Telia Company AB (publ)

Welcome everybody to Telia Company's Q1 2024 results presentation. And with that, I want to hand you over to Telia Company's Head of Investor Relations, Erik Stranden-Peers. Go ahead, please, Erik. The floor is yours.

Thank you, David. And welcome everyone to the call. We have for the first time our new CEO, Patrick Hofbauer, and our CFO, Erik Aagerman, doing this call this morning. And we will do the management presentation followed by a Q&A as usual. I hand the floor to you, Patrick.

Thank you, Erik. And good morning, everyone. And welcome to this Q1 presentation, which is the first Telia result presentation for me, as Erik just mentioned as well. Having started during the quarter, I have already met some of you live during March, and I'm very happy to be back in the Nordic telecom industry, as I have previously been 11 years at Telenor. I spent much of my first approximately 80 days meeting people in Telia and working intensively with our business leaders on our plans. And even though there is still plenty for me to learn about the company, I must say that I'm encouraged by what I've seen so far and when it comes to Telia's impressive, I would say, set of assets, high level of competence and industry knowledge and desire to grow along with our customers. These things are all great prerequisites to build from based on what I've seen and based on my perspectives, so Telia is a competitor for many years. I also see improvement potentials spanning several fields, such as how we deliver our services, execute on our efficiency and investment agendas and how we deliver value to all our stakeholders. There is an opportunity to create faster and less and more efficient Telia. But let's now look at the first quarter. And as you know, Telia has been on a transformative journey with focus on profitable growth, efficiencies and capital allocation. This focus will continue and the first quarter shows that we are on the right track. There is a consistent solid growth in Telco and our TV and media unit, which is still impacted by a weak advertising market, is seeing reductions in losses on the back of digital transformation and successful restructuring. We also continue to deliver better customer experience. This quarter, we for instance launched a new service app in Lithuania, added new premium content to our TV product in Norway and saw record low volumes in the Swedish customer service. All of this appreciated by our customers, resulting in a continued positive trend for MPS and continued low mobile churn levels. This at the same time as ARPUs continue to increase in most markets. As I said in the beginning, I'm impressed by Telia's infrastructure asset and in the quarter, we made further progress on 5G, with especially Sweden accelerating the pace, moving up from 82% to almost 90% population coverage, while shutdowns of copper and 3G are on track, which is also important. So all in all, we have started the year in line with our plans and we can confirm the full year outlook. So let's look into Q1 highlights. And as said, momentum in our telco operations remained healthy, with service revenue growing .7% and again, it was broad-based with growth in all markets as well in both mobile and fixed services. This quarter, consumer was the driving force with a .8% increase, whereas enterprise was neutral. The growth in service revenues also drove EBITDA growth of 2.1%, despite a write-off overdue, receivables and pension refund facing in Sweden. Without these items, telco EBITDA would have grown about around 4%. The performance in our telco operation was further amplified by TV and media improving, resulting in a .6% growth for the full group. Structural OFCF reached 0.4 billion after being impacted negatively by minus 0.4 billion in facing of pension refund. It remains in line with our plan for the year, with quarterly cash flow turning visibly more positive in the coming quarters. Leverage increased somewhat to 2.43x on the back of the cash flow facing and on the quarterly dividend payment. The sale of telodermmark was, I'm sure you have seen, closed in early April, and including these proceeds leverage would have been about 0.2x lower, so comfortably in our target range. Finally, I would like to give heads up that we are planning to have a capital markets update in late September at our office here in Stockholm to tell you more about our midterm ambitions, so we hope to see you here then. Moving now into the markets and starting with Sweden. Service revenues improved again sequentially to a growth rate of 3.5%, driven by the consumer segment and especially by Brauba and TV, where we have strong products allowing for pricing above inflation with maintained customer satisfaction. Together with these segments drove a revenue uplift of more than 200 million. Enterprise growth was more modest this quarter following phasing of tenders and a slowdown after a very strong second half last year. The underlying demand for our services in security, IOT and cloud however remains. Excluding the impact of legacy services, which was 130 million in the quarter, underlying service revenue growth climbed to 5.6%. The closed down of the copper network continued and more than 50 municipalities are now free from copper. EBITDA however moved into negative territory following a 100 million negative impact from refacing of pension refunds from Q1 to Q2 and also a 50 million write down of overdue receivables. Excluding these two items EBITDA growth would have been 2.8%, a good achievement by the Swedish team. Moving on to the operational KPIs and as you can see mobile post-upaid subs grew by 15 000 supported by consumer and prominently growth in fellow but also for the Telia brand as well as continued low churn levels. ARPU however continued to be fairly flat owing to the mixed shift with growth in family tariffs as well as growth on our fellow brand. Our broad buzzer scraper base remained unchanged as growth in fibre and fixed wireless access continued to compensate for the ongoing decline in copper which totaled to 8 000 in the quarter. New fibre pricing taking last year coupled with the reduced campaign levels resulted in ARPU growth of 7% and another quarter of double digit fibre revenue growth. Our TV aggregator business in Sweden which is now a clear market leader continued to show stellar performance with subscriber base growing of 15 000 in the quarter spread between both SDU and MDU and an ARPU that increased 8% on back off pricing. Moving to Finland where service revenue growth remained stable around 2% supported by another solid quarter in mobile which increased 4.4%. Despite a continued headwind from Interconnect. Like previous quarters service revenue growth was driven by consumer while enterprise saw a slight decline attributable to fixed services. New regulation around special service numbers have negative impact on the service revenue growth of about 1 percentage point. EBITDA growth remained healthy at around 4% driven by mobile revenue growth despite much lower energy tailwind this quarter. The mobile subscriber base declined 25 000 mostly attributable to consumer following continued focus on value over volume. This drove consumer mobile ARPU up 12% although going forward we expect the consumer business to rely more on other growth levers such as speed upsell in broadband as the largest ATL pricing opportunities in mobile are now exhausted for the near term. Then moving into Norway where our 5G leadership continues and we are now reached 95% of the Norwegian population something that together with continued strong wholesale development underpins our growth momentum. Our network credentials also allowed us to deliver an EMN solution to missing people for improved communication during search and rescue missions. A great proof point of how important our services are for today's society. Service revenues continue to grow albeit slower as continued good development on mobile was partly offset by 2% reduction on fixed and lower paper invoices feed due to new regulation. Wholesale growth remained strong supported by our agreement with Fjordkraft as well as from other wholesale customers. EBITDA grew almost 6% despite the lower revenue growth and lack of energy tailwind. The mobile subscriber base remained flat but as you can see ARPU increased nicely supported by the consumer segment as well as 6% ARPU increase on the back of pricing and positive mix shift. Let's look into the Baltics. In Lithuania service revenue growth remained steady after around 5% with predominantly mobile contributing this quarter and flow through of EBITDA picked up following good cost management. Estonia was weaker on service revenue following an analyzed impact from pricing while the new price changes that we have just announced are kicking in now in Q2. Despite this EBITDA growth is of 6% was generated on the back on good cost management. My final stop before I hand over to Erik is TV and media where service revenues as expected continue to be under pressure from a weak advertising market in Sweden. Revenue from TV however continued to develop positive up by 5% in the quarter supported by a growing subscriber base. EBITDA improved by 160 million as pressure on advertising was more than compensated by lower content cost and lower general expenditures especially related to resources and marketing. In Q2 we have the final quarter of the current Champions League contract as well as the start of the European Championship the latter of which will in core cost around 400 million equally split between Q2 and Q3. Thereafter we expect substantially lower content cost from Q4 into Q25. Looking at the subscriber base we saw an increase of 30,000 subscribers despite closing Seymour in Denmark. This was driven by non-sport packages especially our H-Vod services in both Sweden and Finland. Our digital transformation progressed well in the quarter with strong digital consumptions, all-time high streaming volumes and all-time high total unique users. Digital advertising revenue grew double digit. Furthermore we saw a great result in the survey amongst Swedish youths in which TV4Play climbed to the third place after beating streaming outlets such as YouTube. And with that I hand over to Erik that will talk us walk us through the Q1 financials. Thank you.

