Tele2 (ST:TEL2b) AB (TEL2-B.ST) has exhibited a strong start to the year, reporting a 4% increase in end user service revenue and a 2% rise in underlying EBITDAaL for Q1. The company has launched a new three-year strategy program focusing on customer experience enhancement and cost reduction, with a goal of saving SEK600 million.
Tele2's commitment to sustainability is evident in its Climate A rating from CDP and a second-place ranking in Sweden for gender equality. A significant shift in the company's ownership structure is underway as Kinnevik agreed to sell its stake to Freya, positioning Freya as the largest shareholder. The company's financial leverage remains below target, and it has generated robust equity free cash flow.
Key Takeaways
- Tele2's Q1 shows a 4% growth in end user service revenue and a 2% increase in underlying EBITDAaL.
- A new three-year strategy aims to enhance customer experience and achieve SEK600 million in cost savings.
- Freya is set to become the largest shareholder following Kinnevik's stake sale.
- The company has received a Climate A rating and is highly ranked for gender equality in Sweden.
- Tele2's financial leverage is below the target range, and the company has generated strong equity free cash flow.
- 5G network expansion is ongoing, with close to 70% of the population covered.
Company Outlook
- Tele2 reiterates guidance and midterm outlook, with expected CapEx to sales ratio of 13-14% in 2025, returning to 10-12% from 2026.
- The company anticipates 90% high-frequency 5G coverage by year-end and is developing a fixed-mobile convergence strategy.
- Churn rates have slightly increased due to price rises, but customer satisfaction remains high.
Bearish Highlights
- Slight uptick in churn due to recent price increases.
- Negative growth reported in Latvia, although price adjustments are planned for later in the year.
- Restructuring costs of SEK180 million were booked, primarily related to resource reductions.
Bullish Highlights
- Strong growth in B2C and B2B segments, particularly in fixed broadband, mobile postpaid, and IoT.
- Successful organizational changes and network optimizations have already contributed to SEK80 million in run rate savings.
- The company is confident in its network strategy and IT improvements, expecting to maintain strong cash flows.
Misses
- The company experienced negative growth in Latvia but plans to address this with future price adjustments.
Q&A Highlights
- CEO Kjell Johnsen discussed the impact of price increases on growth rates and the potential improvement in consumer outlook by year's end.
- The company's focus on delivering the best 5G network and achieving security compliance was emphasized.
- Operational leverage is expected to come from overperformance in mobile and broadband and successful execution of initiatives like TV and TiVo (NASDAQ:TIVO_old) migrations.
Tele2 AB has laid out a robust strategy for the coming years, focusing on enhancing customer experiences, expanding its 5G network, and maintaining financial discipline. The company's leadership is optimistic about the future, with a clear vision of improving both network coverage and IT capabilities. With a strong balance sheet and a commitment to sustainability, Tele2 is poised to continue its growth trajectory in the competitive telecommunications market.
Full transcript - None (TLTZF) Q1 2024:
Kjell Johnsen: Good morning, everyone. Welcome to Tele2's Report Call for the First Quarter of '24. With me here in Heathrow today, I have Charlotte Hansson, our Group CFO, Hendrik Groot, our Chief Commercial Officer, Stefan Trampus, our Head of B2B and we also have our CTO, Yogesh Malik here, who will soon present our exciting Tech Journey, which is why we have extended today's call with up to 20 minutes. So let's turn to Page 2 for some of the highlights. We had a good start to the year with 4% end user service revenue growth in Q1 and 2% on underlying EBITDAaL as top-line growth outpaced cost inflation. We're also happy about our strong cash generation, which has pushed our financial leverage well below our target range ahead of the first proposed dividend tranche in May, and that gives us flexibility going forward. In relation to Q4 results, we announced the launch of our new three-year strategy execution program. Through the program, we shift focus on fixing legacy IT towards our go to market efforts, developing outstanding digital tools and channels aimed at radically improving customer experience and value. It will also allow us to reduce run rate costs by SEK600 million. The program kicked off in Q1, and I will soon share some details on the development so far. In terms of sustainability, we are proud that our Climate A rating with CDP was reaffirmed, a level that less than 2% of more than 21,000 assessed companies globally receive. We're also number 2 in Sweden among the top 100 companies worldwide in Equileap's gender equality ranking. Finally, the long-term ownership structure of Tele2 looks set to be clarified as Kinnevik has agreed to sell its stake to Freya, jointly controlled by iliad and NJJ. Subject to the completion of the transaction, Freya will be the new largest shareholder in Tele2. Let's move to Page number 3, please. End user service revenue grew by 4% organically with solid performance across operations including continued growth acceleration in B2C. Organic underlying EBITDAaL grew by 2% driven by end user service revenue growth partly offset by cost inflation. Q1 was yet another quarter with solid equity free cash flow and Charlotte will walk you through the details. In Sweden B2C, we saw end user service revenue growth accelerating to 4%, by far the highest rate since the Com Hem merger. Both fixed broadband and mobile postpaid grew strongly supported by pricing. Sweden B2B continued to grow nicely in line with previous levels. The mobile business posted 