Telia Company AB (publ)

Thank you. Good morning, everyone and welcome to Telia's Q1 2022 call.

I have with me here our President and CEO, Allison Kirkby; and our CFO, Per Christian Mørland; and my IR colleague, Anders Nilsson. We will do a presentation followed by Q&A.

We try to finish within the hour and I leave the word to you, Allison.

Thanks, Erik and good morning, everyone. And we are looking out to a sunny morning in Solna this morning.

But first, I think we should reflect on where we are after two years of COVID. And you know, back in January when we last spoke to you we were all looking forward to a return to normal.

The war in Ukraine has clearly quickly dampened any hope of a new or positive normal. And like all of you I'm deeply saddened by the human suffering in Ukraine and the worrying geopolitical situation, we now have in Europe.

But to be clear, Telia has no direct exposure to the conflict. But we are working in multiple ways to provide relief and support by both our products and services, as well as via the donations to various humanitarian relief efforts.

Connecting refugee centres, offering employment to Ukrainian victims, and using our massive TV reach to host live fundraising events are just a few examples of what we are doing to play our part for Ukraine. And again, proving just how vital we are as a company and as an industry at keeping society connected, informed and aware in the good times and the bad times.

But now, let's move to the purpose of this morning's call. And I'm delighted that we've got the year off to such a strong start.

Financial performance is strong, operational performance is strong, and our transformation program is picking up in momentum. Service revenue growth of the group accelerated to 3.2%.

And importantly, it's a broad base growth with all markets and key segments contributing and Finland reaching stability. Growth is driven by both Mobile up 4.5%, Fixed up 1.3% and advertising up 9.7%.

OpEx declined by 3% as a result of our transformation agenda, and helped offset inflation or headwind such as roughly SEK 80 million of higher energy costs in the quarter. If you look at EBITDA, core telco grew 4.6% as we were able to slow the strong service revenue momentum and the OpEx benefits down to the bottom line.

However, for the full group, including our TV and media unit, EBITDA growth was as expected, as we know carry the full cost of Champions League for example, cash flow of SEK 2.2 billion was lower than last year's Q1 when we had a very high contribution from working capital. And our balance sheet remains very strong, and therefore very pleased that the board has decided on a SEK 5.4 billion share buyback program to be confirmed after the completion of the Swedish Tower transaction, which we now expect to close around the end of this quarter.

So a quarter area than expected. Moving to strategy progress, our multi-year ambition to reinvent a better Telia is now in its second year and it's progressing according to plan.

And let me provide a few highlights from the quarter, they capture some of the progress that we have made towards inspiring, connecting and transforming to ultimately deliver sustainably. As the leading and most trusted telco media company in the region, our priority has always been to inspire our customers by pursuing a value focused strategy and in a heightened inflationary environment as we now experience, this approach is of even more importance.

Pricing moves such as we've taken in Telia Sweden and Halebop Sweden are supported by improved network experiences and improved content experiences. And across the board, whether it be via improved bundled services, or improved more addressable reach in our media business, we are taking the necessary actions to deliver positive revenue and ARPU development, hence the good progress in the quarter.

A great example of this is the best network combined with the best range of content which has driven our Swedish TV customer base to over a million and the number of Swedish multiplayer customers to 900,000. Access to C More content is also helping drive higher value mobile customer growth in Finland, and bundle Netflix in Norway and Denmark are contributing to the growth in those markets.

Overall, we are very happy with how we're now building a stronger aggregator position across our footprint. On the enterprise side, our strong and trusted brand combined with a broad fleet of services resulted in continued good traction, especially in the public sector.

In the quarter, we signed multi-year contracts with both the Norwegian Army and the Swedish Contingencies Agency MSB. And with the current geopolitical situation, our role will only become more important going forward as societies invest in enhanced security of communication and we are very well placed to take advantage of that.

And we continue to sustain superior reach in our TV and media unit, the TV4 consistently reaching two-thirds of the Swedish audience. And this reach has been further enhanced by our able platforms and the addressable inventory that is enabling significant digital advertising growth.

Everyone our network position was again confirmed by several external measurements in the quarter, including blue light in Sweden, [indiscernible] in Finland, and our 5G network in Norway was recognized as the best 5G network for gaming. And in Finland, we deployed as the first operation in the world, a 4G, 5G virtual private network based on network slicing and edge computing for customer use.

Brand modernization is progressing well and we're continuing to successfully mitigate for a tighter supply chain situation. On 5G, we're progressing at pace with a population coverage of 36% for the group across the whole region, led by Finland at 70%, followed by Norway just above 50% and Denmark just below 50%.

Also in Estonia, coverage is growing fast and approaching 40%. In the quarter we also launched 5G in Lithuania on commercial frequencies after three years of testing.

On Copper legacy retirement in Sweden, another 140 central offices were closed in the quarter with no push 60% of our corporate footprint and the shutdown of 3G by 2023 is progressing according to plan. On transformative digital, our bold agenda to create the most purpose driven digital telco in Europe is on track.

We continue to digitalize with this time a particular emphasis on improving customer experience and service. We're now seeing a sustained reduction in incoming calls from Swedish and Finnish consumers with improved satisfaction scores as we remove false sources and pursue a channel shift towards digital.

We're also continuing to remove legacy platforms and products, having removed another 20 IT platforms in the quarter to over 100 be no retired, and over 25% of legacy products have now been removed. This helped drive an SEK 18 million structural saving in IT costs in the quarter.

