Telia Company AB (publ)

Good morning everyone and welcome to this Q1 2021 Results Presentation from Telia Company. We have our President and CEO, Allison Kirkby with us and CFO, Per Christian Morland as usual, and also the IR team.

And before we start, I would just like to remind you all to please be disciplined and stick to one question each so that we have time for everyone to ask a question. Otherwise, you have a brilliant IR team that can take care of the rest but please do be disciplined.

And by that I leave the word to Allison.

Good morning, everyone. So can you believe it's a snowy day in Stockholm.

So, apart from the weather, 2021 is the start of a journey to reinvent a better Telia. And I'm pleased that we in this first quarter of the journey delivered in line with our expectations, despite increased pandemic-related restrictions across our footprint during this past quarter.

As in the prior quarter, our core telco business has remained resilient while TV and media is rebounding. And ICT was a little bit softer in the quarter, but we believe that it's pandemic related.

So all-in-all, we had a service revenue that like-for-like declined by 2.3%, which is pretty much in line with the level we saw last quarter. EBITDA returned to growth on a like-for-like basis, thanks to OpEx reductions across the group, down 3% and some special items in Norway.

Indeed, if you look at Norway, TV and media and our Baltic businesses, they all grew positively in the quarter, compensating for some headwinds in Sweden and Finland. CapEx is broadly flat, as our increased mobile network investment is replacing the cyber investment of Q1 last year.

Operational free cash flow was particularly strong at 4 billion kronor helped by a positive contribution from working capital. But the more structural elements of operational free cash flow was also good and basically flat year-on-year at 2.3 billion kronor.

This has contributed to a strong closing balance sheet position with pro forma leverage at 2.3 times. As you all know, we launched our new strategy and the turnaround plan for Telia only in January.

It's a multi-year journey. It will take time and investment but I am encouraged by some of the early progress.

So looking at each of the strategic priorities in turn, inspiring our customers, if you recall, is about creating the enablers that will return Telia to top line growth. It's about combining our network leadership position with brands and digital experiences that will enable growth beyond connectivity.

Strengthening our connectivity position, accelerating convergence, and creating differentiated superior customer experiences in both consumer and enterprise segments are our immediate priorities. During the quarter customer satisfaction, as measured by NPS, was broadly stable.

We're sustaining high levels in the Baltics, and we're seeing improvements in Sweden and in Denmark. In Sweden, we're pleased to see the positive trends developing since we invested to increase availability in our call centers, which turned out to be very timely, as we saw more restrictions in the quarter.

In Norway and Finland, where we need to close the gap to competition, we are seeing now consideration and brand perception improve on the back of 5G but clearly, we have more to do there. We've made good progress on our converged customer base in the quarter with Sweden growing 38,000, Norway growing 10, Lithuania growing 10, Finland growing 5000 and also in Finland, we're seeing 50% of all 5G subscribers add C More to their mobile subscription.

Convergence is not just beneficial for the consumer segment and during the quarter we also saw good progress in the enterprise segments. An example being, a renewed but broader contract with the hosting company [inaudible], roughly 20,000 tenants where we will offer a unique combination of digital services, including broadband, TV and smart home IoT solutions with our Cygate business providing public wireless Wi-Fi throughout the year in the States.

After the quarter ended, we landed another similar landlord contracts as well, also an existing customer but now with a larger scope. This is convergence at its best and combined Telia strengths in the form, combined with our strengths in enterprise and our unique strengths in the IoT and ICT segments.

Also in an enterprise, we're winning new highly important governmental contracts, such as a recent win with the ministries of foreign affairs in both Sweden and Norway. Quality networks and security credentials are increasingly important these days for the large and key enterprise, and particularly the public sector.

And our security credentials are second to none and it's a segment that is growing and we will be a part of that growth. As we explained in January, developing TV and media to its full potential is also a key priority for us, and we are delighted to see it rebounding.

We're strengthening our position in both our ad-based free-to-air business and in our C More OTT business, gaining both commercial share of viewing in Sweden and Finland and in the group C More. Moving to the connecting everyone strategic priority, which aims to use the catalyst of 5G and gigabit speed fix networks to enhance our position as the most trusted, reliable and efficient networks for the society of the Nordics and the Baltics.

Having secured the largest and best part of the 5G spectrum of Sweden in January, we have just this week secured the 5G spectrum we need in Denmark as well, also at rational pricing levels. The Danish option included many spectral bands, but together with Telenor, recall, we have the TTN shared network there, we secured 140 mega hertz in the 3.5 gigahertz spectrum, and two times 20 megahertz in the 2.1 spectrum.

We also secured frequencies in the 1.5, 2.3 and 26 gigahertz bands. This means that we can now accelerate our 5G network rollout in Denmark.

