyone, and welcome to this quarterly presentation of the Telia Company's Q2 results for 2021. We will do this exactly as we used to do. We will start with our CEO and president, Alison Kirkby, which will then hand over to our CFO, Per-Christian Merland, and then we open up for Q&A. And as usual, please stick to one question each. Please be disciplined, as we are with CapEx. And by that, Alison, Over to you.

Good morning, everybody. Great to have Andreas on top form this morning. I'm also happy to be reporting another quarter of progress towards reinventing a better telia on this sunny Stockholm morning. As you'll have seen this morning, as societies have opened up during the second quarter, we've also seen an improvement in our performance with growth in both service revenues at 3.2% up and EBITDA at 1.9% up, both on a like-for-like basis. Nice to see, as this is the first quarter since Q4 2015, that we've delivered growth on both top and bottom line metrics. On service revenues, we saw growth return to our mobile subscription service revenues, with six of our seven markets now showing growth, and we're showing mobile growth in both the consumer and the enterprise segments. Service revenues also benefited from a strong recovery in our TV and media units, where advertisers have returned with strong demand and we are seeing strong demand for our pay TV services. EBITDA growth was mainly supported by the recovery in TV and media and further strong progress in the Baltics, but it was also a really solid quarter for Sweden with great underlying momentum. All payouts remained flat during the quarter. Importantly, we see progress in structural cost reduction, both within resource costs and IT, in total amounting to roughly 150 million kronor this quarter. Compared to Q2 last year, there are, however, offsets from some temporary investments to support customer experience, but in Sweden, and COVID-related impacts that reduced our cost base this time last year. So basically COVID mitigants that were taken this time last year. Cash capex is in line with the levels that we saw last year, despite continued network modernization and 5G rollout. And operational free cash flow reached 2.1 billion kronor, which is only slightly below the level seen last year. Year-to-date, we've now generated 6.1 billion kroner, and most importantly, we're well on track to more than cover our minimum dividend commitment for the year. Following this set of results, the completed sale of Tellier Carrier and the announced agreement to divest a minority stake in our Norwegian and Finnish towers, we have an even stronger balance sheet with a pro forma leverage just shy of 2.1 times. It's now almost six months since we embarked on our multi-year and bold ambition to reinvent a better Telia. Here is a quick snapshot of some of the progress made in the quarter. Revenue development and NPS is how we assess progress when it comes to inspiring our customers. And I'll get back to the revenue development in the country section. But in the NPS, we are seeing a positive development in Estonia, signs of improvement of stability in Norway, Lithuania, and even Denmark remains positive. And so it's only Sweden that continues its negative trend, especially in broadband. This is not surprising. And as we expected, as we've communicated, a number of price increases during the quarter. Despite this, we see that customer satisfaction levels are stable relative to Q1. And in all countries except one, we have an underlying churn reduction versus the corresponding period last year. Convergence, as you know, is our chosen route to improve customer experience, increase loyalty and sustain a premium versus the market in both the consumer and enterprise segments. In the quarter, we made good progress on convergence. Sweden's converged customer base is growing 25,000 and on top of that, we've seen a strong intake of Seymour customers throughout the Euros, leading to an even greater convergence potential ahead. Norway is also growing 7,000, with good progress on the expansion of our partner network. And Finland is growing 32,000, including good progress on content access, where we are seeing roughly two-thirds of all 5G subscribers adding a C-more subscription to their mobile subscription. At a group level, the churn on our FMC customer base is being monitored, and they remain roughly five points lower than for a single product customer. even for those customers buying a content with access product. In Sweden, we are one of only five operators globally to bundle Netflix seamlessly with an access product, and certainly the first in Sweden. From launching on the 1st of June, we're off to a good start with the first drop of our consumer aggregator product, with multi-order e-commerce and seamless bundling of connectivity, device, and value-added services. So far, 75% of customers are choosing the highest value tier, that's unlimited 5G+, which includes Netflix and Seymour. We're also seeing increased appetite for upgrades from existing lower data, lower ARPU tier customers, as more than 40% of sales of the new 5G Plus bundles are coming from existing customers trading up. At the same time, we're now monetizing 5G by making the 5G Plus feature available to all subscriptions for a higher ARPU worth 29 kroner. We're also continuing to strengthen our business with Swedish landlords. On top of the deals we signed in the first quarter, we've continued to sign more during the second quarter. So far this year, we've secured more than 130,000 households, of which close to 30% are totally new to Telia. Unique to all these landlord arrangements is the combination of next-generation digital services, including secure access, Wi-Fi, smartphone, IoT, and data and analytics that provide greater insights to the landlord about the utilization and efficiency of their building services. We believe that Telia has a true competitive edge in this area, hence the progress that we are making. This competitive edge and strength beyond connectivity is also evident in enterprise. On one day in June, we struck the biggest enterprise deals ever in both Sweden and Norway. In Sweden, We're honoured to have our contract renewed with Region Skåne for another six plus six years, where we will be their turnkey supplier in its digitalisation journey. On the same day, we signed an eight-year contract with the Norwegian Postal Service, which is a pan-Nordic contract where we will leverage our strong Nordic footprint, as well as our market-leading digital services, including our market-leading IoT portfolio. And TV and media continue to rebound, with commercial share of viewing on the rise in both Sweden and Finland, and see more gaining customers and posting revenue growth of 75% in the quarter, mainly related to a great fleet of sports content, and admittedly, relative to a period last year where a lot of sports were cancelled. As we pursue an ambition to connect everyone, 5G rollout continued at pace. Across our whole footprint, we increased population coverage by more than a third, Population coverage is now at 47% in Finland, we're in 65 cities, 25% in Norway, 34 cities, but 95% coverage in the two key cities. 