Telia Company (ST:TELIA), the Nordic telecommunications operator, has presented its financial results for the third quarter of 2024, showcasing moderate service revenue growth and a stronger EBITDA performance. The company has upgraded its EBIT outlook for the year to mid-single-digit growth and is implementing a change program to boost operational efficiency.
Key Takeaways
- Service revenue increased by 1.2%, with a 2.6% rise in the consumer segment.
- Enterprise revenue declined by 1.7%.
- EBITDA grew by 1.7%, with significant contributions from Sweden and TV and Media.
- The change program is expected to generate efficiencies of at least SEK 2.6 billion.
- Structural operating cash flow decreased due to increased interest payments.
- Leverage has improved, with net debt to EBITDA at 2.17x.
- CapEx guidance has been revised down significantly to below SEK 14 billion.
Company Outlook
- Telia Company aims for a service revenue CAGR of 2% and an EBITDA CAGR of 4% by 2027.
- The company is focused on customer satisfaction and operational efficiencies amid short-term revenue challenges.
Bearish Highlights
- The structural operating cash flow has seen a decrease from SEK 3.7 billion to SEK 3.1 billion.
- Enterprise revenue is on a downward trend with a 1.7% decline.
- Service revenue growth is projected to be below 2% for the near future, influenced by pricing changes and contract exits.
Bullish Highlights
- Consumer revenue in Sweden grew by 3.9%, bolstered by broadband and TV.
- TV and Media experienced a strong quarter with a 2% service revenue growth, mainly from digital advertising.
- The company has secured significant football broadcasting rights, which are expected to enhance its sports portfolio.
Misses
- Service revenue growth in Finland and Norway has slowed, with a slight decline in Finland and mixed results in Norway and the Baltics.
- In Finland, service revenue decreased by 0.6%, adjusted for regulatory impacts.
Q&A Highlights
- Executives discussed market stability and pricing strategies across various regions.
- Management is confident in achieving at least 5% EBITDA growth in the upcoming year.
- The change program aims to improve efficiency and reduce headcount by approximately 3,000 employees.
In summary, Telia Company is navigating through a period of moderate growth with a strategic focus on operational efficiency and customer satisfaction. The company's upgraded EBIT outlook reflects management's confidence in their long-term financial targets and ongoing initiatives.
Despite some challenges in service revenue, particularly in the enterprise sector, Telia's consumer segment and TV and Media division are showing positive trends. The company's commitment to a disciplined investment approach and efficiency improvements, including a major change program, positions it to potentially achieve its financial goals in the coming years.
Full transcript - Telia Company AB (TELIA) Q3 2024:
Operator: Welcome, everyone, to Telia Company's Q3 2024 Results Presentation. And with that I will now hand over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours.
Erik Strandin Pers: Thank you. Good morning, everyone and thanks for joining our Q3 call. We will do as usual, a presentation followed by a Q&A. We have Patrik Hofbauer, our President and CEO and Eric Hageman, our Chief Financial Officer with us here today. Patrick, please go ahead.
Patrik Hofbauer: Thank you, Erik, and good morning, and welcome, everyone. I would like to start with a few overall reflections before we move into the details of the quarter. We hosted our investor update one month ago here in Solna, and I'm encouraged to see that we are making progress on several of the ambitions laid out on the day. The change program, which we launched in September is fundamental for transforming Telia into more customer focused, faster and more efficient operator. We are on track with its implementation and expect to have the new organization in place on the first of December and start to generate the target efficiencies of at least SEK 2.6 billion. We continue to do better for our customer every day, and consumer NPS scores for the group increased both quarter-on-quarter and year-on-year. In Q3, Telia Sweden also came out on top among main mobile brands in the SKI, the annual customer satisfaction survey. And the Fello also came out even better, ending at second place among all Swedish mobile brands. Also, I'm glad to see that the hard work by TV and Media to become more digital and reduce the cost base is paying off, resulting in a continued positive development for both service revenue and EBITDA. Finally, at our investor update in September, we launched new midterm financial ambitions, including service revenue CAGR of 2%, EBITDA CAGR of 4%, book CapEx below SEK 14 billion and an all-in free cash flow, at least at SEK 10 billion by 2027. Turning then to the Q3 financial highlights. Service revenue continued to grow, supported both by telco and TV and Media. The growth pace of 1.2% was a bit slower this quarter as expected. We had elevated revenue in Business Solutions in Q3 last year from project in Sweden and Lithuania and this impacted the growth rate negatively by 50 basis points. Like last quarter, the consumer segment was the driver with a 2.6% increase, whereas enterprise declined 1.7%. Mobile continued to grow by 1.6%, supported by all markets. Fixed increased at 0.6% as continued strong team momentum in Sweden, more than compensated for the pressure on fixed telephony and business solutions. We said last quarter that we expect EBITDA to be approximately unchanged this quarter and we ended up with an increase of 1.7%, mainly driven by Sweden, TV and Media and partly also Finland. Structural OFCF declined from SEK 3.7 billion to SEK 3.1 billion as interest payments increased as expected, SEK 400 million due to phasing and higher market interest rates. Leverage declined to 2.17x even though we are ramping down the vendor financing program. And finally, as you might have seen already this morning, we upgraded our EBIT outlook to mid-single-digit growth for the year and our CapEx outlook to be below SEK 