Telia Company AB (publ)

Welcome everyone to Tellier Company's Q3 2024 results presentation. And with that, I will now hand over to Tellier Company's Head of Investor Relations, Eric Strand and Piers. Please go ahead, the floor is yours.

Thank you. Good morning everyone and thanks for joining our Q3 call. We will do as usual a presentation followed by a Q&A. We have Patrick Hofbauer, our President and CEO, and Erik Hagerman, our Chief Financial Officer, with us here today. Patrick, please go ahead.

Thank you, Erik. Good morning and welcome everyone. I would like to start with a few overall reflections before we move into the details of the quarter. We hosted our investor update one month ago here in Zona, and I'm encouraged to see that we are making progress on several of the ambitions laid out on the day. The change program, which we launched in September, is fundamental for transforming Tellier into a more customer focused, faster and more efficient operator. We are on track with its implementation and expect to have the new organization in place on the 1st of December. And start to generate the target efficiencies of at least 2.6 billion Swedish kronor. We continue to do better for our customers every day, and consumer MPS scores for the group increased both quarter on quarter and year on year. In Q3, Tela Sweden also came out on top among main mobile brands in the SKI, the annual customer satisfaction survey. And Fella also came out even better, ending at second place among all Swedish mobile brands. Also, I'm glad to see that the hard work by TV and media to become more digital and reduce the cost base is paying off, resulting in a continued positive development for both service revenue and EBITDA. Finally, at our investor update in September, we launched new midterm financial ambitions, including service revenue of 2%, EBITDA of 4%, book capex below 14 billion SEK, and an all-in free cash flow at least at SEK 10 billion by 2027. Turning then to the Q3 financial highlights. Service revenue continued to grow, supported both by Telco and TV and media. The growth pace of .2% was a bit slower this quarter as expected. We had elevated revenue in business solutions in Q3 last year from Progect in Sweden and Lithuania, and this impacted the growth rate negatively by 50 basis points. Like last quarter, the consumer segment was the driver with a .6% increase, whereas enterprise declined 1.7%. Mobile continued to grow by 1.6%, supported by all markets. Fixed increased at .6% as continued strong TV momentum in Sweden, more than compensated for the pressure on fixed telephony and business solutions. We said last quarter that we expect EBITDA to be approximately unchanged this quarter, and we ended up with an increase of 1.7%, mainly driven by Sweden, TV and media, and partly also Finland. Structural OFCF declined from 3.7 billion to 3.1 billion as interest payments increased as expected 400 million due to facing higher market interest rates. Leverage declined to 2.17x even though we are ramping down the vendor financing program. And finally, as you might have seen already this morning, we upgraded our EBITDA outlook to -single-digit growth for the year and our CAPEX outlook to be below 14 billion. Let's now move into the units. Overall, till Sweden's growth was driven by consumer also this quarter, which was up 3.9%, and especially by broadband and TV, which together drew uplift close to 200 million. Enterprise declined 3.9%, partly from a soft market, but mainly as Q3 last year contained some 60 million of low-margin license revenues. Looking at the growth excluding CAPEX legacy, growth was at .1% despite at 60 million IT last year. EBITDA growth was driven by both service revenue growth and efficiencies, mainly related to consultants and personnel. We saw a continued decline in incoming customer service volumes as we showed at the investor update, underpinned by improving customer experience and operational performance in customer operations. And we will continue to make improvements in the area which benefit both our customers and us. Moving on to the Sweden's operational KPIs, where you can see that the mobile post-bred customer base remained flat with a small gain consumer and a small loss in enterprise. ARPU increased by 1% with the flat ARPU in consumer, where FamilySims and Othello brand continue to grow and the enterprise ARPU growing at 2%. We launched a new mobile portfolio for small businesses, including enhanced security and more for more pricing. At the same time, in the public sector segment, there has been a handful of barebone mobile deals made at price levels we would not defend as a market leader. And we therefore