Telia Company AB (publ)

Thank you for standing by and welcome to the interim report January to March 2022. At this time, all participants are in the listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. And to withdraw your question, press the hash key. If you require technical support at any time, please press star 0. I would now like to hand the conference over to your first speaker today, Eric Strand in Perth, please go ahead.

Thank you. Good morning, everyone, and welcome to Telia's Q1 2022 call. I have with me here our president and CEO, Alison Kirkby, and our CFO, Patricia Merland, and my IR colleague, Anders Nilsson, who you all know. We will do a presentation followed by Q&A. We'll try to finish within the hour and I leave the word to you Alison.

Thanks Eric and good morning everyone and we are looking out to a sunny morning in Solna this morning. But first you know I think we should reflect on where we are after two years of COVID and you know back in January when we last spoke to you we we were all looking forward to our return to normal. The war in Ukraine has clearly quickly dampened any hope of a new, more positive normal. And like all of you, I'm deeply saddened by the human suffering in Ukraine and the worrying geopolitical situation we now have in Europe. But to be clear, Telia has no direct exposure to the conflict, but we are working in multiple ways to provide relief and support via both our products and services, as well as via the donations to various humanitarian relief efforts. Connecting refugee centers, offering employment to Ukrainian victims, and using our massive TV reach to host live fundraising events are just a few examples of what we are doing to play our part for Ukraine. And again, proving just how vital we are as a company and as an industry at keeping society connected, informed, and aware in the good times and the bad times. But now, let's move to the purpose of this morning's call, and I'm delighted that we've got the year off to such a strong start. Financial performance is strong, operational performance is strong, and our transformation programme is picking up in momentum. Service revenue growth for the group accelerated to 3.2%, and importantly, it's a broad-based growth with all markets and key segments contributing and Finland reaching stability. Growth is driven by both mobile, up 4.5%, fixed at 1.3%, and advertising up 9.7%. OPEX declined by 3% as a result of our transformation agenda and helped offset inflationary headwinds such as roughly 80 million kroner of higher energy costs in the quarter. If you look at EBITDA, core telco grew 4.6% as we were able to flow the strong service revenue momentum and the OPEX benefits down to the bottom line. However, for the full group, including our TV and media unit, EBITDA growth was, as expected, muted as we now carry the full cost of Champions League, for example. Cash flow of 2.2 billion kroner was lower than last year's Q1 when we had a very high contribution from working capital and our balance sheet remains very strong. I'm therefore very pleased that the Board has decided on a 5.4 billion kroner shared buyback programme transaction, which we now expect to close around the end of this quarter, so a quarter earlier than expected. Moving to strategy progress, our multi-year ambition to reinvent a better Telia is now in its second year and is progressing according to plan. And let me provide a few highlights from the quarter that capture some of the progress that we have made towards inspiring, connecting and transforming to ultimately deliver sustainability. our priority has always been to inspire our customers by pursuing a value-focused strategy. And in a heightened inflationary environment, as we now experience, this approach is of even more importance. Pricing moves, such as we've taken in Telia Sweden and in Halibop Sweden, are supported by improved network experiences and improved content experiences. And across the board, whether it be via improved bundled services, or improved more addressable reach in our media business, we are taking the necessary actions to deliver positive revenue and ARPU development, hence the good progress in the quarter. A great example of this is the best network combined with the best range of content, which has driven our Swedish TV customer base to over a million and the number of Swedish multiplayer customers to 900,000. Access to see more content is also helping drive higher value mobile customer growth in Finland and bundled Netflix in Norway and Denmark are contributing to the growth in those markets. Overall, we are very happy with how we're now building a stronger aggregator position across our footprint. On the enterprise side, our strong and trusted brand combined with a broad play of services resulted in continued good traction, especially in the public sector. In the quarter, we signed multi-year contracts with both the Norwegian Army and the Swedish Contingencies Agency, MSB. And with the current geopolitical situation, our role will only become more important going forward as societies invest in enhanced security of communication, and we are very well placed to take advantage of that. And we continue to sustain superior reach in our TV and media unit, and this reach is being further enhanced by our Avon platform and the addressable inventory that is enabling significant digital advertising growth. On connecting everyone, our network position was again confirmed by several external measurements in the quarter, including Umlaut in Sweden, Tutala in Finland, and our 5G network in Norway was recognized as the best 5G network for gaming. And in Finland, we deployed at the first operation in the world a 4G, 5G virtual private network based on network slicing and edge computing for customer use. RAN modernization is progressing well and we're continuing to successfully mitigate for a tighter supply chain situation. On 5G, we're progressing at pace with a population coverage of 36% for the group across the whole region, led by Finland at 70%, followed by Norway just above 50% and Denmark just below 50%. Also in Estonia, coverage is going fast and approaching 40%. In the quarter, we also launched 5G in Lithuania on commercial frequencies after three years of testing. On copper legacy retirement in Sweden, another 140 central offices were closed in the quarter. We've now closed 60% of our copper footprint and the shutdown of 3G by 2023 is progressing according to plan. On transforming to digital, our bold agenda to create the most purpose-driven digital telco in Europe is on track. We continue to digitalize with, at this time, a particular emphasis on improving customer experience and service. We're now seeing a sustained reduction in incoming calls from Swedish and Finnish consumers with improved satisfaction scores as we remove fault sources and pursue a channel shift towards digital. We're also continuing to remove legacy platforms and products having removed another 20 IT platforms in the quarter to over 100 being now retired, and over 25% of legacy products have now been removed. This helped drive an 18 million kronor structural saving in IT costs in the quarter. Rapid digital transformation is also happening within our leading advertising businesses in both Sweden and Finland. With our superior reach and improving addressability, Advertising is no longer just a linear product, which is why we recorded a 26% growth in digital ad revenue in the quarter. On delivering sustainability, our financial metrics are healthy, especially within our core telco and advertising businesses, and we remain on track to meet our 