14 billion. Let's now move into the units. Overall, Telia Sweden's growth was driven by consumer also this quarter, which was up 3.9% and especially by broadband and TV, which together grew uplift close to SEK 200 million. Enterprise declined 3.9%, partly from a soft market, but mainly as Q3 last year contained some SEK 60 million of low-margin license revenues. Looking at the growth, excluding copper legacy growth was at 3.1%, despite that SEK 60 million item last year. EBITDA growth was driven by both service revenue growth and efficiencies, mainly related to consultants and personnel. We saw a continued decline in income and customer service volumes as we showed at the investor update, underpinned by improving customer experience and operational performance in customer operations. And we'll continue to make improvements in the area which benefit both our customer and us. Moving on to the Sweden's operational KPIs, where you can see that the mobile postpaid customer base remained flat with a small gain consumer and a small loss in enterprise. ARPU Increased by 1% with a flat ARPU in Consumer, where family SIMs and a fellow brand continue to grow and the enterprise ARPU growing at 2%. We launched a new mobile portfolio for small businesses, including enhanced security and more for more pricing. At the same time, in the public sector segment, there has been a handful of barebone mobile deals made at price levels we would not defend as a market leader. And we, therefore, expect to put out around 25,000 low ARPU subscribers in the fourth quarter. Our broadband subscriber base continued to grow this quarter by 6,000 and growth is predominantly fiber also fixed wireless access, more than compensated for the decline in copper. Fiber pricing performed last year as well as earlier this year, continued to support ARPU with an increase of 3.3%. Finally, our TV business continued to outperform the market with its leading content offering, subscriber base growth of 14,000, an ARPU increase of 16%. Moving to Finland. Finland saw a slightly negative service revenue development as mobile growth of 1.4% was offset by a 3.5% negative or decline for fixed revenues, driven by continued pressure on legacy revenue, regulatory changes and the ramp down of our nonprofitable invoicing business. EBITDA growth, however, picked up somewhat to 2.1% due to cost efficiencies and lower energy costs. The mobile subscriber base declined by around 10,000 due to a continued focus on value and ARPU rather than volume. Something that moved ARPU up by 5% and the consumer up by a healthy 9%. We are taking further steps to simplify our business by divesting our web hosting business, a deal which closed this quarter, and we continue, as you know, to ramp down e-invoicing. These pressures from regulation, legacy and ramp-downs will increase a bit more than next quarter, but then we estimate that they will ease as we move into 2025. Moving into Norway. Mobile revenue continued to grow, supported by wholesale. At the same time, we had lower revenues from business solutions and paper invoicing fees following new regulation in the beginning of the year. You have probably noted that the move of the national roaming for ICE to Telenor network, which likely means that our volumes for this contract will decline faster than we have planned for, but they were always expected to ramp down. The EBITDA development was in line with our expectation and we flagged it last quarter. We foresee that it will gradually pick up again as we move along. Given successful summer campaigns, a better subscriber development and the pricing plans we have for several products in the coming quarters. In consumer, mobile ARPU and the post subscriber base both grew as our offerings are well received by the market, resulting in five consecutive months of subscriber growth, although this was masked by the exit of non-Enterprise contracts -- sorry, one enterprise contract in the quarter. Our Enterprise offering continued to be popular still and Fornero1, the Eps customer satisfaction survey for the third year in a row. Let's move into Baltics. In Lithuania, growth slowed to around 3% on service revenue and 2% for EBITDA, mainly because Q3 last year contained about EUR 3 million in one-off revenue related to the NATO Summit Mobile revenue growth was 7%, driven by an increased subscriber base helped by our clearly leading network position. In Estonia, growth came down to just 1% due to some phasing impact from a larger enterprise contract that was resigned earlier this year and challenged in court. This court case is now dismissed, and we expect the contract to start to contribute again from Q4 and onwards. Finally, before I leave over to Erik, we have TV and Media, which again had a strong quarter, both with regards to its digital transformation and its financial turnaround. Service revenue growth remained around 2% and supported by a strong development for digital advertising, underpinned increased digital viewing and a larger base of streaming subscribers. Meanwhile, the linear advertising market in Sweden remains soft as linear viewing is trending down. Turning to EBITDA. We again had a good development with an increase of around SEK 60 million due to service revenue growth and lower OpEx despite somewhat increased content costs this quarter because of the euros. Looking finally at the subscriber base, it's almost at 140,000 hire since one year ago. Even with the decline in the quarter as we came out of the positive effect from the euros this summer. ARPU declined due to an increased share of HVOD subscribers. And as you might have seen yesterday, we are happy that we have secured the rights for Swedish football, Allsvenskan and Subrata for the period of '26 to '31 on terms that make financial sense for us. Allsvenskan is one of the most important sports rights in Sweden, and it's a great fit with our existing sports portfolio, which includes the Swedish ISO league. So now it's very clear whether consumers want to go if they have -- want to see top Swedish sports. And with that, I hand over to Erik and will take you through the Q3 financials.