expect to port out around 25,000 low ARPU subscribers in the fourth quarter. Our broadband subscriber base continued to grow this quarter by 6,000 and growth is predominantly fiber, but also fixed wireless access, more than compensated for the decline in copper. Fiber pricing performed last year as well as earlier this year continued to support ARPU with an increase of 3.3%. Finally, our TV business continued to outperform the market with its leading content offering, subscriber base growth of 14,000 and ARPU increase of 16%. Moving to Finland. Finland saw a slightly negative service revenue development as mobile growth of .4% was offset by a .5% negative decline for fixed revenues driven by continued pressure on legacy revenue. Regulatory changes and a ramp down of our non-profitable invoicing business. EBITDA growth however picked up somewhat to .1% due to cost efficiencies and lower energy cost. The mobile subscriber base declined by around 10,000 due to a continued focus on value and ARPU rather than volume. Something that moved ARPU up by 5% and the consumer ARPU up by a healthy 9%. We are taking further steps to simplify our business by divesting our web hosting business, a deal which closed this quarter and we continue as you know to ramp down e-invoicing. These pressures from regulation, legacy and ramp downs will increase a bit more the next quarter, but then we estimate that they will ease as we move into 2025. Moving into Norway. Mobile revenue continued to grow supported by wholesale. At the same time, we had lower revenues from business solutions and paper invoicing fees following new regulation in the beginning of the year. You have probably noted that the move of the national roaming for ICE to Telenor's network in 2025, which likely means that our volumes for this contract will decline faster than we have planned for, but they were always expected to ramp down. The EBITDA development was in line with our expectation and we flagged it last quarter. We foresee that it will gradually pick up again as we move along. Given successful summer campaigns, a better subscriber development and the pricing plans we have for several products in the coming quarters. In consumer, mobile ARPU and the post-pessar subscriber base both grew as our offerings are well received by the market. Resulting in five consecutive months of subscriber growth, although this was masked by the exit of non-enterprise contracts, one sorry one enterprise contract in the quarter. Our enterprise offering continued to be popular still and Foneiro won the EPC customer satisfaction survey for the third year in a row. Let's move into Baltics. In Lithuania, growth slowed to around 3% on service revenue and 2% for EBITDA, mainly because Q3 last year contained about 3 million Euro in one of revenue related to the NATO summit. Mobile revenue growth was 7% driven by an increased subscriber base, helped by our clearly leading network position. In Estonia, growth came down to just 1% due to some phasing impact from a larger enterprise contract that was resigned earlier this year and challenged in court. This court case is now dismissed and we expect the contract to start to contribute again from Q4 and onwards. Finally, before I leave over to Erik, we have TV and media, which again had a strong quarter both with regards to its digital transformation and its financial turnaround. Service revenue growth remained around 2%, supported by a strong development for digital advertising underpinned increased digital viewing and a larger base of streaming subscribers. Meanwhile, the linear advertising market in Sweden remains soft as linear viewing is trending down. Turning to EBITDA, we again had a good development with an increase of around 60 million due to service revenue growth and lower OPEC's, despite somewhat increased content cost this quarter because of the Euros. Looking finally at the subscriber base, it almost at 440,000 higher since one year ago, even with a decline in the quarter as we came out of the positive effect from the Euros this summer. ARP declined due to an increased share of age-shared subscribers. And as you might have seen yesterday, we are happy that we have secured the rights for Swedish football, allsvenskan and superrättan for the period of 26-31. On terms that make financial sense for us, allsvenskan is one of the most important sport rights in Sweden and it's a great fit with our existing sports portfolio, which includes the Swedish ice hockey league. So now it's very clear whether some consumers want to go if they want to see top Swedish sports. And with that, I hand over to Erik and we'll take you through the Q3 financials. Thank