8% end user service revenue growth supported by ASPU and continued strong IoT growth. Baltics had yet another good quarter with a largely ASPU driven end user service revenue growth that trickled down to underlying EBITDA growth. And then let's move to Swedish Consumer, Slide 5. Mobile postpaid ASPU increased by 4% in first quarter, driven by ongoing pricing and supported by churn in free mobile broadband, which largely also explains the RGU decline in this seasonally slow quarter. In fixed broadband ASPU grew by a strong 8% mostly due to price adjustments. The number of RGUs declined by 6,000 excluding a cleanup of 11,000 non-active group agreement customers. Digital TV, cable and fiber remained largely stable in terms of volume excluding a cleanup of 16,000 non-active group agreement customers during Q1. Loss was largely flat. Next slide. Mobile end user service revenue grew by 5% driven by continued acceleration in mobile postpaid, which delivered a strong end user service revenue growth of 7%. Prepaid revenues continue to contract, albeit somewhat less than previous quarters now that the registration requirement in February '23 has annualized. Fixed broadband delivered yet another quarter with impressive end user service revenue growth, this time 9%. End user service revenue for digital TV declined by 2%, driven by continued decline in the legacy DTT business. Now let's move to B2B, Slide 7. The macro situation for Swedish companies have become increasingly challenging as reflected in bankruptcy statistics, unemployment rate and budget deficits in public sector among other things. However, Sweden B2B continued to grow end user service revenue at a healthy underlying 4% in Q1. The main driver is the mobile business, which grew end user service revenue by 8% driven by ASPU and continued strong IoT growth. Net intake was negative with 10,000 RGUs mainly due to a larger public customer that churned during the quarter. We're also happy to see 3% growth in our solutions area supported by high level of activity for networking and unified communications among larger customers. Our copper decommissioning has now reached 95% completion and we begin to see signs of stabilization in our fixed business. And then let's move to the overview of Sweden. End user service revenue growth for the total Swedish operations accelerated to 4%, driven by both B2C and B2B. Underlying EBITDAaL grew by 1% as the strong end user service revenue growth exceeded cost inflation. The cash conversion of 59% is reflecting 14% CapEx to sales during the last 12 months. And then moving to Slide 10. The number of Baltic mobile postpaid customers continued to increase in all markets during the quarter. Organic ASPU continued to grow at a healthy rate driven by Lithuania and our more-for-more strategy, price adjustments and prepaid to postpaid migration. Then moving to the financials. ASPU growth combined with some volume growth in mobile postpaid led to 7% organic end user service revenue growth for the Baltics as a whole, largely driven by Lithuania. When it comes to Latvia, growth has slowed down after some exceptional years, and I'm optimistic about the prospects for regain growth going forward. Underlying EBITDAaL grew in line with end user service revenue at a healthy 7%. Cash conversion remains very strong and reached 75% due to global affluence, reflecting 10% CapEx of sales due to ongoing 5G rollouts. With that, Charlotte, I hand it over to you for the financial overview.
Charlotte Hansson: Thank you, Kjell, and good morning, everyone. So we're on Page 13. So first a few comments on the group P&L. In Q1, total revenue grew by 2% organically whereas end user service revenue grew by 4%. Underlying EBITDA grew by 3% in sector and 2% organically, whereas underlying EBITDA grew by 2% organically, driven by solid end user service revenue growth exceeding a significant cost inflation and continued margin pressure from product exchanges as legacy services continue to decline. In Q1, we had an SEK11 million headwind from Energy year-on-year. As you can see on the slide, items affecting comparability increased by SEK120 million year-on-year, which were related to the strategy execution program. Then our net financial items increased by SEK40 million year-on-year, explained by higher financing costs for outstanding debt. By Q1, we had a debt mix of 67% fixed rate and 33% floating rate. With that follows, every 1 percentage point rate change in underlying market rate, our annualized financial expenses on loans with floating rates moved by around SEK90 million. During 2024, we had some SEK2 billion maturing, of which that majority is fixed and matures during Q2. So, let's move to the cash flow on Slide 14. CapEx remained high in Q1 due to continued intense investments and increased mainly due to timing of payments. Changes in working capital were positive in Q1, mainly impacted by a reduction in equipment receivables and increased provision for restructuring costs. However, despite the positive development in Q1, our ambition to keep working capital cash flow neutral in 2024 remains unchanged. Taxes paid declined year-on-year due to the settlement of taxes paid from SEK93 million related to previous years. And all in all, our equity free cash flow for Q1 ended at SEK1.3 billion and above last year's level. And over the last 12 months, we have generated SEK4.9 billion of equity free cash flow corresponding to SEK7.1 per share and consequently slightly above our ordinary dividend level. So let's move to Slide 15 for our capital structure. By Q1, economic net debt amounted to SEK20.4 billion a decline by SEK1.2 billion compared to year-end due to the cash generated in the business. Our leverage ended at 2.3 times, which is well below our target range of 2.5 times to 3 times. And with that, I hand over to Kjell to comment on the Strategy Execution Program.