Rapid digital transformation is also happening within our leading advertising businesses in both Sweden and Finland. With our superior reach and improving addressability, advertising is no longer just a linear product, which is why we record a 26% drop in digital ad revenue in the quarter.

On delivering sustainability, our financial metrics are healthy, especially within our core telco and advertising businesses and we remain on track to meet our SEK 2 billion OpEx savings targets by the end of '23. On sustainability, Telia Sweden was recognized as Sweden's most sustainable telecoms brand for the 12 years in a row.

And finally we issued our second green bonds in the quarter worth SEK 500 million to finance energy efficient network and green digital solutions to help Telia and our customers with both ours and their environmental ambitions. Moving to Sweden, Sweden had another solid quarter and managed despite their continued legacy headwinds to grow service revenues 1.8% and acceleration versus the level we saw in Q4 of 1.5%.

And the growth was broad based, mobile grew 3% supported by a solid ARPU development and Fixed grew 1.3% including again a stellar performance by TDD growing 15%. Our enterprise business remained in positive territory with 1.4% growth, confirming the trend shift initiated three quarters ago, which ended a 20-year period without growth for the B2B business.

Excluding the impacts from legacy and the recovery of ruling, underlying service revenue growth was even more impressive coming in at just shy of 5% and also showing a slight sequential improvement. So as you can imagine, I am genuinely happy with Sweden's performance, delivering on its commitment and ambition to remain in positive growth territory when it comes to service revenues, and also on EBITDA which grew 4.4% supported by the revenue growth, but in particular due to great work on driving improved productivity and structural transformation, predominantly related to resource reduction with a decline of 7% versus last year with the lift.

Moving on to the operational KPIs and mobile you can see that our subscriber base is stable while we're delivering healthy ARPU development in both consumer and enterprise. Our broadband subscriber base was also stable as growth in future proofed fiber and fixed wireless access products again offset the expected decline in xDSL subscriptions, which amounted to 20,000 subscriber declined in the quarter.

Importantly, most of the growth was in xDU this quarter contributing to a mid single-digit ARPU uplift, and enabled by improved upselling and cross selling. In TV, we continue to see great subscriber development as I mentioned earlier, Swedish consumers are highly appreciating our award winning IPTV service and the ability to aggregate all the content they want in one place.

Turning now to Finland, I'm particularly happy to see that all the hard work by our Finnish team is starting to pay off and yield results. In the quarter, service revenues were flat as a slight growth for mobile despite interconnect headwinds was offset by lower fixed revenues, predominantly driven by the loss of service and low margin business solutions and fixed broadband legacy revenues.

Transformation of the cost base is also building momentum enabling lower OpEx despite elevated energy prices, and helping drive in EBITDA growth of almost 2% and the first quarter growth since 2020, but probably the first structural growth of many quarters before that. However, looking at the progress of our peers in the market, it's clear that we still have work to do.

Our subscriber base was down year-on-year due to the loss of a single enterprise contract loss last year, but which migrated only in this quarter. And ARPU also declined due to continued ARPU pressure in the Enterprise segments and regulated production interconnect.

Consumer mobile ARPU development was however positive and this alongside continued network modernization and 5G progress, combined with other turnaround initiatives keep us on track for a second half turn around. Moving to Norway, with the wholesale revenue headwinds experienced in 2021, the annualized we are seeing really positive top line momentum, service revenues increased 6.6%, mainly driven by a 9% increase in mobile, roughly half of which relates to a change in vast insurance services, accounting and for the underlying mobile growth is more like 4% year-on-year.

Broadband continue to develop very strong growth of 8.2% both from new customers and higher ARPU driven by price increases both CPI-linked collective agreements and price increases on individual agreements. EBITDA as you can see were slightly positive adjusting for one-off items both in this quarter and the corresponding quarter of last year.

The underlying EBITDA actually grew faster than revenue around 6%. Our mobile subscriber base continued its positive trajectory with a stable consumer base and growth in enterprise where we grew our base in all sub segments, SME, large and public and ARPU was again strong, but driven mainly by the vast accounting change as well as from a partial recovery in growing revenues.

Moving to the LED markets now and isn't this finally a beautiful page. Despite our incumbent status in Lithuania, and Estonia, we're seeing almost challenger like growth rates there and it's great to see the turnaround that we're now experiencing in Denmark.

In Lithuania, we continue to see mid single-digit service revenue growth in mobile in both mobile growing 8.7% and fixed growing 3.7%. The flow through to EBITDA from higher service revenues was as you can see excellent this quarter, despite significant headwinds from high end energy costs.

And Estonia performance was against stronger service revenues growing 8% and also broad based, mobile was up 6.1% and fixed was up 7.8%. We had an immaterial impact from the Ukraine conflict due to the closure of our Russian channels and our TV business.

But overall, the road safety impact from the conflict has so far been very limited. Of course, we continue to monitor the effects that the war may have and especially how the situation evolves.

For individual B2B customers, but for now, there is no indication that it will have a material impacts on our 2022 outlook. Finally, in Denmark, we saw continued good progress driven by mobile, which grew 6.5%, especially in consumer, we're seeing an increasing momentum due to the cleanup of historical discounts, and the introduction of bundling benefits and pricing moves.

We're looking forward to more product launches to improve our market position and pricing power going forward. And for example, in enterprise we have moved to CPI-linked contracts for new contracts, combined with good momentum on transformation initiative.

