Telia Company AB (publ)

to 2025 results presentation. And with that, I'll now hand over to Telia Company's Head of Investor Relations, Eric Strandenpers. Please go ahead, the floor is yours.

Thank you, Michael. Welcome, everyone, to the call on this busy morning. We have a presentation ahead of us. We have Patrick Hofbauer, our CEO, and Erik Hagerman, our CFO, to present the results. And after that, we'll go to Q&A, and we'll try this time to make sure everyone has a chance to ask questions. So we'll do two questions each this time, please. But before that, we have lots to present. So, Patrick, please go ahead.

Thank you Erik and good morning everyone. Let me go through what I believe was a very eventful quarter that shows that we are on the right track with our strategic agenda. I'm glad to see that the new organization is delivering efficiencies according to plan and that we continue to execute well on our ambitions to strengthen our core and make Telia more robust. Financially and as a group, we continue to track according to our overall plan, even though the picture is a bit mixed with an EBITDA overperformance in Sweden and Finland, but somewhat weaker development in Norway. As I said, it was an eventful quarter and our M&A team has been working around the clock. Firstly, to close the TV and media transaction. Secondly, for the signing of the memorandum of understanding with our partner in Latvia that will see us fully exit from Latvia in 2026. And thirdly, you saw today a public tender for all outstanding shares of Breban 2, which will strengthen our consumer business in Sweden. Innovation also remains a key strategic priority and we are proud to have extended the North Star Innovation Program by welcoming the Swedish Armed Forces aboard. We are excited to work with them and our other partners to make sure that Sweden stays in the frontline when it comes to secure communication and advanced 5G applications. And finally, we keep the full year outlook unchanged since first half financials for the group are largely as expected. On the next page, I will comment on the financial highlights. Service revenues growth was strong in Sweden and the Baltics, which was partly offset by the expected slowdown in Norway, meaning that overall growth was somewhat below the full year ambition. EBITDA growth of 6.2% was not that different versus Q1, and this was slightly ahead of our own expectations, but we still foresee a somewhat softer Q3 before it picks up again in Q4. CapEx spend remained well within our frame of less than 14 billion per year and free cash flow of 2.3 billion SEK was strong, following positive developments on several line items, including a dividend from TET in Latvia late in the quarter. This cash flow together with the growth in EBITDA and proceeds from the Marshall investment meant that our balance sheet continued to improve and the leverage is now at 2.09x. Moving then to Sweden that continued to track that commercial plan well, leveraging on its premium infrastructure position, improving customer satisfaction and further expanding the North Star innovation program. Our net mobile subscriber intake this quarter was the best for over five years, driven by consumer customer. And we launched a new mobile consumer portfolio with improved streaming bundling. Meanwhile, the TV continued to perform strongly, which was the main reason behind the consumer segment growing 2.3%. Enterprise also had a good quarter despite the poor macroeconomic growth, with strong demand for advanced connectivity, ICT and security services. Part of the growth also came from project and licensing revenue, which will fluctuate from one quarter to the next. EBITDA growth remained strong at around 8%, supported by profitable growth and continued tailwind from the change program. One important reason why we are doing well in Sweden is our focus on the overall household. And I would like to talk about the development of convergence on the next slide. We've had a long-term focus to slowly but surely drive increased convergence in the consumer base and to do this without providing much monetary discounts. The share of the convergent customer is growing steadily about 2 percentage points per year and we are now at the level of 57%. In the second graph, you can see that their average revenue per household grows by more than 5% per year and now exceeds 600 SEK. Churn is also drastically reduced for converged customers. And somewhat simplified, you can see that household churn decreased by about half for each extra service added. To drive convergence, we naturally leverage our award-winning networks. And as you can see, we are now at an unlimited share of 65%. So why is this important? When you get a critical mass on unlimited, you can start to look at the customer base the same way as you do with a fixed base, with simpler and more recurring pricing cycles, with annual and predictable price increases as you have had in the fixed business. Let me now comment briefly on why we have announced the tender to offer all the shares in Breban II. As I said, we have placed a bid for all outstanding shares of Brebant 2. The bid is recommended by its board and supported by its top five shareholders, representing over 50% of Brebant 2 shares. It is a transaction for around 3 billion SEK in enterprise value, which requires over 90% acceptance, as well as local competition clearance. This is a very complementary asset to Telia operating in a segment where we are hardly present today since we lack the tools to compete effectively in the value segment of the fixed broadband market without premium brand. In addition, Breban 2 operates in open networks where our market share is very low. We have a solid case for synergies amounting to over 200 million