you Patrick. Let me now walk you through this quarter's financial development, starting as usual with service revenue and EBITDA. Like Patrick mentioned, service revenue continued to grow, albeit at a slightly slower pace compared to previous quarters due to particularly tough comparisons in Sweden and Lithuania, and with Norway displaying a slightly negative growth. Overall, our broadband and TV growth trends remain strong, while business solutions, which is slightly lumpier by nature, declined. TV and media, however, grew 2 percent, a strong performance from non-advertising revenue and growth in digital ad revenue, more than compensated for a decline in the linear TV advertising market in Sweden. Year to date, our service revenue growth is tracking 2 percent after generating 2.4 percent growth in the first half of the year. We flagged last quarter, as you remember, that EBITDA would be approximately unchanged this quarter versus the strong Q3 we had last year. As such, the 1.7 percent EBITDA growth is somewhat better than what we had guided for. Following our strong performance in the first nine months, and given the outlook for Q4, we are upgrading today our EBITDA guidance for 2024 to -single-digit growth from low to -single-digit growth before. Looking ahead at these trends, we have the ambition, as you know, to grow service revenue by 2 percent and EBITDA by 4 percent over time. But as you understand, there will be short-term variations around these levels. So for the next few quarters, i.e. Q4 this year and the first half of next year, we expect service revenue growth to be below the 2 percent level, while EBITDA growth is expected to be above the 4 percent level. The lower service revenue growth is related to the timing of pricing, including for TV and broadband in Sweden, the exit from the Champions League contract and the continued ram down of the non-core, low-margin e-invoicing business in Finland. The higher expected EBITDA growth relates to several drivers, including the impact from our change program, continued improvements in TV and media, and for Q4 specifically, a comparison base that included relatively high bonuses last year. Let's now have a look at the condensed P&L on the next page. Service revenue growth was altered this quarter, supported by both Telco and TV and media. In the quarter, mobile was up almost 150 million, with most markets showing growth between 20 to 30 million SEK. Fixed also increased, as continued strong development for TV in Sweden and in TV and media compensated for weaker business solutions revenue. The latter was largely due to special items in Sweden and Lithuania, boosting the comparison figures for those two markets by around 90 million SEK and the accelerated decline of our Finnish e-invoicing revenue. Now moving on to profitability. Like for like, adjusted EBITDA was up 1.7 percent this quarter. The biggest contributor to our EBITDA growth this quarter was Sweden and TV and media, together growing by around 150 million and the service agreement with Norlis, which continued to deliver profitable growth. So despite a slowdown in service revenue growth, EBITDA performance is strong considering the tough -on-year comparison and legacy pressure. We can also see that the slowdown in growth largely comes from lower margin services such as business solutions. All in all, we are clearly benefiting from our continued focus to realize efficiencies. The group EBITDA margin of 39 percent is the highest we've seen in the last five years. Lastly in this quarter, our operating and net income increased by 400 and 600 million respectively, mainly as depreciation was lower in most markets. Moving now to OPEX and CAPEX on the next page. Here we see that OPEX was again lower this quarter by 1 percent, mainly due to lower resource and energy costs. The latter declined by almost 50 million, with Finland benefiting the most. These lower expenditures more than compensated for the somewhat increased bad debt due to retroactive bad debt provisioning in our Swedish B2C business. On the right hand side of this page you can see that book CAPEX was 2.9 billion in line with the same period last year. Perhaps more importantly, our capital expenditures in the first three quarters of 2024 are circa 500 million lower than in the same period last year. As we continue to be more choiceful and disciplined with our capital allocation. As a direct consequence, we've upgraded this morning our full year CAPEX guidance to below 14 billion SEK from previously around 40 billion SEK for this year. Let's now have a look at our cash flow. As you can see, most line items are rather flat year on year, except for interest paid, which increased by 400 million from the combination of phasing and higher market interest rates levels, but is very much in line with our expectations. Tax was impacted by some phasing as well as slightly higher dividend taxes in Estonia. This in combination with most other line items being flat resulted in structural cash flow decreasing by 600 million to 3.1 billion. Working capital in the quarter was negative as we are in the midst of downsizing our vendor financing program. In the quarter we reduced the balance by nearly 2 billion. If we ignore the vendor financing impact and look at the pure operational movements in working capital, it improved by around 400 million this quarter. As a result of our operational excellence agenda, targeting for example the optimization of our billing cycles. Excluding the impact from the vendor financing ram down, our all in free cash flow would have been comfortably above 3 billion and well above last year's level. As always, I end the financial section with our net debt and leverage. As you can see, our net debt came down to 2.17 times as the cash flow generation from operations and positive impact from other items more than covered the quarterly dividend of 2 billion and the reduction of our vendor financing balance by 1.9 billion in this quarter. So despite these outflows, we remain comfortably in the lower half of our leverage target range. And with that, I hand back over to you Patrick for a few words on our guidance and the summary of the quarter.