Thank you Patrick. Like Patrick mentioned in the beginning we saw healthy profitable growth in all our telco units as most telco operations maintained the positive trends from Q4 and with service revenue growth continuing to run at around 3%. New regulation on special service numbers in Finland and invoicing fees in Norway created headwinds of together 40 million in the quarter impacting both service revenue and EBITDA. Looking at EBITDA and our telco business we can see that the growth pace is somewhat lower compared to the preceding quarters. However when adjusted for the pension fund re-phasing and bad debt write-off in Sweden underlying growth was actually just over 4%. And for the second quarter in a row also TV and media contributed to the overall EBITDA growth of the group that ended at plus .6% or close to 7% if we filter in the Swedish items of 150 million SEK. Let's now look at the condensed P&L on the next page. We see that revenue was down 400 million compared to the same period last year as we saw reduced sales of lower margin fixed and mobile equipment in mainly Sweden which more than offset the growth in service revenue. Our service revenue growth was also this quarter supported by growth in all geographical markets as well as by both fixed and mobile. For mobile the growth was mainly due to Norway and Finland that both saw a continued rise in the consumer APU and for Norway we also had continued good momentum in wholesale. And this was despite some regulatory headwinds of in total 40 million headwinds that will also remain for the remainder of the year. EBITDA continued to show healthy growth driven by all markets except for Sweden that was negative in the quarter due to the already mentioned one of items. Excluding these items Sweden had a very healthy growth of .8% on EBITDA. Our EBITDA margin expanded by 173 basis points to .6% supported by service revenue flow through good cost management as well as reduction in equipment sales. Our net income was more or less unchanged at 757 million SEK compared to 738 in Q1 last year. This has improved operating income was largely offset by financial items due to mainly higher interest rates compared to the same period last year. OPEX remained unchanged as a SEK 40 million tailwind from low energy cost and our continued good traction on generating efficiencies within resources doing more with fewer people was netted out by the two one-off items in Sweden. Adjusting for these items OPEX declined by 2.3%. We see that we managed to grow service revenue while maintaining or even reducing the cost base. Carpecs declined by 400 million to 3.1 billion year on year due to lower investment levels in mainly Finland, Norway and our delivery engine CPS primarily related to less investments in product development and IT. The reduction however mainly reflects the phasing of Carpecs and we expect the investment level to be somewhat higher in the coming quarters. Our full year Carpecs outlook remains at around 14 billion SEK. Structural cash this quarter ended just below last year's level as we time shifted 400 million into Q2 from the rephasing of the pension refund in Sweden and we also had a negative 100 million impact related to provision we made in Q4 last year referring to VAT in Norway. So our underlying structural operating free cash flow in Q1 was comfortably above last year's level. Higher EBITDA and lower cash Carpecs in the quarter was offset by higher paid interest in line with our expectations for which we still expect an increase of around a billion for the full year. Finally we have an 800 million negative change year on year in other items which is mainly driven by the pension fund rephasing of 400 million and VAT in Norway to the tune of 100 million. We tend to have around 5 to 600 million of payments per year on this line and expect that to be the case also going forward. Our working capital was significantly less negative compared to Q1 last year although still at minus 1.2. This was predominantly related to content payments at TVA Media of 600 million and the VAT provision in Norway. This is in line with plan and we continue to forecast a positive contribution to the full year cash flow. More about this when we move to the next slide that contains an illustrative phasing of the full year cash flow profile. Spectrum Carpecs payments are expecting to remain low throughout the year and not increase again until next year when we have the second payment relating to the 2023 auction in Sweden as well as an 1800 megahertz auction in the same market. Later this year we also expect to see some inflow to PPE divested from our ongoing project to sell local exchanges in Sweden. We have actually sent out the info memos to sell these buildings this week. As you can see on the right hand side of the graph and this is on cash flow phasing we expect cash flow generation to pick up in predominantly H2 as the vast majority of the expected increase in interest paid is H1 tilted. To that we expect working capital to have a material positive contribution that more than compensates for the higher Carpecs. So similar to last year we see a very much H2 weighted cash profile. Let's end this section now with a look at our balance sheet. In the quarter both our gross debt and growth cash balance came down compared to year end but as you can see our net debt is up four billion in the quarter partly due to cash balance coming down faster as we paid two billion in dividend to our shareholders. This resulted in leverage increasing to 2.43 times. But as you have seen we closed the Danish deal in early April and we expect the impact to leverage from that to be around 0.2 times something that will put us back in the lower half of the two to two and a half target range. And to that comes our expectation of rising rising cash flows year to go which should not just down somewhat further as the year progresses. And with that I now hand over to Patrick who will take you through our guidance and summarize the quarter.