Kjell Johnsen: Thank you very much, Charlotte. And then I'd like to take a little bit of a time-line perspective with you. And we talked a bit about this during the Q4 presentation. You will see this illustration of showing a time-line from 2020 to 2026. And I'm trying to put it into a context of the previous program and the current program. We have talked for many quarters about the importance of our IT migration. We've talked about how important it is to move out of the third-party retail. And of course, we are making ourselves prepared for this. And from 2020 up until where we are now, we have worked with consolidating our IT infrastructure going from having multiple stacks into having one, so that we can work faster and more nimble and also have higher quality of execution. And I'm happy to say that basically as we speak now here in April, we are doing the final migrations so that we get this all into one B2C stack. And then, of course, their work continues with building the digital interfaces, the channels, but it is a milestone for us. This is a point where all different assets, Tele2, Com Hem, Comviq, Boxer, these things are coming together and will make us more efficient going forward. And this is what we want to capitalize on with the strategy execution program in the sense that we're going to build an interaction with customers that is more digital, less cost in third party retail. And obviously, running this new stack is going to be in itself a more efficient way of running Tele2. We will also create value from interactions with our customers in doing so by being much more precise in the way we approach them. So I just want to show you this time line and that the idea is that by the end of '26, we will have completely revamped our go-to-market in Tele2. And if you speak to other operators and have an honest conversation with them about these things, which we can do. And I will not name names, I'm talking about companies outside of this market. Many telcos will have a time line if they draw the same figure that we have here that will take them into 2030. That is for sure. So it is quite a big milestone for us, and we will return to this. And also, Yogesh is with us today to help us understand better what we are going to achieve. So let me then move to Page 17. So here's the first update on the progress of the Strategy Execution Program, which aims to deliver radical improvements in customer experience and value and operational efficiency. On the B2C side, we have kicked off by strengthening focus and investment in our own channels. We have also carried out a major migration relating to customer service capabilities ahead of the final large B2C migration later this month. On the B2B side, we have established a program for digitalization and automation. Finally, our brand new 5G network is growing rapidly and is currently covering close to 70% of the population despite us not using 5G in the low band. This is higher frequency coverage in new base stations. Then let's move to Page 18 for the financials. As you know, as a consequence of the program, we are targeting SEK600 million of run rate cost savings by the end of '26. By the end of Q1, which is the first quarter, we had executed on organizational changes and network optimizations worth SEK80 million in run rate savings, of which SEK10 million contributed to our underlying EBITDA year-over-year. In Q1, we have also booked some SEK180 million of restructuring costs, mostly related to resource reductions. A good part of the restructuring costs has not yet contributed to the savings run rate, but we'll start doing so in Q2. But then let's go to the even more exciting stuff. Let's hand it over to Yogesh to take us through our tech journey.
Yogesh Malik: Thank you. Thank you, Kjell. Yes, so what I'm going to cover is what we had presented in 2021, the three years ago, how we are doing right now and what are the plans, what is the vision, and take a little bit deeper dive in network and IT, and then move to our customer priorities for this year. So starting with a recap, now I'm taking myself also two years ago. We have a unique model, unique network sharing model, which allows us to become extremely CapEx efficient. We have our own TV deck and we have our own IT, different parts of IT, which helps us foster time to market and become more CapEx efficient and OpEx efficient. We have been automating processes continuously, but in some cases, we are also going deeper and addressing the fundamentals on how to automate in a sustainable manner. The product of the merger has been multiple networks, whether it is backboard networks, we call that three board networks. We are going to make it one, and we are on that journey very, very successful on that. A lot of teamwork. We have two mobile networks or two JVs, one with Telia (ST:TELIA) called SUNAB and one with Telenor called Net4Mobility. The future JV to survive is Net4Mobility where we are putting all our assets into. We had 6 IT stacks, as Kjell mentioned. We are on a journey of completion to two. We are currently at three. And this slide was presented in 2021 with a clear vision that we want to become the most energy efficient operator with continuously addressing the operating model in detail and also looking at sustainability continuously all the time. So let me take you through the tech journey now. And our tech journey starts with the customer because till the customer sees the impact, it would be hard to say we are doing stuff which helps the business and the customer. So here, I'll run you through step by step. When it comes to the customer, what matters is download speeds, throughput, latency, and we have improved that significantly over the period, two times. We are also working extremely heavily on not only adapting agility, but controlling the processes on configuration and change management. We have been able to reduce incidents, which are affecting our customers by more than 40%. And this is a teamwork to make sure that while we adapt agility, we have to be process controlled as well. Our data consumption is increasing. I'm sure it's increasing in every geography and our range is 15% to 20% every year fixed mobile data consumption, 5G is growing at a very rapid pace as well. At the same time, 4G is also growing very rapidly for us. On CapEx, and we have heard that heavy years of investment, a heavy job to be done. This year is very critical for us to do the swap or complete the swap, abide with the regulations, and next year is critical for us to roll out the site and switch off the JV with Telia with mutual cooperation, which is SUNAB. Here, we have also shown you that we monitor very consistently ex 5G as well, because our goal is to be CapEx efficient and be sustainable in the long run. And when we design networks, we want to design them for the future to improve not only the customer experience of today, not only the AI of today, but the AI of tomorrow as well. And below, you'll see some key initiatives over the years. So, 2022, we began IT migration, not planning, migration, residential, creating the FMC (NYSE:FMC) stack, which we are seeing right now. And I'm very happy to say that it's gone very well. Great teamwork across data center, whether it is private cloud or public cloud, we have been extremely concerted on that, while abiding to the regulation in Sweden. Last year was the year for us to plan 2G and 3G shutdown. It is going to happen in 2025. And I think 3G everyone knows, it's a little bit inefficient if I use a moderate term. Actually, it's super inefficient, and it's good that we are coming out of 3G and 2G as well. This year, full focus on swap and full focus on not only on the swap, but creating a hardware and software layer, which is ready for AI for tomorrow as well, not only of today. And then I'll take you through a stack, and I am sure that there are multiple versions, which can be described in a Tele2 stack. So, left side, you see an extremely colorful picture, happy, but not really that happy, because we have to spend a lot of time. It's a product of the mergers. We have different, so