13% in Estonia, we're in six cities, and we're the sole provider of 5G in Estonia. We're now at 12% in Denmark, in four cities, and we've expanded our 5G service in Sweden, now offering it in 22 Swedish cities. Encouragingly, excuse me, both our 4G and 5G network leadership in Sweden during the quarter, of which Umlaut, formerly P3, is one. In Finland, we achieved a performance milestone with an almost world record speed of 4 gigabits per second, and in Sweden, we just beat the Swedish 5G speed record. Alongside 4G modernization and 5G rollout, we're continuing to step-by-step close down legacy networks across our footprint, with further good progress in Sweden in the quarter, leading to structural cost reductions within both COGS and OPEX worth around 80 million kronor. We're also increasingly migrating traffic from 3G, where traffic has come down by almost 50%, putting us well on track to completely close down 3G throughout our footprint by the end of 2023. And finally, as you know, I've been quite vocal about our infrastructure ambitions. And so late in the quarter, we announced that we'll divest a minority share of our towers in Finland and Norway to Brookfield and Electa. Brookfield, as you know, owns and operates the largest tower footprint in the world and is clearly an excellent long-term partner to help us operate and commercialise these towers better than if we were doing it ourselves. We're aiming to close the transaction in the fourth quarter and based on the multiple, the MSA and the quality of the partner, we have an appetite to do more now elsewhere in our footprint. Moving to transformation, which is continuing at pace, and we made good progress in the quarter. Workforce reductions are progressing to plan, with about 450 colleagues exited year-to-date, and we've continued to expand and utilise our near-shoring operation, which now includes around 1,000 FTEs after adding another 100 in the second quarter. This initiative will strengthen critical digital competencies at a lower cost going forward. On IT transformation, we've started to deliver on a plan to drastically consolidate our supplier portfolio. We have closed agreements with four suppliers as strategic partners and will consolidate the first 29 suppliers into those four, which include Accenture, Capgemini, TCS and Tieto Every. We're already benefiting from the improved commercial terms and new ways of working as of the month of June. Over the next five years, This project will reduce OPEX and CAPEX combined by around 750 million kroner. Additionally to this, we closed a further 75 legacy IT systems in the quarter, contributing to IT cost savings of around 45 million. On simplification, we reached a strategic innovation partnership with software provider ServiceNow, which will fuel simplification and automation of key parts of our operations and a key enabler for our orchestrator value proposition to B2B customers. Implementation activities have now commenced across all markets. In addition, we've removed over 20 products and simplification plans are now in place in all markets to, in some cases, particularly in Finland, remove up to 80% of our existing products through 2025. We're also seeing a growing adoption of common products now at 12% across the group, which is critical to support the removal of legacy products and leverage scale benefits going forward. Finally, from a transformative digital perspective, TV media is clearly a standout in the quarter, with digital ad revenues growing by 177%, giving us confidence that TV4 has the ingredients to be one of Europe's most profitable broadcasters, even as viewers and advertising shifts from linear to digital platforms. Finally, on delivering sustainably, we're on track with all of the financial ambitions we set out to achieve this year so far, and are particularly pleased with the stability in free cash flow and the strength of our balance sheet. We are in good shape as we move into the second half of the year. In the markets where we're the market leader, we are responsibly taking action to restore market growth on the back of the significant investments we've made into our networks. 5G monetization is one of those actions that were recently taken in Sweden, alongside the multiple price increases that we've taken in Sweden recently as well. At the same time, our purpose ensures we also take responsibility for societal progress. And in the quarter, we made good progress and proudly received some high-quality recognition. For example, we were highlighted by the Financial Times as a European climate leader due to our emission reduction and the fact that we set bold science-based climate targets. Together with a few of the largest European operators, we launched a new circular initiative, the Eco-Rating of Mobile Phones, to encourage customers to easily select phones with strong environmental credentials. And we've launched a mobile driving license for Swedish children to provide a safe and secure start to their digital life. And finally, we received a gold-level award, the highest level possible in the Estonian Responsible Business Index Award. So that's the strategic progress, but now to the markets, and let's start with Sweden. Despite the legacy drag continuing to impact revenues worth around $135 million in the quarter, EBITDA was stable due to underlying growth in our future revenue streams and good cost takeout. Underlying, we're seeing solid momentum, most notably in B2B within the large segment and inside it, both showing growth on a year-on-year basis. Sweden B2B actually grew their mobile revenues by 2.5% in the quarter, which is the first time in a long time. In B2C, we're seeing strong growth in fibre, up 11%, TV, IPTV, excluding Seymour, up 17%, and also in mobile, as I said, up 2.1%, if you exclude last year's one-offs. In totality, service revenues, excluding legacy, and the one-offs, grew by a healthy 2%. OPEX was down 4%, and COGS was stable, as savings from copper dismantling and subcontracted field work offset increased content and open city network access costs. Looking ahead, we have in the quarter implemented several price increases on legacy copper products, including PSTN and XDSL. And we're seeing early indications of less legacy burden after having implemented these prices, which, combined with additional price adjustments already announced for the autumn, we're expecting to see improved trends in the second half of the year. These announced price increases include fibre such as the family share plans, we're adding extra SIM cards to the base subscription for a small fee. In terms of leading indicator KPI development, I think this is where Sweden is showing some really good signs. In mobile, we're increasing our postpaid subscriber base with all brands either stable or growing their base. In enterprise, we are still impacted by the loss of a low ARPU public sector customer, but stable, excluding that loss. ARPU levels are moving up, driven by enterprise, partly explained by the loss of that customer, but also by increased usage and value-added services. Overall, pricing levels remain competitive, but no worse than we've seen before, and our broad range of services and tools are proving to be supportive to customer retention and ARPU development for Telia. Churn is also healthy, with reducing churn in consumer and stable in enterprise if you exclude the aforementioned