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, Eric Strandin-Piers. Go ahead, please, Eric. 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 Hagerman, 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 of Telia as 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 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 track, 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 self-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 Orpus continued 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 2.7%. 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 3.8% increase, whereas enterprise was neutral. The growth in service revenues also drove EBITDA growth of 2.1%, despite a right-of-overdue receivables and pension refund facing in Sweden. Without these items, Telco EBITDA would have grown around 4%. The performance in our telco operation was further amplified by TV and media improving, resulting in a 4.6% growth for the full group. Structural OFCF reached 0.4 billion after being impacted negatively by minus 0.4 billion in phasing 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 Taylor Denmark 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 a 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 broadband and TV, where we have strong products allowing for pricing above inflation with maintained customer satisfaction. And 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 close 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 or 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-op aid 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 bus subscriber base remained unchanged as growth in fiber and fixed wireless access continued to compensate for the ongoing decline in copper, which totaled to 8,000 in the quarter. New fiber pricing taken last year, coupled with reduced campaign levels, resulted in ARP growth of 7% and another quarter of double-digit fiber 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 ARP that increased 8% on back of 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 have 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 societies. Service revenues continued 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 that saw a 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 at 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 analysed 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 UEFA 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 costs from Q4 and into 2025. 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 HVOD 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 Eric that will 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 refacing 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 4.6% or close to 7% if we filter in the Swedish items of 150 million SEC. 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 ARPU. 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-off items. Excluding these items, Sweden had a very healthy growth of 2.8% on EBITDA. Our EBITDA margin expanded by 173 basis points to 33.6%, 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 SEC 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 SEC 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. CapEx 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 CapEx, and we expect the investment level to be somewhat higher in the coming quarters. Our full-year CapEx outlook remains at around 14 billion SEC. Structural cash this quarter ended just below last year's level, as we time-shifted 400 million into Q2 from the re-phasing of the pension refund in Sweden, and we also had a negative 100 million impact related to a 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 capex 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 refacing of 400 million and VAT in Norway to the tune of 100 million. We tend to have around 500 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 CapEx payments are expected 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 MHz auction in the same market. Later this year, we also expect to see some inflow to PPE divested from an 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 capex. 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 $4 billion in the quarter, partly due to cash balance coming down faster as we paid $2 billion in dividend to our shareholders. This resulted in a 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 2 to 2.5 target range. And to that comes our expectation of 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, capex will pick up somewhat and cash flow will increase materially in the rest of the year, which means we're executing according to the plan. It's encouraging that Telia growth momentum continued and that TV media is on track with its transformation. Equally important is the rollout of our new networks and the close down of legacy infrastructure in going as expected. I also want to touch on sustainability progress where 55% of our supply chain emission now covered by science-based targets. Our ACE score from CDP being reconfirmed in the quarter and another 200,000 individual reached by our digital inclusion initiative. all of which will continue to be derived 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 meet you all in September, virtually or physically, for a 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 Andrej Kavacek. Andrej, 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 uh by the contrast your main computer a couple of days ago so i wanted to ask on mobile specifically if you could if you could comment on whether uh you think um you know there's some some kind of maybe 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 revenue to to pick back up to the previous levels that was one question And then second question, more conceptual, maybe on the free cash flow where you've had, despite improving working capital dynamics, you still have a lot of 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 uh your free hospital delivery throughout the year because as you say uh it's going to be the second year where it's very heavily tilted towards the second half of the year thank you very much

Thank you. 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's 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, 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. Then we also saw overall still growth despite some legacy drag, but coming more on the fixed side. 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 and the deck 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 at 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 the 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 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.

I just had two questions both following up from Andres. First one on the free cash flow. So, I just would argue that the share price ratios investors are really sensitive to the free cash flow surprises, Telia, given its history, which is understandable. Even though it's been 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 $1.2 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, quarter by quarter. I know you've given a full year help. but particularly for the second quarter, just given you've 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 EBITDA side, like you've seen this quarter with pensions in Sweden or the special number in Finland. So 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 second quarter or through the year, given I know you've raised family tariffs in March? So just help us understand what more you can be doing to make sure you do actually gain benefit from price rises and don't see it go down. through the through the sinkhole in um in spin down thank you i want to take the second question

So, yeah, I understand why people are asking this. I think Eric commented and Patrick commented that 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 to family tariffs and the fellow brand. I think we are in a premium position in the market, 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. And we're not satisfied with the trend. So we're looking at a number of different levers for it. I think, if anything, it's an allocation decision with regards to sales and marketing objects that we spend. We could spend more on the mobile side and less on the fixed side. However, we're also mindful that we won't fuel a price war at the low end of the market.