the way I would explain this tag is starting with the connectivity. It's fixed and mobile connectivity. You go to the transmission layer, which is backbone, where you transmit all your TV as well. You move to the core, which is all the way into voltage. You go into the data center, which host all the application. You move into your application itself, whether they are customer facing or employee facing, and then you go to the exposure layer, whether it is web, whether it's customer operations, retail, or personal sites. And I think that we have done a lot on the legacy to keep us going. But now for us, it is the time for the new. And the new is much more homogeneous. Homogeneous not in terms of anything else than data and AI. So data flows go all the way up from the interface down to the data lake. And what is very important is integrated by APIs. So this would be much more secure, much more intuitive in terms of management of any troubles, which are coming affecting incidents and, of course, cloud compatible. This journey has not been just a piece of cake because it has taken a lot of effort from the whole organization to think through, but we have been extremely true to the vision, which we are developing. And for us, what is very important is employee experience drives customer experience. The more we make it easier for ourselves, we can address more customers eventually. Now, I'm going to take a deeper dive into network and IT. Let's start with the network. So if you go to the next. On the network, we have a unique structure. We have two JVs, one with Telia called SUNAB, another one with Telenor called Network Mobility. And it is extremely important for us to see what are we doing, why are we unique. So, you see here the areas which Tele2 operates. It's called Melodaline area. It's in the middle. And you see the north. Those areas remain consistent, whether it is the new structure or the old structure, which helps us to serve our customers much, much better, much faster and actually also address both fixed and mobile problems at the same time. On the left side, you see an indication, indication of towers, one which is SUNAB, other which is Net4Mobility. And I just want this is an illustration, that's not actual. But what we have seen is designing the new we can use the whole spectrum of frequencies. 700 to 3.5. We can actually use densification. We can remove overlaps. Hence, we've become extremely CapEx efficient. With lower physical presence, we can address the same depth. We can reduce energy consumption per gigabyte. What we have seen through this modernization, which we are on, is that the throughput increases, which I demonstrated before as well. It has increased two-fold and all sides we see it goes up 2 times to 5 times. We also see very clearly that we are controlled in our CapEx. And not only CapEx here and now, long-term CapEx, lifecycle management, we are modernizing the whole thing. Troubleshooting becomes easier because we do not need to go to two looks anymore. We will go to one network, and we see that. And given our similar areas, we are able to control our big enterprises, our customers in our areas as well on top of that. Modernized hardware, every hardware gives new functionalities. So AI enabled across, and I do not mean AI for today. I'm talking about the future AI, where AI will be embedded into much more detail beyond deep sleep and others. And for us, it's a continuous journey. And switching off 2G and 3G is important. 3G especially, because 1% of the traffic and less is being carried by 3G, but 10% of the overall energy consumption is done. So it's really inefficient. So we will save the environment, we'll reduce carbon emission and we'll become more sustainable. And 4G, 5G network going forward will be one of the best. So, now, I take you through the IT journey. And it has been a journey, but we had to start the journey with a vision. And the vision was very clear for us that we need two stacks. One, which addresses enterprises with a solution and the other one, which takes mass market in a very, very composable manner. And why do I call that composable? Because we have to be able to see things which are not deeply connected. We can take things out, replace things in. We have been on this journey and we are going to be finishing this journey. So, it gives me a lot of pride. This would not have happened without Shell (LON:SHEL)'s sponsorship. The CEO sponsorship is extremely important without Hendrik and Stephan, because business sponsorship is extremely important and also to make sure that we can deliver this with our partners. And we have selected partners. For example, we have replaced our charging system. We have replaced our policy management system. And we are on a very good way. What does this new architecture give us? It gives us a clear digital enablement. Of course, digitization will keep going on. We'll go deeper and deeper, but it has enabled us from the fundamental. Number two, for us, as we have fewer incidents, we can manage them very fast. Product configuration, which are on the base level, and pricing configuration can be done by Hendrik's team, which is the market facing team. And we want to make the stack market oriented, yet very composable in design. And to be very clear, we are worried about energy consumption. So, 1,000 servers for Comviq, they will be 100 servers, Because tech has moved on, space management is critical and energy management is critical. So this is building security by design and also making it cloud-friendly. And then I would finish with the customer priorities. And we call that customer priorities, because actually it is all about our customers and its operations first. Start with best 5G, I'm a firm believer in that. Swap by end of this year. It's a massive undertaking and we will be covering 90% of the population. We are close to 70% right now. As Kjell mentioned, 5G security compliance and carbon emissions. We have net zero targets, and we have circular economic targets, and we are totally on that. We have our own TV tech. And Boxer, while we are doing a lot of stuff, what we are focused on is TiVo. TiVo migration has been completed as of yesterday, and it is six months sooner than what it was. Remote PHY, we are executing. And of course, we are looking at all the new techs on fixed because it is very critical for us to make sure that we are able to get that new tech in the landscape where we have a lot of fiber quality of service, quality of experience as well. On the own IT, I think I've gone through that, so I'm not going to deep dive into it. And on operating model, we look end-to-end. One more time that we are looking into business processes, how we can keep them running and how we can keep them forward, change success and see where incidents. So I hope I've given you a little flavor of the whole thing. And with that, I hand over to Kjell.
Kjell Johnsen: Thank you very much, Yogesh. So basically, a massive change building the best 5G network or 4G network and a complete revamp of the entire IT stack, both for consumer and for B2B. That's quite a task that we have been through. Let's then move to Slide 25 for the guidance and outlook. So to make it short, we reiterate both our guidance and the midterm outlook. And as said in the Q4, our EBITDA guidance includes an estimated cost headwind of around SEK90 million, of which SEK35 million relates to the energy support received in '23. And given the outcome in Q1 and the current benign price levels, the headwind could be lower than SEK90 million. As a reminder of our CapEx profile, in 2025, we expect 13% to 14% cap sales driven by the final stage of the major 5G expansion and rollout ahead of the 3G network closure at the end of the year. From 26, CapEx to sales is expected to come down to historical levels at 10% to 12% as our network expansion will return to being demand driven. So with that, let's hand it over back to the operator.
Operator: [Operator Instructions]. We will take our first question. Our first question comes from the line of Ondrej Cabejsek from UBS. Please go ahead. Your line is open.
