Telia Company AB (publ)

Thank you, hello and welcome everyone to the call. We will do a presentation followed by the Q&A as usual and we have with us our President and CEO Alison Kirkby, our CFO, Patricia Nordland and my IR colleague Anders Nilsson. Alison, please go ahead.

Good morning everyone and welcome to our Q2 report live from sunny Solna this morning. A much more pleasant place to be than London yesterday I do feel for all of you. I hope it's a bit fresher in London today. Anyway, back to our quarter, I'm happy to say that the trends we started the year with have continued into Q2 with strong financial performance underpinned by strong operational and transformation progress. Growth momentum continued with service revenues growing a solid 2.4% supported by all units and Finland again relatively stable. Like last quarter, the growth was broad-based with mobile growing in all markets and we also had growth in fixed services in all markets except for Finland. Efficiencies are continuing to come through as we transformed Telia and in the quarter we managed to reduce OPEX by 1.6% and excluding a 100 million set hit from higher energy costs, OPEX was down 3.2%. Core Telco was again strong with 2.4% service revenue growth flowing through to 4.3% EBITDA growth, pretty much in line with what we saw in Q1. And this growth, as expected, was more than offset the cost of content investments in TV and media, with Group EBITDA growing 0.8% this quarter. Operational free cash flow at 1.1 billion is lower than in the same period last year, driven almost all by working capital phasing. However, the structural part of our cash flow is fairly unchanged compared to last year, Q2, at 1.5 billion kroner. Our balance sheet has also strengthened further. Now it's a leverage of 2.01 times. And this is a material reduction compared to Q2 last year as a result of our strategy to crystallise infrastructure asset value. As you know, we closed the Swedish Tower transaction this quarter, the net proceeds of which more than offset this year's first dividend tranche of 4.1 billion, which we made in April. And in June, we started our buyback programme. Buyback shares were around 400 million kronor in the month. And in total, we'll be buying back shares worth 5.4 billion kroner between June and February next year at the latest. Moving to strategy progress in the quarter, as mentioned, all our markets are delivering growth in mobile, largely driven by ARPU growth from a customer value enhancing focus, higher pricing and rolling. I'm particularly proud of the progress we're making in the enterprise segment thanks to the unique breadth of connectivity and digital services that in some cases only Telia can provide, and the increasing demand for them from our customers. Growth is increasingly driven by our corporate customers needing to digitalize their operations by moving to cloud, deploying digital networking and IoT solutions, and enhancing the security of their communication infrastructure. Our unparalleled digital infrastructure with the highest levels of independence and redundancy, combined with our digital services or ITT businesses, especially in Sweden, Finland and the Baltics, make us their partner of choice. In our broadcast TV advertising-funded businesses in Sweden and Finland, we've now fully recovered from the pandemic, as revenue in TV4 was the highest ever for a second quarter, including digital revenue growing again by more than 20%. Network modernization remains on track, with 5G coverage ramping up a lot this quarter. We now reach just shy of 50% of the population across our footprint, with the widest coverage in Norway and Finland at around 70%. Sweden, as you know, started from behind due to the late frequency options, but they doubled their coverage in the quarter, and we now reach a third of the Swedish population. And at this time, we reckon we are clearly ahead of all our competition on 5G rollout here in Sweden. This means that we're able and are taking a leading role in private networks or enterprise mobile networks. We have a double-digit number of running EMN customers and five-plus new contracts signed during the last quarter with a steady line of customer dialogue. We have EMN services available in Sweden, Finland and Norway, and we see that corporates are now starting to demand private 5G networks for critical operations. During the quarter, we won an agreement with Posseva, which is building the first of its kind final disposal facility for nuclear waste in Finland, and with forestry company SCA for a dedicated network at their Molson site in Sweden. Two great examples of how Telia is enabling the digitalization of and the green transition of our region. As we ramp up in 5G, we're also ramping up legacy shutdown and have now dismantled almost 40% of the Swedish 3G network and 70% of the fixed copper network. Interconnected with network modernization is our digital transformation. We've