2 billion kroner OPEX savings target by the end of 2023. On sustainability, Telia in Sweden was recognised as Sweden's most sustainable telecoms brand for the 12th year in a row. And finally, we issued our second green bond in the quarter worth €500 million to finance energy-efficient networks and green digital solutions to help Telia and our customers with both our and their environmental ambitions. Moving to Sweden, Sweden had another solid quarter and managed, despite their continued legacy headwinds, to grow service revenues 1.8% and acceleration versus the level we saw in Q4 of 1.5. And the growth was broad-based. Mobile grew 3% supported by a solid ARPU development ended a 20-year period without growth for the B2B business. Excluding the impact from legacy and the recovery of rolling, underlying service revenue growth was even more impressive, coming in at just shy of 5% and also showing a slight sequential improvement. So, as you can imagine, I am genuinely happy with Sweden's performance, delivering on its commitment and ambition to remain in positive growth territory when it comes to service revenues, and also on EBITDA, which grew 4.4%, supported by the revenue growth, but in particular due to great work on driving improved productivity and structural transformation, predominantly related to resource reduction, where a decline of 7% versus last year was delivered. Moving on to the operational KPIs, in mobile you can see that our subscriber base is stable, while we're delivering healthy ARPU development in both consumer and enterprises. Our broadband subscriber base was also stable as growth in future-proof fibre and fixed wireless access products again offset the expected decline in XDSL subscriptions, which amounted to 20,000 subscriber decline in the quarter. Importantly, most of the growth was in SDUs this quarter, contributing to a mid-single-digit ARPU uplist and enabled by improved upselling and cross-selling. In TV, we continue to see great subscriber development, as I mentioned earlier. Swedish consumers are highly appreciating our award-winning IPTV service and the ability to aggregate all the content they want in one place. Turning now to Finland, I'm particularly happy to see that all the hard work by our Finnish team is starting to pay off and yield. mobile, despite interconnect headwinds, was offset by lower fixed revenues, predominantly driven by the loss of certain low margin business solutions and fixed broadband legacy revenues. Transformation of the cost base is also building momentum, enabling lower OPEX despite elevated energy prices and helping drive an EBITDA growth of almost 2% and the first quarter of growth since 2020, but probably the first structural growth of many quarters before that. progress of our peers in the market, it's clear that we still have work to do. Our subscriber base was down year on year due to the loss of a single enterprise contract lost last year, but which migrated only in this quarter. And ARPU also declined due to continued ARPU pressure in the enterprise segment and a regulated reduction in interconnects. Consumer mobile ARPU development was however positive and this alongside continued network modernisation and 5G progress combined with other turnaround initiatives, keep us on track for a second-half turnaround. Moving to Norway, with the wholesale revenue headwind experienced in 2021 now annualised, we are seeing really positive top-line momentum. Service revenues increased 6.6%, mainly driven by a 9% increase in mobile, roughly half of which relates to a change in VAS, Insurance Services Accounting, and so the underlying mobile growth is more like 4% year-on-year. Broadband continued to develop very strongly with growth of 8.2% both from new customers and higher ARCU driven by price increases both CPI linked collective agreements and price increases on individual agreements. EBITDA as you can see was slightly positive adjusting for one-off items both in this quarter and the corresponding quarter of last year, the underlying EBITDA actually grew faster than revenue at around 6%. Our mobile subscriber base continued its positive trajectory with a stable consumer base and growth in enterprise, where we grew our base in all sub-segments, SME, large and public. And our crew was again strong, but driven mainly by the VASA counting change, as well as from a partial recovery in rolling revenues. Moving to the lead markets now, and isn't this finally a beautiful page? Despite our incumbent status in Lithuania and Estonia, we're seeing almost challenger-like growth rates there, and it's great to see the turnaround that we're now experiencing in Denmark. In Lithuania, we continue to see mid-single-digit service revenue growth in mobile, in both mobile growing 8.7% and headwinds from higher energy costs. In Estonia, performance was again strong, with service revenues growing 8% and also broad-based. Mobile was up 6.1% and fixed was up 7.8%. We had an immaterial impact from the Ukraine conflict due to the closure of our Russian channels and our TV business, but overall in the Baltic, the impact from the conflict has so far been very limited. Of course, we continue to monitor the effects that the war might have and especially how the situation evolves for individual B2B customers. But for now, there is no indication that it will have a material impact on our 2022 outlook. Finally, in Denmark, we saw continued good progress driven by mobile, which grew 6.5%. Especially in consumer, we're seeing an increasing momentum due to the cleanup of historical discounts, and the introduction of bundling benefits and pricing moves. We're looking forward to more product launches to improve our market position and pricing power going forward. And for example, in enterprise, we've moved to CPI-linked contracts for new contracts. Combined with good momentum on transformation initiatives, Denmark delivered 5% EBITDA growth despite a material headwind from energy pricing. And finally, moving to our TV advertising, good development in sports and pay TV, and weaker development in the movie and series side of pay TV. Advertising in Sweden and Finland remains very strong, as I said, growing almost 10% year on year. As the market leaders, we offer superior reach and we are at the forefront of the industry's digitalization. Advertisers increasingly come to us for the unmatched combination of traditional and online viewing, and we're increasingly able to provide precise audience targeting and far better quality impressions than players like Google and Facebook. As a result, digital advertising had another strong quarter with 26% revenue growth. Pay TV had a more flattish quarter, although sports in Sweden had good growth despite the Olympics on rival channels, mainly due to Champions League. This was offset by declines in other sub-segments, including non-sports in Sweden, which was affected by the proliferation and being the unique partner to BritBox here in Sweden. EBITDA declined by €300 million year-over-year, as we expected, reflecting the cost of a full quarter of Champions League, for example, which is still in its first season. Looking forward, the second and third quarters are not full Champions League quarters, and hence we will see lower content costs and certainly a different year-on-year comparison in the second half. Looking at the trends of Seymour, we saw a slight decline in the overall base, driven mainly by the non-sports subscribers, but year-on-year growth in ARPU was driven by the increased share of sports subscriptions and price increases in Sweden. So with that, I hand over to PC for the financials.