Thank you for that Erik and let me now summarize before we go into Q&A. So this quarter was in line with our expectations and we are taking important steps in the right direction both within our telecooperations and in TV and media. The most important thing for us now is to get the organization in place to deliver on our strategic priorities. And as I said, we are on track to have the new organization in place by December 1st, which means that we are now moving at a speed towards a faster, simpler and more efficient telea which can deliver on our strategic priorities to simplify, innovate and grow. We have put the financial roadmap in place with our 25 to 27 ambitions to reach at least 10 billion of free cash flow. And for this year, we are upgrading the full year outlook for ABTI and CAPEX. And with that, we will open up the line for questions. Thank you.

To join the queue to ask a question, please press star 5 on your telephone. Again, that's star 5 on your telephone to ask a question. Our first question comes from Andrew Lee. Your line is now open. Please go ahead.

Good morning, everyone. Thanks for the question. Just had one question really, which is on your obviously strong delivery on EBITDA and CAPEX. I think it's a large link to efficiency execution. But the fact that that's not dropping down into structural OSCF guidance. So obviously, the EBITDA and CAPEX is going better than you expected. I think that's mainly just efficiency execution. But if you want to add anything there, that'd be great. But what has adversely trended below EBITDA and CAPEX to mean that you haven't adjusted your commentary on your structural operating free cash flow? What are the surprises that are coming out there? Thank you.

Thanks for that question, Andrew. Yeah, very happy with the discipline that we also mentioned at the investor update a month ago around OPEX, as you saw, which really helps with EBITDA and which explains the upgrade from today. I think overall, we're tracking roughly in line with expectations. If you think about the cash flow items, we're confirming today the range of seven to eight and that we expect to be at the lower end, which we've been saying for a few quarters now. Taxes and leasing, they are a bit higher than we anticipated. In addition, we've also done more restructuring than we thought two quarters ago, with about 500 of the 3,000 positions as part of the change program already done. So that brings us back to what we've been saying for a while now, that we expect to be at the low range. But we felt that given what we've said on the outlook for Q4 and the way we're tracking around EBITDA and CAPEX year to date and what we expect for the next quarter, that this was the right moment to upgrade those.

Thanks Eric. So the taxes and leasing, what's that related to, that coming in a bit higher than expected? Anything specific we should be aware of?

Yeah, I mean, they're all, it's all small b at the end of the day, right? Because we're confirming that lower end. The one example is Estonia. So dividend tax has gone up there, for example. So we've taken a bit more dividend there. And hence, then in this quarter, we're paying a bit more tax on that because of that in anticipation of increased dividend tax rates next year is one example.

Thank you. The next question comes from the line of Maurice Patrick. Your line is now open. Please go ahead.

Yeah, thanks guys for taking the question. So it's a value versus volume question. I noticed if I look at the Finnish market, you have seen a slowing in serious revenue and EBITDA momentum. Serious revenue is now falling. You cited, of course, some of the legacy and regulation runoff there. But I also noticed a small reduction in postpaid subs, but then ARPU up 9%. So I'm just curious just to your approach going forwards around ARPU versus subs, whether you're going to grow, defend your market share or just happy to see, maybe seed some market share, but see higher ARPU. And just sort of a related point, and it relates to Sweden. I was intrigued seeing Shell from Teletubbies yesterday. He said in a meeting that he saw in the long term a significant consumer surplus in the Swedish market, i.e. people underpaying for their services and talked about maybe over the medium term ARPU could be 50 to 100 sec higher than it currently is. So just curious your thoughts in terms of what is the opportunity longer term for price and the ability of customers to wear that increase. Thank you very much.

Yes. Thank you for the question. It's Patrick here. I can start with the first one and Erik, maybe take the second one. Let's start with the first one. We see a very unchanged market situation overall in Sweden year over year. Our focus is more selling more products to the existing customers when it comes to the consumer side. So the two player three player more services. Given that we have almost 50% of households in Sweden have at least one service from us. And that has been very successful. And we can see that now this quarter we are selling more broadband and TV services to existing customers. So that's really good. So I think there is an opportunity but very hard to predict that we don't see the big changes in the market that Shell talked about that you now referring to. So we believe it will be very stable. But of course there was always an opportunity to do more for more and price increases going forward.

Yeah. And on on Finland, you're right. Obviously, service revenue there is impacted by by regularly the regular changes. So we were printing minus point six percent. If you would adjust that for the regulator impact, you're looking at a plus point three, which is still not a great number. But what is working well is indeed mobile growth there. As Patrick said, it's at one point four and that's driven by sort of flattish number of subscribers. But certainly ARPU seems to be going up where we benefited mainly last year and most of our markets obviously from inflation. And that number is lower. We're quite happy with what we've been able to do on pricing. And if you then go back to, you know, our value creation plan, which is, you know, profitable growth driven, a big part of that is obviously driven by pricing initiatives. We typically don't go into details what sort of awaits us for the next quarters. But if you think about our confidence around doing two percent and four percent in EBITDA in the mid and medium term, that two percent and four percent is partly driven by those price increases, which on the mobile side means, you know, the market must be able to take ARPU increases, which is what we see in most of our markets at the moment. Thank

you.

The next question comes from the line of Andrea Jolson. Your line is now open. Please go ahead.