within three years and with more potential after that. This transaction profile meets our requirement on executing risk and returns on capital employed. So let's now leave Sweden and go to Finland. In Finland, we saw flat service revenue development as we continue to trim our portfolio to drive simplification. The mobile consumer trends are mostly healthy with a continued increase in gross customer intake and ARPA growth of 4%. In broadband, the number of consumer fiber customers also continue to grow. In Enterprise, we ported out 35,000 subscriptions related to one large public contract lost more than a year ago, which explains the negative net debts in the chart and the reported churn increase this quarter. Ongoing simplification of the business as we shut down non-core activities and the strong execution of the change program resulted in EBITDA growth of 10%. It can be noted that without the ramp down of the e-invoicing business, service revenue growth would also have been slightly positive. At this time, I would like to comment on what we are doing to improve our business in Finland going forward. At the investor update in September last year, we laid out the ambition of Finland getting back to growth with improved profitability. And with Holger now in place, that work is now moving into a new phase. We set out ambitions to stabilize our mobile market share, to strengthen the SME business and to improve profitability. After the first three quarters, we are making progress on profitability and simplification as we saw on the previous slide. We have increased the customer intake in both SME and mobile consumer and the fiber market remains healthy. Meanwhile, there have been strong headwinds in enterprise and the macroeconomic growth remains low, so we have much more work to do. Still, we believe that we are on the right track. Product portfolio simplification and the profitability focus will continue. The efficiencies we have created in the central parts of the organization have enabled deployment of selected new customer-facing headcounts into our sales organization, and this is giving visible results. We also have new 5G capabilities that our enterprise customers are keen to explore and have already sold well over 10 private networks with more to come. And we will continue to invest in a healthy fiber market where value is being created. And we see that all of this moves us towards the target we set out last September, moving now west to Norway. which as expected had challenging quarter with both service revenue and EBITDA trending down due to lower mobile wholesale revenue and headwinds in broadband and TV. The challenges in fixed can be seen in the KPIs that were also impacted by the black screen with TV2, which lasted until the end of the quarter when a new multi-year agreement was signed. This development does not come as a surprise, and next quarter you will see that the headwind will become worse before they start to get better, as we have said before. Let's not forget that we have a strong brand portfolio and growing mobile end-user service revenue in Norway, but I know you all want to know how we plan to turn the current trends around, so let's go to the next page. In fact, when it comes to Norway, I'm a lot more confident about our way forward than I was six months ago. We know what we need to do and how to sort out the fixed business. Some of it we can share now and some in the future quarters. Our plan remains to continue to grow with best-in-class profitability. Obviously, we lost the wholesale contract and we have headwinds in fixed with a black screen situation on top of them. But we have now completed a string of important management recruitments, sorted out the black screen situation in a good way, and we have launched a new organization this quarter where we have separate division to focus on the fixed consumer business. Our back-to-growth plan in fixed includes having a focused team, upgrading Coax customers to fiber, replacing a fragmented customer equipment landscape with upgraded and standardized CPEs, and to grow outside our network using fixed wireless access and open networks. Our foundation for this work has been laid as fixed network quality has already improved dramatically and well within our group CapEx targets. Like in Finland, we have an exciting opportunity to grow in advanced 5G services as well as within Saiget ICT portfolio. Our brand portfolio is strong and there is plenty of potential in security services for both consumers and enterprises. And in tandem with the commercial activities, we continue to pursue additional cost opportunities. Turning now east and starting with Lithuania. Lithuania goes from strength to strength financially after delivering another quarter of very healthy service revenues growth supported by both mobile and fixed. New tools for smart personalized pricing have enabled ARPA growth as you see on this slide. Without adverse effects in churn or dissatisfaction. Innovation is also happening together with customers and this quarter we initiated testing of the first standalone 5G ESE installation in the port of Klaipeda. Together with additional efficiencies generated this all resulted in EBITDA growth of 11% and EBITDA minus capex that remained at record high level of SEK 1.6 billion. Moving on to Estonia, which signed an agreement to acquire its long-term IT partner Igloo this quarter, a small but creative transaction that also strengthened Telia, Estonia's ICT proposition in the large enterprise segment. On the financials, development was steady with both service revenue and EBITDA growth going by 3-4%, as you can see with good cash flow conversion. And with that, I hand over to Erik before I come back and summarize the quarter at the end.

