Telia Company AB (publ)

Welcome, everyone, to Telia Company's Q3 2022 results presentation. And with that, I will hand over to Telia Company's Head of Investor Relations, Erik Strandenpets. Please go ahead. The floor is yours.

Thank you, and good morning, everyone, and welcome to our Q3 call. On the call today, we have Alison Kirkby, our President of DEO. I'm Christian Nordahl, our CFO, and myself and Anders Nilsson from Investrelation. Alison, please go ahead.

Good morning, everyone. And as you've seen in our report this morning, macro challenges increased significantly during the quarter. And those of you that have followed us lately know that we've expected to be able to largely mitigate these macro efforts. As we progress through the quarter and now summarising both the quarter and the outlook, we do see larger macro effects than previously and have decided to be more cautious as we look forward. We understand this is painful in the short term for everyone, but it's the right thing to do because we're very much focused on building the long-term value creation of this company. And on that note, it's encouraging to see the continued commercial and operational momentum that we saw in the first half of this year continues. Proof that we are showing resilience in a difficult environment and proof that our plan to create a better telia is on track. Service revenue growth, digital transformation momentum, OPEX reduction and underlying EBITDA are all developing in line with our mid-term ambitions, which are low single-digit revenue development and mid-single-digit EBITDA development. On service revenues, growth continued at a pace similar to last quarter at 2.3%, supported by all our units for the first time since Telia moved to a country-based organisational structure some 10 years ago. Excluding the hit from higher energy costs, which almost tripled in the quarter, efficiencies are continuing to come through as we transform Telia, and in the quarter we managed to reduce the underlying OPEX by just over 2%. EBITDA increased by 1% as service revenue growth and efficiencies compensated for higher energy costs. And excluding the impact from energy, we had a strong underlying growth of 4.9%. So our underlying performance is sustained. Operational free cash flow came in at 2.1 billion kroner, which is 0.9 billion reduction versus the same period last year, driven mainly by a different timing of content payments and slightly higher capex, but both in line with our plan. And if you look at the structural part of our cash flow, i.e. cash flow excluding changes in working capital, it was fairly unchanged year on year at 2.7 billion crore compared to 3 billion last year. Our balance sheet remains healthy with a slight increase driven mainly on leverage, driven mainly by our shared buyback programme. And we've so far bought back approximately 100 million shares by the end of the quarter. And as of earlier this week, we're now 76% through the buyback programme. Finally, considering the macro headwinds around us, we're rightly being more cautious as we look forward And so we have reflected the known energy and interest rate headwinds and some additional caution into our forward-looking statements. But while the macro environment poses some short-term challenges, our strategy is still intact and we will continue to execute on it at speed. Moving to our strategy, as I said, all countries had positive service revenue growth and it was broad-based with mobile growth 4.1%, fixed services growing in all markets except for Finland, and we had another strong quarter for advertising. Our total enterprise segment was again strong and positive, growing 1.5%. Our pricing momentum is building with much more potential as we look systematically in all parts of our service portfolio and in all markets, and this will clearly give us more top-line benefits next year and the following year. Network modernisation is on track with 5G coverage increasing fast and now reaching 63% of the Nordic and Baltic population, up from 49% last quarter. Norway, Finland and Denmark are now all above 70% coverage and Lithuania is already at 80%. Digital transformation is also progressing with product and platform portfolio simplification on track. Another 10 IT systems were decommissioned in the quarter. and IT costs continue to decline despite underlying wage inflation. All of these efforts are designed to create long-term benefits and sustainable economics, although in the short term they cannot compensate, of course, for the dramatic increases in energy prices we've seen. After the end of the quarter, we also announced our intent to consolidate all our linear and streaming content under the TV4 and MTV brands in Sweden and Finland respectively, which means they will each span linear, AVOD, HVOD and FVOD. strengthening their national champion status by all one platform, and fundamental for them to take further advantage of changing viewer habits towards on-demand digital platforms and enabling us to offer richer, targeted inventory to our advertisers. Finally, on sustainability, I'm super proud that Telia was awarded the Platinum Medal by EcoValues, putting us in the top 1% of 75,000 companies assessed worldwide for strong sustainability management, fully integrated, into our policies, our actions, and our results. Moving to Sweden, we again had a solid quarter with service revenue growing 1.2%, mobile growing 2.3% from a continued positive ARPU development, broadband growing 4.1% from pricing initiatives, and again, a strong development in Telia TV services going 15%. Our enterprise business continues to show a solid development even with a slight decline this quarter due to some elevated levels of IoT revenues this quarter last year. So underlying, we're still seeing a stable to growing development and so far no signs of decline in spend amongst our enterprise customers as they continue to digitalise to meet the opportunities of tomorrow. A great example of which is Alibio in making their energy grid smarter and a great proof point of how we can support our enterprise customers on their digitalisation journeys at the same time as we contribute to a more sustainable society. Excluding the impact from legacy and the recovery of rolling revenues, underlying service revenue growth was again very healthy at 3.4%. EBITDA grew 1.2%, somewhat