5G rollout and network modernization continued in the quarter and we're continuing to see increased penetration of 5G enabled handsets now at 50% in Norway and 55% of new sales in Sweden, creating a foundation for monetization opportunities that we planned for later in the year. Alongside 5G rollout, we're migrating away from decommissioning legacy, with good progress in Sweden in the quarter leading to structural cost reductions within both COGS and OpEx worth 75 million kronor.

And we were included again in the Gartner Magic Quadrant for world leading network services. Finally, Telia Asset Management is up and running where our initial focus is in identifying partners for our tower portfolios in Norway and Finland.

I think we can safely say that interest from external partners is very strong. Transforming to digital is the engine to take us from being a good company to a better and great digital company.

As we presented at our investor brief, there are four cornerstones to our digital transformation; product simplification, process automation, increased use of data analytics to support personalization at scale, and a radically simplified and leaner IT organization and infrastructure. The program is ramping up with more than 500 initiatives identified and providing substance and confidence in our incremental five kronor ambition for 2025 - 5 billion kronor ambition.

We're on track with some visible effects that has contributed to the 3% reduction in our OpEx for the quarter. In the quarter, the progress is mainly being seen in further IT cost reduction through closing of legacy IT systems generating savings of around 60 million kronor.

On certification, we've reduced the number of Danish products and price plans by 10% in the quarter. And we're no piloting radical product and process simplification in Finland.

The headcount reduction target for this year is also on track with over 400 of the targeted 1000x [inaudible] ready on March 31 and that will clearly start to benefit us in the coming quarters. And within our TV and media units, we offer customers a mix of analog and digital inventory maximizing reach to prepare for the increased transition to digital.

In recent quarters, we've made a significant step forward with our AVOD platforms, especially for TV4 Play, where we see time spent growing by 36%. This has yielded a strong digital ad revenue growth of 28% in March alone.

And as you might have seen already TV4 is the most profitable broadcaster in Europe, still in 2020 despite the pandemic, but now we aim to be the most profitable and the most digitized broadcaster in Europe going forward. Finally, on delivering sustainably, we're off to the start we expected and guided on even if the pandemic accelerated in our footprint in the quarter.

Our dividend commitment is well on track to be fully covered from operating free cash flow and the proceeds from the Telia Carrier divestment are on track to be received in June, as we have now received all of the final approvals required, meaning that we will close the deal on June 1. On sustainability, just this week, we're presented new targets aiming to support and empower societies within our footprint to reduce CO2 and waste to zero by 2023 to reach 1 million individuals through digital inclusion by 2025, and to continue to maintain and gain customers' trust through strong privacy, and security strategies and all underpinned by a strong governance, ethics and human rights agenda.

I would say, I was pleased to see that the Sustainability Brand Index, Europe's largest brands study measuring the perception of consumers in our markets, recognizing our work as they ranked us Number One in Sweden and the Baltics. Moving to the market and Sweden's first.

Service revenues declined 2.7%, of which 1% relates to loss of roaming. The rest is explained by an increased decline of legacy corporate products.

That includes both fixed-to-net telephony and SDSL. If you exclude the legacy corporate decline and rolling and the mobile one-offs from last year, underlying and sustainable revenue is growing by 1.4% in the quarter driven by fiber broadband, predominately through Open City Networks and TV.

This level of underlying growth is very consistent with the level that we saw in the Q4, which was a high for last year. In the consumer segment, we are basically stable, ex roaming, with fiber and TV growth offsetting legacy declines.

In enterprise, we have a similar stable development underlying despite continued price pressure in core mobile and intensified competition in SME, fixed price increases and a strong trend in the large segment are helping to offset these headwinds. Higher equipment volumes as well as the revenue mix change away from high margin corporate product does have an impact on gross margin and also EBITDA margin.

Despite that there's been good progress on network costs, as I mentioned earlier, and OpEx is down just over 3%, despite a continued higher staffing level in call centers to support the improvement in customer satisfaction. Just as we did across the footprint, Sweden made a number of staffing reductions at the end of the quarter, and the surprising was planned during the second quarter, and an acceleration of the transformation program.

We expect to see improved trends in the second half of this year. Quickly here are some of the underlying drivers of Swedish revenue confirming the relative stability, if you exclude the ruling impacts.

In our mobile business, you can see the stable APRU, ex roaming, the consumer postpaid base is stable, while the enterprise base was impacted by the loss of a public customer with very low levels of ARPU, which we decided not to fight irrationally to retain. Regarding the mobile pricing environment, it does remain competitive, but no different from what we were experiencing in January.

Our larger product portfolio gives us more tools to retain our customers, especially in the large key and public segments. And within SME, we have a large part of the customer base under binding contracts and our value loading mainly through SD-WAN solutions and IoT solutions within automated sustainability where necessary to retain our competitiveness.

Within broadband, again, the consumer base is fairly stable but as we indicated on the previous slide, we do see an acceleration shift from SDSL to fiber, predominantly as we increased penetration with an Open City Networks. ARPU levels are flat, as we aim to compensate the dilution effect from the subscriber mix with price increases or higher speed fiber.