Maybe on free cash flow, just to maybe get a bit more color on the individual items. 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 given. So what is driving ultimately that guidance 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 EBITDA at 4.6%. So that's the starting point. Second, that the interest rate is up, that we pay 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 where there is a decisible negative 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. I think what we're saying is reiterating what we said on the 26th, very comfortable with that 7 to 8 billion range, mainly driven by a profitable growth and are slowly but surely getting a better grip at the one-offs. At the 400 million pension, as Eric said already, is a negative now, but That's the positive in next quarter. And a few of the one-off items that we see that are now behind us, including the 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 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 should know of? And then just what's the interest incremental drag in the second quarter and what's the working capital drag that you're anticipating? Because obviously that phasing you have in the second quarter has the benefit of the pension, but just what specifically for... for working capital and interest should we be thinking about?

Yeah, let me first answer that. We're not giving quarterly guidance, of course. If not, you would have seen numbers on that on page 17. 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 case. Eric, anything specific to add?

Andrew, I fully appreciate the, you know, that would be useful to have a very detailed guidance per cash flow item per quarter. It would deprive the team, our treasury team and the other teams of any flexibility to handle things throughout the year. So we're a bit mindful. When it comes to interest payments, I would... you know, the increase is going to be obviously 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 three remaining quarters. And with regards to one of just the pensions, we expect the refund in Q2, as you're aware about.

Very clear. Thanks. Thanks for your help.

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 um if i sort of ask a um maybe it's a big picture question and then a random um mark one but the big question is more around just pricing overall i mean some of the previous questions are focused on you know the the specific impact of dilution of family plans and discounts but 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 having exhausted some of the pricing, if I heard that correctly. So a big picture of thoughts in terms of the ability for Telia to take price rather than just upsell. And then just one sort of random question. In Denmark, you've sold the assets. I know that some companies, once they've sold assets to third parties, there sort of remains like a TSA or a service agreement between them. I'm just curious as to whether or not there is an ongoing relationship between Telia in Denmark with Norloose Postal Disposal or whether it's just a straight sale. Thank you.

I can start with the first one. Thank you and good morning, Morris, for the question. I think we are 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 going forward because it was also backed by the inflation. But I think we still have pricing power to do. And if I look backwards on the price increase that we have done so far, I can see that customers stay with us. We don't have an increased churn. And we see also MPS, even though we get always a small hit when we do price increase, but 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 question. Thank you.

Yeah, with regards to Denmark?

In Denmark?

Yeah, Boris, indeed, we have a service agreement with Telja Danmark and Norlis, and it should give us a contribution of around 300 million per year for the coming two years, starting from now when we have closed the transaction. So that's helpful.

Already impacting Q2, right?

The next question is from Andreas Jolson from Carnegie. Andreas, the floor is yours.

Good morning, everyone. I really appreciate the placing of the cash flow. That is clearly helpful. But is it possible also to get some color on the facing of EBITDA growth? The outlook tends to indicate similar levels come in quarters or even somewhat lower. You also had some negatives in Q1 that will turn to positives in Q2. So is that the way we should look at it? An improvement in Q2 and then coming down a little bit in the second half. And secondly, if I may, the TV and media ARPU 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 take the EBITDA now. So there is no guidance for EBITDA or the phasing of it like we're doing for the cash flow, Andreas. But we're very comfortable with the guidance that we've given, which are low to mid single digit, which we translate in 3% to 5%. Very happy with the 4.6% for the quarter, very much in line with what we've seen. And we think that's where we feel quite comfortable for the next quarters as well. So somewhere within that 3% to 5% 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 that is non-sports, so lower. This is the H 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 mix 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 Gauffin from D&B. Stefan, the floor is yours.