customers. Within broadband, we're continuing to grow within high-speed tiers, and especially within the Open City Network universe. This quarter, we saw a higher churn within our XASL customer base, which is as expected given the price increases. Our proof is up on a year-on-year basis and flat sequentially, and overall trends are in line with what we've seen in prior quarters. The success we've had within MDUs is also visible in TV subscriber growth, and we also grew in FDUs in the quarter. This is now the fifth consecutive quarter with net additions. TV ARPUs showed a dramatic growth year on year as last year was impacted by the pandemic. So sequentially we are flattish as increased uptake of high ARPU sports packages is mitigated by the dilutive effect of our NDU growth that is implying underneath. All in all, Sweden was a strong quarter with a growing customer base, growing ARPUs and reduced churns. But as you saw in our report this morning, Finland had another challenging quarter, even if the revenue trend did get sequentially better. We declined in both service revenues, down 1.6%, and EBITDA down 9%, driven by the enterprise segment, where especially the IT business lines were lower by 7% than they did at all. The consumer segment was actually flat, and the decline in mobile was offset by growth in TV. But there were some signs that make us hopeful for the future. We saw positive momentum in the mobile customer base, a record 5G migration at an average €3 higher ARPU. We're closing the gap to Alisa in terms of population coverage. We have lower churn in our access with content bundles, and we're seeing continued growth of Seymour, which is now the number two OTT player after Netflix in the Finnish market. However, that didn't help EBITDA materially. EBITDA was particularly weak due to certain pandemic cost reductions or mitigations that were taken last year, and they've now returned, and that includes a pension holiday and marketing, but also from a non-recurring software license cost that we took this quarter and increased energy costs. From a KPI perspective, the mobile subscriber base is growing, driven by enterprise, where we add customers from a large public customer, and our crew is slightly down year on year due to the segment mix shifts. Churn remains at lower levels than the pre-pandemic levels. Several transformation initiatives are now underway, and headcount has already been reduced by 3% since the beginning of the year. In addition, our Head of Strategy and Commercial, Marcus Messerer, will, on top of his group role, become the Finland Chief Commercial Officer to help the Finnish team fix commercial basics and enable a value-accreted commercial turnaround, while Heli focuses on the overall transformation agenda. Moving to Norway. Service revenues declined as expected, but entirely related to lower revenues from our national roaming contract with ICE, which impacted us negatively by around 67 million kroner. Wholesale revenues aside, underlying momentum is actually quite solid, with positive momentum in the enterprise segment, up 3.4%, and especially in SME, where we had our highest subscriber growth ever. We're also seeing positive growth in the consumer segment, with strong growth in broadband, up 3.8%. Churn remains relatively low in both segments, and ARPU development is positive across the board, with continued strong traction to our premium tier mobile subscriptions. That's Telia X, which now represents 17% of our total cost-paid base, and this is clearly supported by rapid 5G rollout, now at 25% coverage and ahead of the main competitor. Similar to Sweden, we are growing our customer base, we are growing our crews, and we are seeing churn declining. The highlight of the quarter was what we touched upon earlier, the deal signed with the Norwegian Postal Service, the largest deal ever signed in Norway. This, as well as the earlier contract signed with the Norwegian police and the renewal of the contract with NRK, the Norwegian public service broadcaster, we have clearly proven that we're a reliable and trusted supplier of communication services to the entire Norwegian public sector. OPEX increased by 4.4%, but mainly related to lower cost taken last year to mitigate pandemic impacts. Underlying, however, we are making good progress on transformation and structural cost takeout, such as proceeding with the outsourcing of our field services during the quarter. Moving to our lead markets, and just as in the previous quarters, the trend remains very strong in our Baltic operations. Lithuanian service revenues grew 5.5% and EBITDA grew 3.7%. We saw more than 5% growth in both mobile and fixed services, with the consumer segment being the main driver at 11% growth, particularly from growth in mobile. Estonian service revenues grew 6.1% and EBITDA growth was excellent at 12%. There is progress on both mobile and fixed segments, with mobile turning to growth and fixed accelerating its pace from previous quarters. In Denmark, our service revenues declined, but albeit at a lower rate than recent quarters, but EBITDA declined quite significantly due to lower equipment margins relative to last year. We also had lower costs in Denmark last year taken to mitigate the early COVID impact. Importantly, though, Danish mobile service revenues are now stabilising, And in fact, flattish for the quarter with a particularly strong end to the quarter during the month of June as Denmark truly reopened. And then finally, TV and media had another strong quarter as it rebounded from the COVID lows and it even accelerated during the quarter. EBITDA increased almost 85%, driven by service revenue growth of 45%, with both ad up 43%, equally in linear and digital, and pay up 58%. Businesses are improving significantly post the pandemic with increased share of viewing in both Sweden and Finland, and premium price levels restored in pay. We continue to take market shares in linear TV, driven by a combination of well-established formats, new successful formats like the season finale of Matt Singer had an astonishing 76% share of viewing, as well as popular sports events such as the World Championships in ice hockey, Go Finland, and the Euros, mark my words, the tartan army and Scotland will be back again. More seriously, as demand from advertisers returned, we could leverage on our strength and market position, offering more inventory and being disciplined on pricing. Additionally, we see strong growth in digital, with viewing time on TV4 Play growing 25% more than any other domestic broadcaster, including the public service broadcaster. As a consequence, our EBITDA grew significantly, though not to the same extent as revenues due to, as expected, higher content costs from the returning sports events. As a reminder, there will be an increase in content costs in the second half as we have some significant and exciting sports rights content in the coming quarters, such as the Champions League. But putting that aside, This quarter is another proof point that we're on our way to restore and reach our original ambitions from media ownership, driving convergence, increasing loyalty, and becoming the aggregator of digital experiences for the home, regardless of its media, connectivity, or smart home services. But now, I'll hand over to PZ.