On TV, we're continuing to add customers, especially in the MDU segments and from the sports packages we launched during last year. ARPU, as you can see here, is reduced to pre- pandemic levels and clearly The Euros in the summer including this LatAm and Champions League in the autumn, we expect TV to grow in the second half.

Finland, however, did have a tough start for the year. And there are a few factors explaining the 4.5% decline.

Roaming was a third of the decline, especially in the enterprise segments. Excluding roaming, we were flat in the consumer segments and down 1% in enterprise mobile.

Fixed enterprise products, mainly ICT and Business Solutions, were another part of this decline. In general, we saw less activity and even some delayed projects, which could be to a large extent related to uncertainty following the tighter COVID restrictions.

In fact, we did already see improved sales trends towards the end of the quarter. The final third is legacy declines and the legal impact that we have mentioned in prior quarters.

OpEx reduced by 4% predominantly related to lower resource costs, which helped mitigate some of the service revenue decline on EBITDA, which was down 2%. Utilizing content as 5G to win the household and becoming the leading orchestrator of digital services to the enterprise are our two key commercial priorities to turn around a Finnish business.

And despite the headline financials, there were some reasons to be cheerful in the quarter. Yes, we're still behind the market leader in 5G roll out but we are accelerating and Telia was the operator with the largest improvement in 5G perception during the quarter.

This combined with our content with access 5G products is starting to help us build our 5G base. It also helped deliver a strong growth in TV subscribers in the quarter, up 32,000, taking us to a total of direct-to-consumer TV customers of 860,000 which is Telia plus C More sub.

5G rollout, convergence and digital transformation remain our key priorities to return Finland to sustainable profitable growth. This quarter was clearly a wakeup call and has emphasized a need for speed.

Moving on to Norway, service revenues declined by 3.5% like-for-life and this is entirely related to two factors. The first being more revenues from ICE, the new contract, and the second drop in roaming revenues.

It was however good to see stability in the consumer mobile subscriber base at stable ARPU levels in the quarter. But continuing to see good momentum and positive benefits from the premium TeliaX proposition which now represents 15% of our Telia postpaid customer base.

TeliaX is not only supporting ARPU, but also sustains a higher NPS level, as high as 37, and our fighter brand OneCall has now had 27 consecutive months of positive net add. As I mentioned earlier, our FMC base is also growing nicely.

On the enterprise side, we are gaining customers both Telia and Fernando [ph]. Gradually, Fernando is increasing its scope and has been particularly successful in the lower end of the SME segment this quarter.

We've also just won our largest SD-WAN contract ever with the Norwegian betting agency and we've increased the scope of our contract with the Norwegian police, which just proves to show that we are building credibility for having very high quality network position in Norway. Broadband revenues are showing strong growth both from a slightly higher subscriber base, but more importantly from the more for more price adjustments we activated in December.

TV revenues however, are declining, but we do have a stable MDU customer base but churn on SDU is diluting the ARPU level. OpEx reduced by 11% from continued good cost control and one-offs.

This resulted in an excellent EBITDA growth of 15%, two-thirds of which are from non-recurring items. Sorry for the background noise but that's our automatic lights showing up.

Moving to the LED market, the trends remain strong in our Baltic operations despite increased infection rates and restrictions. In Lithuania, we saw a 4% growth in both mobile and fixed services with especially the consumer segment that is performing well driven by mobile.

In local currency, EBITDA remains at all-time high levels reached in Q2 2020 despite the roaming losses. In Estonia, service revenues were flat on a like-for-like basis as our mobile services were impacted by lower roaming, while fixed revenues continue to perform well, driven by broadband TV and business solutions.

Strong cost control led to an OpEx decline of 5% supporting EBITDA actually grew by 6% on a like-for-like basis. Denmark suffered relatively more than other countries from the loss of roaming revenues and from having the majority of shops closed during the quarter.

Our revenues were also impacted by ongoing portfolio rationalization. That being said the consumer mobile segment was relatively stable, but we did see a decline in fixed services.

The enterprise segment declined in both mobile and fixed. But a combination of lower resource costs, lower marketing, bad debt and effects from the simplification that we've spoken about from a product point of view and the digitalization we're pursuing there, reduced OpEx by 11%, allowing a flattish EBITDA in the quarter.

Having now secured spectrum we need along with Telenor to modernize our networks and roll out 5G, we will now continue to modernize, simplify and digitalize our Danish business to return it to sustainable growth. And then finally to TV and media where we had an excellent quarter as it rebounds from pandemic loss.

Pay TV was up 10% while advertising revenues declined by 1% in the quarter, but turned nicely positive in March. EBITDA also improved to deliver 120 million kronor from revenue growth and good cost control.