Good morning, everyone. A follow up to Morrie's question on price and maybe a little bit more philosophical. If I look at the Sweden Mobile Postpaid ARPU that you report, it's basically flat since Q1 2019, despite that you now have 5G and probably a better service. Just curious how you see that trend changing going forward. What do you see any other sort of growth drivers for the mobile side in Sweden? I

can give you some color on that. So our focus, if you start with Telia first, our focus is to sell more to existing customers. We are looking at the household perspective. That's the reason why we have been focusing a bit more now on broadband and TV. As you can see, it's paying off on our financial figures. And we see customer satisfaction going up. So that is a really good play that we are doing at the moment. Then you are right, the ARPU is fairly flat. But we see opportunities to actually increase the ARPU going forward. But what is also pulling back a little bit on the ARPU is that we are selling more SIMs to existing customers. We are selling more family cards and we are also selling more on the fellow side at the moment on the lower end. That is of course impacting the ARPU. But otherwise, I think there is a good opportunity to increase ARPU going forward. And we see that for us as an example, people like the customers are very appreciating a lot of our network given that we have now more than 90% population coverage on 5G and one of the three best networks in the world. That is appreciated by the customers. I think there is an opportunity to also increase ARPU going forward.

Okay, thanks.

The next question comes from the line of Stefan Golfin. Your line is now open. Please go ahead.

Yes, hello. A couple of questions relating to Norway. You mentioned the value of the deal to the armed forces in Norway of $300 million for four years. But this is an extension. Is this an increase in order value? And then secondly, other mobile service revenue in Norway beat at least my expectations and it was up close to 25% quarter on quarter. What was driving this and how much is ice out of this business? Tellenor quantified the impact to them to around NOC 400 million in 2025, NOC 400 million in 2026 and NOC 200 million in 2027. This would indicate that ice represents more than half of the revenue in this revenue line in 2024. Any comments relating to the ice contract and if it's ice that drew the strong performance in this revenue line this quarter? Thank you.

Okay, shall I take this? Lots of questions in there. Thank you, Stefan. Let me start with the mobile service revenue part. It's our wholesale business as a whole. Yes, ice is a part of it. And there's been good volumes over the summer in the wholesale business. So overall, our turnover on the ice contract on a 12 month basis is around 300 million kroner. So that's what we see. And it was always expected to decline in the coming years, this turnover. Now I know a lot of people want to understand what the trajectory of those numbers is going to be of the next few quarters. I think that's a question maybe for ice. But we always expected it to decline. So let's see what happens. The value of the contract to the armed forces. I think we rarely go into specific numbers on individual customer contracts. So I'd probably refrain from putting numbers on it. But overall, it just confirms I think what we continue to see both in Norway, Sweden and the other markets that we do have an increasing business from this segment of secure communications both for armed forces and for a secure economy. And for civilian use. So I think I'll leave it at that unless we have something. No, we leave it at that Stefan.

Okay, fine. Thank you.

That wasn't that Stefan. Stefan, did you have a follow up?

Next question.

Okay, thank you.

The next question comes from the line of AJ Sunny. Your line is now open. Please go ahead.

Thanks for taking my question. I've got a couple. Firstly, on your pricing, you said it's going to impact your service revenue over the next three quarters. So can you just remind us what you did on pricing this year and what percentages you pushed through and then following on, do you expect to do a similar increase this year and at a similar time? And then my second one was just on Norway fixed service revenue. Can you just give us a colour on what's driving the decline here and when we could expect this to move more into growth phase? Thank you.

Yeah, shall I start with the pricing? So there is phasing here and it's a little bit, we've heard other people say the same thing in our region. We're sort of in between pricing cycles. So we did quite a lot in Sweden this time last year. And we're doing that a bit later, which is why you see a little bit of the impact. What we've done in Q3, just to briefly run through that. So in B2B in Sweden, we did higher price points and more value. So this is mainly on data and security solutions. In Finland, we've seen list price increases for relatively low output tariffs and back book increases to what is the 100 megabits per second, which impacted roughly 50,000 subscribers. In Norway, we've announced back book increases on mobile, which is about impacting 700,000 subscribers and a couple of CPI adjustments because we can do that in that market. And in the Baltics, we've seen price increases for mobile ID services. I think the overall comment more on what we've said on softer service revenue growth in Q3, Q4 and for the first half of the year, which is very much decoupled from EBITDA because that's moving in the other direction. It is very much about us pushing through price plans. And the other one is obviously we had inflation plus last year and inflation is a bit less this year. But again, we feel very comfortable with the guidance that we've given of 2% service revenue growth for 2025 and also for the years thereafter. I didn't get the other question. What was the other question? The