Thank you, Patrik. Let me now go through the financial development of Q2, starting as usual with service revenue and EBITDA development. As we flagged last quarter, service revenue growth slowed in the second quarter, as stable or improved performance in Sweden, Finland and the Baltics was offset by revenue decline in Norway and the lapsing tailwind from the Norla TSA. Year-to-date we are at a service revenue growth of 1.4% and looking into the second half of the year we expect an improvement due to mainly phasing of pricing and growth coming from enterprise and public sector contracts. Turning to EBITDA we see that growth remained above 6% supported by all markets except Norway with cost efficiencies resulting from the change program being a key driver. We are also encouraged to see that our EBITDA margin expanded by 200 basis points, in line with our margin expansion promise at the investor update September last year. Including TVA Media, which was originally part of our full year guidance, EBITDA growth would have been 11% this quarter. EBITDA this quarter was a bit better than we estimated three months ago and is partly a result of phasing between quarters, as well as better savings on ancillary costs following our change program. Because of that, we still expect that Q3 will see growth below our full-year ambition of more than 5% before re-accelerating again in Q4. Moving to OPEX and CARPEX. As you see, the change program continues to yield good results and is the key reason why operating expenses declined by 5.1% in the quarter, more than compensating for an increased level of marketing spend and somewhat higher IT costs. The combination of service revenue growth and lower OPEX resulted in OPEX as a percentage of service revenue continuing down, this quarter by almost 200 basis points to 30.4%. We also stay committed to maintaining CAPEX discipline. And as you can see from the middle graph, we are now at 12.6 billion on a 12-month rolling basis, showing how clear priorities result in better efficiency. We reserve the flexibility to potentially increase the CAPEX run rate somewhat in the second half, but we will stay comfortably in line with our guidance of below 14 billion for the full year. As you can see on the right-hand side, EBITDA less capex as a simple proxy for free cash flow reached 19 billion on a 12-month basis, up more than a third over two years, or 5 billion SEC in absolute terms. The winning combination of higher EBITDA and lower CAPEX resulted in a much improved cash conversion, now at 60% on a rolling 12-month basis, up from 58% a year ago and materially up from 47% two years ago when we were coming out of a peak investment cycle. Let's now look at the free cash flow for the quarter. Here we can see that there is an improvement in free cash flow of 400 million compared to the same quarter last year. And as for several quarters now, the primary building block is again our continued profitable growth. Cash capex decreased by 300 million versus last year, to a large extent driven by lower booked capex and some phasing. Interest payments, however, went the opposite direction as last year, but as you might remember, that quarter contained an unusually low level due to phasing of interest into Q3 of 2024. We had a positive impact of 200 million relating to dividends from TET, the fixed business in Latvia, where we are a minority owner, following the agreement with our partner there. The mobile business in Latvia, LMT, which we consolidate, will pay dividends in early Q3, which will result in a minority dividend outflow of a similar size in our cash flow statement. So a bit of phasing here that worked in our favour this quarter. Other items were somewhat less negative versus Q2 last year, as outgoing payments related to the change programme was offset by primarily higher pension refund. Let's now briefly look at our net debt and leverage development. As you can see on the right hand side, our net debt decreased by one and a half billion in the quarter as free cash flow more than covered our quarterly dividend payment. And in addition, we had proceeds from divesting our ownership in the Marshall Group. The combination of a reduction in net debt and increased EBITDA reduced our leverage to just below 2.1 times compared to 2.18 times at the end of last quarter. Looking at the longer term trend, we can see that leverage has gone down over the last years and we have grown EBITDA while using proceeds from divestments to reduce our debt levels. including the TV and media proceeds that we received at the beginning of July, leverage has now come down even further. Before I hand over back to Patrick, a few words on some of the financial milestones we have achieved this quarter and how that resonates with our ambitions as laid out at the investor update last year. At this capital market update, we laid out a clear agenda how we aim to create shareholder value. And in this quarter, we continue to make good progress on this agenda. EBITDA continues to grow and CAPEX has come down since new management took over. And both are key building blocks for our ambition to grow free cash flow and dividend per share over time. On active portfolio management, you have heard us talk today about the closing of the sale of the TV and media business, making a bolder acquisition that further supports our core business in Sweden, and the signing of an MOU for the planned exit from Latvia. Also, our balance sheet continues to strengthen. Liquidity is strong, and after the closing of our TV and media exit, we are now at the lower end of our leverage target range. Finally, we paid another quarterly dividend to our shareholders. We covered the first half-year dividend by our free cash flow, and we continue to remain as committed as before to deliver free cash flow above $10 billion by 2027. With that, I hand back to you, Patrick.