Thank you, Alison. So, let me quickly summarize the financials. First, service revenue. At the right on the slide, you can see the plus 3.2% growth broken down by the market and the unit. Sweden, as mentioned, is impacted by a legacy decline that is upsetting the underlying growth. Finland experienced pressure both on mobile and fixed revenues. Norway has underlying growth, but is impacted, as Alison said, by the wholesale agreement with ICE. Our both big markets continue the strong growth momentum, and lastly then, the solid strong recovery of our TV media business. If we move to the left side, the key driver of the 3.2% growth is as mentioned, the recovery in the TV media unit, but we also see good development in our telco business. Total telco consumer segments see a growth of 0.5%, This is driven by growth in mobile revenues in all markets except Finland, and TV revenue growth across our footprint. And this is more than offsetting the roughly 200 million legacy pressure we have in the quarter, mainly coming from Sweden. We are also happy to see that total telco enterprise revenues are flat versus last year, with great trend improvement in Sweden, a good growth momentum and continued strong performance in our Baltic markets. So, year-to-date, after six months of the year behind us, we have recorded a slight service revenue growth of 0.4%, and are well on track to deliver on our outlook for the year of a flash to single-digit growth. On operational expenses, total OPEX was, as mentioned, stable in a quarter, and on the right, we can see the breakdown into the three main cost categories. On resource costs, in the quarter we have 100 million structural cost savings from 450 colleagues that have left us during this year. It is, however, more than offset by three key elements. One is, as usual, salary inflation. The second is, as Alison alluded to, return of certain costs, high-interest-related. Examples include, but are not limited to, temporary layoffs from closed shops last year, temporary lower use of consultants, lower social security charges, and also lower pension costs in some of our markets. And the third component is specific and temporary investments we have done to strengthen customer support and customer experience in Sweden, and also some specific growth-related investments into our B2B operations. cost safeguard also in these areas. The increase in resource cost is offset by efficiencies and reduction in other costs from 50 million lower IT costs related to the vendor and system consolidation that we are pursuing and lower provisions for bad debt in the quarter. This is partly offset by somewhat higher energy costs in some of our markets. Year-to-date, we are down 1.6% In line with our plan, we are on track to reduce total resources by 1,000 during this year. This will both secure a good result for 2021, but more importantly, secure a strong run rate into 2022 and the years to come. 2023 and 4 billion by 2025. On EBITDA, at the right-hand side, you see total EBITDA growth of 1.9%, broken down by market and unit. Sweden is stable, despite pressure from legacy that is offset by cost reduction. Finland is down 9.1%, impacted by both continue to see good growth momentum in the Baltic market, and then there's a strong recovery in our TV media unit has also generated a strong EBITDA growth in the quarter. With EBITDA growth here today of 2% growth, we are well on track to deliver on the outlook for the year of flat to low single digit growth. In the second half, TV media will contribute less on EBITDA than in the first half, due to tougher comparables and also the mentioned increase in content costs. This is somewhat upset by expected improvements in the Telco business, both on the revenue side, but also effects from the cost initiatives. On CapEx, starting from the revenue side, that we see an increase in mobile network investment related to the ongoing 5G rollout and mobile network modernization currently ongoing in all our markets. This is offset by slightly lower investment in fiber in Sweden as planned. Investment into product development and IT is only slightly up our products and IT platforms. As we can see on the left side, total cash capex on a rolling 12-month basis is stable on 13.4 billion or around 15% to net sales. As mentioned before, cash capex will gradually increase in the second half, both from higher planned activity level, but also from the delayed effect of completed activities due to our long payment terms. It's worth noting that the ongoing our business and delayed some of the capex spend, but so far we've been able to mitigate this relatively well. All in all, we are on track with our investment agenda, and given the expected increase in cash capex in the second half, we are well on track to deliver cash capex in the range of 14.5 to 15.5 million for the year. On cash flow, starting from the right, Total cash flow in the quarter was solid at 2.1 billion, slightly lower than last year. EBITDA less cashback is stable in the quarter, but is expected to be impacted in the second half by the higher cash cashback levels. Tax and interest payment is a drag this quarter, but this is entirely due to spacing between the quarters versus last year. Next, other payment is negative. transaction and also the ongoing business transformation program. Lastly, also this quarter, we have a positive impact on working capital driven by the positive contribution from our vendor financing initiative. Moving to the left, year to date, we have now generated a solid cash flow of 6.1 billion or 75% of the minimum dividend commitment of 8.2 billion. On a rolling 12-month basis, and continue to be supported by working capital contributions. On a rolling 12-month basis, excluding working capital, we are still in line with the minimum commitment of 8.2 billion. So, to summarize, we are well on track to generate more than enough cash flow to cover our dividend commitments for this year, and we are well on track from 2022 onward to cover the dividend commitment with cash flow excluding contribution for working capital. On the power transaction, there's not so much more to comment at this point, other than to say that we are very happy with both the valuation of 27 times, but also our strong and solid partners in Brookfield and Electa. And I really look forward to the journey that we have ahead of us. to around 70 billion, with net debt to EBITDA ratio reduced to 2.32 times. This improvement is driven by the receipt proceeds from the carrier transaction. Excluding the proceeds from the transaction, net debt is fairly stable, including payments of the first tranche of the dividend that was paid in the second quarter. is 2.07 times. And this will put us in the lower end of our target range of 2.0 to 2.5 times. So to summarize, after a solid first half with year-to-date results, well-enlivened outlook, and good visibility for the remaining six months, we are confident to reiterate our outlook for 2021 with service revenue and EBITDA, plus the low single-digit growth, cash effects around 14.5 to 15.5 billion. With that, plus the ramp-up of our transformation agenda, we are also well on track towards our mid-term ambition. And with that, I hand over to you, Alison, to summarize the presentation before we go into Q&A.