Yes, hello. Two questions. The first one relates to OpFex in Sweden. So even if adjusting for both the 100 and the 50 million, I get that OpEx excluding equipment sales is up around 4%. year over year uh and that is despite that OPEX was up also in Q1 last year so just any comments on on the OPEX development and what you're doing to to mitigate this secondly for the second quarter in a row you're losing both fixed broadband and tv subscribers in Norway is this due to increased competition or what explains this development thank you

So OPEC Sweden. So this is the reason why today I called out specifically the EBITDA margin growth. Right. So the hundred and seventy basis points up less for for us as a whole group where you can see all countries contributing, including Sweden, if you adjust for. at the 150 one-offs, which is about 100 million of the pension and 50 million of the debt write-off. So adjusted for that, even Sweden 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 notched up a little bit in the first quarter. But we know that they are navigating this really well and steering the profitable growth of our business. So if you think about the 3% to 5% EBITDA growth that we've guided 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 OPEC strands that we're seeing overall as a group, but also for Sweden 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 it's competition that actually built over also with fiber. So that is the broad picture. But we have done our strength in our product, especially on the TV side with the 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 again.

but we're working on it and we are very aware of it thank you our next question comes from jacob bluestone from bmp paribas exam hi good morning thanks for taking the questions i'm not too pleased um 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 the portfolio? I appreciate those 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 sort of get back on this free cash flow question, When you were – your structural free cash flow down is about $8 billion, $7 to $8 billion. It's about $2 billion-ish per quarter. As you mentioned a number of times, you had a number of one-off-y phasing headwinds this quarter. You did also benefit from very low capex. So while a lot of the headwinds reverse, you also have higher capex coming in the upcoming quarters as well. Again, just to sort of get back on the phasing point, are you basically trying to make the point that you're going to have much stronger EBITDA in the second half in absolute terms, and that's why you expect to hit this guidance? 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.

Can I 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 approximately 80 days, as I said in the start, and I spend a lot of time meeting people internally to really understand our operations and also, of course, meeting customers to get some more feedback on the deliveries of the product and services that we deliver. Support them with. And I think short term is really to continue to understand the operations much more, because I clearly see potential when it comes to efficiencies, to simplify the way we work, less complexity, to speed up in the organization, again, as I already mentioned. So I think what I put most of my time in at the moment is really to understand and how we can improve the efficiency in the company. So in parallel, we're working with this day-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 set 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 Erik, with some buildings we have, exchanges we have here in Sweden. So we will continue to look up 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. 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 free cash flow to, again, provide a little bit more color on sort of the movements of the individual item if that happens. So why H2 better than H1? One is continued EBITDA 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. Two, less of an interest paid impact because a big part of that 1 billion plus we've already seen in Q1. Yes, a bit more capex, as you said, because it's mainly dribbled to phasing. Less line item and other items. As I explained, we expect typically to have 500 to 600 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 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 the full year. So to be able to get to those numbers, 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 pension in the second quarter. So that strengthens our belief to one, confirm the guidance to that we see this H2 weighting versus H1. Perfect. Thank you.

The next question is from Nick Lyle from Bernstein. Nick, the floor is yours.

Thanks very much. Morning, everybody. Can I go back to Maurice's question, please, guys? Just on the Swedish pricing, firstly, mobile price rises, I'm interested why you think Swedish mobile prices are still, or rises are still possible. On the face of it, the results seem to show the price premium for the Telia brand isn't sustainable. Can you explain why that's wrong now? And also how much, I think, Eric, you mentioned you might need to spend more sales and marketing. How much might that cost to push more price rises through? Are they going to be less profitable? And the second thing, on the finish point, I don't think you answered what the area was where you thought the opportunity had been exhausted for growth. Could you just explain again what the areas might be for that as well? Thank you.

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 tremendously well with a number of action points. And some of those are one-offs we can't repeat this year, introducing fees for things like If I remember correctly, voicemail and bank identification, these things. And I think one of our competitors made a similar comment that the Finland consumer mobile segment is going to be less about price lists changes going forward but continued 5g migrations of course and then also the fixed line products where we can see 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 segment 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 we have also opportunities in Helbop, 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 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 the price increases, but still there's a potential to continue to grow.