Thank you for that Erik, and let me now summarize before we go into Q&A. We continue to perform in line with our plans overall, with Sweden a bit stronger and Norway falling a bit short of the moment. But like I explained earlier, we feel confident in our plans in Norway and Finland. This quarter we clearly see the efficiencies coming from the change program from last year, but I'm also happy to see that the new organization we have created works well. This is very important as we are on a simplification journey and will continue to generate efficiencies. Strong progress for the asset portfolio management with TV and media now in a new home and for next year looking forward to the same for our Latvian business. But also hopefully welcome Breban to Telia. The outlook for the full year is reiterated. And with that, I will open up for questions. Thank you.

To join the queue to ask a question, please press star five on your telephone. Again, that's star five on your telephone to ask a question. We kindly ask that you limit yourself to a maximum of two questions. Thank you. Our first question today comes from Andrew Lee. Please go ahead.

was on your cost-cutting outlook in light of what we've heard from your peers recently and then secondly just on implications on how we should read the Latvian asset sale. Just on the cost cutting, I think you're going through a second benchmarking exercise on cost now. You previously suggested that we shouldn't expect another big scale cost efficiency programme or transformation programme like the one you laid out a year ago. We've since seen your peers really step up at another level in terms of cost efficiencies, most notably Teletoo yesterday. So just wondered how you're now thinking in terms of benchmarking and the scope for cost-cutting in light of material improvements and efficiencies from your peers. And then just secondly on Latvia, is that an asset-specific step away from a complex ownership structure that gives you some simplification, or should we see it maybe as suggesting an intention to more broadly step away from that broader region and simplify the group portfolio further from here? Thank you.

Good morning, Andrew. I can start with the second question first. This is not to be seen that we are exiting the Baltics. This is, rightly as you said, this is to reduce the complexity of our organization and company, so continue the simplification journey. So that's the reason why we are leaving Latvia. So no other intentions to leave Lithuania or Estonia where we have strong assets and good management in place as well. Then on the first question regarding cost-cutting, well we did as you also stated in the big change program last year, this was to right-size the company and then we were very clear on that we want to continue to drive efficiencies in the group and that will continue. Then we are doing benchmarks from time to time to make sure that we are competitive in the different markets and that will continue. But we will continue to drive efficiencies for the coming years. But it will not be a one-time big off. That is not what we see at the moment. But we are still always evaluating what more we can do. But clearly, we are working on an efficiency agenda.

Okay, thank you. That's helpful.

Our next question comes from Victor Hogberg. Please go ahead and ask your question.

Good morning. So, on the bid on two, do you expect any regulatory hurdles, any remedies, given the combined 45% market share, going back to the figures for 2024? The two is at roughly 23%. So, that's the first question on that part. And the second question on this part, what kind of synergies do you see in terms of revenues, costs you talked about? Second question after that, if I may.

Okay, I can start with the regulatory first of all. So Breban 2, they have a low market share in the SDU market, in tele, open fiber and OCN, et cetera. But they are stronger in the MDU market. It makes the potential to improve margins for us, you know, and COGS, et cetera. So we see it more as a complementary. Of course, we have done the regulatory evaluation, and we think that the Swedish competition authorities will, of course, approve this. That's the reason why we placed this in the bid this morning. So this is actually very short on our view on the regulatory perspective.

The second part of that question was on synergies, I believe. As per the analyst presentation, we're saying the run rate cost synergies is about 200 million a year, and the best way to think about it in a split between revenue and cost savings is half and half.

Thank you. Second question on fiber. There was an article yesterday about the captain looking to potentially sell his stake in the Finnish fiber JV you have to get a VK. Would you consider buying the remaining 60% of that? Or does the bid on two acquisition suffice in terms of Nordic fiber M&A? Presentation said that you want to pursue growth opportunities in fiber in Finland. So is this an asset you would want to consolidate?

So, we are aware of the recent market speculations, but of course we cannot comment on rumours. If you look at Valkyltanen, the asset in Finland that you're pointing out, this is part of our strategic focus in digital infrastructure and we remain committed to develop that one. We see continued good growth and value creation in the Finnish fibre market and want to of course participate in that going forward. And I mean, so basically that is our view at the moment.

Yeah, maybe just to add to it, we have a history on when it comes to core assets to either develop those on our own or with strong partnership. And at the moment it's with Katman, but you've seen us do other partnerships, for example, on Towers. So we are quite open-minded about whether we do this on our own or we do this together with a partner.

Thank you.

Our next question comes from Eric Lindum. Please go ahead and ask your question.

Yes, good morning. Two questions for me. You mentioned having really solid or I think even the best net mobile intake on the consumer side in Sweden for over five years on the back of the new consumer mobile portfolio. Was there any introductory offers here, or why do you think this growth is a very nice acceleration? And then I wanted to ask you as well on the EBITDA growth for the quarter here. So in Q1, you highlighted that you were looking at somewhat lower EBITDA growth compared to the full year guidance in Q2 and Q3, and now you deliver very nicely about the guidance here in Q2. So what were the main surprises that you saw here in Q2 that drove this? Thank you.

Good morning, Erik. I can start with the first one. We have no special campaigns in a new portfolio. This is just good work from the team and a broad perspective. So no special campaigns that actually managed us to grow our consumer business. We had some good trends for a while now, and this is just accelerating those trends. So it looks, I think, no special campaigns.

Perhaps we can add, Patrick, that all of the three brands actually contributed positively. So there wasn't one single one.

On the second question, EBITDA, where indeed a quarter ago our expectation was we're going to land for Q2 below 5%, and we did a very encouraging 6.2%. It's quite simple. Both Finland and Sweden overperformed somewhat on cost. I think the other one that we clearly see, is on central functions. The ancillary cost that we save by having fewer employees following the change program, those costs are down. Things like travel, expenses, et cetera, all of those are down and helping us. If you then look at our guidance for Q3, why then are we guiding below 5% there? That is all attributable to Norway. But let's see what that quarter brings. when we get through the coming months.

