Telia Company AB Q2 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Oscar Ronnkvist - ABG Sundal Collier ASA - Analyst : Thank you very much and thanks for taking my questions. Good morning all. So my first question would just be on the cash flow outlook. I think you guided before on SEK1 billion interest payment growth year over year. I think now if we are looking for SEK1.2 billion in Q3 and then half of that in Q4, I think it is around SEK800 million. Just if you could confirm that? Also, I think you said that the interest payments were supposed to be H1 tilted. So it seems like around SEK500 million increase now year over year. So I just wanted to have some clarification on that. Then just, I'm not sure if you want to guide on the sort of guidance, but SEK7 billion to SEK8 REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 18, 2024 / 8:00AM, TELIA.ST - Q2 2024 Telia Company AB Earnings Call billion in structural part of operational free cash flow, a pretty broad range now with two quarters left, you retain your CapEx guidance and I think some other items should be pretty known at the moment. So just wanted to get a sense of if you can give some more clarification on what should drive it to the lower or the higher part at the moment? And also, my last question would be on the free cash flow phasing. The structural part of free cash flow is usually very soft in Q4, yet you now guide for it to be the highest one in 2024. Obviously SEK600 million lower interest payments around that should be more than offset by lower EBITDA. Thanks.

Question: Oscar Ronnkvist - ABG Sundal Collier ASA - Analyst : Okay, thank you very much. That was all.

Question: Andreas Joelsson - Carnegie Investment Bank AB - Analyst : Good morning everyone. Two questions from my side. The first one is a bit broad, but if you could describe the overall pricing situation that you see now in the various markets and the various products, we come from a period with perhaps unusual high price activity in the industry and how do you sort of grade your ability to continue to work on price and move ARPU up further? And secondly, of course a quite strong report. So sorry for focusing on something that maybe wasn't that strong, and that is Sweden mobile service revenue growth, which has been a bit lack-luster for some time. So just curious what you can do to turn that trend around and if you can take some learnings from the good performance in TV and move that to mobile? Thanks.

Question: Andreas Joelsson - Carnegie Investment Bank AB - Analyst : Very, helpful. Thank you Patrik and Eric thanks too.

Question: Stefan Gauffin - DNB Markets - Analyst : Yes, a couple of questions. First of all, on the TV side. So if we assume an earlier cost of around SEK1 billion for Champions League, could you give some sort of indication what will happen with this cost? Well, Viaplay has taken over the asset in Sweden, but you continue to own the asset in Finland. Will the Telia subscribers for the sports package still be able to view the Champions League? And yes, what's the cost impact from Q4? And then just a clarification. Last quarter, you mentioned SEK300 million per year in service agreement from Norlys. Looking at the reporting, today it seems like the contribution this quarter was bigger than this with a year-over-year increase of SEK130 million. So just a clarification there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 18, 2024 / 8:00AM, TELIA.ST - Q2 2024 Telia Company AB Earnings Call

Question: Stefan Gauffin - DNB Markets - Analyst : That's perfect. Thank you.

Question: Erik Lindholm - SEB Equities - Analyst : Good morning everyone. And thank you taking my question. So a couple from me. You mentioned digital advertising as a driver to the return to growth here in TV and media. Can you perhaps quantify how large part of this business is digital advertising and how much is this growing? And also if you could quantify the cost impact from the Euros here in Q2 and perhaps in Q3 as well? And then also, you mentioned ramping up investments in Norway in the fixed network. I mean is this -- is it possible to quantify this and is it also included in your CapEx guidance here going forward? Thank you. I'll stop there.

Question: Erik Lindholm - SEB Equities - Analyst : So the question was regarding our comments to maybe ramp up investments a little bit.

Question: Erik Lindholm - SEB Equities - Analyst : All right. Perfect. And just your outlook for the coming years in terms of CapEx? Is it still that CapEx will be sort of roughly stable as a percentage of sales in the coming years?

Question: Erik Lindholm - SEB Equities - Analyst : All right. Perfect. I'll turn into that. Thank you.

