Telia Company AB (publ)

Welcome, everyone, to Telia Company's Q2 2023 results presentation. And with that, I will hand over to Telia Company's Head of Investor Relations, Eric Strandenpers. Please go ahead. The floor is yours.

Thank you, Sam, and welcome everyone to our Q2 call with Alison Kirkby, our president and CEO, and Patricia Merland, our CFO, who will take us through the Q2 results and then we'll go for Q&A. Alison, please go ahead.

Thanks, Eric. So good morning, everyone, and a warm welcome to this second quarter results. So as you've seen, we started this year with a full focus on restoring profitable growth momentum in our telco businesses whilst taking decisive action on capital allocation. and this focus continues and is clearly evident in the quarter. The solid telco trends we started the year with have persisted and in many cases strengthened further, resulting in a second consecutive quarter of improvement to service revenue and EBITDA. Telco service revenues improved to 3.2% growth, supported by growth in all markets, all segments, and with consistent growth of about 3% in both mobile and fixed services. On EBITDA, the strong telco service revenue growth was more than compensated for a higher cost level in the quarter and resulted in a growth rate just shy of 5%, with all markets back to growth. The solid telco performance was, however, offset by recessionary fears triggering challenging times for advertising in our TV and media business unit, resulting in a neutral EBITDA for the full group. But as expected, our operational free cash flow for the quarter was muted. This is in line with our plan for the year, with cash flow turning positive in the second half and especially Q4, driven by higher EBITDA, lower capex and working capital phasing. Leverage increased to 2.66 times, primarily on the back of the cash flow phasing and a weakening of the Swedish and Norwegian currencies. And as cash flow turns positive in the second half, leverage will decline and will be further reduced by the Danish sale proceeds. Strategy execution, as I said, continues at pace with our network technology and security leadership most evident this quarter. 5G rollout and network modernisation is progressing well, reaching 84% 5G pop coverage by the end of the quarter and well ahead of key competition. We're seeing strong growth in enterprise digital services, including increasing momentum in areas such as security, enterprise mobile networks and IoT, contributing to a double digit growth in what we call beyond connectivity digital services in the quarter. And our strategy to always be the highest quality and the most trusted partner to the most demanding customers was confirmed as we were selected as the sole connectivity provider to the NATO summit in Vilnius just last week. Finally, the Danish transaction remains on track and expected to close in Q1 next year at the latest. And our outlook metrics all remain unchanged. In the interest of time, I don't intend to run through our key priorities again, but here, as I said at the beginning of the year, is our four-pronged approach to building a better Telia and which guides us every day. So let's now look at the progress made against each of these priorities in the quarter in each of our business units, starting with Sweden. In Sweden, we sustain our 5G leadership with a pop coverage of 73%, up from 63% last quarter. And according to the most comprehensive tests in the market, we have clearly the best network and we believe that we've extended that leadership during this year. This helped drive further improvement in revenue, growing just shy of 2%, as pricing activities and customer experience improvements are starting to yield visible results. Enterprise was especially strong on the back of an unparalleled level of trust and a superior breadth of digital services. Our ICT business, Telia Saige, in particular, accelerated revenue growth further to 18%, and IoT services in Sweden also grew to 14% in the quarter. Like last quarter, the growth was broad-based with all major product areas growing and broadband in particular improving very positively on the back of fibre price increases. Excluding the impact from legacy and roaming, underlying service revenue growth was 4.1%, a clear improvement compared to the last few quarters and confirming that we are moving in the right direction. Sweden also moved back into growth territory on EBITDA as service revenue growth more than compensated for salary inflation and higher content costs. But with pricing fully established and good visibility on the cost base for the balance of the year, we are aiming for an improving EBITDA momentum in the second half. Moving on to the operational KPIs, despite the weaker retail environment, mobile subs grew in both consumer and enterprise, supported by the lowest churn we've seen since the pandemic. ARPU remained fairly unchanged, owing to the popularity of our family tariffs on the Telia brand and the Fellow brand for price-sensitive consumers. Our broadband subscriber base remains stable in the quarter, despite significant pricing, as growth in fibre and fixed wireless access pretty much compensated for the ongoing decline in DSL subs, of which we now only have 70,000 remaining. New fibre pricing taken in Q1 resulted in good ARPU growth and another quarter of double-digit fibre revenue growth. In TV, we're continuing to grow in both