lower than Q2, but fully explained by a one-off write-down of inventory. So again, a solid operational performance by our Swedish team, especially if looking at underlying revenue and EBITDA development. Moving on to the operational KPIs, we're seeing a stable mobile customer base and a continued growth in ARPUs, supported by an improving NPS, and that's the SPI pricing initiative on both the Telia and the Halobot brands that we took earlier. This meeting is being recorded. Not yet fully followed. On broadband subscribers, we're not able to fully compensate the loss of XCSL customers this quarter, but as you can see, ARPU accelerated on the back of price increases on both copper and fibre. And in TV, we again saw a strong subscriber base, and importantly, we saw another strong ARPU quarter, supported by both pricing and a higher share of premium sports packages in the base. During the quarter, we entered into a partnership with Discovery on the streaming rights for the Swedish Football League of Svensson to build on our aggregator position. However, as you know, right at the end of the quarter, we were not able to agree with BioPlay on a new agreement that makes financial sense for us or for our customers. Moving now to Finland, we saw a slight pickup for service revenues, very much driven by mobile, which despite interconnecting increased by 3.5% and made a good start to the sports season on TV. That being said, the progress on mobile was largely offset by continued pressure on fixed revenues that relate mainly to legacy data comm services. The turnaround of mobile is on track and so is our cost transformation, especially in digitalisation and in the move to online with an underlying 2% reduction this quarter. Admittedly, it is, however, difficult to see the cost transformation this quarter and Finland is particularly hard hit by energy cost increases, which were 80 million kronor higher. Subscriber base grew slightly in the quarter, driven to some extent by consumer, but mainly by the enterprise segment, and you're seeing R2 increase by 2%, helped by continued migration to 5G. With these trends, continued network modernization, pop coverage is now 75%, and a range of cost initiatives, we remain committed to improve Finland in a structural way, But we do recognise that we've got a bit more to do, considering the magnitude of the current headwinds. Norway had another quarter of very strong momentum. Service revenue increased just shy of 6%, driven by an almost 6.5% increase in mobile, on the back of a growing subscriber base, poor ARPU expansion, higher wholesale revenues and a strong recovery in rolling. Enterprise grew by an impressive 8%. This strong service revenue development was also confirmed by the regulator, which confirmed that Telia was the fastest-growing mobile operator in both B2B and B2B segments in the first half of this year from a value point of view. We also had strong development on fixed services, with excellent broadband developments growing 4.3% and TV growing 5.7% on the back of pricing. And you might have seen we announced some new additional broadband pricing in Norway this morning. EBITDA grew 4.5% as higher service revenues more than offset a 50 million negative impact on increased energy costs. The mobile subscriber base continues its positive trajectory in both our brands, but mainly in Finero this quarter, and ARTE was again strong with a 2.6% increase, helped partly by Roman's recovery. Moving to the lead market, in Lithuania we grew mobile 10.8%, which is in line with Q2, And we've taken a clear lead in 5G with an excellent commercial launch and see strong initial demand. The development for fixed service was a bit softer year on year, resulting in total service revenue growth at 5%. And the flow through to EBITDA this quarter from the higher service revenues was weak as a result of the energy headwind for 40 million kroner. Hedging in the Baltics is less straightforward than in the Nordics, but we are taking other mitigating actions in this inflationary environment, including a number of significant price increases, which are taking place now. In Estonia, performance is again strong, with service revenues going 5%, and as you can see, EBITDA growth in line with service revenues, despite the energy headwinds, which have been held by historical PPAs that we have in that market. This is another strong achievement for Estonia, alongside excellent NPS development too. And finally, in Denmark, We have service revenue growth driven by mobile growing at 2.8%, but energy headwinds were especially strong in the quarter. Our shared network does not hedge, but revenue growth, an easy call from the cost side, and generally excellent turnaround momentum resulted in just over 8% EBITDA growth. Finally, moving to TV and media, we had a record high third quarter in mass advertising, despite that we had the Euros last year, and this compensated for a challenging development in pace. The shift to digital continues, and we saw a 20% growth in Swedish digital ad revenues. Pay had a soft quarter, driven mainly by the loss of Formula One in Finland, and continued headwinds from a wholesale agreement in Denmark that expired in the fourth quarter last year. EBITDA increased by 24%, driven by mainly lower sports, as last year contained both Football Euro and World Cup qualifiers. And if you look at the pay TV customer base, we saw an increase of 28,000 in the quarter, driven mainly by strong high-tier sports growth in Sweden, driven by the Swedish Hockey League, UCL and other sports fund-links. Looking ahead, we're now starting the work I mentioned in the strategy highlights to simplify our TV and media setup. We've seen more premium content to be transferred into the TV4 and MTV streaming services. and offering a more focused slate of premium Nordic content, including both AVOD, HVOD and SVOD services. These changes will be implemented during the course of next year and will build on the strengths of the TV4 and MTV brands. And regarding the output for advertising revenues in these tough macro times, we continue to see strong demand from advertisers, but clearly after four quarters of advertising revenue goals ranging from 4% to 11%, We cannot expect a high growth rate going forward at this time. But that's enough from me, and I'll now hand over to PC. Thank you, Alison.