Thank you Erik and let's now summarize before we go into Q&A. As you see on the right our full year outlook is unchanged across all metrics because as Erik has described Carpecs will pick up somewhat and cash flow will increase material in the rest of year which means we're executing according to the plan. It's encouraging that tele growth momentum continued and that TV media is on track with its transformation. Equally important is the rollout of our new networks and the closed down of legacy infrastructure in going as expected. It's also I also want to touch on sustainability progress where 55 percent of our supply chain is now covered by science-based targets. Our A score from CDP being reconfirmed in the quarter and another 200,000 individual reached by our digital inclusion initiative. All of which we will continue to be drive throughout the year. Capital allocation will continue to be an important focus for us as we are pleased with the closing of the transaction in Denmark. Finally I hope to capital markets update and with that we will open up for the line for questions. Thank you.

To join the queue to ask a question please press star five on your telephone. Again it's star five on your telephone to ask a question. Our first question comes from Andre Kavishek. Andre the line is yours.

Hi everyone thank you for the presentation. I had maybe two questions please. One the first one on Sweden. So just as well you had very strong service revenue growth despite the legacy drag but mobile specifically turned negative in the quarter which is by the contrast here may consider a couple of days ago. So I wanted to ask on mobile specifically if you could comment on whether you think there is some value market share losses for some particular reasons or whether there is some temporary effect that you expect to kind of reverse and see in a relatively healthy pricing environment your mobile service revenues to pick back up to previous levels. That was one question. And then second question more conceptual maybe on the free task flow where you've had despite improving working capital dynamics you still have a little volatility which I think is appreciated by investors. If there are any measures that you can take going forward to maybe smooth out in general your free task flow delivery start the year the criticism say it's going to be the second year where very heavily tilted towards the second half of the year with a lot of volatility. So that's fine. Thank you very much.

Thank you. I will try it's Patrick here I will try to answer your first question. I'm not sure if I understood it but I assume it was a little bit about why Sweden mobile is not stronger. But let's see if I can answer your question because it was a bit difficult to understand. But first of all it's not a new trend. We have the mixed effect from growth in fellow and family tariffs tariffs of course causing a mixed shift and offsetting the positive ARPU impact from price increases. We have also lower insurance sales as effect from low equipment demand. I would say we keep our market share when it comes to handset sales. So then we also saw overall still grow despite some legacy drag but coming more on the fixed side. So but to be honest we are not satisfied with the trend and we will absolutely work to improve it. I hope I answered your question.

Yeah and on free cash flow maybe a couple of comments. So first and foremost that we're very happy with the year on year performance that we're seeing. You've seen on the cash flow slide in the deck and that we're now also giving you a free cash flow number at the end of the cash flow statement. So clearly that is up both for operational cash flow by almost 3 billion. So we're very encouraged by that year on year performance. I think secondly what you see is the impact of the interest rate that we flagged on the 26th of January where we said it's going to be up a billion. 700 of million has already fallen in this quarter and then there is a couple of one-offs in the working capital. So what we said is we're happy with the guidance 7 to 8 billion. We also said that we expect working capital for the full year to have a meaningful positive inflow and the start of the year minus 1.2 is impacted by a couple of one-offs. One is the content payments that we were doing which is mainly sports related in TV and media business to the tune of 600 million and then the negative impact from the VAT payment which is about 200 million. Again adjusted for that and not only is the year on year better but also the quarter would have looked materially different and that is something that we will see coming back in the second quarter certainly when it comes to the pension. So negative this quarter positive in second quarter.