Denmark delivered 5% EBITDA growth despite a material headwind from energy pricing. And finally, moving to our TV and media unit, you can see that service revenue increased by 5.8% with outperformance and advertising, good development in sports and Pay TV, and recent development in the movie and series side of Pay TV.

Advertising in Sweden and Finland remains very strong, as I said, growing almost 10% year-on-year. As the market leaders we offer superior reach and we are at the forefront of the industry digitalization.

Advertisers increasingly come to us for the unmatched combination of traditional and online viewing, and we're increasingly able to provide precise audience targeting and far better quality impressions and players like Google and Facebook. As a result, digital advertising had another strong quarter with 26% revenue growth.

Pay TV had a more flattish quarter, although sports in Sweden had good growth, despite the Olympics on rival channels, mainly due to Champions League. This was offset by declines in other sub segments including non-sports in Sweden, which was affected by the proliferation of streaming computation and the phasing of content.

Looking ahead with a set of high quality releases in Q2, including Hamilton, and being unique partner to BritBox here in Sweden. EBITDA declined by SEK 300 million year-over-year, as we expected, reflecting the cost of a full quarter of Champions League for example, which is still in its first season.

Looking forward to the second and third quarters are not full Champions League quarters, and hence we will see more content costs and certainly a different year-on-year comparison in the second half. Looking at the trends of C More we saw a slight decline in the overall base driven mainly by the non-sport subscribers.

But year-on-year growth in ARPU was driven by the increased share of sports subscriptions and price increases in Sweden. So with that, I'll hand over to PC for the financials.

Thank you, Allison. Let me quickly take you through the Q1 financials.

And the start with sales revenue. As Allison has gone through, we had a solid growth 3.2% we've been now stabilized and all other units with solid growth.

The third revenue growth is broad based, with Telco growth both in the consumer segments up 2.5%, and enterprise segment with a solid 3.2% growth. On top of dimension TV media growth of 5.8%.

We have a good momentum with several quarters of low single-digit growth and are well on track to deliver on the outlook for 2022 and 2023. Let's move to OpEx.

Total OpEx is reduced by 3% or SEK 190 million in the quarter. This reduction is driven by lower resource costs of SEK 124 million from the FTE and FTC reductions from 2021 combined with an additional reduction of 100 during Q1 this year.

In addition, we have reduced marketing spend in the quarter by SEK 50 million, mainly from media spend consolidation combined with a more efficient channel mix. Other OpEx is quite stable, where we see IT simplification, consolidation, and modernization reduced our IT costs by SEK 81 million.

This is however in the quarter offset by increased energy costs of SEK 80 million following the higher energy prices across our footprint. Despite inflationary pressure, we have tri-quarter into our transformation reduce our OpEx with SEK 0.5 billion or SEK 0.7 billion if we exclude the energy costs on a rolling 12 month basis.

Our transformation agenda are going really well. And despite some increased headwinds, we believe that we are still on track towards a SEK 2 billion net OpEx reduction by 2023.

Let's move to EBITDA. Total EBITDA was flat in the quarter.

We grow in all units except TV media that as expense is impacted by higher content costs mainly related to Champions League. But total EBITDA is flat, we have gained a significant growth momentum across all our units in the telco business, with total EBITDA growth at a solid 4.6%.

The strong growth momentum on the telco side combined with each year, year-over-year comparisons for the TV or media business in the second half of 2022 onwards makes us well on track towards the outlook for 2022 and 2023. We detach CapEx as expected, CapEx has come down to more normal levels after very high CapEx in Q4 last year.

Total cash CapEx in Q1 is SEK 3.0 billion, slightly higher than Q1 last year. And despite a challenging global supply chain situation, we are able to stay on track with our investment program to modernize our mobile network, dismantle our legacy infrastructure and to transform Telia to a much more digital company.

Cash CapEx on the rolling 12 month basis are at SEK 14.6 billion or 16.6% on net sales. We expect to be within our outflows of SEK 14 billion to SEK 15 billion for 2022 and 50% CapEx in net sales by 2023.

Next on cash flow. Operational free cash flow ended as a solid SEK 2.2 billion in Q1, but SEK 1.9 billion lower than Q1 last year.

EBITDA on a reported basis are slightly positive with impacts on the Carrier investments last year is offset by positive FX effect. Cash CapEx is as mentioned slightly higher compared to Q1 last year.

And change in working capital is positive by SEK 0.2 billion in the quarter, but significantly less than SEK 1.7 billion positive that we carried in the first quarter of 2021. Total cash flow on a rolling 12 months basis is as expected on a somewhat declining trend due to increase investments and lower contributions from working capital.

The structure of cash flow are expected to improve going forward mainly driven by EBITDA growth in the second half of 2022. Following the continued growth momentum on the telco side and easier calm on TV media.

We reiterate our ambition to generate sufficient structural cash flow to cover the minimum dividend commitment from this year onwards. Moving to net debt and leverage, total net debt reduced by 0.9 billion in the quarter driven by good cash flow generation purchases, but some effects on leases and exchange rates.

Total net debt to EBITDA ended at 2.09x down from 2.14x last quarter and/or at the lower end of a targeted range for 2.0x to 2.5x. The first dividend tranche equal to SEK 4.1 billion was paid in April and are of course not included in the Q1 numbers.

As we have all the approvals now secured to Sweden tower transaction is expected to close during Q2. Pending closing the board has also decided to initiate a SEK 5.4 billion share buyback program with intention to start it up during Q2 and to complete it in due time before AGM next year.

We will come back with more details on this program at closing. On the outlook, with a strong start of the year, we are on track to deliver on our outlook that we have communicated to.