All right, perfect. Thank you for the comment.

Our next question comes from Andreas Jolson. Please go ahead and ask your question.

Thanks a lot and good morning everyone. I would like to start with the convergence discussion that you had in the presentation. Obviously, Telia has talked about convergence for many, many years and you show steady progress. When do you think we can see this in the actual numbers that Sweden presents as well, that this can trigger an underlying growth on the service revenue and on EBITDA? And secondly, following up on Eric's EBTA question, you continue to say that Q3 will be a little bit weaker and then recover again in Q4. Can you give some concrete examples of what you see in Q4 that will improve the trend and accelerate the EBTA growth again in Q4 and maybe into 2026 as well? Thanks.

Good morning, Anders. Yes, Andreas, I mean, I can start with your first question regarding convergence. We wanted to highlight this a bit more because we are talking about it, but we didn't show any facts and figures in the past, but now we are doing that. And we are continuously growing, as you saw, above 5% on the household perspective, and this strategy really works. On your question then, when you can translate it, well, we have some headwind, as you know, in the copper, the legacy. If you exclude that, we are at 4%, and the majority of that is from the consumer side. So if we exclude that, the growth is actually there and will continue for the coming years. So we feel very comfortable on those figures going forward.

And on the second question, in October last year, we signalled this sort of H1 being below what a medium term guidance is on top line, around 2%, and that more weighted toward the second half. We clearly see that also from an EBITDA perspective, a better Q4 than Q3, as just a signal. Why is that? Why is that top line better in the second half? I think one is the continued good momentum that we expect in Sweden. where clearly we see visibility or better visibility on larger customer projects in the enterprise segment and also the public sector. Secondly, the impact that we will see from pricing in several markets, but mainly also in Sweden. I think lastly, what we expect for Finland. Finland at the moment is a small negative on service revenue, and that is mainly because of the drag that we have from the ramp down of our invoicing business. That was 4.4 million euros impact this quarter. We expect that drag to become less and less as we progress through the year. So, improvement in EBITDA towards the end of the year, driven by increased service revenue. because H2 is better than H1 from a service revenue growth perspective.

Very clear and helpful. Thanks a lot.

Our next question comes from Maurice Patrick. Please go ahead and ask your question. Yeah, morning, guys.

Thanks for taking the question. Just on the breadband acquisition you've announced today, I mean, you talk about the nationwide market share goes from 32% to 44%. You discussed that earlier, and you suggest that there was relatively low overlap due to breadband having a low market share in the SDUs and higher MDUs. Could you just help us understand in the breadband footprint what you think your sort of pre- and post-market share program would be? and that's why you would expect to get competition or authority approval. It's generally been my sense, talking to Telia management teams over the years, that the company has been fairly, I'd say, pessimistic on the ability of Telia to pursue in-market consolidation like that. And then, a very quick follow-up on numbers. On your guidance for the year-on-free cash flow, the more than 7 billion cash flow, I think your spectrum assumption is 650 million SEC. Could you just confirm that is the case, given that I think Sweden alone, the four key payments, I think it'll be 780. There's going to be a further auction in Q4 for 1,800 megahertz. I think there was some spectrum payments in Q1 also. Thank you.

Thank you, Maurice. It's Erik here at IR. I'll take those questions. So on bredband 2, so this will be based on previous regulatory reviews, and we've certainly done our analysis. This will be analyzed most likely on a segment basis. We are, as you noted, strong in SDUs. Redband 2 are very strong in MDUs and in open networks where we have a very low presence. And in addition, you might note that we have a premium position, they have a more value position. So it's a very complementary asset. And yes, there are of course limitations to how much you can consolidate the market, but this asset in particular is one that we think there isn't really one like it, but this one we think is a very complementary fit. So we're quite optimistic about it. On the free cash flow, yes, we expect more spectrum capex. In the fourth quarter, we have a second installment of about 780 from Emory. On the free cash flow guidance we have for the full year, we use a normalized spectrum capex number, as you may recall, of 650. This is because we always want to guide on the bottom line free cash flow which should include our Spectrum CapEx although we can't guide on that specifically. So that's why we just put in the 650 normalized number when we calculate our full year free cash flow guidance. The actual Spectrum CapEx will be what it will be, varying from low numbers to high numbers from one year to the next. So this year is going to be more than 650, we know that.

Thank you. Our next question comes from Andre Kabyshek. Please go ahead and ask your question.