Sorry, Nick. I think that's a tricky point to put a price point or an exact cost, what it costs to boost the growth in mobile. We've made some decisions 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 do back book on extra users, for example, this quarter, as well as front book on HaleBop. So... There's things we can do, absolutely.

Yeah, and we have 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, but again, we look for new opportunities going forward.

Okay, that's great. Thanks very much.

Thanks. The next question is from Kaval Karoya from Deutsche Bank. Kavala, the floor is yours.

Mark, you talk about eliminating barriers and complexities to unlock cash flow growth. I don't think you can say anything at this stage, but do you feel you need to step up investment to drive the revenue and cost reduction momentum, or do you see the current Telco-Everdugger momentum as sustainable even through periods of transformation? And second, lastly, you made good progress on reducing headcounts. I think 1,300 people left, and the bulk of that was at the end of Q1 or start of Q2. How has head cap reduction progressed this year, and how should we think about personnel cost development versus what you saw in Q1? Thanks.

We didn't quite get the first one, so maybe you can repeat that in a minute. Let me address the second one. So yes, if you look at the EBITDA margin growth that I mentioned is driven by OPEX containment. 1,300 less FTEs last year, about 300 in the first quarter, and more to be expected this year. Again, as the reason why we're flagging The ambition and the sort of ideas and priorities that Patrick has hands us talking about the Capital Markets Day. So more to follow on that later in the year. But we're very happy with the progress that we're making on reducing, you know, making the business more cost efficient, as you saw from the EBITDA margin growth. Perhaps you can repeat the first question because we couldn't quite hear it.

Yes, sure, sure, no worries. So in Patrick's opening remarks, he talks about eliminating barriers and complexities to unlock growth. Do you feel you need to step up investment to drive the revenue or cost reduction momentum? You know, sometimes you've seen that to get the cost out, you need to actually invest up front. You've seen that in Telia's history as well. Or do you think the current Telco EBITDA growth momentum is sustainable even through these periods of transformation?

Yes, thank you. Okay, then I understand the question and I could hear it clearly. You know, I don't think we need more investments. We have a guidance out that we look into and we feel comfortable to deliver on those investments. But it's about priorities and also the structural and efficient in the ways of working we do internally. So we look, of course, for, OK, how can we be more efficient, i.e. lower 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 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 Lihall 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 say you're sure you're going to understand the business better and take down complexities and all. I would like to understand your view on if you should keep TV and media or not. Should Telia be a company that continues to invest in content, continue to build out operations as a second leg to the classical telcos, or should tell you again the sort of connectivity play going forward would be interesting to hear. Thank you.

Yes, thank you for the welcome also, Fredrik. First of all, the focus for us is really to deliver 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's important for us is to get the distribution agreements. And if you can get distributions 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 on turning the TV media around. Then in parallel, we'll of course evaluate the strategic necessity of owning that asset. But our focus clearly now in the short term is to get the full potential out of TV media, which we can see they have. And hopefully we will see a better advertising market during the second half, so they will catch up, because on the digital side, they are growing nicely at the moment, and we are happy with that, and to continue that. I hope I answered your question, because there are a lot of rumours and speculations out in the market whether we will sell the asset or not, and we will of course not comment on that, but this was my broad perspective on owning TV content. And, you know, I've been 11 years at Telenor in the past, you know, so this has been on and off discussion in this sector for many, many years.

Yeah, I know that. Perfect. Thank you. Very clear.

The next question is from Steve Malcolm from Redburn Atlantic. Steve, the floor is yours.

Yeah, good.

in the room here.

Sorry, Steve seems to have dropped. We can come back to Steve. The next question is from Usman Ghazi from Berenberg. Usman, the floor is yours. Steve, if you could come back on and raise your hand, that would be perfect.

Hi, everyone. Thank you for the opportunity. I just have a question on Swedish B2B. Obviously, you're not a banker. That bankruptcy in Sweden in the macro is not helpful. Typically, B2B has come under pressure with a bit of a lag. I was wondering, in the context of a fairly strong performance over the last few quarters, how is your team feeling about B2B prospects? Thank you.