Ondrej Cabejsek: Hi, everyone. Good morning. Congratulations on the very good quarter and thank you for the question. So, but two please. One is, just for management in general, if you've had any conversations already with the new reference shareholders and what are some of the changes in focus or strategy or just execution that one you might be expecting going forward from Tele2? That's one question. And the second question, you've had a really improved kind of set of trends around Sweden B2C. I think it's quite a material step up compared to basically a more gradual expectation by the Sweden. So if you could maybe walk us through the dynamics there and what kind of the outlook is in terms of trends, because you also mentioned in the previous calls that some of the pricing that you've done, for example, would be only hitting from 2Q onwards. So in terms of the run rate of Sweden, B2C, EUSR, could we expect a further improvement throughout the rest of the year? Thank you.
Kjell Johnsen: Thank you, Ondrej. I'll start with the iliad question. Yes, of course, we do have contact with iliad. At this stage, they are in sort of in the middle of a transaction that needs regulatory approval. So they are not insiders at Tele2. So that limits the dialogue we can have to more gen generic. I can't say more to them than I can say to you. But that would, of course, change by the middle of May when we expect these things to come through. And we are quite excited about getting them in. Kinnevik has been a fantastic shareholder at Tele2 from inception all the way up until now, very supportive and a very professional shareholder. Now we're getting a new shareholder that has pretty much the same kind of challenger mindset that we connect with Kinnevik and NJJ. We get it now with Xaviel Niel and iliad, who have been challengers in multiple markets in Europe with success. And I would say this is early days. We typically do a strategy review once a year. We look forward to their inputs, which, of course, we'll be listening very much to and discussing with them. We also are keen to learn more about how they run their operations, for example, in Poland, where they have Play and UPC, which has similarities with us. And who knows? Maybe a few of the things we do here are pretty good, so maybe they can learn a little bit from us also. So that will be a good and nice dialogue for all of us. Very excited about that. And I'm sure that Hendrik is happy to speak about good results in Sweden B2C. He's worked hard for that for a couple of years. So maybe you can, sure, take that.
Hendrik De Groot: Hi, Andre, and thanks Kjell. And yes, it is a continuation of our journey basically. We still and we still have a bit of a difficult market that the consumer market is in with device sales down 9% also in this quarter. But we've been able to build strength in the underlying foundations and I think some of that you can really see come to fruition at the moment. Last year, basically built on the things we have done around Tele2 Mobile making it more stable in terms of moving Tele2 Mobile together with devices and handsets and doing all the steps in the portfolio at that time with the new unlimited portfolio has really built some good strength in our mobile business that sort of we're benefiting from today. And also as part of our strategy execution, we have moved to a new pricing model that we've talked about in previous quarters. That's been quite substantive. So the pricing model that we've now moved to from more for more is an annualized pricing model and there's some quite big changes in that. Where in the past, we would take cohorts of customers spread out through the first half of the year that we would then price up. We have now taken the approach that all of our customers will receive pricing and with all of the customers, I mean, all those customers that are not in a binding relationship with us. And they have all been communicated to the beginning of the year, and they will all be receiving their first bill in March and April and that's quite different to what we've done before. So basically, it frontloads the pricing, and that's a, from a year-on-year comparison effect something to take note of in particular for this year versus last year because last year we were still in the old model where you saw that the pricing effect came in more towards the end of the year. So we're now having a pricing model that comes in more front loaded. Only some of the pricing sits in the first quarter. In the second quarter, we'll see the full effect of it. And then as customers run out of their binding relationships, during the year they will also be priced onto the new front books, because part of the pricing strategy has been that also from January we have actually across all of our services introduced new price books, new front books and we've taken that across all of our BTL prices as well. So all of our underlying BTL prices, SafeDisc everything has been receiving the same price treatment. So it's quite a different approach to what we've done before. And if you want to translate that into an outlook, I would say, this quarter has benefited from an effect from last year and the first month of pricing in March. The full effect will come into the second quarter and will take its way through the year. But on a year-on-year comparison basis as we go to the second half of the year, of course, you will see the effect of last year's pricing come in from a year-on-year comparison point of view.
Ondrej Cabejsek: Thank you, very much. And just one follow-up quick, please. In terms of the lapsing, the majority of the lapsing price increases last year, when exactly would that be kind of happening? And so, I guess, what you're saying is one month of 1Q then full Q2 benefiting from an overlapping set of price increases, but then when exactly in the second half is that lapse time, the majority of that?
Kjell Johnsen: No, if you look at our pricing last year, I think we also guided on that during last year that we would see the effect of price increases fully into the last quarter Q4, which we've also seen in the ramp up of the growth rate in the B2C business in the fourth quarter. And if you take our pricing effects for this year, you will see the full effect in Q2 and in Q3. Of course, also taking it through to Q4, but your year-on-year comparison of course will you'll need to take into account that we had a ramp up in the fourth quarter of last year, if you compare it year-on-year.
Operator: Your next question comes from the line of Oscar Ronnkvist from ABG Sundal Collier. Please go ahead. Your line is open.
Oscar Ronnkvist: Good morning. Thanks for taking my questions. So just the first one on the consumer outlook. I think we saw some comments from you Kjell that we could see or could hope to see an improvement throughout the year. So just wanted to get any comments on the full year guidance and what is incorporated in that, please, if the consumer environment is maybe a little bit better than you initially expected? Thanks.