Hi. Good morning, Lauren. Thank you. Two questions for me, please. One is related to your scarce presentation yesterday. So tell us who basically is signaling a gradual exit from third-party sales channels. And this is something I emphasized in my presentation yesterday. Obviously, they need everyone else to kind of follow if this is to work. So I was wondering if this is something you are also looking to be doing, and from your perspective, what kind of upside is there? from the returning commissions in the case that does happen. That's one question, please. The second question, I was wondering also on the presentation around FM, sorry, not FMC, but unlimited. Patrick, you said a very interesting thing, which was that as you get to the scale of, say, two-thirds of customers on the unlimited, this creates an environment where the kind of pricing strategy moves very much closer to what you do in fiber, so regular annual price rises. So, you know, at the same time, we're seeing a lot of, I guess, promotional activity and a lot of aggression, especially around unlimited tariffs. So, how do you kind of balance those two aspects in your view that the scale kind of elements that you're clearly highlighting as positive for price increases, but at the same time, a lot of promotional activity. So do you think kind of this is possible to do without kind of consolidation and speed and even, and when do you think you kind of have maybe more pricing power from the scale that you're highlighting? Thank you very much.

So I can try to start because there were many questions in your couple of questions. So I will try to see if I spot this right. So the first one on the fixed mobile convergence, as we said, when we see the base is growing and we get more and more customers over to unlimited, that will be a more similar situation as we have with the fixed side, with fiber. We feel fairly comfortable that the profile will be very similar, so we start with doing annual more predictable price increases as we have done for many, many years in the broadband side. And we don't foresee that the number of campaigns etc. will start to increase just because of that. We don't see that in front of us at the moment. You can just look into the fiber market and see how that actually work with the proposal, etc. So it will be quite similar. So we feel that the model that we have actually works very, very fine. And on the other, your first question there, I don't really understood what you were asking for, but I've tried to, what I think you're asking for is that if we are focusing more on our own channels, and yes, that is correct. We are not commenting whether we will start or leave any external channels. We have had for the last years more and more focus on our internal channels. We see that in Finland, we have seen it in Sweden, because we actually want to control more of the sales, the full process by ourselves. And as more online we get, as more own channels we have. So this will continue to develop in our own channels going forward. I hope I answered your question on that one. Thank you.

Yes, Patrick, thank you very much.

Our next question comes from Frederick Liho. Please go ahead and ask your question.

Thank you very much. Thank you for taking my questions as well. Maybe just a follow-up on Norway. You said it would, if I understood you correctly, it would be a little bit weaker in Q3 compared to Q2. Did you still have revenues from ICE in the Q2 period then? Is that why you could see the weakness in Q3? And on that, will you sort of turn that and get better traction in the Q4? What we change that would be interesting. The second question is really, on the cash flow a little bit if you could dissect the details on networking capital and also if the facing capex, if that means that paid capex in the second half would be higher than booked capex, for example. So it would be interesting to hear Eric putting out some details there. Thanks.

Yeah, let me start with the last one. Indeed, that will be higher. And ultimately for the free cash flow overall, it will be neutral. So where previously we were expecting the delta between cash and book to be about a billion, we're looking at around 1.5 billion at the moment. But the Delta, you will see that as a wash in working capital. Overall, for working capital, our view has remained the same, that we see this as an inflow similar to what we had last year. So coming back from a period where it was a cash outflow for the group. That's one of the building blocks of getting to 7.5 and then growing it to 10 billion. With regards to Norway, just to give you a bit of a sense, we lose about 100 million per quarter. But to be exact, in Q2, the impact was 74 million. And for next quarter, we expect it to be a little bit above 100 million. So as I said in one of the previous questions, that's one of the reasons why we're guiding for a lower EBITDA in Q3 versus Q2. It's driven by Norway and it's mainly driven by this ICE contract. Then when it comes to what do we expect for Q4, Patrick talked through that turnaround slide. Obviously, it's very early days, but we do expect things to get gradually better while we start to get a better grip on what's happening on our wholesale business, our mobile business, on the consumer and the enterprise side, but also on the fixed side, where the investments that we're doing on fiber, where we are then better competing versus our previous COEX offerings at SDUs and MDU levels, that that starts to have traction. So we're expecting to see some green shoots towards the end of the year in our Norwegian business.

All right. Very helpful. Thank you, and have a nice summer.

Our next question comes from . Please go ahead and ask your question.

Thank you for taking the questions. And I have two, please. So some of your mobile and user service revenue trends in Sweden, Finland, and Norway are perhaps still lagging peers. Are you happy with the current development? And what do you see as key to driving improvement And then secondly, you'd earmarked about 300 million sec of capex per year for fiber deployment in Norway. How many homes have you rolled out so far this year? And what are your broadband trends like for your cable base in Norway specifically? Thank you.