Thank you, Alison. Let me quickly take you through the Q1 financials, and let's start with sales revenue. As Alison has gone through, we have a solid units with solid growth. The surge revenue growth is broad-based with telco growth both in the consumer segment of 2.5% and enterprise segment with a solid 3.2% growth on top of the mentioned TV media growth of 5.8%. We have a good momentum with several quarters of low single-digit growth and are well on track to deliver on the outlook for 2022 and 2023. Let's move to OPEX. Total OPEX is reduced by 3% or 190 million in the quarter. This reduction is driven by lower resource costs of 124 million from the FTE and FTC reductions from 2021, combined with an additional reduction of 100 during Q1 this year. In addition, we have reduced marketing spend in the quarter by 50 million mainly from media spend consolidation, combined with a more efficient channel mix. Other OPEX is quite stable, where we see IT simplification, consolidation, and modernization reduce our IT costs by 81 million. This is, however, in the quarter offset by increased energy costs of 80 million following the higher energy prices across our footprint. Despite inflationary pressure, we have five quarters into our transformation, reduce our OPEX with $0.5 billion or $0.7 billion if we exclude the energy cost on a rolling 12-month basis. Our transformation agenda are going really well, and despite some increased headwinds, we believe that we are still on track towards a $2 billion net OPEX reduction by 2023. Let's move to EBITDA. Total EBITDA was flat in a quarter. we've grown in all units except TV media that as expected is impacted by a higher content cost mainly related to Champions League. While total EBITDA is flat, we have gained a significant growth momentum across all our units in the telco business with total EBITDA growth at a solid 4.6%. The strong growth momentum on the telco side combined with easier year-over-year comparisons for the TV and media business in the second half of 2022 onwards makes us well on track towards the outlook for 2022 and 2023. Moving to cash capex, as expected, capex has come down to more normal levels after a very high capex in Q4 last year. Total cash capex in Q1 is $3.0 billion, slightly higher than Q1 last year. And despite the challenging global supply chain situation, we are able to stay on track with our investment program to modernize our mobile network, dismantle our legacy infrastructure, and to transform Telia to a much more digital company. Cash capex on a rolling 12-month basis are at 14.6 billion, or 16.6%, Next on cash flow, operational free cash flow ended at a solid 2.2 billion in Q1, but 1.9 billion lower. positive by 0.2 billion in the quarter, but significantly less than the 1.7 billion positive that we carried in the first quarter of 2021. Total cash flow on a rolling 12-month basis is as expected on a somewhat declining trend due to increased investments and lower contributions from working capital. The structured cash flow are expected to improve going forward, mainly driven by the EBITDA growth in the second half of 2022, following the continued growth momentum on the telco side and easier comp on TV media. We reiterate our ambition to generate sufficient structural cash flow to cover the minimum dividend commitment from this year onwards. Moving to net debt and leverage. Total net debt reduced by 0.9 billion in a quarter, driven by good cash flow generation, partly offset by some effects on leases and exchange rates. Total net deaths we saw ended at 2.09 times, down from 2.14 times last quarter, and are at the lower end of our targeted range, from 2.0 to 2.5 times. to start it up during Q2 and to complete it in due time before AGM next year. We will come back with more details on this program at closing. On the outlook, with a strong start of the year, we are on track to deliver on our outlook that we have communicated to you. For 2022, we are targeting low single-digit growth in service revenue as well as total EBITDA with a low to mid-degree growth on the core telco business. CapEx, including License and Spectrum, is also unchanged and expected to be between $14 to $15 billion in line with last year. And with that, I hand over to you, Alison, to conclude the presentation before we go into Q&A. Thanks, PC.