For 2022, we are targeting low single-digit growth in sales revenue, as well as total EBITDA with a low to mid single-digit growth on the core telco business. CapEx including license and spectrum is also unchanged, and expected to be between SEK 14 billion to SEK 15 billion in line with last year.

And with that, I'll hand over to you Allison to conclude the presentation before we go into Q&A.

Thanks PC. So to summarize, it's been a strong start to the year and we're continuing to deliver on our client.

Growth momentum as accelerated especially in our core telco business, and especially in Sweden. And Finland has started to stabilize this idea at last from some of you on the call.

TV and media is also delivering to plan albeit with heightened investments, but with a particularly vibrant advertising business. Modernization and transformation are structural and are on track for a sustainably better digital Telia.

Our balance sheet remains strong and our board has chosen buybacks to distribute the proceeds from Swedish tower transaction, a program worth SEK 5.4 billion on around 3.5% of our outstanding shares to commence on closing of the transaction in the next couple of months. So as we move into year two of our strategy, I remain absolutely confident in our ambitions and plans for this year and beyond, and ultimately to return Telia to consistent sustainable growth that will benefit all of our stakeholders in the months and years to come.

So let's take questions.

Operator, we are ready for the questions.

Thanks very much and good morning everyone, and congrats Allison on a strong set of numbers. I have a couple of questions.

So first and foremost, you have been looking for the past year and a half to improve commercial momentum. And you're having it now, seem to be strong growth across all the Nordic Baltic operation as you highlighted, particularly in Sweden, the common denominator seems to be stronger ARPU and when you use the phrase pricing power in Denmark, we know that something is happening in the industry.

Could you elaborate a bit on why, what is driving the improved pricing power in the telecom sector for now Allison and for Telia in particular, and perhaps specifically also, you seem to be taking a step ahead of competition at the moment in Sweden? What is driving that out performance and your ability to get at pricing power, please.

And if you would just finish off by perhaps giving up this morning in case when do you think we will start, you will start to talk, speak more positively about 5G impact? Thank you.

Thank you, Peter. I think it's a combination of many things, as we first of all COVID and the geopolitical situation we have in our region is making it much cleaner, that high quality, trusted and secure communication services is more important than ever.

So under that backdrop, and then with us always as the incumbent, we've always had value focused more for more strategy. And by investing on our networks, both modernizing 4G, upgrading to 5G by investing in the range of services, so much richer content services provided over better platforms, particularly in Sweden, and strengthening the orchestration of all the services and particularly the digitalization of services in the Enterprise segment.

All of that backdrop is allowing us to move pricing up in a way that customers still feel as though they're getting great value for money in a safe and secure way. And as the incumbent, it's our responsibility to ensure that we during inflation, many times we are and tighter investing that we're able also to nudge pricing up as well.

And that's what we are doing whatever we can at the moment, but it's very much driven by an improved quality of products and services, and an improved customer experience, which is also being enabled and delivered by our transformation. And what was the final question you had there, I think that's giving you the 5G.

So on 5G, clearly we -- it has been an enabler to the change in the brand perception to the positive in both Finland and Norway so far. And we doubled our 5G base in Finland in the quarter, some of that through migration of 4G customers, but some of it by new traction, particularly in the consumer space.

And that 5G leadership that we've had in Norway since the beginning and continues even through external network performance tests is allowing us to sustain the growth there as well. What we're really happy to see in Sweden is if you recall late last summer, we introduced an extra tariff for 5G+, offering unlimited data at unlimited speeds to really reinforce the added value of the 5G service.

And it's been great to see in this week that one of our competitors has now introduced a similar tariff, recognizing the higher value premium of 5G. So I think that only positive for the future and can only bring upside because we've only got 18% coverage in 5G in Sweden so far.

And then on the Enterprise side, Peter, we are taking the lead on the industrial use cases that will come with 5G. We are leaders in the mining industry and the forestry industry.

And as I said in the report, we launched the world's first consumer, sorry, customer use case of 4G, 5G slicing. So that helps us again establish that quality, premium, trusted partner to the Enterprise segment, that's bringing the new use cases, that bring added value for our customers and both for Telia.

And that's a great combination to sell around some of the core connectivity services and it's really an enabler to the growth we're seeing in the Enterprise segment, 3% growth is pretty amazing for an incumbent telco.

Great. Thanks, Allison.

Thanks, Peter.

Yes, good morning, everyone. Just had a couple of questions on service revenue growth outlook, I think the two key investor questions today, one on your free cash flow drop through of your revenues, but also on the outlook for the revenue growth.

So just going off one on Sweden, one Finland, on Sweden is about how much you can accelerate growth from here obviously, good acceleration and strong results in the first quarter. As you mentioned, Allison, there's been some roaming coming back and COVID, you provide some odd comps.

So just wondering if you view your service revenue growth as structural, and whether we should expect it to kick on from here. And just on that point, you tell us that you're nudging off of prices, I wondered if you could help us understand that your competitors efforts on that front?

And then on Finland, stabilized revenues reached key milestone but there's still some share loss versus peers. And so just wondered how we should expect performance to trend from here.

And what your current expectation is on the timeline for return to service revenue growth in Finland. Thank you.

Thanks Andrew. I'll leave the free cash flow drop through to PC, but let me take the service revenue questions.

I see that Swedish rules are structural. Yes, there is a bit of roaming benefits for the group, it's not a -- it's developing positively.