I mentioned the commercial viewing market share progress earlier supporting the recovery in our free-to-channels. Later in the quarter, we premiered a new format the Masked Singer, with more than 2 million viewers per episode on Friday evenings.

Remember Sweden only has 10 million population. It has turned out to be the most successful premiere in the history of TV4, which means TV4 now owns the weekends when it comes to commercial viewing.

And here you can see the progress in Pay TV with C More OTT growing 20% year-on-year, and this is before Champions League, which reminds me to remind you that there will be an increase in content costs ahead, as we have some sports events coming up that we could not broadcast last year due to COVID, for example, The Euros as well as new content such as Champions League. Clearly, we are on our way to restore and reach our original ambitions from media ownership, driving convergence, increasing loyalty, and becoming the aggregator of all the digital experiences for the home, regardless AVOD media, connectivity or smart home services.

But now I will pass over to PC who will take you through the numbers.

Thank you, Alison. Let me quickly summarize the financials for you.

As mentioned, total service revenues is down 2.3% in the quarter or 450 million. As mentioned, around half of this is attributed to the roaming decline.

If we take consumer across our footprint, the revenues are stable, if we exclude the effects from roaming. Enterprise, however, across the footprint see a decrease which is a combination of roaming revenues, legacy declines but also price pressure in some of our key markets.

If we break down the service revenue by our unit, of course all units have impact from roaming. In addition, we see Sweden impacted by legacy declines.

We see that the fixed revenues are putting pressure on the Finland service revenue. In Norway, we see pressure from the revised wholesale [ph] agreement with price, as earlier announced.

And then that is partly offset by good growth momentum, both in the Baltics but also in the TV and media unit. So they reported service revenue of minute 2.3% in the quarter is below our outlook for a whole year as a whole and with the biggest of the slide to Sweden.

However, but if you are looking at most of the roaming decline year-over-year behind us, also looking at the good growth momentum and also the EBIT comparison, both on TV revenues and for our media units, combining the effect from an initiated and planned pricing and 5G monetization initiatives, we will be well on track to deliver on the outlook for the year in 2021. If we move over to operational expenses, it was a good start to the year, which OpEx more than 200 million down, like-for-like.

Although, as mentioned, there is structural savings in the quarter, but it's not the whole effect that we see. Going forward, however, we expect to see more effects from our transformation agenda and the related reductions in our resources, both FTEs and also FTCs.

If we break down the OpEx development by category, we see that we had a relatively stable resource cost development versus the quarter last year. And these are various costs initiatives implemented across our footprint, offsetting salary inflation and an increased pension costs in the quarter.

And then as Allison mentioned, towards the end of the quarter, we have reduced our resources by more than 400, both on FTEs and FTCs and we will see effects on this Q2 onwards. The IT cost is down 60 million in the quarter from structural cost initiatives and this we expect will continue to develop in a positive direction from vendor consolidation, in-sourcing and also near-shoring activities.

And then over time, we will start to see more effect from a more structural product transformation with product simplification, process automation and also IT modernization. Combined, travel and bad debt is down 100 million in the quarter versus last year.

Travel is down and due to lower travel activities from the pandemic. And some of this is expected to return when the societies open up again but we also expect to see sort of permanent lower travel costs going forward.

And I think for '21, we don't expect any significant changes on the travel area. Bad debt is lower in the quarter, mainly driven by comparison versus the first quarter last year.

So overall, we are well on track to deliver the 1000 reductions in resources in 2021. And we're also well on track to reduce OpEx by 2 billion by 2023 and 4 billion until 2025.

If we move to EBITDA, we reported and Allison has mentioned an underlying growth of 2.2%. And this is where OpEx and cost reductions are mitigating the pressure on the service revenue.

In addition to the OpEx decline, we see lower costs from roaming, interconnect, and also network cost. The reduction on the network costs is structural cost savings, particularly in our Swedish business unit.

If we look at total EBITDA development and how that has developed in a different unit, we see that Sweden is impacted by a combination revenue declines but also as Allison mentioned, the mix of the revenues. Norway is positively impacted with a very strong EBITDA in the quarter, also impacted by the special items mentioned.

And TV media is growing by a combination of revenue growth and also lower costs. And then we have smaller positives and negatives in the other business unit netting each other off.

Our EBITDA growth in Q1 is in line with the yearly outlook and we are on track to deliver on the EBITDA being flattish or slight growth in 2021. On cash CapEx, last 12 month, we have delivered 13.4 billion or 50.1% to net sales.

We expect, as we had talked about earlier, that cash CapEx will gradually increase going forward. We also see that COVID-19 had some impact in the quarter, where it's hard to keep up all the investments activities with the restrictions that we have in most of our markets.

However, our team has done a fantastic job to mitigate this and keep up to date on the sort of key investments that we have in our program. Going forward, we also see some risks related to the global supply chain situation that can have an impact on the timing of the investment activities and therefore some delays on our CapEx.