So to summarize, it's been a strong start to the year and we're continuing to deliver on our plans. Growth momentum has accelerated, especially in our core telco business and especially in Sweden. And Finland has started to stabilize, did I hear at last from some of you on the call. TV and media is also delivering to plan, albeit with heightened investments, but with a particularly vibrant advertising business. Modernization and transformation are structural and are on track for a sustainably better digital telehealth. Our balance sheet remains strong, and our board has chosen buybacks to distribute the proceeds from the Swedish Tower transaction, a programme worth £5.4 billion, or around 3.5% of our outstanding shares, to commence on closing of the transaction in the next couple of months. So as we move into year two of our strategy, I remain absolutely confident in our ambitions and plans for this year and beyond, and ultimately to return Telia to consistent, sustainable growth that will benefit all of our stakeholders in the months and years to come. So let's take questions.

Thank you so much.

We are ready for the question.

Yes, we will now begin the question and answer session. As a reminder, if you wish to ask a question, please press star one on your telephone keypad. Again, it's star one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Peter Nielsen. Your line is open.

Thanks very much. Morning, everyone, and congrats, Alison, on a strong set of numbers. I have a couple of questions. Alison, first and foremost, you have been looking for the past year and a half to improve commercial momentum, and you're having it now. We seem to be strong growth across all the Nordic Baltic operations, as you highlighted, particularly in Sweden. The common denominator seems to be stronger ARPUC. And when you use the phrase pricing power in Denmark, we know that something is happening in the industry. Could you elaborate a bit on why? What is driving the improved pricing power in the telecom sector for now, and for Telia in particular? And perhaps specifically also, you seem to be taking a step ahead of competition at the moment in Sweden. What is driving that outperformance and your ability to have pricing power, please? And if you would just finish off by perhaps giving a small indication of when you think we would start to, you would start to talk, speak more positively about 5G impact. Thank you.

Thank you, Peter. I think it's a combination of many things. You know, as we, first of all, COVID and now the, you know, the geopolitical situation we have in our region is making it much cleaner that high quality, is more important than ever. So under that backdrop, and then with us always, you know, as the incumbent, we've always had a value focused more for more strategy. And, you know, by investing in our networks, both modernizing 4G, upgrading to 5G, by investing in the range of services in the enterprise segment, all of that backdrop is allowing us to move pricing up in a way that customers still feel as though they're getting great value for money in a safe and secure way. And as the incumbent, it's our responsibility to ensure that we, during inflationary times, nudge pricing up as well. And that's what we are doing wherever we can at the moment. But it's very much driven by an improved quality of products and services and an improved customer experience, which is also being enabled and delivered by our transformation. What was the final question you had there? I think that's giving you the 5G. So on 5G, clearly it has been an enabler to the change in the brand perception to the positive in both Finland and Norway so far. And we doubled our 5G base in Finland in the quarter. Some of that through migration of 4G customers, but some of it by new traction, particularly in the consumer space. And that 5G leadership that we've had in Norway since the beginning and continues even through external network performance tests is allowing us to sustain the growth there as well. What we're really happy to see here in Sweden is, if you recall late last summer, we introduced an extra tariff for 5G+, offering unlimited data at unlimited speeds to really reinforce the added value of the 5G service. And it's been great to see in this week that one of our competitors has now introduced a similar tariff, recognising the higher value premium of 5G. So I think that's only positively You know, we are taking the lead on the industrial use cases that will come with 5G. We are leaders in the mining industry and the forestry industry. And, you know, as I said in the report, we launched the world's first consumer, sorry, customer use case of 4G 5G slicing. So that helps us, again, establish that quality premium trusted partner to the end. bringing the new use cases that bring added value for our customers and both for Telia. And that's a great combination to sell around some of the core connectivity services. And it's really an enabler to the growth we're seeing in the enterprise segment. Well, 3% growth is pretty amazing for an incumbent telco. Great. Thanks, Alison. Thanks, Peter.

Thank you. Your next question comes from the line of Andrew Lee. Your line is open.

Good morning, everyone. Just had a couple of questions on service revenue growth outlook. I think the two key investor questions today are one on your free cash flow drop through of your revenues, but also on the outlook for the revenue growth. So, I was just going to ask one on Sweden and one on Finland. On Sweden, it's about how much you can accelerate growth from here. Obviously, good acceleration and strong results in the first quarter. As you mentioned, Alison, there's been some roaming coming back and COVID provides some odd comps. So just wondered if you view your service revenue growth as structural and whether we should expect it to kick on from here. And just on that point, you've told us about your nudging up of prices. I wondered if you could help us understand your competitors' efforts on that front. And then on Finland, stabilised revenues, which is a key milestone, but there's still some share loss versus peers. And so just wondered how we should expect performance to trend from here and what your current expectation is on the timeline for return to service revenue growth in Finland. Thank you.