Eric Hageman: Thank you, Patrik. Let me now walk you through this quarter's financial development, starting as usual with service revenue and EBITDA. Like Patrick mentioned, service revenue continued to grow, albeit at a slightly slower pace compared to previous quarters due to particularly tough comparisons in Sweden and Lithuania and with Norway displaying a slightly negative growth. Overall, our broadband and TV growth trends remained strong, while Business Solutions, which is slightly lumpier by nature, declined. TV and media, however, grew 2% and as strong performance from nonadvertising revenue and growth in digital ad revenue more than compensated for a decline in the linear TV advertising market in Sweden. Year-to-date, our service revenue growth is tracking 2% after generating 2.4% growth in the first half of the year. We flagged last quarter, as you remember, that EBITDA would be approximately unchanged this quarter versus the strong Q3 we had last year. As such, the 1.7% EBITDA growth is somewhat better than what we had guided for. Following our strong performance in the first nine months and given the outlook for Q4, we are upgrading today our EBITDA guidance for 2024 to mid-single-digit growth from low to mid-single-digit growth before. Looking ahead at these trends, we have the ambition, as you know, to grow service revenue by 2% and EBITDA by 4% over time. But as you understand, there will be short-term variations around these levels. So, for the next few quarters, i.e., Q4 this year and the first half of next year, we expect service revenue growth to be below the 2% level, while EBITDA growth is expected to be above the 4% level. The lower service revenue growth is related to the timing of pricing, including for TV and broadband in Sweden the exit from the Champions League contract and the continued ramp down of the noncore low-margin e-invoicing business in Finland. The higher expected EBITDA growth relates to several drivers, including the impact from our change program, continued improvements in TV and Media and for Q4 specifically, a comparison base that included relatively high bonuses last year. Let's now have a look at the condensed P&L on the next page. Service revenue growth was also this quarter supported by both telco and TV and Media. In the quarter, mobile was up almost EUR 150 million, with most markets showing growth between SEK 20 million to SEK 30 million. Fixed also increased as continued strong development for TV in Sweden and in TV and Media compensated for weaker business solutions revenue. The latter was largely due to special items in Sweden and Lithuania boosting the comparison figures for those two markets by around SEK 90 million and the accelerated decline of our finished e-voicing revenue. Now moving on to profitability. Like-for-like adjusted EBITDA was up 1.7% this quarter. The biggest contributor to our EBITDA growth this quarter was Sweden and TV and Media together growing by around SEK 150 million and the service agreement with Norlys, which continued to deliver profitable growth. So, despite a slowdown in service revenue growth, EBITDA performance is strong, considering the tough year-on-year comparison and legacy pressure. We can also see that the slowdown in growth largely comes from lower-margin services such as business solutions. All in all, we are clearly benefiting from our continued focus to realize efficiencies. The group EBITDA margin of 39% is the highest we've seen in the last five years. Lastly, in this quarter, our operating and net income increased by SEK 400 million and SEK 600 million, respectively, mainly as depreciation was lower in those markets. Moving now to OpEx and CapEx on the next page. Here, we see that OpEx was again lower this quarter by 1%, mainly due to lower resource and energy costs. The latter declined by almost SEK 50 million with Finland benefiting the most. These lower expenditures more than compensated for the somewhat increased bad debt due to retroactive bad debt provisioning in our Swedish B2C business. On the right-hand side of this page, you can see that book CapEx was SEK 2.9 billion, in line with the same period last year. Perhaps more importantly, our capital expenditures in the first three quarters of 2024 are circa SEK 500 million lower than in the same period last year as we continue to be more choiceful and disciplined with our capital allocation. As a direct consequence, we've upgraded this morning our full year CapEx guidance to below SEK 14 billion from previously around SEK 40 billion for this year. Let's now have a look at our cash flow. As you can see, most line items are rather flat year-on-year except for interest paid, which increased by SEK 400 million from the combination of phasing and higher market interest rate levels but is very much in line with our expectations. Tax was impacted by some phasing as well as slightly higher dividend taxes in Estonia. This, in combination with most other line items being flat, resulted in structural cash flow decreasing by SEK 600 million to SEK 3.1 billion. Working capital in the quarter was negative as we are in the midst of downsizing our vendor financing program. In the quarter, we reduced the balance by nearly SEK 2 billion. If we ignore the vendor financing impact and look at the pure operational movements in working capital, it improved by around SEK 400 million this quarter as a result of our operational excellence agenda targeting, for example, the optimization of our billing cycles. Excluding the impact from the vendor financing ramp down, our all-in free cash flow would have been comfortably above SEK 3 billion and well above last year's level. As always, I end the financial section with our net debt and leverage. As you can see, our net debt came down to 2.17x as the cash flow generation from operations and positive impact from other items more than covered the quarterly dividend of EUR 2 billion and the reduction of a vendor financing balance by EUR 1.9 billion in this quarter. So, despite these outflows, we remain comfortably in the lower half of a leverage target range. And with that, I hand back over to you, Patrik, for a few words on our guidance and the summary of the quarter.