other question on Norway fixed and we when we expect this to turn around so that there are a few components. I think we can come back to what we said that the investor update in September. I think the priorities for some of the priorities for Norway is to increase the investments in fiber upgrades in the network. And that will give an effect over time. We will also continue to develop our partner model in Norway, which is important and that we look positively on. Let's see when it has an impact, but it goes in the right direction. And then we have some sort of short term headwinds that will expire. There's the paper invoicing fees, which are means 60 to 70 million lower high margin revenue this year. It will annualize in January and also the bank ID of loss of bank ID messaging fees. It's about a third of that volume and annualizes now actually in September. So there's a few short term headwinds that we get behind us. So it should improve going forward, but it's hard to say it's exact quarter numbers.

Great, thank you very much.

The next question comes from the line of Victor Hogberg. Your line is now open. Please go ahead.

Yeah, good morning. So just on the race to the day, go up guy this year. That's only due to Q3 isolated or something which you change your expectations with you for 12.

Specifically on EBITDA or overall?

EBITDA, EBITDA, yeah.

Yeah, no. So we've we've obviously seen the trajectory this year, which has been positive. Another quarter to the third quarter under a belt and then, you know, good visibility of what the fourth quarter will look like, where we think it's going to be above above trend as as highlighted this morning. Part of that, of course, is we had quite relatively high bonuses last year in the fourth quarter, which we won't have to the same extent this year. And the other one, of course, we have said that the change program will be implemented as of the first of December. So it's only one month as opposed to next year, we will have full 12 month benefit of that. But even that one month adds to the pot. So with that, we felt very comfortable to now say that it's going to be mid single digit.

Thank you. And a follow up on that in your organization from the first of December. Just for your guide for next year, the at least 5% growth, what else needs to fall in place to be realized? So what's this the main item?

No, I think what we said at the time, if you think about the drivers for EBITDA, one, obviously, it's had service revenue growth where today we're saying it's more tilted to the second half, right? So below 2% first of and then above in the second half. Overall, to land at 2%, like we've done in the first nine months of the year, the improvements that we've seen in OPEC's overall, so over and beyond what we're doing with the change program affecting 3000 people, because there's also other costs that you have, which are non FTE related that we're focusing on. I think the third one obviously is the performance improvement that we're seeing in TV and media specifically. So we have a couple of hundred million of EBITDA this year, but we've guided for close to a billion or at least a billion for next for next year. And then the fourth one is what we said on the 26. What we're seeing is a margin expansion across the various units. As I said in the presentation just now, we have record EBITDA

margin. Okay, thank you.

The question comes from the line of Steve Malcolm. Your line is now open. Please go ahead.

Yeah, thank you. Morning guys. Thanks for taking the question. Yeah, a couple please. First, just on the restructuring plans and I'm wondering if you can maybe update some conversations you're having with the unions, you know, and when you expect to get clearance sign off, you know, for your various programs across the region. That'd be great. And then just coming back to service revenues, Eric and Patrick, appreciate the extra color on the short term, but I'd still like to sort of try and better understand, you know, how you kind of hate the word inflect second half of next year. Obviously, you're going to have a bigger impact from the loss of the ice revenues in the second half. I mean, do you have sort of specific pricing programs in mind already for the second half of next year? And, you know, are you linked to sort of economic growth recovery? You know, are the second half growth ambitions? Because if you're going to grow kind of low ones in the first half, you're going to need to grow, you know, nearly 3% in the second half to hit the 2%. So, you know, I know it's difficult given commercial sensitive. Is there any sort of extra confidence you can give us that you can absorb that loss of ice and still be exiting the year, you know, two and a half, 3% to get to two would be great. Thanks a lot.

Okay, thank you for your question. Starting off with the change program. Remember again, you know, the change program is the plan is to implement it from December 1st and it will help us then to simplify and be more efficient as a company and make it very clear on the responsibility on the countryside level since it's twofolded. It's just a structure and it's a head count reduction. So, so far, the discussions with Union are going well and has been well, partly already done and closed in some of the markets and still ongoing in some other markets. But overall, good dialogue. Everyone understands what we're trying to achieve and doing and we are on track to deliver the expectation. So deliver on the plan, as we said on December 1st, but November will be a really tough month, you know, because then we will inform all the employees saying basically saying goodbye to almost 3000 people, which is of course a very tough for us to do. So I have a big respect for that change. But so far, everything is on track when it comes to that. Then I will try to answer your question on the service revenues for 25. And Eric support me if you should add something. So first of all, if you look at 25, the regulatory headwinds that we have in Norway and Finland will be annualized. So this is a negative service revenue that we have now with this year on 250 million almost. We have a legacy pressure that will decrease every year, especially in Sweden, but also in Finland from the copper. As you know, we have a pricing that we are on the way to do on the recurring basis. I would say across all markets and also all products. Estonia, for example, was hampered last quarter by the appeal of the governmental I.T. contract that is now resolved. That will help us both in Q4, but also then going into the next year. And then we have the invoicing business, you know, that the headwind we have that will ramping down will be gone from 26. And then revenue from mission critical services in Sweden will gradually also increase 25 to 27. So this is basically the main points. Now,