If I may build on that it's the other Eric here. Andre to your question of what we can do to smooth the profile the reason why we're refacing pension refund is actually to smooth it profile. So from the second half of this year I don't expect the pensions should be part of our cash flow story going forward but that's it's an important matter of course.

Thank you very much.

The next question comes from Andrew Lee from Goldman Sachs. Please go ahead the line is yours.

Just had two questions both following up from Andre's. Just first one on the free cash flow. So just would argue that the share price ratio of investors are actually really sensitive to the free cash flow surprises you know TVA given its history which is understandable and even though mainly a phasing issue in the first quarter investors weren't prepared for the scale of that 700 million interest cost headwind in the quarter or the one point two billion working capital outflow. So I wondered just to make things easy if you could just go through phasing of free cash flow this year in a bit more detail course by quarter. I know you gave you've given a full year help but particularly for the second quarter just given you've got obviously got the visibility on these things so we can take into account all the material moves and let us know if there's anything else on the revenue or even Dar side like you've seen this quarter with pensions in Sweden or special numbers the special number in Finland. So just if you just help us understand better the phasing through the year of free cash flow so that we don't get surprises like we did today. And then on the Swedish mobile side just more specifically you haven't seen price rises more broadly across the market filter through into ARPU like your competitors have. Is there more that you can do to avoid the spin down that's meaning your price rises at the headline basis aren't flowing through into ARPU and should we see ARPU trend improvement in the family tariffs in March. So just helps understand what more you can be doing to make sure you do actually gain benefit from price rises and don't see it go through the through the sinkhole in in spin down. Thank you.

Want to take the second question. So yeah it's I understand why people are asking this as I think Eric commented and Patrick commented we have in Sweden a good growth considering the legacy drag we have overall but on mobile yes there is a considerable effect from the spin down down to family tariffs and fellow brand. I think we are in the premium position in the market which is which is growing a lot in the price oriented part of the segment and that is up to us to manage of course we need to find ways to improve it but I think that's where we are at the moment that we're not satisfied with the trend so we were looking at the number of different levers for it. I think we if anything we it's an allocation decision with regards to sales and marketing optics that we spend we could spend more on the mobile side and less on the fixed side. However we're also you know mindful that we want a few price war at the low end of the market.

Yeah maybe on free cash flow just to maybe get a bit more color on the individual item so if we think about which is why we put the cash flow phasing page in one relatively similar to last year clearly h2 weighted slightly less h2 weighted than last year if you recall it was very q4 weighted we expect that to be more smoother as you can see from sort of the illustration that we've that we've given so what is driving ultimately that guidance that we've that we've given of seven to eight is one is the top line growth that you have seen which converts very well into the VDAR at 4.6 percent so that's the starting point. Second that the interest rate is up that we pay about about a billion a big proportion of that increase has already fallen into q1. Two that we reiterate that we expect working capital inflow for the year whether is a sizable negative in in q1 so what we then expect as of q2 onwards is to slowly but surely for us to crawl back from negative to positive again where it's q2 weighted so I think what we're saying is reiterating what we said on the 26th very comfortable with that seven to eight billion range mainly driven by a profitable growth and are slowly but surely getting a better grip at the at the 400 million pension as Eric said already is a negative now but it's the positive and next in next quarter and a few of the one-off items that we see that are now behind us including the Norway Norway VAT so again to underline that we feel quite comfortable with the guidance that we've given a couple of months ago and what we see going forward for the company in the coming quarters free cash flow wise.

Thanks Eric can I just just follow up are there any other one-offs that we should be aware of coming in for the rest of the year that you know of that we don't or that we we should should know of and then just what's the interest incremental drag in the second quarter and what's the working capital and drag that you're anticipating because obviously the second quarter that phasing you have in the second quarter has the benefit of the pension but just what specifically for working capital and interest should we should we be thinking about?

Yeah let me let me first let me first answer us and we're not giving quarterly guidance of course if not you would have seen numbers on that on page 17 and we're happy to give full year guidance because of the volatility that we've seen the ones that we know are the ones that we have talked about today and I think we've been very clear in our voiceover to make sure that we reiterate if something impacts us for the remainder of the year that that's the that's the case. Eric anything specific to add?

I fully appreciate the you know that would be useful to have a very detailed guidance per cash flow item per quarter it's it's it would deprive the team our treasury team and the other teams of the any flexibility to handle things throughout the year so we were a bit mindful when there when it comes to interest payments I would you know the increase is going to be considerably less in each of the quarters going forward possibly it was slightly higher in Q3 than the other quarters but otherwise I'll put it in pretty much the same level for the for the three remaining quarters and with regards to one of just the pensions we expect in Q2 as you're aware about.

Very clear thanks thanks for your help.

The next question is from Maurice Patrick from Barclays please go ahead the line is yours.