now closed more than a third of both our legacy products and legacy IT systems and increasingly launched new products on the new common technology platforms. We're also improving processes and achieving both structural cost savings and a smoother experience for our customers with the need for manual interactions reducing, in some cases significantly. Incoming contacts for our B2C contact centres declined across all our markets with volumes in Sweden down almost 30% year on year. And in addition, we're transforming our channel mix with Finland, for example, now seeing 80% of all incoming contacts going through our own digital channels. These efforts contribute to our lower OPEX and keep us on track towards our 2 billion of net reductions by 2023. Although now, as forward-looking rates are no longer indicating a reversal of energy prices, we're building a stronger energy headwind into our forward-looking assumptions. We now expect to reach at least 2 billion of reductions in OPEX, excluding energy, and mitigate the energy headwinds through a combination of both cost and pricing initiatives to meet our short and mid-term EBITDA targets, which are unchanged. And PC will touch on this a bit more later. Finally, seeing great progress in our sustainability agenda, we made two significant long-term agreements to purchase wind and solar power in Denmark and Estonia, which will cover most of the energy needs there. Positive news both for the advancement of green energy in society and for the longer-term resilience of our cost base. And in another report on sustainability, we're stepping up our efforts to protect our customers online, a great example of which is the new security service for Swedish households. Moving then to the markets, as you can see here, Sweden again delivered a very solid quarter. Service revenues increased 1.2% despite legacy headwinds, and like last quarter, the growth of broad-based with mobile growing 2.7%, from a continued positive ARPU development, broadband growing 4.1% from pricing initiative, and again, a stellar performance in the TV business displaying a 16% growth. Sequentially, the service revenue growth was slightly lower, driven mainly by lower fiber installation fees and lower copper wholesale revenues. Our enterprise business continued to show a solid development and grew 1.1%, confirming the trend shift initiated one year ago. We saw solid momentum in all enterprise segments, with even growth in the SME segment for the first time in many, many years. And we have a healthy pipeline of customer deals, including this quarter the win of an agreement to continue to deliver network services to the Swedish Public Employment Agency, including new advanced security solutions. The combination of our security credentials combined with our breadth of digital services is proving to be a real sweet spot for us, particularly in the public entity segment. Excluding the impact from legacy and the recovery of roaming revenue, underlying service revenue growth was again strong, coming in at 3.3%, with the headwind from copper being stable at 170 million. So the pivot to growth continues in Sweden, and also on EBITDA, which grew 2.8%, benefiting from revenue growth and from unlocking productivity gains from transformation. Specifically this quarter, we saw OPEX decline 7% versus last year. Moving on to the operational KPIs, we see a continued growth in mobile ARPU, supported by pricing initiatives and the return of roaming, and also a growth in subscriber base, equally in consumer and enterprise. Our broadband subscriber base was fairly stable as growth in fibre and fixed wireless access are more or less offsetting the organic decline in XDSL subscriptions. And like previous quarters, the ARCU continued to grow nicely supported by pricing. In TB, we again saw strong subscriber base development driven by growth in both SDUs and MDUs. And importantly, we saw another strong ARCU development supported by pricing and a higher share of premium sports packages in the base. Turning to Finland, we had another quarter of relatively stable service revenue development as improved growth momentum for Roval, despite interconnect headwinds, was offset by lower fixed revenues, predominantly driven by the acceleration and the loss of legacy copper revenues. We are continuing to see positive results in brand, value and network perception among our customers and the turnaround is materialising step by step. The transformation of Finland continues at pace, albeit with some temporary cost tailwinds. Q2 last year carried extra costs for software licenses, and this quarter being positively impacted by industrial action. However, OPEX was reduced by 6%, and this is despite the 35 million energy headwind. So, in summary, a stable service revenue development, mobile growth of 3%, excluding interconnect, and a substantially reduced cost base, albeit not all structural, drove an EBITDA improvement of 