Thanks, Andrew. I'll leave the free cash flow drop through too. I see the Swedish growth of structural. Yes, there is a bit of rolling benefit for the group. It's developing positively, but it's around 100 million for the whole group in the quarter, with about three quarters of that flowing through to EBITDA. But we're still only around two-thirds, of the roaming revenues that we had in 2019. And we're seeing really solid development there. So the roaming piece is structural. There were no other COVID outliers in Sweden in Q1 last year. And I think, you know, based on the underlying movements that we're making on pricing, on bundling, on a broader range of services and the enterprise segment, we remain confident in the low single-digit revenue development for our core telco business, and of course Sweden plays a big role in that going forward. In terms of what we've seen on pricing moves by competition, as I just mentioned to Peter, it's great to see that one of our competitors has also recognised the value of what we call 5G+, that we launched in the summer, with only 18% pop coverage. That's that tariff yet, but clearly that's going to be an opportunity for us to continue to market going forward. So, you know, we promised that Sweden had returned to positive top line and bottom line momentum going forward. It pivoted there in Q4 and it's going to stay there going forward. In terms of Finland, yes, you're right, we've stabilised, but clearly relative to Alisa, we're still losing share. And it's our ambition that we grow in line with the market in Finland going forward. And what are we doing? Certainly, if you look at what has driven the positive momentum in the quarter, yes, it was nowhere near competition, but let's remember where we're starting from. We're now at 70% network coverage. We're winning network awards. Tutala, we won in the quarter. So that's re-establishing Telia as a quality provider of 4G and 5G services. And we are relaunching the brand on the back of that, combined with driving content with access. We're also doing a lot of work on customer value management. We've really up-weighted cross-selling of C-more, of fixed wireless access. And as I said there with Peter, we have more than doubled our 5G subscriber base that still comes with over €3 ARPU uplift versus 4G during the quarter. And we're starting to see churn reduce as well. We have also, now that we've moved to a more value-loaded focus, we're seeing our mobile handset ARPU on average increase 2% year-on-year. And we're doing a lot of work on channel optimization, shift to digital, cross-transformation. So still very much on track for the second half turnaround that we promised Andrew. And ultimately, we want Finland to grow in line with the market going forward.

your question on the cash flow.

Yeah, I don't want to take too many questions. I was just mentioning that there's an investor focus on that. But given I had two questions on revenues, I don't want to be greedy, but it's just, yeah, drop through to free cash flow. And obviously, working capital is a big moving part that confuses a lot of investors. Yeah, that was just the point.

No, but I can give a quick comment on it, right? we have been very clear that that will calm down. And that's also what we see. Keep in mind that working capital is still positive, it is less than before. And from a structural cash flow that we are mostly focused on, we are very much where we expected and wanted to be. And now with the increased momentum on the EBITDA generation, once we have annualized the year-over-year we thought, you will start to see the floater into improved structural cash flow generation going forward. And then, of course, also when we have some of this investment space behind us, that will also, you know, help us in the longer end on the cash flow generation.

Thank you very much.

Thank you so much. Your next question from Maurice Patrick. Your line is open.

Yeah, hi, guys. I'll just go with the one question, please. On the TV media side, I mean, you made a point around the OPEX being elevated due to the Champions League costs, but that likely to moderate for the year. Can you talk a bit about the revenue phasing? I mean, is that likely to follow a similar trajectory, or should we expect some of the strong revenues you've seen in this period continue throughout the rest of the year as well? Thank you.

Good morning, Maurice. So if you look at how Champions League in particular gets charged through the P&L, you have the majority of matches in the Q4 and Q1 quarters, with slightly less matches in the Q2 and the Q3 quarters. So the absolute amount that will go through our P&L in Q2 and Q3 for Champions League will be lower than what you saw in Q1. And we annualise in Q3. So it is in our base by Q3. And that's why we've remained super confident on a real second half flow through to EBITDA development across the whole group. In terms of revenue, and, you know, we're not committing to any new major sports rights at the moment that would distort that in any way. In terms of revenue facing, I think, you know, we are, as I said, seeing, you know, really great development in our advertising business with, you know, just shy of double digit growth. And I think by Q2, we've kind of annualized the COVID impact. So it might come down a bit, but based on the growth we're seeing in digital advertising, I continue to be very upbeat about that overall advertising business. On pay TV, I think looking forward, certainly as Champions League falls off a bit over the summer, That's why we're putting in some new content and entertainment investment over the summer to offset perhaps some of the revenue trends that we might see over the summer, but overall on track for the guidance that we gave for the year.

Great. Thank you for that.

Thank you so much. Your next question from Andre Kabasek. Please go ahead.

Hi. Thanks for the presentation. Congratulations on the strong delivery. Two questions for me, please. One on the effects delivery. So you gave the guidance of $2 billion before all of this macro situation you're highlighting. in the presentation that of the 0.7 growth that you delivered so far, about 0.2 has been already diluted by higher energy costs. I'm just curious in terms of that $2 billion that you're going to deliver by the end of 2023. uh you'll clearly need to like draw upon uh other areas so how confident you are uh that you can still deliver this to billion even this inflationary environment that's one question please and then the second one uh in terms of tv so your your competitor i guess uh finally deal with with nancy now and so i was curious if you have any comments for initial assessment in terms of how that may impact your own see the outlook either negatively, I guess, for obvious reasons, or perhaps even positively with pricing now, I guess, increasing quite substantially across a large part of the market. Thank you.