Yeah morning guys and thank you for taking the question. If I sort of ask a maybe a big picture question and then a random remark one but the big question is more around just pricing overall I mean some of the previous questions are focused on you know the specific impact of dilution of family plans and discounts but you know over the last couple of years you've had high levels of inflation you've been able to put through large price increases and I'm very curious as to if you think there's much more scope for price increases if I'm not wrong in your prepared remarks you spoke a bit about Finland maybe how many exhaust it some of the pricing if I if I heard that correctly so picture thoughts in terms of the ability for tell you to take price rather than just upsell and then just one sort of random question I would say to Denmark you've sold the assets I know that some some companies once they sold assets to third parties that sort of remains like a TSA or series again between them I'm just curious as to whether or not there is an ongoing relationship between tell you and Denmark with no loose poster disposal or whether it's a straight sale thank you

thank you and good morning Morris for the question you know I think we're operating in fairly rational markets and we have been able to do price increases historically as you know you also pointed out I think that ability will soften a little bit a little bit going forward because it was also backed by the inflation but I think we still have pricing power to do and if we look backwards on the pricing we have done so far I can see that customers stay with us they we don't have an increased churn and we see also MPS even though we get always a small hit when we do price increases but we still in the long run the MPS is improving so obviously people are prepared to pay for the services so I think there will be still a pricing power going forward but I think it will be a bit softer compared to the history I hope I answered your questions thank you

yeah with regards to Denmark in

Denmark

yeah

Morris the indeed we have a service agreement with with Tellia Denmark Norlis and it should give us a contribution of around 300 million per year for for the coming two years starting from from now when we have closed the transaction so so that's helpful already

impacting q2 right

thank you

the next question is from Andreas Jolson from Carnegie Andreas the floor is yours

good morning everyone I really appreciate the facing of the cash flow that is clearly helpful but is it possible also to get some color on the facing of EBTA growth the outlook tends to indicate similar levels come in quarters and or even somewhat lower but you also had some negatives in q1 that will turn to positives in in q2 so is that the way we should look at it improvement in q2 and then coming down a little bit in the second half and secondly if I may the tv and media are on the direct to consumer side looks quite weak any color on that besides what you stated on the slide with annualization or price increases would be really helpful thanks

let me let me take the the EBITDA now so there is no guidance for for for EBITDA or the phasing of it like like we're doing for the for the cash flow and yes but we're very comfortable with the guidance that we've given which are low low to mid single digit which we translate in three to five percent very happy with the 4.6 for for the quarter very much in line what we've seen and we think that's that's where we feel quite comfortable for the next quarters as well so somewhere within that three to five percent range

and I can give some comments on the ARPU andreas regarding the growth as you saw from our report we have made a quite good quarter with 30 000 subs growing in tv4 and there is non-sports so lower this is the age customers you know so they are a bit lower ARPU that's the reason why it's a bit soft so I think it's a mixed as well in the product so it's a low ARPU customers but nicely growing so that's

positive thank you

thank you the next question comes from Stefan Gofan from dnb Stefan's floor is yours

and yes hello two questions the first one relates to Opvex in Sweden so even if adjusting for both the 150 million I get that Opvex excluding equipment sales is around four percent year over year and that is despite that Opvex was up also in Q1 last year so just any comments on on the Opvex development and what you're doing to to mitigate this secondly for the second quarter in a row we are losing both fixed broadband and tv subscribers in Norway if this due to increased competition or what explains this development thank you

so one Opvex Sweden so this is the reason why today I call that specifically the EBITDA margin growth right so the 170 basis points up less for for us as a whole group where you can all countries contributing including Sweden if you adjust for the 150 one-offs which is about 100 million of the pension and 50 million of the at the bed that right off so adjusted for that even even Sweden is is is up specifically for our largest division they are very vigilant when it comes to our marketing spend the number of employees that we have which has not stopped a little in the first quarter but we know that they are navigating this really well and steering you know the profitable growth of our business so if you think about the the three to five percent EBITDA growth that we've guided for for the year and the comment that I just made to Andreas on the phasing that is not possible if you won't have Sweden moving in that direction as well so we feel quite comfortable with the Ophex trends that we're seeing overall as a group but also for the coming quarters.

Yes and thank you for the question regarding NOVA and the fixed side. First of all it's a focus area for us we are of course not happy we are churning out the coax customers to the majority and and and its competition that actually built over also with fiber so that is the broad picture but we have done now is strengthen our product especially on the tv side with a new Viaply agreement so we hope to see this turn around a little bit more on a positive note not continue in the same direction but we're working on it and we are very aware of it.

Thank you our next question comes from Jacob from BNP Paribas exam.