I can start with the first question. It's regarding mobile and mobile development, and it varies between the markets. But look, Sweden is our most important market, the home market, and we have much more a household perspective on the consumer side here. And we have said that many, many times and I think I want to repeat it again. We see that the play that we're doing with the convergent is actually working very well. So we have more focus on the household and how we can generate more services into the household rather than just looking at each one of them. And we had a clear upside on broadband and especially on TV where we have the absolute best TV solution in the market. And we want to focus on that to take a bigger share of that market. And that has been our focus for the last year and will continue for a couple of more quarters since we have this advantage on the TV side. So this has been strategically important for us and obviously it works. Then, we are not happy with the development that we have seen in Finland. However, we see some improvements, especially on the consumer side, and we are targeting actually to defend the market share, which we have been very explicit on as well, and to grow in the SME segment. In the SME segment, we are growing with the mobile portfolio as well. Lithuania and Estonia, obviously, you know how that is developing, and Norway we just touched into.

On Norway, on the deployment of fibre, I think the main takeaway is the update we did on the one page, which is we have made a change in management, where there is a clear responsible head and a new creative division for fixed. which will be responsible for looking at where do we invest, where do we not invest. So that will be deployed. I mean the simple rule of thumb if you want to do a calculation of how much 300 million buys you is every connection is roughly between 40,000 to 50,000 NOC. So that gives you a way of calculating how many homes you can address. We're very happy with the billion we've earmarked for this. On the new management we've agreed There is no need to up this, given what we're seeing, and that should be enough for us to be competitive in the market versus the competition who clearly had a strong set of results today.

And so are you just able to say what's happening to the cable base in Norway specifically? I mean, I know you know the 7,000 broadband decline overall, but I was kind of curious what's happening to cable within that.

Our cable base, it works well. The number of network incidents has dropped a lot and we will replace it gradually by fiber, but I don't have the number exactly how many we have replaced this quarter. We can find out until the next call. The main actions are, as Eric described, we have created a new organization, replaced lots of CP equipment, so they've got new boxes and routers, and that has made a big difference. But let's come back to exactly where the timeline, what the timeline will be for their replacements.

Sure, that's clear. Thanks, all.

Our next question comes from Steve Malcolm. Please go ahead and ask your question.

Yeah, good morning, guys. Thanks for taking the questions. I'll go for two. One on CapEx, Eric. I think you kind of said that, you know, there were some moving parts around, you know, whether you would step up CapEx in the second half, given the current run rate is quite well below the guidance. Can you sort of maybe cast a little bit of extra light on what those moving parts are and what would make you, you know, step up CapEx and what would, you know, make you decide not to? And then just on the balance sheet, you know, I guess, you know, when you bake in TV media closing, the acquisition today, the likely sale in Latvia next year, your leverage is going to be kind of mid-high ones, you know, 1.7, 1.8 times. And the capital markets update in September, I think you said you'd be choiceful, you know, the targets two, two and a half times. Can you just give us an idea when you might come back to us and kind of, you know, update us on what you're thinking on leverages and how you, you know, how you might take the leverage back up, you know, from a very low level? Is that for the second half event? Is it a January event around the four-year results? That would be very helpful. Thanks a lot.

I can start with your second question on the balance sheet and how to treat that with the leverage etc. We have had a proper discussion with the board. There are still some job to be done on the deal for Latvia to get that in place. We have said that we want to have a shell agreement in place before year end and then it will happen next year. So there is something still job to be done, you know, before we know the exactly picture on where we are. So we have decided that we will come back as soon as we have had a proper discussion with the board also and look on the proceeds and where they are, when they are coming in, etc. So we will come back on that question. We don't have an answer today, but we understand your question and we, of course, we will come back on it.

And on CapEx, so it's a bit more weighted towards the second half, so there was a bit of phasing in there. I think the main thing is the flexibility that I mentioned is we see really good growth opportunities for our business across the various countries, but I would say predominantly in Sweden also because it's our biggest market. And those customer propositions often require CapEx and they have really, really good return profiles, right? Really high RRs, very good return on capital employed opportunities for us. So we will want to give us the flexibility to do that. Having said that, we do expect to be well below the 14 billion as we have seen. I think the other one is the point that you made on spectrum. which obviously you have capex with or without Spectrum, however you want to look at it. It is going to be more than that 650. We don't know exactly how those auctions will go. So let's see what that does. So we will be below 14, a bit more capex in the second half than the first half, as we see it now, capturing the growth opportunities that we have across the markets, but mainly in Sweden.

So just coming back on that first question, Patrick and Eric, just to be clear, are you saying that, you know, when you finalize the Latvian situation, it's going to be quite tricky? I understand there's a lot of moving parts there, but that's the point to which you may well come back to the market and kind of give some fresh thoughts on the balance sheet and leverage.