Question: Andrew Lee - Goldman Sachs - Analyst : Hi, good morning everyone. I had a question on TV and media advertising and then also on corporate spending across the Nordics. On the advertising side, you've previously said that you'd look to offload TV and media and the advertising growth is a kind of prerequisite for that. Obviously, we've just had a quarter of it, so not necessarily expecting you to go and offload the business now. But how do you now think about a timeline for simplifying your business and stepping away from some of those businesses given the inflection to growth? And then the second question, just on corporate spend in the Nordics. We basically had slightly differing commentary from your peers on what's going on in corporate spend. A couple including Tele2 and Elisa have both said that there's been some macro pressure on corporate spend that's now abating and that they expect to see increased B2B spend into the second half of the year. Telenor on the other hand basically highlighted stronger competition in the corporate space. I wonder if you could just talk about how you see the corporate kind of growth outlook from a macro competition perspective, particularly in Sweden, but if you want to speak on the broader Nordics as well, that would be great? Thank you.

Question: Andrew Lee - Goldman Sachs - Analyst : Thank you very much.

Question: Nick Lyall - Bernstein - Analyst : Good morning everybody. It was a couple, if I could, please. Firstly, on the Swedish business, the service revenue growth was solid, but it doesn't seem to translate into EBITDA growth. So could you talk a bit about costs please? It looks like cost pre-equipments are up around 3%. So are you struggling to see or are there certain things you had to invest in this quarter? Could you give us a bit of an update on that? And secondly, just back to -- I think Eric, you just mentioned the Norwegian upgrade being within the SEK14 billion CapEx envelope. Could you just tell us what sort of scope of upgrade you're thinking of? Because that seems pretty low if it is sort of 800,000 homes at EUR1,000 per home, let's say. What am I missing there? Is it spread over such a long period of time or have I just got the numbers wrong? Thanks very much.

Question: Nick Lyall - Bernstein - Analyst : That's great. Thanks Eric.

Question: Siyi He - Citi - Analyst : Hello. Hi, good morning. Thank you for taking my questions. I think my question is really on the 3.5% OpEx reductions reported this quarter. I apologize if I missed some of your answers during the call. I was just wondering if you can just single out what's sort of key drivers and maybe you can point out in which regions that you see being the biggest contributor to the OpEx reduction this quarter. And I guess this question finally boils down to how should we think about the trends for the remaining of this year, especially that we are seeing that the trend has EBITDA growth come down in Norway, in Finland and you suggested that this could also be quite limited for Q3. So what we think about Q4, you expect the EBITDA growth to pick up and what are the main drivers? Or should we expect those regions to improve again? Or you think that the majority of the drivers is coming from the content cost savings in the TV area? Thanks.

Question: Siyi He - Citi - Analyst : Thank you. That's very clear. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 18, 2024 / 8:00AM, TELIA.ST - Q2 2024 Telia Company AB Earnings Call

Question: Steve Malcolm - Redburn Atlantic - Analyst : Yeah. Thanks very much. I just want to come back to interest costs, if I can, quite boringly. But Eric, I heard your commentary earlier. But just to be clear, when I look at consensus, I think that's 4.3 for the year, you are guiding to 1.8 in the second half, that's 4, so that's a SEK300 million tailwind. You're kind of saying you expect free cash flow still to be bottom-end of the range. So am I reading that right? And if that is the case, what are the kind of offsets against that improved interest outlook? And as you look into '25, you must have a pretty good idea where interest is going to land. I think there's kind of expectations of two or three more rate cuts in Sweden. So can you give us a sort of a range of outcomes within a couple of hundred million SEK, where you think interest costs will land next year? That would be super helpful. And just a quick one on TV and media. Can you -- and I appreciate the comments on sort of not disclosing Euro cost, but do we assume is it loss-making in Q2? Maybe just a sort of sense of the underlying ex-Euro growth rate in EBITDA because it looked pretty good. But I guess, is that above your expectations when you started, when you look at this at the beginning of the year, that would be great to know? Thanks a lot.