But we will of course do what we can to mitigate this also going forward. If you look at CapEx in the quarter, we have a stable CapEx development on a cash basis versus last year, even if we have increased the activities on the mobile network investments, related to the mentioned modernization of 5G, where we see a somewhat delayed impact on this because of the good payment terms we have on a large part of this spend.

As mentioned also we see a year-over-year decline on a fiber investment in Sweden of around 100 million. Sweden launched a CapEx level in Q1, it is somewhat lower than the sort of the full outlook for the year, it is mostly a combination of spacing between the quarters, but also a delayed impact coming from the long payment terms that we have on these activities.

On cash flow, we report operational free cash flow of 12.8 billion supported by significant positive contribution from working capital. We also report cash flow excluding working capital at 8.8 billion, still above the sort of minimum dividend commitment of 8.2 billion that is necessary to honor the SEK2.00 dividends per share that we communicate as approved.

Looking at the cash flow for the quarter, we see a stable development on the key structural components on the cash flow but positive contributions in the quarter on net working capital versus the change last year of 800 million. And this is, as in the previous quarters, still supported by increased spend on our supplier financing arrangements that we have and also vendor financing in some of our key markets.

So, overall, we are well on track to deliver cash flow in 2021 to cover the minimum dividend commitments and from 2022 onwards, to cover the minimum commitment by cash flow generation excluding change in working capital. In Q1, our net debt-to-EBITDA ratio has slightly improved to 2.52 times.

Net debt is reduced by 1.1 billion, despite a 2.7 billion negative impact from foreign exchange rate and also an increase in change of lease liabilities. And as I mentioned, we will now close the transaction on the Telia Carrier deal at June 1.

The proceeds from this transaction will reduce the net debt-to-EBIT ratio down to 2.29 times and then that will put us well within our targeted leverage range of 2.0 to 2.5 times. If we can summarize with the outlook, I am taking you through now our outlook on service revenue adjusted EBITDA and also on cash CapEx.

And at mentioned, we are well on track to deliver on that and therefore, we iterate our outlook full year. And with that, I will hand over to Allison to summarize the quarter before going into Q&A.

Yes, so thanks, PC. Just in summary, we are where we expected to be and I'm pleased to see us return to EBITDA growth despite the challenges the pandemic keeps throwing out.

Our core telco business is holding up well, but it's the TV and media unit that stands out, along with the strong EBITDA performance in Norway and the Baltics for the quarter. Cash generation remains very healthy and our balance sheet is solid.

So our sole focus is now on creating a base Telia by delivering on the roadmap that we set out in January. Our roadmap is aiming to reinvent a better Telia for our customers and employees and our shareholders, while contributing our core part to enabling the development and digitalization of the societies of the Nordics and the Baltics.

So, still focus on strategy execution is what we are doing at this time. And on that note, I think it's time for Q&A.

Yes. Please, operator, let's have the first question.

Hi, guys. It's - yes, Maurice here.

I guess it's a very simple question for me. Just a question on the Swedish competitive outlook, you've seen - can you still talk about more of the value of the volume implying less of a focus on assuming up-growth but focusing on growing APRU who wants to position themselves most premium brand.

And they have lost postpaid service for a couple of quarters in a row. I know you say you've done flattish consumer postpaid.

But just, are you seeing changes in the Swedish festive market? Are we seeing a more rational market overall or is it still as competitive as it was?

I say it's pretty much the same at the moment, Maurice. There is no real change in the quarter versus prior quarter but I am confident that the appetite for trading up to 5G that we're seeing in Finland is therefore something that we'll be able to take advantage of in Sweden once our networks are more broadly available for the population.

Great appetite for 5G-enabled handset. That's basically 5% of all handsets sold, so I think no change.

And it's our responsibility, as a market leader, to use the next generation of technologies to take customers up to higher speeds and higher premium products.

Thank you. And your comments around Sweden improving in the second half, was that more around just pricing or pricing alone or was it pricing and also operational momentum?

Pricing and operational momentum, clearly, we will have a very strong content package to take to the market in the second half as well. And, as I mentioned a couple of examples there of some of the wins we're getting in MDUs as we go into Open City Networks with a great TV package, supported by the services that we can provide through IoT and our ICT business, where we're seeing great commercial momentum from that.

So I see TV as a catalyst for us to continue to really push convergence and build commercial momentum. And a lot of the work we're doing on customer experience and digital transformation, I would expect to see some of those benefits coming through in the second half as well.

And, enterprise has been tough for a while. We are - we continue to perform relatively better as the market, particularly in the large key and public sectors and that remains a strong area for us Maurice.

Great. Thank you so much.

Thanks a lot Maurice. Could we have the next question, please?

Thank you very much and morning, Allison. Just a question related to something you just touched upon, namely your improved content offering in the second half of the year.