the SDU and MDU segments. ARPU, however, remain mostly unchanged due to a somewhat negative mix shift. But we expect this to improve in the second half as we've just announced price increases ranging from 16% to 25% on our basic TV packages. Moving to Finland, our 5G network reached 86% population coverage and our strengthening network credentials helped secure new enterprise mobile network contracts in the quarter. We're also proud that our Helsinki data centre became even more eco-friendly as its waste heat is now being transferred to the city's district heating and over time this will provide heating to 20,000 homes and businesses in the local area. As you know, we've been working hard establishing Telia as the most trusted network and it continues to help our growth momentum with service revenue improving to 2% year on year. Mobile growth picked up and reached 2% despite materially lower interconnect revenues driven by a 3% growth in consumer while enterprise did see a slight decline in mobile revenues but overall had a strong quarter with strong demand for ICT and professional services as we are also seeing in Sweden. EBITDA grew despite headwinds in the shape of savings from industrial action in Q2 last year versus a one-time wage settlement of the same amount in Q2 this year. And our subscriber base was relatively stable, even though we have moved away from offering unprofitable cheap subscriptions. ARPU grew by 4%, supported by a solid 9% growth in consumer ARPU. Moving to Norway, our 5G leadership continues and we now reach 92% of the Norwegian population, underpinning improved customer satisfaction and growth momentum. This network's strength is also enabling growth in wholesale, with the migration of Fjordcraft's mobile customers now completed mid-quarter. Consumer, enterprise and wholesale all contributed materially to our 5% service revenue growth. EBITDA growth was very strong at 14%, supported by the solid service revenue development, lower marketing expenses, some FX and one-off items of around 50 million also helped. But even considering that, Norway really did have an impressive quarter. The mobile subscriber base was stable as a slight growth in enterprise was offset by a slight reduction in consumer. And as you can see, ARPU increased nicely, supported by the consumer segment where we saw an 8% ARPU increase on the back of pricing and a positive mix shift. And the good news continues as we move on to our lead markets, which, as you can see, had another great quarter with double-digit EBITDA growth across all three markets, enabled by the same network and technology strengths, combined with customer experience focus that you're seeing throughout Telia. In Lithuania, we finalised the network swap to Ericsson and the 5G rollout after reaching 99% pop coverage, way ahead of competition. Service revenue grew 6.5%, with both mobile and fixed contributing at a similar rate. And despite inflation, the flow through to EBITDA was again strong. Estonia was also strong with service revenue growing 8% and like in Lithuania it was broad-based with mobile growing 10% and fixed growing 7% supported by all services except for a slight headwind from fixed telephony. And EBITDA growth clearly outpaced service revenue growth despite inflationary headwinds. Finally, in Denmark, we saw service revenue returning to positive territory, helped by underlying mobile ARPU growth driven by pricing and growth from fixed wireless access, and great work on structural cost reduction leading to another very strong EBITDA quarter. With the relaunch and rebranding of our fighter brand, CallMe, happening towards quarter end, we expect to see commercial momentum build further during the coming months. Finally, moving to TV and media. As I said in my intro, we've seen the advertising market, especially in Sweden, deteriorate further in the quarter, leading to advertising revenues falling by 14%. Pay, however, did have a better quarter, with revenue improving by 4%, fully supported by price increases. EBITDA deteriorated to a slight negative for the quarter, driven by both lower service revenues and higher content costs. And also IT and general admin did increase, largely driven by the ongoing work to consolidate Seymour under TV4 and MTV. But with more visibility on the Seymour consolidation and an accelerating shift to digital, we did announce a further efficiency programme that will impact the entire organisation during this quarter. We expect the benefits to accrue from this as we move into next year. Looking at the subscriber base, we saw a decrease driven by a challenging streaming environment and normal seasonality as sports seasons are either coming to an end or taking a break for the summer. Additionally, with more focus on restoring profitability, pricing is no doubt having an impact on our subscriber base. And as you can see, our poo here increased by 14%. The actions we took this time last year to refocus the TV and media unit around the TV4 and MTV platforms with a much more focused premium sports offering, a leaner cost base and even better digital capabilities were exactly the right things to do, especially now considering the major shifts we are seeing in the sector. We're therefore looking forward to launching our new TV4 Play service in August, which will be the first public milestone of our new, more digitally focused future. And now I'll pass over to PC.