But it's around SEK 100 million for the whole group in the quarter with about three quarters of that flowing through to EBITDA. But we're still only around two-thirds of the roaming revenues that we had in 2019.

And we're seeing really solid development there. So the roaming piece is structural.

There were no other COVID outliers in Sweden in Q1 last year. And I think based on the underlying movements that we're making on pricing, on bundling, on a broader range of services in the Enterprise segment, we remain confident in the low single-digit revenue development for our core telco business.

And of course, Sweden plays a big role in that going forward. In terms of what we've seen on pricing move by competition, as I just mentioned to Peter, it's great to see that one of our competitors has also recognized the value of what we call 5G+ that we launched in December with only 18% spot coverage, there's a lot of subscribers on that tariff yet.

But clearly, that's going to be an opportunity for us to continue to market going forward. So, we promise that Sweden has returned to positive top line and bottom line momentum going forward.

It pivoted there in Q4, and it's going to stay there going forward. In terms of Finland, yes, you're right.

We've stabilized but clearly relative to Elisa, we're still losing share. And it's our ambition that we grow in line with the market in Finland going forward.

And what are we doing? Certainly if you look at what has driven that positive momentum in the quarter, yes it was nowhere near competition.

But let's remember where we're starting from. We're now at 70% network coverage.

We're winning at network awards, two we won in the quarter. So that's reestablishing Telia as a quality provider of 4G and 5G services.

And we are relaunching the brand on the back of that combined with driving content with access. We're also doing a lot of work on customer value management, we really weighted cross selling of fixed wireless access.

And as I said, there with Peter, we have more than doubled our 5G subscriber base that still comes with oversea Euros, ARPU uplift versus 4G during the quarter, and we're starting to see churn reduced as well. We have also though that we've moved some more value loaded focused, we're seeing our mobile handset ARPU on average increase 2% year-on-year.

And we're doing a lot of work on channel optimization, shift to digital cross transformation. So still very much on track for the second half turnaround performance Andrew and ultimately we want to grow in line with the market going forward.

And then in terms of free cash flow…

Andrew, can you repeat your question on the cash flow?

Yes, I don't want to take, I have been mentioning that there's an investor focus on that. But given I had two questions on revenues, I don't want to be greedy, because it's just dropped through to free cash flow and obviously working capital is a big moving part that confuses a lot of investors.

Yes, that was just the point.

No, but I can give a quick comment on it, right. So, coming from a space where we had gradually increased our investments, as I showed on a cash CapEx development.

And then we've been carrying both in 2020 and 2021, a significant contribution from working capital, around SEK 3 billion for each of the years. And that is something that we had enjoyed, but we have been very clear that that will come down.

And that's also, keep in mind that working capital is still positive, it is less than before. And also from a structural cash flow that we are mostly focused on, we are very much where we expected and wanted to be.

And now with the increased momentum on the EBITDA generation, once we have analyzed the year-over-year as a content on Champions League, and with the momentum we have on the telco side and EBITDA, you will start to see the flow through into improved structure cash flow regeneration going forward. And then of course, also, when we have some of these investments base behind us that will also help us in the longer end on the cash flow generation.

Thank you very much.

Yes, hi guys. I just got one question, please.

On the TV media side. I mean, you made a point around the OpEx being elevated due to the Champions League cost, but is that likely to moderate for the year.

Can you talk about a bit about the revenue phasing? I mean, is that likely to follow a similar trajectory or should we expect some sort of strong revenues you've seen in this period continue throughout the rest of the year as well?

Thank you.

Good morning, Maurice or Morris. Yes, so if you look at how Champions League in particular gets charged through the P&L, you have the majority of matches in the Q4 and Q1 quarters with slightly less matches in the Q2, and the Q3 quarters.

So the absolute amount that will go through our P&L in Q2 and Q3 for Champions League will be more than what you saw in Q1, and we annualized in Q3. So it is in our base by Q3.

And that's why we remain super confident on a real second half flow through to EBITDA development across the whole group. In terms of revenue, and we're not committing to any new major sports right at the moment that would distort that in any way.

In terms of revenue phasing, I think we are as I said seeing really great development in our advertising business with just shy of double-digit growth there. And I think by Q2, we've kind of annualized the COVID impact, so it might come down a bit.

But based on the growth we're seeing in digital advertising, I continue to be very upbeat about that overall advertising business. On Pay TV, I think looking forward, certainly as Champions League falls off a bit over the summer.

That's why we're putting in some new content and entertainment investments over the summer to offset perhaps some of the revenue trends that we might see [Technical Difficulty] over the summer, but overall on track for the guidance that we do for the year.

Okay, thank you for that.

Hi, thanks for the presentation. Congratulations on the strong delivery.

Two questions for me please. One on the OpEx delivery.

So you gave the guidance of SEK 2 billion before all of this macro situation you're highlighting in the presentations that of the 0.7 growth that you delivered so far, about 2.2 has been already diluted by higher energy costs. I'm just curious, in terms of that SEK 2 billion that you aim to deliver by the end of 2023.

You clearly need to like draw upon the other areas as to how confident you are that you can still deliver this SEK 2 billion in inflationary environment. That's one question, please.

And then the second one, in terms of PBE. So if you're a competitor, I guess find the deal with NENT [indiscernible].

So I was curious if you have any comments, for initial assessment in terms of how that may impact your own TV outlook, either negatively I guess for obvious reasons, or perhaps even positively with pricing now, I guess, increasing pricing essentially, across a large part of the market. Thank you.