Clearly, the TV, as you highlight is a key driver for the convergence proposition. Have you fully clarified Allison, how you're going to capitalize on these rights from this expensive content you will have in the second half and drive - and use it to drive your convergence offering in the consumer market?

And is this something you can discuss with us now? And when should we start to see sort of some science on this in the market, I mean, in terms of Telia increasing its branding, its marketing efforts?

When should we start to see signs of this? Thank you very much.

Yeah, well, we haven't said how we will capitalize on Champions League across our different platforms, Peter. So we'll continue to keep that a secret because the key asset is Champions League, and so clearly that start kicking in September onwards.

But during the summer, we will also benefit from The Euro, which is on a number of our TV platforms. Not that we'll be able to drive particular convergence on that, but that just strengthens all of the sports packages that we've been driving since last summer.

And I'll say again, we have black card in the Swedish team to cheer you up on a Friday.

Thank you, Peter. Not sure if the Denmark, you see The Euros but perhaps I don't keep track of Denmark.

Next question please.

Morning guys. Scotland are for a change, so we'll [inaudible].

On the Finnish ARPU, it was a bit weaker last quarter. Is that all down to the ICT and business solutions that you mentioned?

That seemed a bit of a strange performance, given some of the small 5G benefits in the consumer side you're starting to see coming through. So could you maybe just mention why that's a little weaker?

And maybe a clarification, if that's okay, just on the debt. That's quite a big move in ForEx below the line.

Could you just maybe describe if there were some one-offs in there, is there something to bear in mind? Thank you.

Yeah. So PC will take the debt question.

Yeah, the Finnish ARPU, yeah, it was weak. If you recall, we had a very strong end to the year in the ICT and business solutions area.

And then with increased pandemic restrictions, real cautious sentiments settling into the Finnish market, we saw a very quiet January, February, in the enterprise segment. And I think we've heard from one of our peers in the market, they had a similar experience that clearly just dilutes our overall revenues in the market.

On the positive and I did see it there, we are starting to see signs of improvement in March. And I think, we need to accept that we have such a significant share of revenues in non-connectivity in our enterprise segment.

They do come in a lot lumpier way. But why are we not seeing the benefits coming through on 5G yet because we are still seeing the Euros and above all migration, it because the base is just too small neck.

I think we've got 70,000 customers in the consumer segment now and we are not ramping up. We were slower than competition to go up to a start with 5G, we've now got new strategic contracts with Nokia, both in our own network and in our shared network that we expanded with DNA during the quarter and we will be ramping up.

And I'd expect to see, as the more that 5G becomes a meaningful part of the business, the more that that will start to improve ARPUs again. On the positive, as you know, we've been suffering from network quality perception versus the key competitor in Finland for a number of years, all of the studies we're now doing is saying that 5G is closing that perception gap.

And that combined with TV content is changing the consideration for Telia in Finland. So, I'm sure that once we get out of pandemic and we have a bigger shade of 5G in the base, and particularly with the market seems to be ready to take on 5G tariff that we will start to see a turnaround.

And then on your debt question, I think out of the 2.7 billion, around 1 billion is related to the increase in lease liability. And this is mainly driven by our new head office in Norway.

Then there is an effect of 1.6 billion, which is the FX related and this is coming from that we had debt, both in Norwegian kroner and also in Euro and we haven't totally swapped it into the Swedish kroner due to that we have exposure, both on the Norwegian currency and on the Euro currency. So, since we have this exposure, there will be some effects from time-to-time on the FX but this should not be bigger than the effects that you see here.

And it is an attempt on us to try to optimize for the hedging, and also the costs related to that.

That's great. Thanks very much.

Thanks, Nick.

Thanks, Nick. Could we have the next question please?

Thank you. I got a question of Norway.

So if you think back to Norway last year, you saw a significant step up in EBITDA growth from the second quarter. How should we think about the EBITDA trends for Norway for the rest of the year, given you do have tough comps?

And also the loss of the ICE revenues for the rest of the year, are there any increments OpEx cuts planned for Norway to offset this? Thank you.

So clearly, we've had a major acceleration in our EBITDA in Norway, as will benefit from integration savings and with starts but they are no stabilizing out now. But what our ambition is like, on the back of our new strategy, is to transform the cost base, and to start to get to growth on the top line as well.

So - but - and the Norway, like all of our footprints are taking out headcount, they took out some headcount at the end of March. And, as we become more efficient and more automated, they will continue to be driving headcount out as well.

But I think, we're kind of at a new level on Norway, and the incremental growth quarter-on-quarter will not be able to scale that you've seen recently.

That's clear. Thank you.

Thank you, Keval. Next question, please.

Yeah. Good morning, everyone.

Just a question, really a quick follow up on the Swedish KPIs this quarter, particularly broadband. Can you just help us sort of understand the envelope around your broadband business?