Patrik Hofbauer: Thank you for that, Erik. And let me now summarize before we go into Q&A. So, this quarter was in line with our expectations, and we are taking important steps in the right direction, both within our telco operations and in TV and Media. The most important thing for us now is to get the organization in place to deliver on our strategic priorities. And as I said, we are on track to have the new organization in place by December 1, which means that we are now moving at the speed towards a faster, simpler and efficient -- more efficient Telia, which can deliver on our strategic priorities to simplify, innovate and grow. We have put the financial road map in place with our '25 to '27 ambitions to reach at least SEK 10 billion of free cash flow. And for this year, we are upgrading the full year outlook for EBITDA and CapEx. And with that, we will open up the line for questions. Thank you.
Operator: [Operator Instructions] Our first question comes from Andrew Lee. Your line is now open. Please go ahead.
Andrew Lee: Good morning, everyone. Thanks for the question. Just had one question really, which is on your, obviously, strong delivery on EBITDA and CapEx things largely, I think, to efficiency execution. But the fact that that's not dropping down into structural OCF guidance. So obviously, the EBITDA and CapEx is going better than you expected. I think that's mainly just efficiency execution, but if you want to add anything there, that would be great. But what has adversely trended below EBITDA minus CapEx to mean that you haven't adjusted your commentary on your structural operating free cash flow. What are the surprises that are coming out there?
Eric Hageman: Thanks for that question, Andrew. Yes, very happy with the discipline that we also mentioned at the investor update a month ago around OpEx, as you saw which really helps with EBITDA and which explains the upgrade from today. I think overall, we're tracking roughly in line with expectations, if you think about the cash flow items. We're confirming today the range of 7% to 8% and that we expect to be at the lower end, which we've been saying for a few quarters now. Taxes and leasing, they are a bit higher than we anticipated. In addition, we've also done more restructuring than we thought two quarters ago with about 500 of the 3,000 positions as part of the change program already done. So that brings us back to what we've been saying for a while now that we expect to be at the low range. But we felt that given what we said on the outlook for Q4 and the way we're tracking around EBITDA and CapEx year-to-date and what we expect for the next quarter that this was the right moment to upgrade those.
Andrew Lee: Thanks, Eric. And so, the taxes and leasing, what's that related to that coming a little bit higher than expected? Anything specific we should be aware of?
Eric Hageman: Yes. I mean they're all -- it's all small at the end of the day, right, because we're confirming that lower end. One example is Estonia. So, dividend tax has gone up there, for example. So, we've taken a bit more dividend there. and Hanson this quarter, we're paying a bit more tax on that because of that in anticipation of increased dividend tax rates next year is one example.
Andrew Lee: Thank you.
Operator: The next question comes from the line of Maurice Patrick. Your line is now open. Please go ahead.
Maurice Patrick: Yes. Thanks, guys, for taking the question. So, it's a value versus volume question. I noticed if I look at the Finnish market, you have seen a slowing in service revenue and EBITDA momentum serious revenue is now falling. You cited of course, some of the legacy and regulation runoff there. But I also noticed a small reduction in postpaid subs, but an ARPU up 9%. So, I'm just curious as to your approach going forward around ARPU versus subs, whether you're going to grow defend your market share or just happy to see what we see some market share to see higher ARPU? And just a sort of a related point and it relates to Sweden. I was intrigued seeing Shell (LON:SHEL) from Tele2 (ST:TEL2b) yesterday. He said in a meeting that he saw in the long term, a significant consumer surplus in the Swedish market, i.e., people under paying for their services and talked about maybe over the medium term, ARPU could be SEK 50 to SEK 100 higher than currently years. Just curious of your thoughts in terms of what is the opportunity longer term for price and the ability of customers to where that increase? Thank you very much.
Patrik Hofbauer: Yes. Thank you for the question. It's Patrik here. I can start with the first one, and Eric maybe will take the second one. Let's start with the first one. We see a very unchanged market situation overall in Sweden year-over-year. Our focus is more selling more products to the existing customers when it comes to the consumer side. So, the two player three player to more services, given that we have almost 50% of the households in Sweden have at least one service from us and that has been very successful. And we can see that now this quarter, we are selling more broadband and TV services to existing customers. So that's really good. So, I think there is an opportunity, but very hard to predict. And we don't see the big changes in the market that Shell talked about that you're now referring to. So, we believe it will be very stable. But of course, there is always an opportunity to do more for more and price increases going forward.
Eric Hageman: Yes. And on Finland, you're right. Obviously, our service revenue there is impacted by regular changes. So, we were printing minus at 0.6%. If you would adjust that for the regulatory impact that you're looking at a plus 0.3%, which is still not a great number, but what is working well is indeed mobile growth there. As Patrik said, it's 1.4%, and that's driven by sort of flattish number of subscribers. But certainly, ARPU seems to be going up. Where we benefited mainly last year in most of our markets, obviously, from inflation and that number is lower. We're quite happy with what we've been able to do on pricing. And if you then go back to our value creation plan, which is profitable growth driven, a big part of that is obviously driven by pricing initiatives. We typically don't go into details what sort of awaits us for the next quarters. But if you think about our confidence around doing 2% and 4% in EBITDA in the medium term, that 2% and 4% is partly driven by those price increases, which on the mobile side means the market must be able to take ARPU increases, which is what we see in most of our markets at the moment.