Okay, PC you want to start with your first question. And then I'll take the next question.

Yes, I can do that. So, of course as I said also in my presentation, we have experienced some additional headwinds that we didn't expected when we announced the transformation agenda and the SEK 2 billion target.

Of course, what we are also working on is a sort of a stronger portfolio of cost initiatives and transformation initiatives to make sure that we actually can deliver on the SEK 2 billion. So one of the things that we are doing now, and we have been doing for some time is to sort of further strengthening our portfolio of initiatives.

And I think as I said, we are actually very happy with the progress that we see so far, that we are able from a structural perspective already now to take our quite significant amount of cost. That is actually offsetting very well the inflationary pressure that was there.

Having said that, of course, it is very volatile situation right now. So we don't know exactly how some of these elements will play out over the next few quarters.

But in general, we are pretty confident on our development in 2022, where we see kind of a limited exposure from inflation across the board, with one exception being the energy cost development. But as we said in Q4 is that, we expect energy costs to be SEK 100 million to SEK 200 million higher this year.

With the recent development, I will say that we are probably more on the higher end of that. So that means that we need to offset an additional SEK 200 million this year.

And then it depends on how it develops going forward into 2023. But keep in mind here that over the SEK 1.2 billion we have on energy costs, there's only SEK 300 million this year and slightly higher next year that is actually directly exposed to the spot rate.

The rest is either already hedged or is energy costs related to greed and taxes. And then on the salary inflation, what we see for this year, we expect around SEK 400 million on salary inflation.

That is pretty much in line with where we are as of now we don't see a big exposure for that for 2022. But of course, we'd have to monitor how the whole inflationary environment continue into '23 and it might be some effects of that.

Just to give you some flavors on it. So, I mean in the totality, we are still well on track towards the two, but we are working hard to make sure that we can assess the inflationary pressure that we are seeing.

And we are now preparing to operate in a more predictable environment with a higher sort of inflationary rate with higher interest and higher salary inflation.

Still connected to the SEK 2 billion. Yes and then on the question on NIM, I think it's positive that our main competitor now is pursuing an aggregator strategy like the one we've already been pursuing.

And I think it's also positive that Viaplay are increasingly striking partnerships with distributors, and not going direct. So I think the overall aggregator strategy that we've chosen is going to be a positive in this environment as consumers start to look out what are all the additional subscriptions that they have chosen to buy outside of the core telco and TV bundle subscription.

And I think we are in a strong position therefore to be able to offer our customers everything they might want to choose to view and offer it in a great value for money way back to the bundles that we can provide them that they can get the same value for money if they go and buy all the subscriptions individually. Does that answer your question, Ondrej?

It does, thank you both. Thank you.

Thank you.

Good morning, hope you're well, and couple of questions, Allison, please. One on Finland and one on Norway, if that's okay.

Just going back to Andrew's point on Finland. You're a long way short of Elisa's performance at the moment, and just could you, I think you mentioned a B2B contract again, you've mentioned a couple of quarters ago was hitting this quarter.

Could you talk about what the trends look like there and just how sustainable are we, because even with that B2B removed, it looks as if you have flat ARPU which is a bit concerning, given the 5G mix coming through and everything else and still puts you way short. So could you maybe describe what the underlying trends?

And secondly, on Norway, just a quick one, do you have any idea of what the overlap with Telia Mobile in Norway on the Althodox regions and broadband customers are placed? Thank you.

Okay, I'll give the Norwegian questions, although I'm not quite sure we know the exact overlap. But let's see if we can answer the Norway question separately.

On Finland, yes, you're right. We are still alone on Elisa's performance.

But I looked at that as just an opportunity. The big enterprise drag on ARPU is when we secured a contract with the government procurement agency, which came in with very low 4G Mobile ARPUs.

And that will be a headwind during the course of this year. If you put that aside, underlying revenues are predevelopment as positive with what I said, the mobile ARPU development in consumer actually up 2% year-on-year.

And that's very much driven by the removal of some of our discounts. And as I said, the improved number of 5G subscribers that we now have in our base.

So a long way to go, but we are heading in the right direction. But the enterprise piece will still be a bit of a headwind this year.

And on Norway, your question was about overlap of ICE and Ulti Box in our base? Is that -- was that the question.

Yes, well more so. You can see what I'm thinking.

I'm thinking if leasing nice to getting together, then what's the risk to Lithuanian mobile base? You may be Ulti Box customers at the moment and all of a sudden that offered ICE product.

So what percentage of the TV or mobile base do you think an Ulti Box broadband customers at the moment?

Yes, so I don't think we will disclose the kind of the exact percentage, but of course, given our total size in the Norwegian market, you can look at this all the total population and looking at our mobile base versus the fixed base that that they have. So of course there is an overlap.

I think it's important to remember that the way we see this development in which market is actually also positive from the sense that it takes out quite a lot of potential risk or having, let's say, new players entering, trading and more disruptive Norwegian market. What we see now is that we have treat very kind of solid long-term industrial owners, or we kind of converse position.

And all interested in maintaining and developing the Norwegian market and in a good way. So, I think that is one starting point.

Then, of course, also we will then have a competitor, which sort of, which is long-term, and which has a sort of a strong financial position that we need to compete head to head with. But I think what we see is that, with the development that we have had in Norway after we integrated, the guest and the [indiscernible] business into Telia is that we are in a very good situation to compete against any competitors against Telenor and against combined these Ulti Box.

So, but then, of course, our team -- commercial teams are now looking at concretely, what do we do on ground to make sure that we continue to develop how it has been over the last sort of two years?