Yeah, I mean, if you go back to the slide that I presented, which has those four buckets of value creation, right, the slide that we introduced at the Capital Markets Day, it clearly sets out how we want to progress things. And today we gave a great update, I think, on the progress we've made on all three. We need to work our way through both the transaction of the acquisition here in Sweden, secondly, finalizing the MOU, making that into an SBA, closing that in H1. That will then give us a sense to then say, okay, what are you then going to do in that last bucket? But we've been very clear at the Capital Markets Update what our plan is, and we know how to create ultimately value for shareholders. So having that healthy balance sheet gives us that flexibility.

Great. Thanks very much.

Our next question comes from Nick Lyle. Please go ahead and ask your question.

Yeah, morning, guys. I hope you can hear me. I have a quick question, Patrick. Looking at households, the RPUs for postcode mobile and broadband still seem pretty weak, given the price rises this quarter. Can you comment on what is holding that back? Is that because you are focusing One household may be offering more discounts across products. What's going on here to discount or to offset the price rises? And then secondly, just back to Maurice's point on the Bread Ban 2 acquisition. Again, take your point that you think these businesses are complementary, but does the PTS and the competition authorities take that view as well? Could you tell us what they've said in your initial chats, at least, about whether they're prepared to look at these things on maybe an MDU, SDU basis, and open networks or whatever? Because it seems like quite a chunky market share versus the number two. Thanks very much.

Right, so a good question on the ARPU there, Nick. We did raise prices on the Telia brand for consumers, and that had the expected effect, so that came in. But we do have a few drags, and one is that we have prepaid. And that is coming down. And we have insurance, which is dragging us down a bit. And I think on the ARPA side, it's mostly insurance. And then we have, of course, the usual growth in family SIMs. So I think it's between those buckets, fairly evenly distributed, that you see the drag, which takes us back to about flat mobile service revenue growth.

But I guess maybe just to add, and I think that was in the previous question that you answered, Patrick, which is do we think we need to do better in mobile across the park? Certainly also if we compare that to Some of our competitors yesterday and today, absolutely. I think we're pretty clear on that. Maybe on the announced transaction from this morning, it's a public transaction. We need to let the regulators and everyone, the lawyers mainly do their work. But let's be clear, Nick, we would not come to an announcement as we have done if we did not feel comfortable about this. And we think we have a strong case, but ultimately let that, you know, the regulators do their work, and then we'll come back to that when there is an update. But we feel confident about this. Again, if not, we would not have done this.

Great.

Thanks very much. Thank you. Our next question comes from Ulrich Rath. Please go ahead and ask your question.

Yeah, thanks very much. At this point, I have only one question, and it's sort of slightly bigger picture regarding the B2 acquisition. I mean, ultimately, you're buying customers, really, not infrastructure. Is that the best use of capital? I mean, structurally, one could argue that Telia's key weakness in the Swedish market is that it has a very limited ownership of the full value chain, i.e., of the fiber infrastructure. And the key thing that sort of, you know, changes in this world in this way versus the prior situation that, you know, in copper, you had 100% infrastructure share. Now, this has been going on for some time, but if you do acquisitions to sort of change market structure, it's really the best use of capital to do that at the market share front. There is of course also this risk always when you buy resellers that you essentially encourage other people to start a reseller in the hope that they get taken out later. Thank you.

The last comment I don't really understand, but I will point out the first one. I mean, we have been looking through this and followed this company for many years. Yes, we are buying a customer base. It's 500,000 customers. Makes a lot of sense because it's complementary to our business and they are strong in markets where we are weak. So that makes a lot. Then I don't agree. We have a lot of infrastructure in Sweden as well on our assets. So I'm a bit surprised of that comment. But otherwise, I think strategically, we are buying this customer base. It's a well-driven and well-run company. And we think we can have a good opportunity here to actually cross-sale and create more value and give these customers more value from our portfolio. So I think that's the logic. And I think it's strategically a very good fit. And also... the price level we pay is also reasonable.

Yeah, maybe my comment will be maybe less around sort of what it does for the market or infrastructure, no infrastructure. I think for us it takes many boxes. One is strengthening one of our core markets, which is our home market. It's not that often that you have an opportunity to do this, so we feel very happy with that. I think it's fair value for us as a buyer, them as a seller. I think ultimately, through capital allocation, we are very disciplined when it comes to these things. So we have evaluated many options on buying things, and it's easier to do that after you've divested a lot. We've divested Denmark, we've divested Marshall, we've divested TVM. So that gives us the balance sheet flexibility. But even with that flexibility, you want to be very disciplined when it comes to that. So we evaluated this. It has, as the slide said, a ROSI, which is bigger, substantially bigger than the WAC, free cash flow accretive already near one. We obviously compared it also to buying back our own shares. And this is a very, very attractive transaction for us, as it is for the shareholders of Brede Bantoum. Great. Thank you very much.

There are no further questions at this time, so I'll hand it back to management.

All right. Thank you very much for listening in and all the good questions on this busy day. And we wish you a very enjoyable summer. Thank you and goodbye.