Maurice Patrick: Well, thank you.
Operator: The next question comes from the line of Andreas Joelsson. Your line is now open. Please go ahead.
Andreas Joelsson: Good morning, everyone. A follow-up to Maurice question on price and maybe a little bit more philosophical. If I look at Sweden mobile postpaid ARPU that you reported, it's basically flat since Q1 2019 despite that you now have 5G and probably a better service. Just curious how you see that trend changing going forward? Or do you see any other sort of growth drivers for the mobile side in Sweden? Thanks.
Patrik Hofbauer: Yes, I can give you some color on that. So, our focus, if you start with Telia first, my focus is to sell more to existing customers. We are looking at a household perspective -- that's the reason why we have been focusing a bit more now on broadband and TV, as also you can see is paying off on our financial figures. And we see customer satisfaction is going up. So that is a really good play that we are doing at the moment. Then you are right, the ARPU is fairly flat, but we see opportunities actually to increase the ARPU going forward. But what is also pulling back a little bit on the ARPUs that we are selling more seems to existing customers. We're selling more family cards, and we're also selling more on a fellow side at the moment on the lower end. That is, of course, impacting the ARPU. But otherwise, I think there is a good opportunity to increase ARPU going forward. And we see that for us, as an example, People like the customers are very appreciating a lot of our network, given that we have now more than 90% population coverage on 5G and one of the three best networks in the world. That is appreciated by the customer. So, I think there is an opportunity to also increase ARPU going forward.
Andreas Joelsson: Okay, thanks.
Operator: The next question comes from the line of Stefan Gauffin. Your line is now open. Please go ahead.
Stefan Gauffin: Yes, hello. A couple of questions relating to Norway. You mentioned the value of the deal to the arm forces in Norway of NOK 300 million for four years, but this is an extension is this an increase in order value? And then secondly, Other mobile service revenue in Norway is at least my expectations, and it was up close to 25% quarter-on-quarter. What was driving this? And how much is ICE out of this business? Telenor quantified the impact to them to around NOK 400 million in 2025, NOK 400 million in 2026 and NOK 200 million in 2027. This would indicate that ICE represent more than half of the revenue in this revenue line in 2024. So, any comment related to the ICE contract and if it is that drove the strong performance in this revenue line this quarter? Thank you.
Eric Hageman: Okay. Should I take this?
Patrik Hofbauer: Yes. Lots of questions in there.
Eric Hageman: Thank you, Stefan. Yes. So let me start with the mobile service revenue part. It's our wholesale business as a whole. Yes, ICE is a part of it. and there has been good volumes over the summer in the wholesale business. So overall, we -- our turnover on the ICE contract on a 12-month basis is around SEK 300 million. So that's what we see. And it was always expected to decline in the coming years, this turnover. Now I know a lot of people want to understand what the trajectory of those numbers is going to be over the next few quarters. I think that's a question maybe for ICE but we always expected it to decline. So, let's see what happens. The value of the contract to the force, yes, I think we rarely go into specific numbers on individual customer contract. So, I'd probably refrain from putting numbers on it. But overall, it just confirms, I think what we continue to see both in Norway, Sweden and the other markets that we do have an increasing business from this segment of secure communications, both for Armed Forces and for civilian use. So, I think I'll leave it at that unless we have something now. We'll leave it at that, Stefan. Stefan, did you have a follow-up? Fine. Okay. Thank you.
Operator: The next question comes from the line of Ajay Soni. Your line is now open. Please go ahead.
Ajay Soni: Hi there. Thanks for taking my question. I had a couple. Firstly, on your pricing, you said it's going to impact your service revenue over the next three quarters. So, can you just remind us what you did on pricing this year and what percentage you pushed through? And then following on, do you expect to do a similar increase this year and at a similar time? And then my second one is just on Norway fixed service revenue. Can you just give us color on what's driving the decline here and when we could expect this to move more into growth phase? Thank you.
Patrik Hofbauer: Yes. Shall I start with the pricing? So, there is phasing here, and it's a little bit -- we've heard other people say the same thing in our region. -- sort of in between pricing cycle. So, we did quite a lot in Sweden at this time last year. I'd be doing that a bit later, which is why you see a little bit of the impact. What we've done in Q3, just to briefly run through that. So, in B2B in Sweden, we did higher price points and more value. So, this is mainly on data and security solutions. In Finland, we've seen less price increases for relatively low ARPU tariffs and back book increases to what is the 100 megabits per second, which impacted roughly 50,000 subscribers. In Norway, we've announced back book increases on mobile, which is about impacting 700,000 subscribers and a couple of CPI adjustments because we can do that in that market. And in the Baltics, we've seen price increases for mobile ID services. I think the overall comment more on what we said on softer service revenue growth in Q3, Q4 and for the first half of the year, which is very much decoupled from EBITDA because that's moving in the other direction. It is very much about us pushing through price plans. And the other one is, obviously, we had inflation plus last year and inflation is a bit less this year. But again, we feel very comfortable with the guidance that we've given of 2% service revenue growth for 2025 and also for the years thereafter. I didn't get the other question. What was the other question?