Okay, that's great. Thank you very much.

Thank you, Nick.

Yes, most of my questions have been answered, but perhaps dig in a little bit on the Pay TV side. Where I mean, you have invested massively in the Champions League, right.

And despite that, you show a negative subscriber intake this quarter and flat Pay TV revenues? Have you had a wrong focus on this business perhaps for the full cast of Champions League rights would automatically give to other subscribers?

Or how should we look upon that? Secondly, you mentioned something around that is what positive that meant move in the direction of also distributing the content to Telia to.

Do you see an opportunity to also enter that kind of agreement with NENT? Thank you.

Thank you. On the second question, we already have an existing agreement with NENT.

And that is the key. It's a part of our overall aggregator strategy.

So that's why I view positive that, basically our key competitor is following well, we already have witnessed. So that is only positive for the future.

But everybody sees the future of aggregations. And it seems to be that, Telia to move is just about improving the content offer that you have to the existing customer.

So, rather than it being a real push and into our customer base. On the Pay TV side, yes.

We invested massively behind Champions League. But I think you've got to look at all the different aspects of what's going on in the TV media arena at the moment.

Very strong advertising, development, and increasingly strong evil to business. It's a third of our advertising growth this quarter.

So that's developing more positively than we expected. What is also developing very positively is our aggregator position, 15% TV growth in freedom are by the Champions League.

And that is feeling improved convergence content with access propositions in Sweden and Finland. And then guess Pay TV, if you just look at it as a standalone entity, it looks as though it has negative SOPs quarter-on-quarter.

There is some seasonality going on there. We also lost the Formula One rights in Finland.

January is always the flow month for Champions League and we it's a particular mutual development and actually negative development in the movies and series side of the Pay TV business. For the sports side in Sweden is fine.

And the Finland side it's because of the Formula One race moving to another distributor during the quarter. But overall, I prefer to look at total TV media has been better than expected sports doing kind of in line with expected, really some series are a little bit muted.

And let's see how things develop over the coming months.

Great. Okay, thank you.

Thank you.

Yes, thanks very much. And maybe two questions, one on the cost measures where you talked about accelerating efforts to make sure the SEK 2 billion target can be delivered.

How should we think about this is essentially that you're seeing energy costs, prices going up? So you're addressing the energy costs, the energy consumption more heavily.

And similar with headcount with wage inflation increases you're addressing resourcing? Or is it simply that you're widening the pool overall, and just pushing a little bit harder across the piece?

If you see what I mean. And in particular, could you give any color where you'll find the incremental opportunities that you hadn't seen before?

The second question is, Allison, we had in prior calls really over the years. Comments from you about potential deal making opportunities now you had these two great tower deals?

But how high up is this up on your priority right now, further deal making. And you can talk about Denmark and Sweden, consolidation, the infrastructure has been out there was under debate at some point.

I'm not asking for specific comments on this. But in terms of the overall picture, how much time do you spend on deal making at this point?

Thank you.

Okay, I'll take the deal making, and then PC you can deal on the OpEx. I'm, of course, not going to disclose what percentage of my time I spend on deal making.

But clearly, there are parts of our business where there is structural inorganic opportunity to go after. We've been quite vocal that we are keen to expand our power business to rooftops and beyond the Nordic footprint.

They are not as ready to go as we were with Sweden after announcing Norway and Finland. But that remains a priority for us, because we are absolutely delighted by the partnerships that we've now struck with Brookfield elector.

And we know that they are keen to expand our tower footprint so that we continue to be the leading tower company in the region. And there's definitely more opportunity to go after there.

Also, I do believe, as I've been very vocal about that there will be consolidation opportunities in Denmark in the years to come. Our priority at the moment is to prepare to take advantage of that in the best possible way, a turnaround of the business is the most important thing we can do first and foremost.

And that's what we're focused on. And then we'll just be for whatever movements happen in the market going forward for us to take advantage.

And then finally, I think there will be consolidation opportunities in TV media going forward as well, particularly as a result of what you're seeing in the streaming side of the business. And I believe in scale, and I believe in finding consolidation opportunities that create value for our shareholders.

So it's still the end of the priority. But first and foremost, I'm focused on instructional sustainable turnaround of our core business.

And on that, why don't you talk about OpEx

Yes, I'm happy to. So first of all, let me announce the SEK 2 billion target by trying to treat our internal, let's say plan and initiatives was of course greater than that.

So we have some headroom built into the plan. So that's one dimension.

The levers that we talked about, and what we're pushing out are the same. So it's not like we're not going into new areas.

So looking at resource costs, we looking at process improvement, process automation, legacy dismantling, products and system modernization. We're looking at a big one is how do we digitalize our customer interactions, and what we see is that we are able to have a very good traction on this.

And then we're actually as of now ahead of our plans, in terms of taking our costs, and that gives us some more comfort. So we're also doing then, of course challenging ourselves and how can we try and close some of these savings even earlier.

The same thing as we're doing on pricing and it's inflationary pressure. On the commercial side we step it up a bit, and that's also what we're doing on the resource cost side.

Then on the sales and marketing, it is the same dealers that we have talked about before. It is reducing dependency on expensive third-party channels, it is to increase the share of digital interaction and it is to consolidate the media spend and move towards more targeted customer communication.

So it's nothing new. But if we are scrutinizing and pushing harder and then moving initiatives further than what we had originally.