very good. I think it's a great it's a great summary. I mean, ultimately, if you look at the drivers for our service revenue growth, I think we're very clear that it's mainly tilted to the second half. And there's no reason for us to change our view that we feel comfortable with that 2% guidance that we've given, given the plethora of measures that we see as just explained by Patrick Steve.

Steve, sorry, just because I'm sorry, it's it's Eric here. I just had one

one.

There's a delay on the line. So go ahead, Steve.

No, I was just going to ask you that. I mean, do you think you've got enough a difficult question to answer, but enough in your kind of cost locker to get to the dark guidance, even if service revenues maybe don't quite to I mean, it is one of them is 1.5 1.6. Is that still two in your mind? You know, can you still get to the EBITDA? You know, given the cost savings, you've got, you know, almost in the bank, you know, pending the union negotiations being finalized.

Yeah, I think where where you should take confidence from or where we take confidence from is what we are demonstrating in our results, for example, today, right with the clear upgrade and EBITDA for this year and continuing to say we're going to do at least 5% next year. And it's not just as I said, the change program, which obviously has an immediate impact, as I just said, even that one month in Q4 has a positive impact. It is also what we do on non FTE related cost as an organization, right? Just the fact that we are being much more disciplined is really, really going to help help with that. But I'm going to say it again. It's really important. We have full confidence in that 2% service revenue growth for 2025. That is the first building block in that at least 5% EBITDA. And then on top of that, obviously, the cost initiatives that we're that we're doing. Eric, you want to add something?

Yes, just just to put some context also on the fact that we are simplifying things a little bit and stepping away from some non core and unprofitable services so that the Champions League exit and the ramp down of the invoicing in Finland, for example, together. And then these will cause a headwind of say 50 basis points or somewhere they were around in the next few quarters. Those are that's conscious decisions that we are taking. And they were, of course, annualized in the second half of next year. So they don't have but they doesn't that doesn't help our ability to generate EBITDA at all. On the contrary, it helps us. So just to have that perspective in mind also.

Right. Thanks. Thanks a lot.

Next question comes from the line of Keeble Kavoya. Your line is now open. Please go ahead.

Thank you. I've got two questions and they really follow on from the last. So I appreciate that the regulatory drags affecting the absolute trends. Just looking from Q2 to Q3, we had a 1.7 percentage point slowdown in Finnish mobile service revenue growth and 1.9 percentage point slowdown in Norway. Could you just elaborate a bit more on the moving parts from Q2 to Q3 on mobile service revenue growth for those two markets? And secondly, just just going back to ice as well for Norway specifically, have you identified additional measures to compensate for the ice related EBITDA? And if so, what would those be? And when should those kick in? Thank you.

So starting with the with the compensating the loss of the ice, of course, we are doing measures. I don't want to go into detail on the measures that we are doing, but we are doing a lot of measures to mitigate, of course, the loss of that contract. And maybe that will be clear for the coming quarters when we then report, but we don't want to disclose those now. So that's the first one. Then Eric, you can take that one.

Yeah, maybe just to add to to to ice specifically, there's many other initiatives that we have when you lose a wholesale contract on, you know, your B2C and your B2B business, which is doing well in that in that market, as you saw with the continuation of the of the mobile growth, we have fewer customers is mainly what is driving that in that specific segment. And we are up in Finland has gone up, but not quite yet in Norway because of the price initiatives that I've just said that we've pushed through this quarter, which we then will benefit from next quarter. So it's subscriber growth related. And then the output that is yet to go up because of the price initiatives that we're putting through, putting through now.