Eric Hageman: Yes. The other question on Norway fixed and when we expect this to turn around. So, there are a few components. I think we can come back to what we said at the investor update in September, I think the priorities for some of the priorities for Norway is to increased investments in fiber upgrades in the network, and that will give an effect over time. We will also is continue to develop our partner model in Norway, which is important, and that we look positively on. Let's see when it has an impact, but it goes in the right direction. And then we have some sort of short-term headwinds that will expire. There is the paper invoicing fees, which means SEK 60 million to SEK 70 million lower high-margin revenue this year. It will annualize in January and also the bank ID loss of bank ID messaging fees, it's about a third of that volume and annualize is now actually in September. So, there's a few short-term headwinds that we get behind us. So it should improve going forward, but it's hard to say it's the exact quarter numbers.
Ajay Soni: Great. Thank you very much.
Operator: The next question comes from the line of Viktor Hogberg. Your line is now open. Please go ahead.
Viktor Högberg: Yeah, good morning. So just on the risk EBITDA growth guidance here, is that solely due to Q3 isolated or something which would change your expectations for Q4 '12?
Eric Hageman: Specifically on EBITDA or overall?
Viktor Högberg: EBITDA. EBITDA, yes.
Eric Hageman: Yes. No. So we've obviously seen the trajectory this year, which has been positive, another quarter to the third quarter under our belt and then good visibility of what the fourth quarter will look like where we think it's going to be above trend as highlighted this morning. Part of that, of course, is -- we had quite relatively high bonuses last year in the fourth quarter, which we won't have to the same extent this year. And the other one, of course, we have said that the change program will be implemented as of the first of December. So, it's only one month as opposed to next year, we will have full 12-month benefit of that, but even that one month adds to the port. So, with that, we felt very comfortable to now say that it's going to be mid-single digit.
Viktor Högberg: And a follow-up on that new organization from the first of December. Just for your guide for next year, the at least 5% EBITDA growth, what else needs to fall in place to be realized? Or was this the main item?
Eric Hageman: No. I think what we said at the time, if you think about the drivers for EBITDA, one, obviously, it's a service revenue growth, where today, we are saying it's more tilted to the second half, right? So below 2% first half and then above in the second half overall to land at 2%, like we've done in the first nine months of the year. The improvements that we've seen in OpEx overall. So over and beyond what we're doing with the change program affecting 3,000 people because there's also other costs that you have, which are non-FTE related that we're focusing on. I think the third one, obviously, is the performance improvement that we're seeing in TV and Media specifically. Also, we have a couple of hundred million of EBITDA this year, but we've guided for close to SEK 1 billion or at least SEK 1 billion for next year. And then the fourth one is what we said on the '26. What we're seeing is a margin expansion across the various units. As I said in the presentation just now, we have a record EBITDA margin, the highest in the last five years. And that is because if you look at all markets specifically, everyone is increasing the EBITDA margin. So, the combination of those is what gives us confidence to say at least 5% EBITDA growth for next year.
Viktor Högberg: Okay. Thank you.
Operator: The question comes from the line of Steve Malcolm. Your line is now open. Please go ahead.
Stephen Malcolm: Yeah, thank you. Morning, guys. Thanks for taking my question. A couple, please. First, just on the restructuring plans, and I'm wondering if you can maybe update us some conversations you're having with the unions. And when you expect to get clearance sign off for your various programs across the region, that would be great. And then just coming back to service revenues, Eric and Patrik, appreciate the extra color on the short term. But I'd still like to sort of try and better understand how you kind of hate the word inflect second half of next year. I mean, obviously, you're going to have a bigger impact from the loss of the ICE revenues in the second half. I mean, do you have sort of specific pricing programs in mind already for the second half of next year? And are you -- how linked to sort of economic growth recovery, are the second half growth ambitions because if you're going to grow kind of low ones in the first half, you're going to need to grow nearly 3% in the second half to hit the 2%. So, I know it's difficult given commercial sensitivities, but any sort of extra confidence you can give us that you can absorb that loss of ICE and still be exiting the year, 2.5% or 3% to get to two would be great. Thanks a lot.