Yeah, thanks, PC. So, just in summary, we're clearly pleased to be back to growth on both top and bottom lines. and importantly delivering in line with the outlook that we set out for this year. Our core business is improving, driven by mobile, where we're seeing growth in six out of seven markets. TV and media recovery is real, and we're closing in on the full potential imagined when Bonaire was acquired with an exciting autumn ahead of us. We're progressing well with our strategic priorities, that includes the transformation programme. We've received the proceeds from the sale of Telia Carrier and announced our first tower deal. cash generation remains very healthy and our balance sheet is strong. So our full focus is now on creating a better Telia by delivering on the roadmap that we set out in January, a roadmap that aims to reinvent a better Telia for our customers, our employees and our shareholders, while contributing our part to enabling the development and digitalisation of the societies of the Nordics and the Baltics. So, I think it's time for Q&A now. We've been talking for far too long.

Thank you both. And operator, please, let's open up for Q&A.

Thank you. We will now begin the question and answer session. To ask a question, please press star and 1 on your telephone keypad. Your first question comes from the line of Peter Nielsen from AVG. Your line is now open.

Thank you very much. Morning, Alison and Pierre-Christian. Alison, I'd like to take a step back from the Q2 results, please. If we go six months back to the strategy update we had at the time, some of your new management team had barely settled in. I think some hadn't even arrived yet. Then you outlined sort of the transformation process as well as your plans for a strategy for regaining commercial momentum. Now it's been two quarters. How would you evaluate the progress and the size of the challenge, the way management views it today? You're saying that the transformation process is going as planned, which is positive. It sounds a bit like the challenge in Finland perhaps is a bit greater than originally thought. How would you say about Sweden? Is your view on Sweden, what is required, the size of the challenge to turn Sweden around? Is that unchanged, Alison? Thank you.

Thanks for the question, Peter, and thanks for rising above the queue too. Yeah, you're absolutely right. You know, in January, a number of the team were new. And I think reflecting back, I'd say we're actually slightly ahead of plan on commercial momentum if you exclude Finland and Denmark. I'm actually really quite happy at how momentum is building commercially. And the transformation program, our leader to lead that came in in the summer of last year. And that is very much ramping up in line with expectations. And where I think we're slightly ahead of plan is probably TV media. TV media has rebounded faster and they are transitioning to digital faster than we expected as well. And clearly our TV position across the footprint, not just in the Bonnier asset, is really strong. So that's where we're probably a little bit ahead of plan, Peter. But you're right, it's similar that we're behind plan. And I think what we've realised is there's more work to be done on the commercial agenda there. The transformation and cost structure take-out is clear and we're moving forward with that. But it's more the commercial agenda and machinery that is weaker than we expected. And that's why I'm sending in Marcus to help because he brings great experience from Austria, from Switzerland, from e-commerce. And we do need to radically digitalize and change our channel focus in Finland. So and then moving to Sweden, you know, I think. I'm actually really happy with the underlying momentum in Sweden. If you look at, everybody has reported now, and if you put aside Hutch, we're ahead in consumer mobile, we're ahead on enterprise mobile, but we're doing that in a value-accretive way. We're sustaining, if not growing, our pooms. We're reducing churn, and we are proving that when you sell in a broader range of services, particularly in the enterprises, or to landlords, and even to the consumer now with great content, we're starting to be able to sustain that premium ARPU position that we have. And we've now, in the matter of the last quarter, taken a number of pricing moves to restore market rules. And excluding churn effects, they could be worth up to 350 million on an annualized basis going forward. Some of them are on legacy products. So I think, you know, 200 to 300 million on an annualized basis from that pricing. So overall, you know, good about Sweden. But this is a major transformation, Peter. You know, we said at the time, it will take time. You know, but we're happy with the progress today. And the team remains super excited about the potential. And when we find such basics missing in our commercials, operations in Finland, we know that actually just fixing the basics will create a lot of value, too.