Kjell Johnsen: Yes. That was more of a macro comment from my side. And in a way, your guess is as good or maybe better than mine. Just reflecting on the fact that it's been a bit tricky for years. We went out of COVID, we had inflation, we have had higher interest rates, and people's pockets have, of course, been impacted by inflation and higher interest rates. If we now see interest rates start coming down, which seems pretty clear, at least in Sweden, it definitely will. I'm thinking that towards the end of the year, people will maybe have a little bit more money in their pockets. So this is not something that I think is going to have a significant impact necessarily on our development this year, but it could. And I think we see that the trends should start becoming supportive at some point towards the second half of the year.
Oscar Ronnkvist: I think just sort of on what to extrapolate from this Q1 also. I think that you believe you guided for flattish EBITDA growth now in Q1, came in at 2%. And maybe would assume that it's top-line driven with an acceleration in the Swedish consumer growth as the previous question highlighted as well. So just on what sort of drove the 2% sort of beat versus your expectations? Maybe it's a little bit on the low side to fully extrapolate. But have you experienced a better customer response from the price increases that you did in the early part of the year? Or how should we think about the better than expected Q1, please, in terms of what we can extrapolate?
Kjell Johnsen: I think we still see some effect, although not that much course of the pricing we have done this year. We have the, it played out well with the last price adjustments last year. Lithuania has been off to a very good start, which is also helpful. So I'm glad we could come in a little bit above, and maybe we were slightly conservative looking at the first quarter. But it's nice to come on this side of the equation, so to speak. Please, if you want to add something.
Unidentified Company Representative: Yes. I think just to add, I think we should also just take into account that we had a pretty good run-in the years, particularly the second half of last year. So some of the benefits is coming through pricing, but also we've been able in particular on the mobile side to have a good base growth and that of course we're benefiting from as well. So I think it's a combination of the two. And, yes, I think for the year, let's not forget the device market, the handset market is still down even versus it was last year. So consumers are still a bit careful although of course the things seem to be stabilizing. But I think it has mainly been a good sign of resilience to a market that is expected and got used to price increase over the last period.
Operator: We will take our next question. Your next question comes from the line of Andrew Lee from Goldman Sachs (NYSE:GS). Please go ahead. Your line is open.
Andrew Lee: Good morning, everyone. I just wanted to build on some of the questions and answers that we just had and also on the operational gearing. So as people have alluded to, you delivered 4% service revenue growth and 2% EBITDA growth this quarter. And that's sort of mid to upper end of your full year guide. And as the last question said, you've been soft guiding to flat EBITDA this quarter. If we build on what you just said through this call, you've just made meaningful and relatively early Swedish price rises that haven't fully impacted yet. And I think you suggested previously that energy headwinds will be greatest earlier on in the year. Plus, you said the restructuring costs would contribute more to EBITDA from the second quarter and that maybe energy headwinds could be lower than the 90 million that you guided for the year anyway. So the first question is, would it be erroneous to say that your service revenue growth should at least be sustainable from here, probably be better in the second and third quarter and that your EBITDA growth should accelerate through the year. Just any help you can give in what's wrong or what's going in the wrong direction to make those statements incorrect, at least flat to accelerating service revenue growth from here and accelerating EBITDA growth? And then secondly, just on again on operational gearing, do you think we can reach the point in H2 or by Q4 where EBITDA growth exceeds service revenue growth for Sweden and the group? Thank you.
Kjell Johnsen: Yes. Andrew, this is a very interesting discussion. First of all, we're not going to change our guidance on revenues, but tonight we'll try. So when it comes to EBITDA, I sometimes get the feeling when we have this discussion that people focused on look at the company on mobile and the broadband and then extrapolate from that. And if that were the case, I would have promised you operational leverage without any hesitation. The thing is we do a couple of other things also. We have the TV side that we have to deal with. And some of the things that we are doing technically, for example, we talked about TiVo and mentioned that we have finalized it, actually quite a bit ahead of plan. These migrations of customers over to new standards involve risk. We're also now in the process of doing some upgrades around Boxer. So some of our customers are getting cards and these things, and this is normal. It happens all the time, but they do have risk elements to them. And there are elements of our business that do not automatically benefit from the price increases we do. We are working towards operational leverage as a whole, but then in order to deliver that, we need a substantial over delivery on a couple of our categories to be able to get to that for the whole company. You see we can do it in the because of this. That model is simpler in the positive sense of being easier to understand and easier to run. With the bigger complexity and stability of the Tele2 Sweden business, we need an over performance in mobile and broadband, in particular, in order to lift the whole ship up to operational leverage. So but I'm not telling you something you don't know, Andrew. I'm just kind of rehashing it.
Andrew Lee: Yes. No, thanks. That's really helpful. Can I just ask a follow-up question on what you just said, Kjell? So you've built in kind of risk around TV and TiVo migrations to new standards and boxer upgrades. So if those go well, I guess, then maybe we could see operational gearing. But when do we know whether those have gone well or not? And what's the time line of getting insight into that?
Kjell Johnsen: Well, TiVo, we said to you that, that has happened. So of course, that gives its little contribution to the overall picture, and we are all happy with the performance in Sweden B2C. That's one of the elements, of course, into it and then others. So we've said to you that our ambition is to come up to mid-single-digit EBITDA growth in the medium term, and that involves getting all these things more or less completely right. And TiVo has indicated that it can be done right. The other things that go very well. So we just need to continue to execute on our plan. And you see the SAP is here, that's an element of it, not only for the cost benefits, but also for the improvements in the go-to-market. So we just need to be very disciplined about delivering quarter by quarter on these plants, and then we can get back to those levels.
Andrew Lee: Thank you.
Kjell Johnsen: I wish I had a simpler story, but it's going to be like that.
Operator: We will take our next question. Your next question comes from the line of Andreas Joelsson from Carnegie. Please go ahead. Your line is open.