Hi good morning thanks for taking the questions I'm not too pleased. Firstly question for Patrick as a new CEO I was wondering if you can give us a little bit more flavor of your priorities what are you spending your time on what do you think are some of the key challenges what are some of the sort of big focus areas how do you think a little bit about you know the portfolio I appreciate there's indeed coming up in September but it's still quite a way off so it'd be useful to just get a little bit of your initial thinking and then secondly just to start get back on this free cash flow question when you're structural free cash flow is about eight billion seven to eight billions two billion ish per quarter and you as you mentioned a number of times you had a number of one-off the phasing headwinds this quarter but you did also benefit from very low capex so while a lot of the headwinds reverse you also have higher capex coming in the the upcoming quarters as well but again just to sort of get back on the phasing point are you basically trying to make the point you're going to have much stronger EBITDA in the second half in absolute terms and that's that's why you expect to hit this guidance it's just if you can maybe explain your free cash flow guidance just in the context of the fact that you do also have a big headwind later in the year thank you I'll

start with the second yeah

I can start with the first one to give you some reflections and thanks for the question well I've been in our approximately 80 days I said in the in the start and I spend a lot of time in meeting people in turn to really understand our operations and also of course meeting customers to get some more feedback on the on the deliveries of the product and services that we support them with and I think short term it's really to continue to understand the operations much more because I clearly see potential in when it comes to efficiencies to simplify the way we worked less complexity to speed up in your organization again as I already mentioned so I think what I put most of my time on at the moment is to really to understand and how we can improve the efficiency in the company so in parallel we're working with this -to-day execution and to understand that better we're also working with this plan again as I said I'm sorry to repeat myself but also to understand in parallel then okay what is the midterm ambition that we shut out to actually be more and it's a lot about efficiency and how we can make this company even better tomorrow and it's not so much a portfolio we can do some cleanup in the portfolio and we're doing that already mentioned by eric with some some buildings we have exchanges we have here in sweden so we will continue to look up to to for example simplify the portfolio but after we have exited denmark we feel pretty okay or good with the markets that we are in at the moment we have strong positions in all markets yes there are challenges but those are we addressing and then look into how we can simplify the way work simplify the structure and be more efficient that's the focus

yeah and maybe just on on free cash flow to again provide a little more color on sort of the movements of the individual item if if that happens so why age two better than h1 one is continue deeper die growth in absolute terms and year on year as we've been doing in q3 in q4 and again in q1 and as we guide for that growth also for the remainder of the year too less of an interest paid impact because a big part of that one billion plus we've already seen in q1 yes a bit more capex as you said because it's mainly dribble to two phasing less line item and other items as i explained we expect typically to have five to six hundred million negative there we've already seen 300 million of that and last but not least a big negative so minus 1.2 in q1 for for working capital which has some one-offs in it but we remain confident that we will have a meaningful positive inflow from working capital for for the full year so to be able to get to those numbers you you have to believe that we have that uplift in the second half of the year so those are the individual items and then obviously the plus 400 million on on pension in the second in the second quarter so that you know strengthens our belief to one confirm the guidance to that we see this age two waiting versus h1 so

perfect thank you

the next question is from nick lial from panstein nick the floor is

yours thanks very much morning everybody um can we go back to morris's question please guys just on the on the swedish pricing firstly mobile price rises i'm i'm interested why you think swedish mobile prices are still or rises are still possible on the on the face of it the results seem to show the price premium for the telia brand isn't sustainable can can you explain why that's wrong now and also how much i think eddie you mentioned you might need to spend more sales and marketing how much might that cost to push more price rises through you know are they going to be less profitable and the second thing on the on the finish point i don't think you you answered what the what the area was where you thought the opportunity to be exhausted for growth could you just explain again what the what the areas might be for that as well thank you

i can start eric here i can start with the last one so the comment on finland is that we have had a year behind us where we've grown as you've seen the consumer art be tremendously well with a number of action points and some of those are we can't we can't repeat this year introducing fees for things like if i remember correctly voicemail and and bank identification these things and i think one of our competitors made a similar comment that it it's going to finland consumer mobile segment is going to be less about plus you know price lists changes going forward but continued 5g migrations of course and then the fixed line products where we can see a continued potential to upsell the broadband base to a higher speeds etc so the pricing agenda for finland continues but it's going to be more weighted towards other segments in particular fixed line than mobile

i can give a comment on sweden i think yes we have a price premium on the telia brand but also opportunities in hellbop which is a bit more mid segment brand and also fellow and other of these more low end products so i think there is potential to to go there and we have also potential in fmc we still have a potential to grow more and get more bundles together for the consumers i think those are the main levers maybe the fmc one is not an answer for you on on the price increases but still there's a potential to continue to grow

price tag and we're sorry nick i think that's it's a tricky to point to put a price point or an exact cost what it costs to boost the the growth in mobile we've made some decisions to to focus on the overall household perspective and i think that will continue but as patrick mentioned there is still pricing opportunities in mobile we did uh we do back book on extra users for example this quarter as well as front book on hellbop so there's things we can do absolutely

also the last couple of months we have also focused more on the fixed side which you also can see in our tv product growing nicely here in sweden so i think those are also priorities that we have done and but again we look for new opportunities going forward

okay that's great thanks very much

thanks the next question is from a kval kariya from dutch bank

marks you talk about eliminating barriers and complexities to unlock cash flow growth don't need to consider anything at this stage but do you feel you need to step up investment to drive the cost reduction momentum or do you see the current telco even digress momentum a sustainable even through periods of transformation and second lastly you made good progress on reducing headcounts i think 1300 people left and the bulk of that was at the end of q1 was started q2 how has headcap reduction progressed this year and now should we think about personnel cost development versus what you saw in q1 thanks