That's great. Thank you for that answer.

Thanks, Pika.

Thanks, PK. Can we have the next question, please?

Thank you. And your next question comes from the line of Andrew Lee from Goldman Sachs. Your line is now open.

Morning, everyone. Thanks for the presentation. Just to add a couple of questions on Sweden. Firstly, just on the Swedish consumer service revenue trends. I know you had relatively easy TV comps in the second quarter, but should we expect mobile and broadband trends to kick on and accelerate into the second half, given the price rises you announced in Q2? And how should we view the scale and breadth of those price rises? And then the second question was just on B2B, which is Always hard from an outsider's perspective to get a true understanding of. But I know you lost a public sector contract. But do you think that the pricing pressure has abated somewhat in large corporate? Is this a trend? And how are you holding up in SME given Teletubbies tariff changes? Any help on that? what's going on on an underlying basis in B2B would be great. Thank you.

Yes, absolutely. Thanks, Andrew. So on B2C, yes, as a result of the pricing moves we've taken, the stability and actually underlying growth in our customer base and the churn reduction and with Champions League coming uniquely to teleplay and Outlook, the outlook is actually really quite good for our consumer business. And as I just said to Peter there, in totality, the pricing is worth up to $350 million on an annualized basis. But if you assume there's some churn there, we can look at $200 million to $300 million upside. And so, you know, good outlook on B2C. Really strong. We grew the large segments, as I said, always mid-single digits. Cygates is growing, and they are, you know, with all of the demand for digitalization support in our customers, I think that growth will continue. We are seeing stability of Arcus in public and key, and seeing stability in SME as well. So, you know, both of them had similar trends to Q1. And that's in the low single digit decline range. So not seeing any negative impacts and actually holding up really well. And as I said, we are sustaining an ARPU premium because of the range and quality of services that we're able to take to the market.

Thank you. So it sounds like B2B is improved versus a pretty tough 19, 20, and that's kind of sustainable.

Yeah, absolutely. You know, as I said, you know, we grew mobile and enterprise 2.5% in the quarter. It's been a long time. And, you know, you're positive in large SMEs, low single-digit decline, and, you know, there's no roaming in there now. So I really... really, really solid Swedish quarter, actually, in terms of underlying base, ARPU, churn reductions, initiatives ahead. No, very good.

Thank you.

Thanks, Andrew. Next question, please.

Thank you. And your next question comes from the line of Maurice Patrick from Barclays. Please ask your question.

Yeah, morning, guys, and thanks for taking the question. If I could... move the conversation onto the towers. You've been pretty clear in the presentation, Alison, it's more than just getting a high multiple for it. But picking up on your comment around Brookfield about helping you do it better than doing it yourselves, what is it specifically you think Brookfield can bring to help you run that tower portfolio better than maybe if you're doing it just on your own? And you also said, I noticed in the presentation, that this is our first tower deal. So I guess the obvious question is, what's the next one? Or what can we expect? And do you still take the view that Sweden is sacrosanct? Or are you going to wait and see how the Brookfield deal lands before you start taking more strategic moves? Where are we in that perspective? Thank you.

Thanks for the question, Morris. So, yeah, I've been very clear that we see the industrial logic in our digital infrastructure. We went into the first power transaction with an ambition to sell a minority stake, but to bring in a partner that will help Telia be better. So not just crystallizing value, but giving us a competitive MSA agreement, allowing us to control that MSA agreement. And in terms of Brookfield, you know, just They run a footprint of 185,000 towers today. We treat our towers as something on the side. We've not been running them efficiently. We don't proactively go out to find new tenants. And a world of massive microcell deployment, which will happen with 5G and 6G, with the likes of Brookfield operating in India, where all of those towers, where they've got many, many towers, and pushing more and more kit onto those towers, we are going to learn so much. And we saw that in the partner presentations. We really focused as a management team on what do the partners bring, and Brookfield really stood out for us. And they're in it for the long run. So really, really delighted with that. And their ambition, and actually all the other parties that we met, ambition was for us to build out a Nordic Baltic Tower portfolio. So Norway, Finland, concrete and steel is first. We've still got the rooftops to go after. And considering the quality of the partner and that partnership between Brookfield and Electra, we might be more willing to proceed on a faster basis with Sweden as well.

That's very helpful. Thank you.

Thanks, Maurice. Next question, please.

Thank you. And your next question comes from the line of Nick Corral from Society General. Your line is now open.

Morning, everybody. It was just a quick one, Alison, please, on Finland. If you could talk about what costs have risen, if that's okay. I know it sounds like early days as your team go in to look at the costs, but how long do you think, if at all, it's going to take you to get the costs down? Is the 2 billion sec target for... for full cost savings dependent on getting these finished costs down, or would this be additional on top? How does that play along with the big group targets, please? Thanks.