Andreas Joelsson: A couple of quarters ago, Kjell, you spoke about convergence and the importance of convergence and that it will increase in importance. Just want to know how far you have come in your view on that subject? And also, how important is it for your mid- to long-term outlook that you actually accelerate on the convergence? And secondly, you mentioned 70% coverage of high-frequency 5G. First of all, when or how will you utilize that position more commercially that we will more see 5G offerings and 5G solutions in your view? Thanks.
Kjell Johnsen: Yes. Yogesh talked a little bit about the technology part of convergence. Obviously, the whole work that has been done over the last few years of going to one stack is a prerequisite for being efficient in building convergence. And then I have said a couple of times that I think that the converged market, the FMC market, is going to be built throughout the whole of 20s in the Swedish market. It's not going to happen over a few quarters. You can do offerings and this and that, but I think we and at least one more player will be building convergent solutions throughout the 20s. And that is one of the key things that Hendrik is working on, and maybe you would like to expand on that. I'll just take the one on the 70% first. So when we launched the new 5G pricing plans for Tele2 in Sweden, we were the first in the market that treated 5G as a broadband product, which it obviously is, and in terms of the pricing structure. And we see that the market is clearly moving in that direction, which is good. So that gives us the opportunity to do more on the kind of pricing that Hendrik talked about here earlier. We are at 70% now of high frequency, and we will be around or close to 90% by the end of the year also with high frequency real 5G experience, not a 4G plus experience. So that's a good prerequisite for building these services. And then final thing before I hand over to Hendrik. I think building FMC is going to be important for, us because it's a way to isolate part of the market for us who have those capabilities. And so we can have less of this froth that's going on in the no frills that we see around us today, which basically is not moving anything forward in terms of keeping people happy over the long-term.
Hendrik De Groot: Absolutely, Kjell. And Andreas, I mean, FMC is the foundation of our Tele2 brand. And this call, we need a number of things to be at our disposal. So first of all, we need to make sure that we have a Customer 360 at our fingertips. And Yogesh just talked you through the tech journey, and I'm so happy that we are at a position now that we truly see at all of our touch points at Customer 360 that by the way we can also start to bring recommendations to in terms of next best action and next best offer. We also need to be able to really expose a complete digital journey to our customers and that is still a number steps that we need to do and we can accelerate on. And within that also include a seamless multi product and multi service experience to our households. So those are things that we're working on and Yogesh should have talked you through on the technology side. What we're doing today is, whilst we're sort of seeing these capabilities come to us. We are already with Tele2 very much into what I would call an FMC journey. So if you look at all of our channels and the way we run the business, we basically always look at the customer through the lens of mobile and the lens of broadband. And I think probably if you look at our growth numbers in the core, in our core connectivity that you've just been seeing today, some of that is delivered basically through our FMC approach. So on all of our touch points and the way we offer our services, we constantly look at what does a combination mean for our consumers. There's a lot of cross selling going on in all of our touch points. And actually, we see that our customers are quite interested and open to that. We have at the moment propositions and offers in the market around what we call connectivity combinations. And we are very much looking forward to combining our Entertainment Suite into those type of offers as we go on in the year and into next year. So there's a lot happening. And we already have quite a proper penetration on our broadband and mobile base of what I call FMC households.
Operator: Your next question comes from the line of Nick Lyall from Bernstein. Please go ahead. Your line is open.
Nick Lyall: First question on churn, please, Kjell. It looked like even with the cleanups, your churn was up a little bit this quarter. Could you just tell us how much is due to the price rises? And then how much the value strategy and maybe how much competition? Just to give us a rough idea, and is there a risk the second quarter gets worse given Henrik's comments on the timing of the price rises? And then secondly, gearing looks very low now at 2.3%. I think even with the divvy, you're seeing 2.5% for the gearing. So presumably, it's going to be below the guidance range for the full year now. Could you just remind us of your options on that and what the current thinking is about prudence on the balance sheet and what your options might be? Thank you.
Kjell Johnsen: Yes. On the churn, clearly, we laid out that some of these were related to group agreements. So really, the P&L impact is zero, close to zero, very little. Hendrikcan explain that more. So, I think bringing that with you. And maybe you want to elaborate a little bit more on that?
Hendrik De Groot: Sure. No, I can take you through, let's say, sort of the churn of the net intake position in the first quarter. I'll take you through all of the products. So first of all, if you look at on mobile, as we said, it's very much driven for, I mean, first of all, just to step back on all products, typically the first quarter is a bit of a softer quarter, given that we have always a busy Q4. That is a seasonal effect, if you want to call it like that. And then secondly, yes, we have done quite significant amount of pricing, but in particular also pricing communication to all of our customers that I was explaining before and that of course has its impact. But underlying, if you look at mobile, we've stated that a lot of that is also driven by the free MBB. And you probably recall that we have launched a broadband service with mobile fallback. In the early version, we joined an MBB with the service that later on and we launched it last year, we integrated into our router, which now then therefore the mobile MBB becomes a component, not any longer an RGU. And some of that is sort of just life cycling out. And we have therefore, if you net look at the numbers, the net intake position between Q1 this year and Q1 last year on core mobile postpaid is pretty much at the same level. So there are little bit of pricing effect in there, but it's actually not too bad. It's really tainted by the free MBB effect. If you look at our TV and Entertainment position, then we're pretty much year on year where we are. Again, the first quarter is a bit of a slower quarter. And I would actually say, given that we've done the TiVo migration that we've completed, which is over it is nearly 100,000 customers that we've been migrating with actually very little churn effect, there's quite I would say actually quite a strong number on that net income position. And lastly, if you look at the broadband, on the broadband you could say even if we take the cleanup out, we are a little bit weaker. And I think that is probably valid. A lot of that is also again driven by pricing. But as I said, we've taken through the pricing all the way through all of our BTL and on to our Safe Desk. And we've done also some cost passing, in particular on to the Olam customer base. Throughout last year, we've seen that a lot of the network operators have been pushing through quite large price increases. And we've taken those price increases in cost passing to our customers and some of price rises have been quite substantial. And from a margin perspective, by design, decided not to save all of our customers. So you can see that we have a little bit of a margin management dimension here, if you look at the net add position on broadband. And then maybe last but not least, whilst I'm talking anyway about the net intake position, if you look at our prepaid. Just to touch on that, also on the prepaid, we have a specific position in the queue in the Q1 with a little bit of a higher churn year-on-year. And that is due that when preregistration entered for all customers in first quarter last year, we saw a run of buying, basically prepaid cards of those customers that preregistration moment. So you can see a little bit of that fallout now. But that gives you a little bit of a color on churn and net intake.