Yeah, so I think we heard most of that, Ousmane, 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. 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 is an increased rate of bankruptcies 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 2.5 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 Saehee from Citi. Saehee, the floor is yours.

Hello. Thank you for the questions. I just have two quick ones, please. The first one is on the networking capital and vendor financing management. And we saw last year, I think, the big swing of the networking capital because you renegotiated on the vendor financing program. I'm just wondering if you can just comment on how long this renegotiated agreement will last, and do you see that, given that the interest rate could potentially come down, do you see there could be a scope for you to even broaden the volume of the vendor financing going forward? And the second question is on the contents. I think you mentioned that you expect confidence to come down significantly from Q4 onwards. I wonder if you have any update for us on how should we think about the Champions League right? Thank you.

I can start with the second one. Yes, Champions League is now ending by end of May. So the cost for Champions League will disappear. And then it's just a matter 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 Sweden. And then secondly, we have also the European qualifying coming in in June and July, which is a 400 million. And 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 TV4. But these are the main drivers for lower content costs. And that will remain into 2025 as well.

And then on that working capital, you're absolutely right. So last year, same quarter last year, was 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 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 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 balance, this vendor balance, changing all that much. And hence, it's not going to hurt us as it hurt the company in Q1 2023. Thank you.

Just I want to follow up. When do we expect this agreement to be renegotiated? Is there a timeframe 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. So they are, you know, renewed on a typical quarterly 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 a 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 Vronkes from ABG. Oscar, the floor is yours.

Thank you. Good morning, all, and thanks for taking my questions. I have two. So just the first one, 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 is it more sort of continuing to right-size in terms of headcounts? I think it would be helpful to get some more tangible comments on what you're seeing in terms of efficiencies. And then just the next one, I respect that you, Patrik, 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 numbers. So I just wanted to get a sense of if we should read into anything from your interview that i saw that you did not expect the two chrono dvd to be covered by cash flow in 2024 so just sort of uh 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, you should not read anything in it that we have changed our view on the outlook for cash flow for the year. So don't read anything else. We are the same. At least from when I talk to 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, it's not, I think we have CapEx. enough 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 I'm happy to actually disclose that to you in September when we have the capital markets update. I hope I give you some more flavor 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. I had two quick ones, please. The first one is that you've 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 operational, you've got free cash flow itself. Is there a case for simplifying that? Can you still see 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 the telco sector in making that distinction, and obviously ultimately dividend coverage is what matters. And then secondly, a clarification of something I probably should know the answer to, but I think you mentioned in your prepared remarks that copper had been switched off in 50 municipalities in Sweden recently, Can you tell me how many there are in total? How should I think about that in terms of the total work that needs to be done? Thank you.

Yes, I can take the last one regarding the copper and the municipalities. Well, you know, there is around 290, roughly, municipalities in Sweden, 220 of them a bit bigger. 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 we have started in many more. So it's not that this is these 50. They are really closed. But we have many others that we have already started in. And this will continue until 2026. So we're following the plan and it goes, I would say, good. And yeah, so nothing dramatic or news or deviation to report.

Yeah, maybe just to clarify, 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, the 50 gives a bit of color around 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? Yeah. Good. With regards to free cash flow, absolutely. And again, as you can imagine, as 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 the Capital Markets Day in September. So working very hard on the plans. And these are also the things that we are looking at. I'm very conscious of also the comments that Andrew made earlier in the Q&A sessions, right? We want to make sure that we under-promise and over-deliver on all metrics. And this is a very important one, to have three on one page is odd. The reason why I guess Eric and I supported by 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 that, you know, growing your free cash flow per share over time is incredibly important to investors, including not just the free cash, but also the number of shares you had, which is why we're starting with that today to then gradually get to something more definitive, which we want to share with you when we come to the September Capital Markets Day. Eric, anything to add?

No, I think that's it. Obviously, as you say, we inherited this. And for continuation, we don't want to give the measures up at the moment. But, of course, we will look at this in September.

Great. Thanks very much. Thank you for your questions. TD Company, to you.

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.