Yeah, so thanks. Thanks for the question. So clearly, short term, there was a bit of a bump up in costs. You know, some one-off license costs, some increase in energy costs. And we were coming off of a period last year where there were some short-term interventions, like no pensions and no marketing. But our cost agenda that we're planning on is a part of that $2 billion. It's not going to add to the $2 billion. It's included. We're just a bit slower to get our share of that, and it's phasing a little bit later than we were expecting. Where does the cost come from? We have, over the years, really proliferated all of the B2B products and services through acquisitions. We've already in the quarter sold two small businesses, alert and alarm business and a remote monitoring business. So a lot of the cost benefit comes from radical portfolio simplification. I think our group ambition is to reduce products by about 50%. In Finland, we're going to go much harder and we will go faster, particularly in the B2B area. And then it's about automation driving productivity and efficiency, having a smarter channel, go-to-market channel strategy. We're very reliant on third-party retail that's very costly. We aim to go much more digital. And really, by building the network perception, the brand perception, and bringing some of the digital capabilities from elsewhere in the footprint and what Marcus brings from his e-commerce experience. We hope to go harder and faster there. And then really driving convergence to reduce churn. And we've got a big churn machine in Finland, unfortunately. That drives a lot of subscriber acquisition costs that clearly is part of the transformation agenda as well. So a lot to do. It's all part of the 2 billion. It's just coming a little bit slower than we expected, but now we will go harder and faster and catch up as soon as we can.

Is it fair to say, because of that, so I get the point about the 2 billion, but is it fair to say there might be a few more rocky quarters in Finland on the way? I mean, it doesn't sound like a straightforward exercise, this. I think even the previous management and the one before that struggled with the Finnish cost. So is it something you've got to beat a few things up before they come right?

Yeah, well, this management is going to fix it once and for all. And yes, it's going to take a few quarters, certainly. You know, it's not going to be solved overnight, but I'd hope to be on a better run rate by Q1 next year.

That's great. Thanks, Alison.

Thanks, Nick. Thank you, Nick. Next question, please.

Thank you. And your next question comes from the line of Terence Sui from Morgan Stanley. Your line is now open.

Thank you. Good morning, everyone. I had a question around the TV and media unit, please. Basically, it's just great news that you've got the Champions League rights from next season after such an exciting summer for England and some of the Nordic countries as well. You mentioned that the costs should increase in the second half of 2021, but I'm just thinking about whether you can steer us a bit more around the evolution of revenues and cash flow as well. How do you expect to to eventually be paying off the increased content costs? And how should we think about the evolution of revenues over time? Thank you.

Yeah, we've not really disclosed that because a lot of the revenue will actually flow through in our Swedish business unit. It won't necessarily all flow through in the TV media unit because we've now announced the packages will be split between Seymour, offer to all, and some unique experiences on telly or play. So they both contribute to our overall outlook for the year of flat to low single-digit growth and clearly trying to maintain the momentum that we've seen in Q2. In terms of, again, the cost impact, as you know, these contracts don't allow us to disclose the absolute cost impact, but the The rumours in the media is a good estimate of what it will cost over the three-year period. And clearly you should be planning on that cost hitting us, you know, two quarters of that cost or half a year of that cost in the second half. I don't think I can really say any more than that. Although, you know, the revenue development will be positive for TV media and Sweden in the coming quarter.

And the cost will be booked as the games are broadcasted. So it will be fairly even along the period. And then on cash, part of it has already been paid. So then there will be other installments inside.

look at consensus for the TV media unit at the moment for the year, I wouldn't take that up any further as a result of the Q2 results. That is a good estimate. Don't go further is my guidance to you.

Great. Thanks for the clarifications.

Thanks, Karen. And also good to see that Denmark actually was in the Euro, which I missed last time. Apparently they were. Next question, please.

Thank you. And the next question comes from the line with Ulrik Ratlatsch from Jefferies. Your line is now opening.

Yeah, thanks very much. I wanted to get back to the Swedish price increases. I think the way you've positioned it, right, is that you're sort of putting the price umbrella over the market as the market leader. and Teletubbies sort of communicates in a similar way that they're taking responsibility. Question is, if you look at the prices, price levels that you will be at in the second half after the price increases you've now announced and Teletubbies being where they are, are you essentially exposed to, to, you know, to the price levels of the rest of the market and, and, you're watching what they're going to do. And if they don't move, then you have to rethink it. Or do you feel you're in an entirely comfortable position with the situation that you will be in in the second half, also given where Teletubbies will be at that point? I'm just trying to figure out what the pull forward and then sort of the ratchet situation is and how you look at that commercially. Thank you.

Yeah, I think, you know, clearly we're always cautious when we take pricing, and that's why I said, you know, you've got to think about reducing the absolute amount by a bit of churn before you assume you can get the full value. But if you look at the pricing we're taking, we're not doing anything dramatically ahead of inflation. Where we can, we are implementing them alongside some value-added services. So if you look at how we're nudging up price we're pushing a 5G plus premium. That's an extra service for our customers. We're adding an extra SIM for the family. That's an extra service for our customers. And in the fiber area, we're pushing higher speeds all of the time as well. So none of them are particularly dramatically going to move us away from the market. There are multiple levers of small pricing that overall is worth a lot that I don't believe will make us disadvantaged from a competitive point of view, it will be.