So, PP, do you want to start with the OPEC question, and then I'll take the NAICS question?

Yeah, I can do that. So, of course, as I said, also I transformation agenda and the 2 billion target. Of course, what we're also working on is a stronger portfolio of cost initiatives and transformation initiatives to make sure that we actually can deliver on the 2 billion. So one of the things that we are doing now and we have been doing for some time is to sort of further strengthening our portfolio of initiatives. And I think we, as I said, from a structural perspective already now to take a quite significant amount of cost that is actually, you know, offsetting very well the inflationary pressure that we where we see kind of a limited exposure from inflation across the board, with one exception being the energy cost development. But as we said in Q4 is that we expect energy costs to be 100 to 200 million higher this year. With the recent development, I would say that we are probably more on the higher end of that. So that means that we need to offset going forward into 2023. But keep in mind here that over the 1.2 billion we have of energy costs, there's only 300 million this year and slightly higher next year that is actually directly exposed to the spot rate. The rest is either already hedged or is energy costs related as of now we don't see a big exposure for that for 2022 but of course we have to monitor how the whole inflationary environment you know continued into 23 and there might be some effects of that just to give you some flavors on it and preparing to operate in a more predictable environment with a higher solar inflationary rate, with higher interest and higher salary inflation.

It's still committed to the two billion. Yes, and then on the question on NENT, I think it's positive that our main competitor now is pursuing an aggregated strategy like the one we've already been pursuing. And I think it's also positive that BioPlay are increasingly striking partnerships with distributors and not going direct. So I think the overall aggregator strategy that we've chosen is going to be a positive in this environment as consumers start to look at what are all the additional subscriptions that they have chosen to buy outside of their core telco and TV bundle subscription and I think we are in a strong position therefore to be able to offer our customers everything they might want to choose to view and offer it in a great value for money way thanks to the bundles that we can provide them. that they can't get the same value for money if they go and buy all of the subscriptions individually. Does that answer your question, Andrew?

It does. Thank you both. Thank you. Thank you.

Thank you so much. Your next question from Nick Yell. Your line is open.

Yeah, morning all. Hope you're well. A couple of questions, Alison, please. One on Finland and one on Norway, if that's okay. Just coming back to Andrew's point on Finland, You're a long way short of a leases performance at the moment. I think you mentioned a B2B contract again that you'd mentioned a couple of quarters ago is hitting this quarter. Could you talk about what the trends look like X that and just how sustainable are they? Because even with that B2B removed, it looks as if you're at flat ARPU, which is a bit concerning given the 5G mix coming through and everything else and still puts you way short. So could you maybe describe what the underlying trends look like? And secondly, on Norway, just a quick one. Do you have any idea of what the overlap with Telia Mobile in Norway and the AltaBox regions and broadband customers are, please? Thank you.

Okay, I'll give the Norwegian question, although I'm not quite sure we know the exact overlap. But let's see if we can answer the Norway question separately. On Finland, yes, you're right. We are still a long way off, at least in performance. But I look at that as just an opportunity. The big enterprise drag on ARPU is when we secured a contract with the government procurement agency, which came in with very low 4G mobile ARPUs. And that will be a headwind during the course of this year. If you put that aside, you know, underlying revenues, ARPU development is positive with what I said, the mobile ARPU development in consumer actually up 2% year on year. And that's very much driven by the removal of some of our discounts. And as I said, the improved number of 5G subscribers that we now have in our base. So a long way to go, but we are heading in the right direction. But the enterprise piece will still be a bit of a headwind this year. And on Norway, your question was about overlap of ICE and Altebox in our base. Was that the question?

Yeah, well, you can see what I'm thinking. I'm thinking if Lisa and ICE are getting together, then what's the risk to your Telia mobile base? who maybe are AltaBox customers at the moment, and all of a sudden they're offered ICE product. So what percentage of the Telia mobile base do you think are AltaBox broadband customers at the moment?

Yeah, so I don't think we will disclose the exact percentage, but of course, Given our total size in the Norwegian market, you can look at the total population and looking at our mobile base versus the fixed base that they have. So, of course, there is an overlap. I think it's important to remember that the way we see this development in Norwegian the Norwegian market. What we see now is that we have, you know, three very kind of solid long-term industrial owners, all with kind of commerce position and all interested in maintaining and, you know, developing the Norwegian market in a good way. So I think that is one starting point. Then, of course, also we will then have, you know, a competitor with sort of, which is long-term and which has a sort of a strong financial position that we need that we have had in Norway, you know, after we integrated the GET and the TDC business into Telia is that we are in a very good, you know, situation to, you know, compete against any competitors, against Telenor and against combined these Altibox. So, and then, of course, our team, commercial teams are now looking at concretely what do we do on ground to make sure that we continue to develop how it has been over the last sort of two years.

Okay, that's great. Thank you very much.

Thank you, Nick.

Thank you. Next question from Stefan Goffin. Your line is open.