5.3% in the quarter. The subscriber base was stable, and a slight loss in consumer was compensated by a gain in enterprise, and the ARPU stabilized after several quarters of negative development despite the aforementioned interconnect reductions. Consumer mobile ARPU development improved to 3% versus the 1% we saw last quarter, and in enterprise we're starting to see the pressure on ARPU easing. Given these positive trends, continued network modernisation, 5G migrations and turnaround initiatives, we remain on track for a more structural turnaround in the second half of the year. Moving on to Norway, we saw another quarter of really great top-line momentum. Service revenue increased 6.8%, mainly driven by an 8.9% increase in mobile, driven by a growing subscriber base, and core ARPU expansion in both the consumer and enterprise segments, combined with higher wholesale revenue. Enterprise grew by an impressive 11% in the quarter, continuing a long trend of excellent performance. And as you might have already seen, the Norwegian regulator recently confirmed in its annual market report that Telia grew more in the Norwegian enterprise market than all the other players combined last year. And as we continue to win new customers on quality and service credentials, we expect this trend to continue. Broadband also continued to develop very positively at 8.1%, driven by both customer and ARPU growth. And the ARPU growth is very much driven by price increases through our CPI-linked collective agreements, as well as on individual agreements. EBITDA grew 2%, as higher service revenue was partly offset by higher content and marketing costs, as well as from a lower equipment margin in the quarter. And the mobile subday continued on its positive trajectory with a stable consumer development and growth in enterprise, where we grew our base in all sub-segments, SME, large and public, as well for both Rams, Telia and Fenero. ARPU was again strong, driven partly by core ARPU, but to a large extent also by the value of accounting change, as well as Roman recovery. Moving to the led markets, it's the second to the 32th quarter of a beautiful page for these markets. In Lithuania, we continue to see broad-based service revenue growth, with mobile growing double digits and fixed by 5.1%. The flow through to EBITDA from higher service revenues was, as you can see, excellent this quarter, despite significant headwinds from higher energy costs. In Estonia, performance was again strong, with service revenues going 4.7%, and like in Lithuania, it was broad-based, with mobile growing 5.9% and fixed going 4.3%, supported by all services except for Cleary Fixed Telephony. And as you can see, EBITDA grew in line with service revenues despite the inflationary headwinds. Finally, in Denmark, we saw continued good progress driven by mobile growth of 3%, which more than compensated for a slight softness on the fixed side. This, combined with continued good momentum on the cost transformation, resulted in Denmark delivering an excellent 9.5% EBITDA growth for the quarter. Finally, moving to TV and media, and we can see that service revenues increased by 2% from a strong performance in advertising growth, 4.2%, partly offset by weaker performance in the pay business. Ad revenues in Sweden and Finland remained strong despite a tough comparison with the Euros last year, and digitalization of advertising is continuing at speed. So far, we are not seeing any signs of deteriorating demand from advertisers due to the macro situation. Pay TV had a softer quarter as growth in Sweden was offset mainly by lost Formula One rights in Finland and an expiring DTV agreement in Denmark. As expected, our EBITDA declined by $231 million year-over-year, reflecting the higher content costs mainly from Champions League, as well as higher OPEX relating predominantly to the return of live events, higher resources as a result of that, and marketing spend. Looking at the PTD customer base, we saw a decline of 41,000 in the quarter, driven mainly by normal sports seasonality, as predominantly Champions League and the Swedish hockey season ended towards the end of the quarter. But we did see a slight growth in our career year over year, driven by an increased share of sports subscriptions and price increases in Sweden. Looking ahead, we have now annualized the Champions League investment and will no longer carry that as a headwind on a year-on-year comparison from next quarter onwards. However, clearly the TV market is going through a period of significant change, and now, especially in the S1 market, it's very competitive, as you all know. With this backdrop, and as you would expect, we are now looking at how best to position Talia's assets in the future, leveraging our strengths in aggregation and our core telco-based business, and a phenomenal reach in our broadcast TV business. So with that, I'll hand you over to PC for a run-through of the financials.