And then on the IT side it's probably, where we continue on agenda. We have been very successful, year-to-date on taking out IT costs on the back of system and vendor consolidation.

So for there we have more or less following the plan now going forward, because some of the more fundamental structural savings will take time before the year. And we really need to fix the underlying root causes.

Then specifically on energy, right, so we're also mitigating the energy costs, but we cannot limit on how much we can do. But what is, as I also have talked about before, what we're doing, what is of course on pricing, making sure that we have a good hedging policy, and we are considering PPAs when it makes sense.

We are now moving earlier, some of the software upgrades on our run to reduce the consumption and we see some good development on that in Finland, and also coming to other parts of our footprint, which is so dampening the total energy costs increase. And then we are also now pushing and moving a little bit forward the upgrade on the battery side, the shutdown on our legacy print, a lot driven by copper in Sweden with a very good, let's say effects on energy consumption.

So both the software and the hardware upgrades. And that is also even if it doesn't really saw the challenge short-term.

We are also now moving into more advanced and more kind of reinventing energy discussions. And I think we announced last quarter the pilot that we're doing with Polarium, where we're looking at, how we can utilize when there is low consumption of energy there is and distort energy on our batteries, and then utilize it from the batteries when the load is high on the grid and the cost is high.

And then the next and we actually have now reversed live site. And we are looking at how we can scale that.

And then the next step is actually also to see how we can then contribute energy back to the grid, when that makes sense. So of course, it's early days.

But it's very interesting, both from a cost perspective, but also very much important our sustainability agenda. So that definitely some flavors on where we are on our SEK 2 billion cost side.

I think we are getting close to the full time, but we have three or four more callers. So let's try to do two more before we round off, please.

Operator.

Thank you very much for the presentation and for taking my questions. Even though we over the time, two very quick ones in that case.

First one, maybe a little bit of a follow-up on the competitive situation. Given that one of your competitors like higher intensity in Q1.

But on the other side, I think as well discussed that you manage quite well on adding postpaid subscribers growing upwards. So just maybe what's your impression has been over the first quarter, and also importantly, for the first few months and Q2?

And then a second question quickly on this, we just Telia deal that has now been cleared by the [indiscernible]. Is there any particular reason that drove your decision to do a share buyback compared to a special diligence and to return to telco seeds?

And for the previous deal in Norway and Finland now four months after closing? Can you share any additional feedback from the partnership with investors?

Okay, I'll try to be quick. So to make the situation in Sweden, as I said at a recent investor conference it's like Whack-a-mole.

It's a different mole every quarter that you've got to Whack. And there has been one competitor that has heightened its third-party commissions during the quarter.

It was a different competitor in Q4. But it was a different competitor in Q1, which is quite normal.

And we've just got to rise above that being the most highest quality, more structured secure communication provider and investing back for our customers so that they feel as though they're getting good value for money. And I don't think anything has really changed in April versus Q1 in terms of that, but that being said, we are continuing to grow despite that environment both stable customer base and positive ARPU development.

Swedish tower deal why the share buyback? Well as a shareholder.

I'm delighted that Board have chosen a share buyback, clearly, both buybacks and dividends can create value for shareholders. But we believe buybacks on top of our strongly committed ordinary dividend just builds, it shows the confidence that the Board has in our plans and the long-term value creation available in our business.

And therefore, we view it as a very confident, positive confidence vote in our plans. And it's also a very smart way for us to remove the dilution effect from the minority stake that was sold in towers.

So from a shareholder value point of view, we believe very positive. And then so far on the partnership with Brookfield and Alecta very early days, but they are actually bringing.

We have talked a lot about energy at the moment. And they bring a lot of real practical experience tied to conserve energy in towers companies going forward.

So that's the one real practical example. I'm really delighted so far and the partnership is developing so far.

Thank you.

Thank you.

Thanks for taking the question. I've got two, please.

Firstly, you talked about some of the multiple benefits on contents. But can you talk a bit more about just how you measure those benefits versus the cost that's gone in?

So I guess what I'm really trying to work out is whether you think you're covering the cost of Champions League when you take into account the benefits across some of the different parts of the business? And the second question is really about leverage.

Obviously, you will be returning the proceeds from the latest tower transaction. But your leverage is so arguably quite low.

If the business is now improving, what would it take for you to take a more optimistic view on the leverage that can be sustained? Thank you very much.

Okay -- excuse me, on the content -- we invested in content to drive our core business to drive convergence. So the way we look at the investment is are we getting a return on investment in the combined standalone Pay TV business.

And in how it is driving convergence of our aspects business in the core Telia telco business as well. So we both look at both aspects.

And then we also look at a third aspect as to what leverage does that give us in our overall free-to-air advertising business as well, when we are doing other content deals, and when we are trying to shift customers onto digital platforms as well. So we look at that in multiple ways.

But so far, I think very positive developments on our IPTV business in our content with access business, and not yet washing its face on the Pay TV business, which we will continue to monitor over the coming months. And as I've always said, once with a full-year of Champions League behind this kennel have a better idea of what we want to do going forward.

Yes. And then on the leverage side, I think we're very happy with our current leverage ratio of 2.0x to 2.5x and, we want to stay well within that range.

And I think that's, we don't have any plans to do any changes on that.

Okay. Thank you so much.

Okay. Do you have a follow-up?

No, okay then…

Thank you very much. Some great questions.

I know there are a couple of more questions online, but we have to round off the call. So very happy to accommodate those off-line.

Please give us a call. Thanks for listening in everyone.

And looking forward to speak to you again in the three months.