Yes. Most of my questions have been answered, but perhaps dig in a little bit on the pay TV side where, I mean, you have invested massively in the Champions League rights. And despite that, You show a negative subscriber intake this quarter and flat pay TV revenues. Have you had a wrong focus on this business and perhaps thought that Champions League rights would automatically give you other subscribers? Or how should we look upon that? Secondly, you mentioned something around that is positive, that NEMT moved in the direction of also distributing the content to Tele2. Do you see an opportunity to also enter that kind of agreement with NEMT? Thank you.

Thank you. On that second question, we already have an existing agreement with NEMT, and it's it's a part of our overall aggregator strategy. So that's why I view it positive that, you know, basically our key competitor is following what we already have with NET. So that is only positive for the future, but everybody sees the future of aggregation. And it seems to be that, you know, the Teletoon move is just about improving the content offer that they have to their existing customers. So rather than it being a real push into our customer base. On the pay TV side, yes, you know, we invested massively behind Champions League. But I think you've got to look at all the different aspects of what's going on in the TV media arena at the moment. Very strong advertising development and increasingly strong AVOD business. You know, it's a third of our advertising growth this quarter. So that's developing more positively than we expected. What is also developing very positively is our aggregation. And that is fueling improved convergence, content with access propositions in Sweden and Finland. And then yes, pay TV, if you just look at it as a standalone entity, looks as though it has negative subs quarter on quarter. There is some seasonality going on there. We also lost the Formula One rights in Finland. January is always a slow month for Champions League. And it's a particular muted development and actually negative development in the movies and series side of the PPD business. But the sports side in Sweden is fine. and the Finland side, it's because of the Formula One rights moving to another distributor during the quarter. But overall, I prefer to look at total TV media as doing better than expected, sports doing kind of in line with expected, movies and series a little bit muted, and let's see how things develop over the coming months.

Okay, thank you.

Thank you.

Next question from Ulrich Rath. Your line is open.

Thanks very much. Maybe two questions. One on the cost measures where you talked about accelerating efforts to make sure the 2 billion target can be delivered. How should we think about this? This is essentially that you're seeing energy cost prices going up, so you're addressing the energy costs, the energy consumption more heavily. And similar with headcount, with wage inflation increases, you're addressing resourcing. Or is it simply that you're widening the pool overall and just pushing a little bit harder across the piece, if you see what I mean? And in particular, could you give any color where you're finding incremental opportunities across government that you hadn't seen before? The second question is, Alison, we had in prior calls, really over the years by now, comments from you about potential deal-making opportunities. Now, you had these two great tower deals, but how high up is this on your priority right now for the deal-making? We can talk about Denmark and Sweden consolidation, the infrastructure spin-off that was under debate at some point. I'm not asking for specific comments on this, but in terms of the overall picture, how much time do you spend on potential deal-making at this point? Thank you.

Okay, I'll take the deal-making and then, PC, you can do your next one. I'm, of course, not going to disclose what percentage of my time I spend on deal-making, but clearly there are parts of our business where there is structural inorganic opportunity to go after. We've been quite vocal that we are keen to expand our power business to rooftop and beyond the Nordic footprint. They are not as ready to go as we were with Sweden after announcing Norway and Finland, but that remains a priority for us because we are absolutely delighted by the partnership with Brookfield Electra, and we know that they are keen to expand our tower footprint so that we continue to be the leading tower company in the region, and there's definitely more opportunity to go after there. Also, I do believe, as I've been quite vocal about, that there will be consolidation opportunities in Denmark in the years to come. Our priority at the moment is to prepare to take advantage of we can do first and foremost, and that's what we're focused on. And then we'll just see for whatever movements happen in the market going forward for us to take advantage. And then finally, I think there will be consolidation opportunities in TV media going forward now as well, particularly as a result of what you're seeing in the streaming side of the business. And I believe in scale. and I believe in finding consolidation opportunities that create value for our shareholders. So it's still there as a priority, but first and foremost, I'm focused on the structural, sustainable turnaround of our core business. And on that, why don't you talk about OPEX?

Yeah, happy to. So first of all, when we announced the £2 billion target by 2023, our internal, let's say, plan and initiative So we have some headroom built into the plan. So that's one dimension. The levers that we talk about and what we're pushing out are the same. So it's not like we're now going into new areas. So looking at resource cost, we're looking at process improvements, process automation, legacy dismantling, product and system modernization. We're looking at a big one is how do we digitalize our customer interactions? And what we see is that we are able to have And that gives us some more comfort. So what we're also doing then is, of course, you know, challenging ourselves on how can we front blow some of these savings even earlier. You know, the same thing as we're doing on pricing under the inflationary pressure on the commercial side, we step it up a bit. And that's also what we're doing on the resource cost side. Then on the sales and marketing, it is the same lever. of digital interaction, and it is to consolidate the media spend and move towards more targeted customer communication. So it's nothing new, but we are scrutinizing and pushing harder and then moving initiatives further than what we had originally. And then on the IT side is probably where we continue on our agenda. We have been very successful year to date of taking out IT costs on the back of system and vendor So there we are more or less following the plan now going forward because some of the more fundamental structural savings will take time before they yield. And we really need to fix the underlying root causes. Then specifically on energy, right? So we are also mitigating the energy cost, but there are limits on how much we can do. But what is, as I also have talked about before, what we're doing, one is, of course, on pricing, making sure that we have a good hedging policy and we are considering PPAs when it makes sense. We are now moving earlier some of the software upgrades on our run to reduce the consumption, and we see some good development on that in Finland and also coming to other parts of our footprint, which is dampening the total energy cost increase. forward, you know, the upgrade on the battery side, the shutdown on our legacy, you know, a lot driven by copper in Sweden, which had very good, let's say, effects on energy consumption. So both the software and the hardware upgrade. And then it's also, even if it doesn't really solve the challenge short term, you know, we are also now moving into more advanced and more kind of reinventing energy discussions and I think we announced last quarter the pilot that we're doing with Polarium where we're looking at how we can utilize when there is low consumption of energy and to store the energy on our batteries and then utilize it from the batteries when the load is high on the grid and the cost is high. And then the next, and we actually have now our first live site, and we are looking at how we can scale that. And then the next step is actually also to see how we can then contribute energy back to the grid when that makes sense. So, of course, it's early days, but it's very interesting, both from a cost perspective, but also very much to support our sustainability agenda. So that leaves some flavors on where we are on our 2 billion cost area.