yeah we didn't quite get the first one so maybe can repeat that in a minute let me address the second one so so yes um you if you look at the eboda margin growth that i mentioned is is driven by our opex containment um 1300 less fte's last year um about 300 in the first quarter and more to be expected this year again um as the reason we're flagging the ambition um and the sort of ideas and priorities that patrick has um hands are talking about the capital markets day so more to follow on that later in the later in the year but we're very happy with the progress that we're making on on reducing you know making the business more cost efficient as you saw from the eboda margin growth perhaps you can repeat the first question because we couldn't quite hear it

yeah sure sure no worries so in patrick's opening remarks he talks about eliminating barriers and complexities some of growth um do you feel you need to step up investment to drive the revenue or cost reduction momentum you sometimes have seen that to get the cost out you need to actually invest upfront you've seen mentelius history as well or do you think the current telecom development momentum is sustainable even through these periods of transformation

okay then i understand the question and i could hear it clearly clearly you know i don't think we need more investments we will we are we have a guidance out that we look into and we feel comfortable to deliver on on on those but it's about priorities and also the structure and efficiency in the ways of working we do internally so we look of course for okay how can we be more lower cop opex we look also into capital allocation how we allocate our capital how to get more out of there better return on investments that we have in using our capital so those together and then of course the value creation drivers on the growth side as well so all these will be addressed in the plan that we're currently working on on a three-year horizon which we actually try will try to call out in september or not try we will call it out in september

okay thank you

the next question is from frederick from shb frederick the floor is

yours thank you good morning and welcome to patrick i have a question for you follow up on your an earlier question on your priorities and you think you say you're sure i'm not going to understand the business better and you know take down complexities and all i would like to understand your view on if you should keep tv media or not should tell you the company that continues to invest in content continue to build that operations as a second leg to the classic telcos or should tell you again the sort of connectivity play going forward would be interesting to thank

you yes thank you for the welcome also frederick first of all the focus for us is really to deliver good good core services and services on top that are close to the core so then the question of whether tv media is strategic or not we have been using tv media content to aggregate tv as you know and we have been successful by doing that so my view on that is what the important for us is to get the distribution agreements and if you can get this to be distribution agreements it's not necessary for telco this is a broad perspective to own tv assets so my view on that is short term now for us is to focus alternative media around then in parallel will of course evaluate the necessity of owning that asset but our focus short clearly now in the short term is to get the full potential out of our tv media which we can see they have and and and we will see a bet hopefully we will see a better advertising market during the second half so they will catch up because they're on the digital side they are growing nicely at the moment and we are happy that and to continue that i hope i answered your question because there was a lot of rumors and speculations out in market whether we would sell the asset or not and we'll of course not comment on that but this was my broad perspective on on on owning tv content and you know i've been 11 years at teleno in the past you know so this has been on and off discussion in this sector for many years yeah

perfect thank you very clear

the next question is from steve malcolm from redburn atlantic steve in

the

room here here

sorry steve seems to have dropped uh we can come back to steve the next question is from uzman ghazi from berenberg is on the floor is your steve if you could come back on and raise your hand that would be perfect

i know i'm dying to be opportunity i just had a question on speed is b2b or the few things you're not so bad that bankruptcy in sweden and macro is not um you know typically b2b has you know service revenues have um come under pressure with a bit of a lag uh and i'm just wondering in the context of the very strong performance over the last few quarters how is your team feeling about b2b prospects thank you

yeah um so uh i i think we heard most of that uh usman but thanks for the question so b2b service revenues you're absolutely right there's been a few strong quarters now slowing down a bit i think it has to do with not one single factor but a few different ones uh there is a certain part of that revenue base which is linked to larger projects by larger customers and that's a certain lumpiness in that so a quarterly variation coming from that secondly there is some macro impact as you alluded to it's not dramatic but some projects take a longer time for clients to decide on at the moment and yes there are there's an increased rate of bankruptcies in in sweden but not having a dramatic effect yet but it's there thirdly i would also mention regulation where we have this quarter as you noted a two and a half million euro impact approximately from that special numbers regulation in finland which hits entirely on the b2b segment so a few different bits and pieces there

thank

you the next question is from say he from city side the floor yours

hello thank you for questions i just have two quick ones please um the first one is on the networking capital and the vendor financing management and so we saw last year i think the big swing of the networking capital because you were negotiating on the vendor financing program i'm just wondering if you can just comment on how long this re-negotiating agreement will last and do you see that giving up the interest rate could potentially come down do you see the credit rate be a scope for you to even broaden the the volume of the vendor financing going forward and the second question is um the content i think you mentioned that you expect contents to come down significantly from q4 onwards and i wanted if you have any update for us um how should we think about the champions league right thank you

i can start with the second one um um yes champions league is now ending by end of may so the cost for champion league will disappear and then it's just a matter if if we buy it again it will be to a significant lower cost and it's not yet decided who will actually win the tender for for spore sweden and then secondly we have also the european qualifying coming in in in june and july which is a 400 million and they those will exit by q2 and q3 and then after that we will have a significant lower cost on the content side so these are the two main drivers but of course there are also smaller efficiencies in tv four but these are the main drivers for for lower content costs and that will remain into 25 as well