Thank you, Alison. Let me quickly take you through the Q2 financials. As Alison has gone through, we have a solid growth at 2.4%, with Finland Stabilized and all other units with good growth momentum, partly on the back of a continued roaming rebound. The service revenue growth is broad-based, like in Q1, with telco growth both in the consumer segment of 2.7% and in the enterprise segment of 2.1%, on top of the mentioned TV and media growth of 2.0%. We have a good momentum with several quarters of low single-day growth and are well on track to deliver on the outlook for 2022 and 2023. Let's move to OpEx. Total OPEC is reduced by 1.6%, or $104 million in the quarter. The reduction is driven by lower resource costs of $173 million from more than 1.2,000 or 1,200 reductions in FTE and FTC since Q2 last year. Marketing spend is reduced by 15 million in the quarter, where underlying growth in spend and activities was offset by efficiencies from media spend consolidation, more target communication, and a more cost-efficient channel mix. Other effects increase 84 million, where continued IT cost reduction from IT simplification, consolidation, and modernization are offset by 101 million increase in energy costs from increased energy prices. Despite inflationary pressure, we have six quarters into our transformation journey, reduce our effects by 0.6 billion or 0.9 billion if we exclude energy costs. The ongoing digital transformation of our business is fully on track and has enabled a significant reduction in number of resources, marketing efficiencies, and lower IT costs. During the last few quarters, the energy prices in our footprint have soared, and during the last quarter, also the market outlook for energy prices the coming years has increased significantly. Despite hedging so far this year, the energy cost has increased 184 million, and if we use the updated market outlook for energy prices, the total energy cost for 2022 is expected to increase by around 300 million versus last year, and with a similar increase again in 2023. As stated, our transformation agenda is moving forward, and we are on track to deliver at least 2 billion net OPEX production by 2023, excluding the energy cost. The energy cost increase will be fully mitigated by a combination of additional cost and pricing initiatives to reflect the higher cost base and be fully offset on EBITDA levels. Let's move to EBITDA. Total EBITDA grew 0.8% in the quarter, We grow in all units except TV and media. That, as expected, is impacted by the higher content costs related to Champions League. But totally besides only slightly growing, we have gained a significant growth momentum across all our units in the telco business, with EBITDA growth at a solid 4.3%, similar to Q1. The strong growth momentum on the telco side, combined with easier year-to-year comparison on the TV and media business in the second half of 2022 onwards, make us well on track towards the outlook for 2022 and 2023. Moving to cash gap X, total cash gap X in Q2 is 3.7 billion, slightly higher than Q2 last year. Mobile and fixed network investments are similar to last year, But we see some high investments related to product development and IT to support our ongoing transformation. This is expected to come down again to the same level going forward. 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 as a much more digital company. Cash cashback on a rolling 12-month basis has increased to $15.0 billion, or 16.9% of net sales. Cash cashback is expected to reduce on a rolling 12-month basis in the second half, bringing cash cashback well within the 2022 guidance of $14 to $15 billion, and further down in 2023 to be in line with the outlook of 15% of net sales. On cash flow, operational free cash flow ended at 1.1 billion in Q1, down from 2.1 billion in Q2 last year. In Q2, sorry. Even though on a reported basis, a slightly positive with negative effect from the carry divestment last year is assessed by underlying growth and positive FX effects. The decline versus last year is mostly driven by in-year facing a working capital in addition to the slightly higher cash effect in the quarter. Total cash flow on a scrolling 12-month basis is as expected from a somewhat declining trend due to increased investments and low contributions from working capital. The structural part of 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 the TV and media business. This combines with a somewhat lower cash cash base on the 12-month rolling basis in the second half. Working capital is expected to be positive for a year, but less positive than the $3 billion positives that we carried last year. This will secure cash regeneration, both including and excluding working capital, to at least cover the minimum dividend commitment of $7.9 billion post our share buyback. Moving to net debt and leverage, our total net debt reduced by 2.0 billion in the quarter driven by good cash regeneration and the 5.4 billion proceeds from the Swedish power transaction. This is partly upset by the distribution of the first installment of dividends of 4.1 billion and the first batch of share buybacks of 0.4 billion in the quarter. Total net debt ended at two, 0.01 times, down from 2.09 times last quarter, and are now at the very end, low end, of the targeted range of 2.0 to 2.5 times. Finally, on the outlook, with a strong first half behind us in line with our own expectations, combined with a solid plan and execution momentum, we are well on track to deliver on our outlook both for 2022 and the period 21 to 23. And with that, I will hand back to Alison to summarize the presentation before going into the Q&A.