Question: Steve Malcolm - Redburn Atlantic - Analyst : Okay, thanks a lot.

Question: Keval Khiroya - Deutsche Bank - Analyst : Thank you. Two questions, please. So firstly, historically, you had talked about scope for rooftop transactions. Do you think those transactions are more likely as rates hopefully go lower. And are you thinking about scope for info transactions anywhere else? And secondly, if we strip out Fjordkraft, am I right in thinking the Norwegian EBITDA growth is about 1% in Q2? And I just want to understand what you think is really key to getting Norway back to growth because it's already delivering a margin of 48%? So is there much you can do on the OpEx side or does it need to be more revenue-driven? Thank you.

Question: Keval Khiroya - Deutsche Bank - Analyst : Okay. Thank you, guys. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 18, 2024 / 8:00AM, TELIA.ST - Q2 2024 Telia Company AB Earnings Call

Question: Adam Fox-Rumley - HSBC - Analyst : Thanks very much. I had my first question was on mobile consumer in Finland, please. I mean, Patrik, in your prepared comments, you talked about good ARPU, low churn, good customer satisfaction, but you want to address the subs growth element with new sales capacity. I suppose what I'm wondering is whether that's designed to kind of turbocharge the growth in that market or whether -- I'm sort of thinking from a broader competition perspective, is there any risk that with those first three elements already being pretty good that you risk kind of heating up that market a little bit? And then secondly, just -- I wondered if you could just give us a quick update on where you stand with your 5G network deployment across the big markets, just to get an idea of where you are and how much there is to go? Thanks.

Question: Adam Fox-Rumley - HSBC - Analyst : Thanks.

Question: Fredrik Lithell - Handelsbanken Capital Markets - Analyst : Hi. Thank you for taking my questions as well. I just wanted to stay with Finland. I mean it looks like it's a tough situation for you and you're doing what you can. But looking at and listening to Telenor and also what Elisa is doing, it feels like you are a little bit behind them. So could you talk a little bit more about where you see, do you have an upside in terms of pricing, if you are a little bit lower on them and you can close that gap in order to improve your trends a little bit more? And also then you are doing ¡ you are talking about some portfolio rationalizations. It could be interesting to hear what that implies and also the web hosting how will that impact the numbers from Q3? So a little bit more on Finland would be interesting. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 18, 2024 / 8:00AM, TELIA.ST - Q2 2024 Telia Company AB Earnings Call

Question: Fredrik Lithell - Handelsbanken Capital Markets - Analyst : Just a follow-up, do you anticipate you will need to sort of invest your way forward in terms of should we expect that it will be a pressure on EBITDA from these activities that you feel are necessary in order to reignite sort of your trends and your position?

Question: Fredrik Lithell - Handelsbanken Capital Markets - Analyst : Okay, that's very clear. Thank you.

Question: Usman Ghazi - Berenberg - Analyst : Hello. Thank you for the opportunity. So I've got two questions, please. One is a clarification. So on the TV business, you're saying that SEK200 million of EBITDA this year and SEK600 million for 2025, if I read that -- if I heard you correctly. I just wanted to inquire about the SEK600 million. I mean, because, I guess, this year you've had the SEK400 million for the Euros. That was an additional cost that's kind of offsetting the benefit you get from the Champions League exit. But next year, you get the full run rate of SEK1 billion in cost benefits. So -- and the advertising market seems to be picking up. So the SEK200 million just going to SEK600 million, I mean, I just wanted to ask what the driver there is? I mean, are you expecting a big kind of loss there in subscription because of the exit from Champions League or any color there would be helpful? Then the second question was just on the capital intensity, and this is the clarification bit. So earlier, I think there was a question asked, are you happy with what you had said in the past and the revenue -- CapEx represent revenues going forward, that's how you should be looking at this business and that should be fairly stable? But then you said today that you don't want to comment on that further because you've got a Capital Markets Day coming up. Obviously, given sensitivity around CapEx amongst investors, I just wanted to give you a chance to clarify whether are we expecting some discontinuity here or is the previous messaging intact? Thank you..