Thanks, BC.

I think we... We are getting close to the full time, but we have three or four more callers, so let's try to do two more before we round off, please.

Operator? Yes, next question from Beidou Sun. Your line is open.

Thank you very much for the presentation and for still taking my questions, even though we're over the time. Two very quick ones in that case. First one, maybe a little bit of a follow-up on the competitive situation in Sweden, given that one of your competitors lacked higher intensity in Q1. But on the other side, I think we have well discussed that you managed quite well on adding postpaid subscribers, growing up. So just maybe what your impression has been over the first quarter and also, importantly, for the first month in Q2. And then a second question quickly on the Swedish Tower deal that has now been cleared by the EC. Is there any particular reason that drove your decision to do a share buyback compared to a special dividend to return the tower proceeds? And for the previous deal in Norway and Finland, now four months after closing, can you share any additional feedback from the partnership with investors?

Okay, I'll try to be quick. So, the situation in Sweden, as I said, a recent investor conference is like whack-a-mole. to whack and there has been one competitor that has heightened its third party commissions during the quarter. It was a different competitor in Q4 but it was a different competitor in Q1 which is quite normal and we've just got to rise above that being the most high of quality most structured secure communication provider and investing back for our customers so that they feel as though they're getting good value for money. And I don't think anything has really changed in April versus Q1 in terms of that. But, you know, that being said, we are continuing to grow despite that environment, both, you know, stable customer base and positive ARPU development. Swedish Dower deal, why share buyback? Well, as a shareholder, I'm delighted the board has chosen a share buyback. Clearly, both buybacks and dividends can create value for shareholders, but we believe buybacks on top of our strongly committed ordinary dividend just shows the confidence that the board has in our plans and the long-term value creation available in our business. And therefore, we view it as a very confident, a positive confidence vote in our plans. And it's also a very smart way for us to remove the dilution effect from the minority state that we sold in our towers. So from a shareholder value point of view, we believe very positive. And then so far on the partnership with Brookfield and Electa, very early days. But they are actually bringing, you know, we have talked a lot about energy at the moment. They bring a lot of real practical experience as how to conserve energy in towers companies going forward. So that's the one real practical example. I'm really delighted so far at how the partnership is developing so far.

Thank you.

Thank you. Thank you.

Thank you so much. Another question from Cabal. Your line is open.

Thank you for taking the question. I've got two, please. Firstly, you talked about some of the multiple benefits and content, but can you talk a bit more about just how you measure those benefits versus the cost that's gone in? So I guess what I'm really trying to work out is whether you think you're covering the cost of Champions League when you take into account the benefits across some of the different parts of the business. And the second question is really about leverage. Obviously, you will be returning the proceeds from the latest TAO transaction, but your leverage is still arguably quite low if the business is now improving. What would it take for you to take a more optimistic view on the leverage that could be sustained? Thank you very much.

Okay. Excuse me. All the content, you know, We invested in content to drive our core business, to drive convergence. So the way we look at the investment is are we getting a return on investment in the combined standalone PTV business and in how it is driving convergence of our asset business in the core tele-atelco business as well. So we look at both aspects. And then we also look at a third aspect as to what leverage does that give us in our overall free-to-air advertising business as well when we are doing other content deals and when we are trying to shift customers onto digital platforms as well. So we look at it in multiple ways, but so far I'd say very positive developments on our IPTV business, in our content with access business, and not yet watching its face on the PayTD business, which we will continue to monitor over the coming months. And as I've always said, once we have a full year of Champions League behind us, Kevin, I'll have a better idea of what we want to do going forward.

Yeah, and then on the leverage side, I think we, you know, we feel very happy with our current, you know, leverage ratio of 2.0, 2.5 times. And, you know, we want to stay well within that range. And I think that's, we don't have any plans to do any changes on that.

Okay, thank you so much.

All right.

Did you have a follow-up? No? Okay, then. Thank you. Thank you very much. Some great questions. I know there are a couple of more questions online, but we have to round off the call. So very happy to accommodate those offline. Please give us a call. Thanks for listening in, everyone, and looking forward to speak to you again in three months.

That does conclude our conference for today. Thank you for participating. You may all disconnect.