That's very helpful. Thank you.

Thank you, Ulrich. Next question, please.

Thank you. And the next question caught in the line of Keval Kirolia from Deutsche Bank. Your line is now open.

Thank you very much. I've just got a question on Finland. You helped elaborate some of the issues related to OPEX, but just When we think about the service revenue performance, can you talk a bit more about just what you think is going wrong? You did mention, I think, distribution, but just to understand exactly why you think the brand is really underperforming versus DNA, and at least it would be helpful. And also, as you try to fix the service revenues, is there a risk that actually you need to spend more OPEX just to also get the revenues in the right way? Thank you.

Thank you. Well, we've been, we're still living from a period where network perception was a problem for Kelly and our sales team were trying to, they were too focused on going after growth ads at a discount rather than retaining the current customer and working with that customer through added value services. So we're going to shift more to a customer value management approach, really upselling 5G now, now that we've got to 47% population coverage. We're seeing an acceleration of 5G take-up. We're now over 100,000 subs. So that will help as well. And we're going to do a lot more work on churn prevention, which was not the case during the last six months in the way that we'd expect. And we've also got some pricing moves to take advantage of, particularly in the all-pay area and some of the lower value tiers as well coming. So I don't expect to see a dramatic impact in OPEX to drive this. In fact, As we move away from third-party channels and move more to digital, that should actually reduce our OPEX over time.

That's very clear. Thank you.

Thank you, Kiral. We have a couple of questions left, so let's try to move quickly. Next question, please.

Thank you. And your next question comes from the line of Steve Morecambe from Redbird. Your line is now open.

Yeah, morning, guys. Thanks for taking the question. Can I just come back to Ulrich's question on pricing? Maybe I've got it wrong, but I thought your fiber prices were going up double digits in the second half without any noticeable increase in speeds. Can you just clarify that if that is the case? And if it is, is it plausible to get MPS up against those sorts of price rises? And what would be success in terms of the movement of turn in net ads against those sorts of price rises? And your broadband subs are already declining significantly. Do you expect that to continue? Just an understanding of the overall movement on price and broadband and the expected subscriber evolution would be great. Thanks.

Okay. Yeah, the pricing, we're going from $439 to $479 on the 100 megabits. We're going from $509 to $529 on the 250 megabits. So I don't really see those as being particularly aggressive, and then we're always trying to treat customers up to higher speeds as well. The bigger, more ahead of inflationary pricing is on XDSL and PSTM, which, you know, we've got a history of driving those price increases ahead of inflation. And yes, it accelerates a bit of churn, but it still contributes to the bottom line positively. Did I ask that question fully, answer that question fully, Steve?

Well, I guess it's usually sort of more for more. We're seeing the same for more, which is, you know, more for more has got a checkered history, more, you know, the same for more. There's not much history at all. It's kind of an odd move in this particular time, I guess, in the market.

Not that we're also selling in great TV packages as well. We've got the best TV packages in the market at really great value for money. So that is where we're driving the wheel for more benefit for our customers, as well as nudging up the pricing of fiber, which is fundamental to the sustainability of the market. the value of fixed connectivity in Sweden going forward, because fiber is cheaper than some copper products. So offering more for more on the TV and driving up fiber pricing, I actually think is a good strategy. And because of the bundling we have, not just of our own content, but also with Viaplay, And with D+, we've got all of the sports that anybody could want at a very good price. And now with Netflix and Jetson as well, we're in a strong position.

So maybe you can give us an idea when you expect NTS scores to improve. Obviously, there's going to be a bit of a lag with the price rises coming through.

Well, I think it will be tough this year with all the pricing we're taking. But maybe they'll be delighted by Champions League and that might nudge us up.

So will the 109 customers get Champions League in that price rise or do they pay extra for that?

No, they pay extra for that. That's pure fiber.

Okay, so it's pure fiber, and they still get 100 megs for the same price, basically. Sorry, for the extra price.

Yeah, it depends what their TV package is at the moment for failing, yes.

Okay. Okay, thanks.

Thanks, Steve.

Thanks, Steve. We have time for one more question, the final one. Maybe something for BP.

Thank you very much. And your next question comes from the line of Stefan Galfred from DNB Bank. Your line is now open.

Good morning. Well, most of my questions are answered, but perhaps could dig in a little bit deeper on the cost increase in Finland. You reported very solid postpaid subscriber intake in Finland, but I think you mentioned at the call that it was a large B2B contract behind that number. Can you clarify that, or if you also had good solid subscriber intake on your 5G plans? And the reason why I'm asking is, I wonder if higher subscriber acquisition costs explain part of the cost increase this quarter.

You go ahead and talk about the cost increase. It was more related to the artificial low marketing costs that we had last year. That is part of explaining the cost increase that we have reported this year. But the cost increase in Finland is not just driven by marketing. It's also other cost items that affect the comparability versus last year.

and all the subscriber base increase was in the B2B segments driven by that new public customer.

Okay, that's very clear.

But good progress on 5G subs, one of the many things that makes me hopeful for the future. Thank you.

Thanks, Stefan, for letting PC in as well. Very good. Despite that, We conclude the Q2 and wish you all a great summer. And let's get back in touch when we are all back.