I mean, you talked very clearly about the drag from SDSL, the replacement of those lines with customers on Open City Networks. So maybe just update us on what the sort of - what the overall drag you're going to face on the DSL basis and what the opportunity is on Open City Networks and how we should think about that over the next two or three years within the context of overall broadband growth.

And as you move - as customers - as you lose SDSL customers, you replace them with Open City Networks fiber customers, what's the margin impact of that migration? That'd be that'd be really helpful.

Thanks.

Okay. Thanks for the question, Steve.

I think if you look at the chart that we gave you this quarter, we're starting to try and isolate for you the legacy headwinds and some of those other items and roaming implications. So that 791 million is basically the headwinds that we now have remaining, which is a mix of fixed telephony and SDSL.

And I'm looking at Andreas to see if we've ever disclosed for the split of that is between the two and you'll probably say, well, not.

No.

But - so that's how giving you a little bit of an understanding of what less to do. We have, clearly, there's opportunities in Open City Networks.

There are also opportunities for us to continue to connect cyber customers in our network that we've built yet to get connected. And we see scope with fixed wireless access as well.

And that we have - if we connect fiber - our own fiber and we have fixed wireless access, those margins are better than the margins on Open City Networks, which we don't disclose. But remember, there's no CapEx associated with those Open City Networks.

Okay. I mean, in overall broadband volumes we have been losing for a couple of years now.

I mean, can you see any point at which you might - you would hope that starts to inflate as the DSL drag dissipates and the fiber opportunities improve?

I think you're starting to see a pretty good stability now in absolute broadband base. And clearly that was one of the rationales for the investment in TV was to give us various proposition to take into MDUs and SDUs where we didn't have a Telia customer base.

And also, going forward, when you do your forecasting, please note that we have announced price increases on SDSL of 50 kronor, which is roughly 40x VAT and also on the PSTN subscription. So that will be effective as the 1st of June this year.

Okay, great. And one just quick follow, just on post - your postpaid mobile churn pops up as well in Q1.

Was that down to the enterprise loss that you talked about? Was a bit surprise churn went up in a lockdown?

Yes, it was all enterprise, actually churn was down in consumer.

Okay. Great.

Thanks.

Thank you, Steve. Next question, please.

Thank you. Good morning, everyone.

I just had a question around how you see the trajectory of the group service revenues evolving through 2021. Obviously, the Q1 number of minus 2.6% is quite a bit below the full year guidance.

I'm just seeing what - I am just wondering what you think are the key moving parts for you to accelerate and hit the flat to single digit growth for the year overall? Thank you.

Yeah, I'll get some headlines, and then maybe PC can do a bit more detail. Clearly, we don't have the headwinds from year-on-year roaming reduction starting already in Q2.

And with the acceleration, we're now starting to see in advertising revenues, I would expect a quick bounce back in our TV media unit as well. And we've got a number of pricing we've planned too.

PC, do you want to build on that?

Yeah, just to add, I think also last year, our TV revenues was quite badly hit, especially in the in the second quarter, but also in third quarter, both from COVID. We don't see and we don't expect similar implications this year.

And that will help us on a year-over-year comparison. And then also I think the content and the Champions League affected in the second half, that also would be a contributor on the top line.

So I think the 2 billion hits that we had from - in our ad-based business and from roaming last year, we were very - quite explicit on that quarter-by-quarter. So that gets - that starts to give you a bit of an understanding of what Q2, Q3 and Q4 might look like.

And then if you add on a bit of pricing, but offset a bit of legacy headwinds, then that should help you get there.

So we should be able to deliver on the outlook without any sort of significant trend shifts in our underlying business.

Yep.

Great, thank you for that.

Thank you, Terence. Let's move to the next question.

Yes. Hello, this is Johanna Ahlqvist from SEB.

One question for me related to the Swedish SME market. I think we discussed this thing in previous quarter as well.

I'm just wondering how you feel that this market has developed because two of your key competitors have followed three and lowered prices. I think it's 349 for all you can eat.

And I'm just wondering how concerned are you that this will continue to be a negative spiral on the SME segment and what can you do to prevent this, to be honest? Thank you.

Yeah, well as the market leader, we are not matching the movements that we've seen in the market. As I said, what we are trying to do instead is value lot with SD-WAN, as an example.

And because most of our SME customers are on binding contracts, then when they come to the end of the contract period, that's when we are able to step in with some of the value loading interventions. We've done some campaigning in the quarter as well, but we have not matched competition, because we are hopeful that it will move rational again, but we are continuing to see that Telia's range of services and quality network allows us to sustain 150 plus ARPUs higher than the market.

Thank you.

Thank you, Johanna. Next question, please.

Yeah, thanks very much. I would like to ask about working capital, please.

You mentioned that in the year-on-year comparison, there is a boost. Could you maybe put a bit of color on that in terms of the guided end to that working capital program?