Patrik Hofbauer: Okay. Thank you for your question. Starting off with the change program. And remember, again, the change program is the -- the plan is to implement it from December 1, and it will help us then to simplify and be more efficient as a company and make it very clear on the responsibility on the country side level since it's two-folded: it's structure and it's a headcount reduction. So, so far, the discussions with the union are going well and has been well partly already done and closed in some of the markets and still ongoing in some other markets. But overall, good dialogue. Everyone understands what we are trying to achieve in doing and we are on track to deliver the -- to deliver on the plan, as we said, on December 1. But November will be a really tough month because then we will inform all the employees saying -- basically saying goodbye to almost 3,000 people, which is, of course, a very tough for us to do. So, I have a big respect for that change. But so far, everything is on track when it comes to that. Then I will try to answer your question on the service revenues for '25 million. and Eric support me if you should add something. So, first of all, if you look at '25, the regulatory headwinds that we have in Norway and Finland will be analyzed. So, this is and negative service revenue that we have now this year on SEK 250 million almost. We have a legacy pressure that will decrease every year, especially in Sweden but also in Finland from the copper, as you know. We have pricing that we are on a way to do on a recurring basis. I would say, across all markets and also all products. Estonia, for example, was hampered last quarter by the appeal of the governmental IT contract that is now resolved, that will help us both in Q4, but also then going into the next year. And then we have the e-invoicing business. You know that the headwind we have that we're ramping down will be gone from '26. And then revenue from mission-critical services in Sweden will gradually also increase '25 to '27. So, this is basically the main points.
Eric Hageman: Very good. I think it's a great summary. I mean ultimately, if you look at the drivers for our service revenue growth, I think we're very clear that it's mainly tilted to the second half. There's no reason for us to change our view that we feel comfortable with that 2% guidance that we've given, given the plethora of measures that we see as just explained by Patrik, Steve.
Erik Pers Berglund: Yes, sorry, it's Eric here. There's a delay on the line. So go ahead, Steve.
Stephen Malcolm: No, I was just going to ask you, I mean, do you think you've got enough a difficult question to answer, but enough in your kind of cost locker to get to the EBITDA guidance even if service revenues maybe don't quite hit the two. I mean it's 1.5, 1.6, is that still two in your mind? Can you still get to the EBITDA, given the cost savings you've got almost in the bank, it's tenant negotiations being finalized?
Eric Hageman: Yes. I think where you should take confidence from where we take confidence from is what we are demonstrating in our results, for example, today, right, with the clear upgrade and EBITDA for this year and continuing to say we're going to do at least 5% next year. And it's not just, as I said, the change program, which obviously has an immediate impact as I just said, even that one month in Q4 has a positive impact. It is also what we do on non-FTE-related cost as an organization, right? Just the fact that we are being much more disciplined is really, really going to help with that. But I'm going to say it again, it's really we have full confidence in that 2% service revenue growth for 2025. That is the first building block in that at least 5% EBITDA. And then on top of that, obviously, the cost initiatives that we're doing. Eric, you wanted to add something?
Erik Pers Berglund: Yes. Just to put some context also on the fact that we are simplifying things a little bit and stepping away from some noncore and unprofitable services so that the Champions League exit and the of the invoicing in Finland, for example, together, these will cause a headwind of, say, 50 basis points or somewhere there around in the next few quarters. Those are that's conscious decisions that we are taking. And they were, of course, annualized in the second half of next year. So, they don't hamper that doesn't hamper our ability to generate EBITDA at all. On the contrary, it helps us. So just to have that perspective in mind also.
Stephen Malcolm: Great. Thanks a lot.
Operator: The next question comes from the line of Keval Khiroya. Your line is now open. Please go ahead.
Keval Khiroya: Thank you. I've got two questions and then really follow on from the last. So, I mean, I appreciate you got the regulatory drags affecting the absolute trends. But just looking from Q2 to Q3, we had a 1.7 percentage point slowdown in Finnish mobile service revenue growth and 1.9 percentage point slowdown in Norway. Could you just elaborate a bit more on the moving parts from Q2 to Q3 on mobile service revenue growth for those two markets? And secondly, just going back to ICE as well. For Norway specifically, have you identified additional measures to compensate for the ICE related EBITDA? And if so, what would those be? And when should those kick in? Thank you.
Erik Pers Berglund: So, starting with the compensating the loss of the eye, of course, we are doing measures. I don't want to go into detail on the measures that we are doing, but we are doing a lot of measures to mitigate, of course, the loss of that contract. And maybe that will be clearer for the coming quarters when we then report, but we don't want to disclose those now. So that's the first one. Then Eric, can you take the other one?
Eric Hageman: Yes. Maybe just to add to ICE specifically, there's many other initiatives that we have when you lose a wholesale contract on your B2C and your B2B business, which is doing well in that market, as you saw with the continuation of the mobile growth. We have fewer customers is mainly what is driving that in that specific segment. And where ARPU in Finland has gone up, but not quite yet in Norway because of the price initiatives that I've just said that we pushed through this quarter, which we then will benefit from next quarter. So, subscriber growth related and then the ARPU that is yet to go up because of the price initiatives that we're putting through now.
Patrik Hofbauer: Yes. And you asked about the Q2 to Q3 on mobile service revenue, Finland and Norway. Norway, you have the annualization of the feed craft agreement in the other mobile service revenue, which affects the growth rate a little bit. And then you have a little bit of a blip in the prepaid revenues, which we can go into after the call. But if you look at the core postpaid revenue trend, there isn't any deterioration from Q2 to Q3 -- in Finland, we have flagged for some time that the good healthy ARPU trend that we see continuing in consumer is going to slow down a little bit for natural reasons as some of the measures annualized. So that's the main reason. And then -- there is a small one in other mobile service revenue related to how we reinvoice energy, I believe, on the towers, but fully as expected, I would say.