yeah and then on that working capital you're absolutely right so last year same quarter last year was uh minus 4.3 negative working capital which at the time was explained by indeed vendor financing impact to the tune of 3.1 billion clearly as i said earlier today we didn't see that right that's the big difference in working capital this year versus last year and part of that is indeed um this vendor financing the balance was 11.5 at the end of the year and it was also 11.5 billion at the end of the quarter so so no cash in no cash out for that and part of what we said when we guided for working capital for the full year where we expect a meaningful cash in for this year is that we don't see this uh this balance this vendor balance uh changing all that much and hence it's not going to hurt us as it hurt the company in q1 2023

thank you just want to follow up when do we expect this agreement to be renegotiated is there is a time for that

they are staggered as all of these countries are right so there's various vendors some of it handset some other equipment as well um so they are you know renewed on a typical quarterly uh cycle and then you know so there's one in q2 for a certain amount and then in q3 for another amount so this is just on a rolling basis so and again just to reiterate the point we don't see any risk to that vendor finance balance changing to either to positive or negative for us this year as we saw last year

thank you very

much thank you the next question is from oscar von kess from abj oscar the floridia

uh thank you uh good morning all and thanks for taking my questions uh i have two so just the first one uh patrick if you could elaborate a little bit on the potential for efficiencies as you are alluding to a number of times so would that be sort of it related but i think you maybe mentioned that you didn't expect any additional investment so it's more sort of continuing to right size in terms of headcounts uh i think it would be helpful to get some more sort of tangible comments on what you're seeing in terms of efficiencies and then just the next one i respect that you patrick had not started at the time but i think last quarter it was mentioned that at least the management aimed for the top of the cash flow range on the full year number so i just wanted to to get a sense we should read into anything from your interview that i saw that you did not expect the two corona dv to be covered by cash flow in 2024 so just sort of the q1 or the start of the year compared to your expectations if we should read anything into that or if it's unchanged thanks

i will ask eric also to comment on top of mine but first of all i don't you should not read anything anything in it that we have changed our view on the outlook for for cash flow for the year so don't read in anything else we are the same at least from when i took people internally since i started february 1st we have the same outlook the only thing we know now after q1 is that we feel more comfortable to deliver on those figures for the full year so that's the first one then the second the other question you had or the first question you had was regarding the opportunities i see well well it's not i think we have capex enough in in our plans to also cover because we have already started transformational initiative when it comes to it legacy etc we need to do some more prioritizations and we need to simplify the way we work so we need to be more efficient and for me it's the efficiency it's all about how much cash we can generate out of the top line we have and what happens in between so so that is actually what i look into and i will promise you to give you more details i cannot do it now because all the plans are not already set but this is what i'm on and and i'm happy to to actually to close that to you in september when we have the capital markets update i hope i give you some more flavor on on it at least on the direction but there we are

perfect thank you

thank you the next question is from adam fox rumley from hsbc adam the floor is yours

thank you very much um i had two quick ones please the first one is that you you both really inherited this cash flow definition pre and post working capital and if i look on slide 16 you know you've got structural operation free cash flow you've got operation or you've got free cash flow itself is there a case for simplifying that can you still see the the the rationale for keeping the working capital pulled out separately of what you're guiding on because i think you're pretty alone in in the telco sector in in making that distinction and obviously ultimately different coverage is is what matters um and then secondly a clarification is something i probably should know the answer to but i think you mentioned in your prepared remarks that copper has been switched off in 50 municipalities in sweden can you tell me how many there are in total kind of what what how how do you think about that in terms of the um the total the total work that needs to be done

thank you yes i can take the the the last one regarding the copper and the well you know there is there is around 290 roughly municipalities municipalities in sweden 220 of them a bit bigger it's it's a simplified version to sell that we have now closed it's right that we have closed down 50 municipalities sorry i can't say the word anymore but but we have started and many more so it's not that we this is these 50 they are really closed but we have many others that we have already started in and this will continue until until 2026 so we're following the plan and it goes i would say good and and yeah so so nothing dramatic or news or deviation to report yeah

maybe just to to clarify um i just want to make sure that you don't do 50 divided by 290 and then you end up oh wow there's still a hell of a lot to go that would be the wrong way of thinking about this for us to 50 gives a bit of color around that that we're on track etc so we're still very much on track on phasing this out by the end of 26 as we've said right good with regards to free cash flow absolutely um and again as you can imagine as um you know seven months in and i guess two and a half months in these are actually the discussions that we're having it's also the reason why we call out today at the capital markets day in september so working very hard on the plans and these are also the things that we are we are looking at um i'm very conscious of also the other comments that andrew made earlier in the and in the q and a sessions right we want to make sure that we uh under promise and over deliver on all metrics um and this is a very important one to have three on one page is odd the reason why um i guess eric and i support about patrick wanted to get the free cash flow and free cash flow per share actually on this page is because we think that is what sort of best in class looks like and i guess it's also a hint to you know what we've all learned um that you know growing your free cash flow per share over time is incredibly important to investors including and not just the free cash but also the number of shares you had which is why we're starting with that uh today to then gradually get to something more definitive which we want to share with you uh when we come to this september day eric anything to add

no i think that's it obviously as you say we inherited these and for continuation we don't want to give the the measures up at the moment but that we of course we will look at this uh in september

great thanks very much

and so any questions

uh td company for the g.a.

okay thank you very much a lot of good questions today so thank you for that we look forward to continuing the discussion and we are available at invest relations if you have further questions so thank you very much and goodbye