Is that something that would unwind later in the year or is it sort of the last bit of it or do you actually see a little bit more opportunity, as it were in working capital? And can you clarify how you treat liabilities in net debt to actually include that in net debt?

You said liability will come out of this vendor financing. And then finally, if I may, on that subject, when that vendor financing is repaid, does that go through your net working capital line or does it go through cash flow from financing?

Thank you.

Yeah, I will try to do a few questions in that question. I will try to answer some of them and then I guess we can follow up if there are more on it.

If you go back to what we had guided on, we had a positive working capital contribution in 2020 of around 3 million, we guided that we still expected to see positive contributions in '21 onwards, as particular in '21 but at first that will be less than 3 million that we saw in 2020. Now, we are seeing a strong start to the year after the first quarter with a significant contribution of working capital.

We have not done any radical changes in terms of the scope or the arrangement and so on, so these are aspects of what we have done before helping us and increasing scope on the arrangements that we have. There are still opportunities ahead but as we had said that, we would like to work more on the structural parts of the working capital as well and less on the sort of financing part.

So what we will do going forward, we will continue to work on billing cycles, inventory management, and so on. But we don't expect to see major implications in the future from sort of supplier financing and terminal financing, at least not in the levels that we have seen in the past.

And then in terms of the liabilities, I think you asked if they were included in net debt? No, they are not.

And then you had a question on when we pay net debt -

How they will unwind on which line in the cash flow, they will end up?

Yeah, so that depends, right. If it's related to the investment activities, they will be booked as part of the cash CapEx.

If they are outside investment activities, they will be then coming through on the - I lost it.

Which line they will come through?

[inaudible]

We will follow-up Ulrich. That's the downside of asking many questions.

Yeah, but there is no unwinding of that this year. As we said, we guided that it would still be a positive contribution this year and it's not going to be a headwind in the foreseeable future to our cash generations, which is off to a strong start this year.

That's all good. Thank you very much.

Thank you, Ulrich. Next question, please.

We have time for a couple more.

Yeah. Hi, everyone.

I have a question just on the scope for higher ARPU in Swedish mobile, I just wondered if you could give your thoughts and views on the ability for the Swedish market to entertain speed-based pricing to the extent that, say, the Finnish market does. And then just the follow up questions to that will be, did you think your 5G network is at the point where 5G could start to provide that platform for speed-based pricing in the coming months or it will take longer than that?

Thank you.

Well, you're asking detailed questions about potential commercial activity in the market, Andrew, which I probably can't talk about publicly. But clearly, based on the experience we are seeing in Finland, and the willingness of the consumers to pay more, and the Swedes love to be connected as much as the Swedes - the Swedes love to be connected as much as the Fins, we do believe that whatever movement we make on 5G in the coming months will enable 5G monetization.

And in terms of 5G network rollout, as I said, we you should expect to see 5G monetization starting in the second half of this year.

Thank you. That's really helpful.

Thank you.

Thank you, Andrew. We have time for one more question, so the final question, please, operator.

Hi. Thanks for the presentation.

It's actually a follow up on Sweden mobile. So you mentioned price increase here in the call but then you didn't indicate that in your view, the competitive situation in Sweden would be improving much.

And this is despite there is a price increases from your main competitors at different rates. Would these price increases also encompass mobile at all in the near future?

And then, in terms of 5G, you seem to be actually putting more hope into 5G driving mobile than then pricing itself. So maybe in terms of the scope of that, would you say that the ballpark figures that, for example, Allison is guiding for it have kind of 1% incremental additions to the growth is something that you think is achievable in Sweden?

Thank you.

5G monetization is one of many aspects of how we will start to return our company to positive revenue development over the coming years. As the market leader, we have been the one that has led pricing.

In recent years, we were the one that led quite significant pricing two years ago. Some of our peers did not follow but in recent, we did see one of the moves last quarter but that was on the [inaudible] brand following some scalable pricing that we took about a year earlier.

But - so, no, we are not yet ready to give guidance on what 5G can bring to the top line but our guidance is that we will return to low-single digit growth over the period across our whole business and Sweden is one of those in the coming years and 5G will be part of that.

Thank you. And maybe just one clarification please, so would it be, in your view, more a function of this kind of organic 5G up-sell versus actual price increases or nominal price increases?

In mobile, it will be a combination of trading - we're always looking at migrating customers up to bigger buckets. And we're always looking at what are the new ways that you can stimulate higher revenues per customer.

So, and of course, we are used to taking the inflationary pricing on our fixed business, starting to see some inflationary pricing kicking in, in other mobile markets at the moment and that's something that we definitely consider in the future as well.

Thank you very much.

Thank you.

Thank you, Ondrej. And with that we conclude this call.

As always, me and others are eagerly waiting for your call for the questions that you didn't get answers to, so please reach out to us and talk to you and come back to you when it's time for the Q2 report back in July. Thank you.