Keval Khiroya: Okay. Thanks.
Operator: The next question comes from the line of Usman Ghazi. Your line is now open. Please go ahead.
Usman Ghazi: Thank you for the opportunity to respond from Bernburg. I just wanted to ask a clarification question and then a follow-up. Did I hear correctly that was SEK 15 million tailwind from told energy costs in Q3. And if that is the case, obviously, that seems to be higher than what was being projected because you already had a SEK 14 million reduction in Q1. And I think for the year, you had one correctly, you're anticipating up the SEK 18 million reduction in energy costs, but now you have SEK 14 million in Q1. Or, and if key and Q3 is right, and that's already trending above. But I guess the question is, if you have had that level of energy cost reduction in Q3 then EBITDA growth that you post-all of it is just driven by energy right. So, there's not much that we're seeing in real cost efficiency or just some comments there is the application that we have. Second question was on the enterprise side, you've mentioned a few instances in a few markets where it stepped away because pricing was too low or that lost contract that has impacted the KPIs. And the question here is that are you seeing anything on the enterprise market specifically where your traditional challenges in the consumer space and now just going into the enterprise market more aggressively? Or is this just usual business? Thank you.
Patrik Hofbauer: I can answer the second question or first, the enterprise side or the bus of the business. Well, we will clearly step away if we feel that the prices are too low. And we have done that in a couple of cases. nothing unique, nothing specific. It's no trends. It's basically the same year-over-year or every year. But of course, it could be some hit as we disclosed today that we will be negative now coming into the fourth quarter with some subs loss. But otherwise, it is basically business as usual.
Eric Hageman: Yes. And on energy cost, maybe just to -- by the way, it was really hard to understand your question. There was a very bad connection, not with the others. So, the tailwind that we expect for this year for energy is similar to maybe slightly higher than what we saw last year. Just to remind you, last year, we had SEK 120 million tailwind. And the second part is, year-to-date, we had about SEK 95 million. So, this quarter, it's supported by roughly SEK 48 million, which is mainly Finland, a bit in Norway and a bit in Latvia.
Usman Ghazi: Thank you.
Operator: And the final question comes from the line of Felix Henriksson. Your line is now open. Please go ahead.
Felix Henriksson: Felix from Nordea. Thanks for taking my questions. I have a couple. Firstly, on CapEx, you now see that declining already to below EUR 4 billion this year as opposed to the Capital Markets Day about a month ago where you stick to it into your guidance of around SEK 14 billion for this year. Just wanted to get a clarification on what exactly is going faster than anticipated in your CapEx reduction program? And then secondly, on TV media, I think you first kind of like previously you've guided for SEK 200 million of EBITDA for 2024 and SEK 600 million for 2025, and then make your investor update, you said that EBITDA will be close to EUR 1 billion for 2025. So just curious to hear your thoughts about the full year '24 EBITDA in TV and Media and how that will step up closer to SEK 1 billion in 2025. Thanks.
Erik Pers Berglund: Yes. I can start with TV Media first. So, TV Media has a change program ongoing for the last year with focus on on moving -- or actually generating more digital revenues. One part is is the digital side on the advertising and the other one on the subscriber. As you can see, it's a 27% growth this quarter on revenues on digital advertising. At the same time, we are, of course, there's a structural change in the market, moving away from linear TV. So, we have a negative development there. But very good that they're managing to compensate. The rest is actually coming from lower cost and more efficient operations. And we see that the Champions League is out of the books also for this year and for next year. So, this, in total, so the change program is going a bit better than we have expected. And that's the reason why we will see an EBITDA and we feel fairly comfortable for that close to SEK 1 billion next year in the TV media business. And as you've noted also, we also now secured Allsvenskan and Subrata the two most important football rights here in Sweden, but that is from '26 and onwards. So, it's not valid. We still have it in Telia, et cetera, for the portfolio, but this is valued from '26 onwards. So, you know that just for your information. Thank you.
Eric Hageman: All right. And on CapEx, I mean, as the two questions, right? Why are you lowering it? And why now? So, under why it's part of what we said at the investor update, which is we are being much more disciplined as simply said, if we're not seeing the return on the investment, we are saying no to proposals that we get from the various markets that ultimately come to us. And just raising the bar, increasing the hurdle rate that we're looking for means that we're saying why now, we wanted to wait for -- could we have done a dent possibly. We wanted to wait for the full results for the quarter, also the latest update of what people sort of expenditure plans are for the last quarter of the year. Putting all of that together, was pretty clear that we could not come out saying we're going to be around 14% because we're just not going to spend it. And hence, we've changed it now.
Felix Henriksson: Thank you, that's helpful.
Anders Olsson: Any more questions? Operator?
Operator: There are no further questions in the queue.
Anders Olsson: All right. Thanks, everyone, for listening to the call. We are always available if you have any more questions after the call. Thank you, and goodbye.
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