And you asked about the changing Q2 to Q3 on mobile service revenue, Finland and Norway. In Norway, you have the annualization of the Fjordkraft agreement in the other mobile service revenue, which affects the growth rate a little bit. And then you have a little bit of a blip in the prepaid revenues, which we can go into after the call. But if you look at the core post paid revenue trend, there isn't any deterioration from Q2 to Q3. In Finland, we have flagged for some time that the good healthy ARP trend that we see continuing in consumers going to slow down a little bit for natural reasons. So some of the measures annualize. So that's the main reason. And then there is a small one in other mobile service revenue related to how we re-invoice energy, I believe, on the towers. But it's fully expected, I would say.

OK, thanks. The next question comes from the line of Usman Ghazi. Your line is now open. Please go ahead.

Hi, everyone. Thank you for the opportunity to respond from the road. I just wanted to ask a clarification question and then follow up. Did I hear correctly that there was a 15 million ail went from low energy costs in Q3? And if that is the case, obviously that seems to be higher than what was being projected because you already had a 14 million reduction in Q1. And I think for the year, you remember correctly, you're anticipating an 18 million reduction in energy costs. But now you have 14 in Q1, 15 in Q3 is right. And that's already trending above. I guess the question is, if you have had that level of energy cost reduction in Q3, then the EBITDA growth that you posted, all of it is just driven by energy. So there's not much that we're seeing in the way of cost efficiency or just some comments there.

The

second question was on the enterprise side. You've mentioned a few instances in a few markets where you've stepped away because pricing was too low or that you lost a contract that has impacted the KPIs. And the question here is that, are you seeing anything on the enterprise market specifically where your traditional challenges in the consumer space are now just going into the enterprise market more aggressively? Or is this just usual business?

I can answer the second question now first. The enterprise side or the business to business. Well, we will clearly step away if we feel that the prices are too low. And we have done that in a couple of cases. Nothing unique, nothing specific, no trends. It's basically the same year over year or every year. But of course, it could be some hit as we disclose today, you know, that we will be negative now coming into the fourth quarter with some subs loss. But otherwise, it is basically a business as usual.

Yeah, and on energy cost, maybe just to, by the way, it was really hard to understand your question. There was a very bad connection, not with the others. So the tailwind that we expect for this year for energy is similar to maybe slightly higher than what we saw last year. Just to remind you, last year we had 120 million sec tailwind. And the second part is year to date, we had about 95 million. So this this quarter, it's supported by roughly 48 million, which is mainly Finland, a bit of Norway and a bit in a bit of Latvia.

And the final question comes from the line of Felix Henriksen. Your line is now open. Please go ahead.

Hello, Felix from Nordia. Thanks for taking my questions. I have a couple. Firstly, on capex, you now see that declining already to below 14 billion this year, as opposed to the capital markets day about a month ago, where you stick stuck into your guidance of around 14 billion for this year. Just wanted to get a clarification on what exactly is going faster than anticipated in your capex reduction program. And then secondly, on on TV media, I think the first kind of like previously soft guided for 200 million of the day for for 2024 and 600 million for 2025. And then your investor update, you said that the would be close to close to one billion for 2025. So just curious to hear your thoughts about the full year 24 TV media and how that will step up closer to one billion in 2025. Thanks.

Yes, I can start with TV media first. So TV media has a change program ongoing for the last year with focus on on moving or actually generating more digital revenues. One part is is the digital side on the advertising and the other one on the subscriber. As you can see, it's a 27 percent growth this quarter on revenues on digital advertising. At the same time, we are of course, there's a structural change in the market moving away from linear TV. You know, so we have a negative development there, but very good at managing to compensate. The rest is actually coming from lower cost and more efficient operations. And we see that the Champions League is out of the box also for this year for next year. So this in total, so the change program is going a bit better than we have expected. And that's the reason why we will see a bit. We feel fairly comfortable for that close to a billion next year in the TV media business. And as noted also, we also now secured all svenskan and super 1 under two most important football rights here in Sweden. But that is from 26 and onward. So it's not valid. We still have it in Thelets, et cetera, for portfolio. But this is valid from 26 on onwards. So you know that just for your information. Thank you.

All right. Why are you lowering it? And why now? So on the why, it's it's part of what what we said at the investor update, which is we are being much more disciplined. I simply said, if we're not seeing the return on the investment, we are saying no to proposals that we get from the various markets that that ultimately come to us. And just raising the bar, increasing the hurdle rate that we're looking for means that we're saying no. And why now? We wanted to wait for could we have done it then? Possibly. We wanted to wait for the full results for the quarter. Also, the latest update of what people sort of expenditure plans are for the last for the last quarter of the year. Putting all of that together was pretty clear that we could not come out with saying we're going to be around 14 because we're just not going to spend it. And hence we've changed it now.

Thank you.

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