Kjell Johnsen: Then, Nick, on your balance sheet question, yes, of course, we it's clear that we are now actually below the range. We have said over the last quarters that we'd like to be a little conservative, but it's also clear now that if we forget for a moment about the Red Sea issues that supply chains are more predictable definitely. We see that inflation is starting to get under control, interest rates probably coming down. So you can say that the need for being conservative is luckily going to be lower than it was before. So if we are in a situation and we also have a new shareholder coming in, so the options are quite straightforward. If we are consistently below and we don't buy a bolt-on asset that would be very good for our business, then we would look at that in terms of our shareholder remuneration policy and see what's the right level for us. And that's, of course, a dialogue for the board to have. And, of course, the new shareholder can have opinions about that. I don't know what they would think about that. That's a future discussion. But we have a policy, of course, and over the long run, we should looking forward.
Operator: Your next question comes from the line of Stefan Gauffin from DNB. Please go ahead. Your line is open.
Stefan Gauffin: A few questions. First on cost savings. I think you said in Q4 that the new transition program would happen gradually. And now you take quite substantial restructuring charges already in Q1. I would say that is indicating that the cost savings could be more front end loaded than what you than at least what I interpreted of the Q4? Second question is just on pricing in the Baltics. You have negative growth in Latvia and flattish in Estonia. You also comment that competitors have raised prices in both markets during the quarter. So is there room for you to do further price initiatives in coming quarters? And then just thirdly, Via Play, which you have a cooperation with, is losing content. So part of Premier League matches goes to Amazon (NASDAQ:AMZN). Disney is taking over Europa League and Conference League. And these are part of your current TV packages. Does this affect your content cost? And do you need to do adjustments on pricing in these packages? Thank you.
Kjell Johnsen: Yes. I'll start on the program. So within the first quarter, we have done restructuring inside the company here in Sweden. So that means that we have reduced the amount of employees and consultants by around 240, of which around half were consultants. And of course, that's part of the reasons why we are doing a restructuring charge here in the first quarter. So I think that kind of answers the question. Of course, that will give a cost benefit as we progress going forward. And the Baltics, well, Lithuania goes super well. Let's look at Latvia, which is the second biggest, And they had two price increases in '22, the last one in December '22, and they were at some point up at around 20% EBITDA growth. So it was almost like in the good old days. And they will they are in between price adjustments, but without being explicit on things, I am quite confident that they will be back into a cycle there again later in this year. So positive on that. There is room for maneuvering in the Baltics. ViaPress?
Hendrik De Groot: Yes. ViaPress, Stefan, our customers, as you know, they have, what I call, hybrid packages, most of them. So that means linear and both content based on via play. They continue to enjoy it. I think we're getting very good feedback and we don't see a reason for them to have a feeling that they're getting less. So there's no changes in that sense too how we look at our consumers and also the feedback we're getting. And of course, with regards to our relationship, we are continuous contact with our key partners, and we have ongoing discussions about how we move the business forward.
Operator: We will take our next question. Your next question comes from the line of Erik Lindholm-Rojestal from SEB. Please go ahead. Your line is open.
Erik Lindholm: Thank you, and good morning everyone. So a bit of a longer term question to start with. Can you talk a bit about the sort of the visibility you have in clearly lower CapEx from 2026 and beyond here? And then you talked about the new setup with only having that for mobility, et cetera. But do you think CapEx to sales could be even lower than the long-term average of around 10% beyond 2026?
Kjell Johnsen: So visibility is very strong because what we do in '25, in '24, sorry, is 100% linked to the regulatory decision that we have to swap out Huawei, so that is very easy to identify. And what we do in 2025 is very much linked to the closure of SUNAB, which has to happen end of 2025 because that spectrum doesn't exist anymore. It has been resold by regulatory authorities. So SUNAB will have zero spectrum from the 1st January 2026 that will all rest with Net4Mobility. So the visibility on that is total. And then, of course, we are into commercial development. But then since we already will have a massive coverage, we're then talking about to capacity increases here and there and some coverage sites here and there. So it's going to be back to normal run rate. But I wouldn't get your hopes too high up on getting further below the 10% number. You should remember that a lot of the CapEx that we spend is also in terms of running our own development. We are not in the pockets of any of the big integrators. So we have the freedom to make our own decisions and that means that we do development ourselves. We also build out remote five, we do upgrades. So 5G is a very important part of our CapEx, but I wouldn't get your hopes up high on getting below 10. I would even say that if you go back in time, there probably were times when CapEx was artificially low in parts of the business, and that's not a smart thing to do.
Erik Lindholm: And then a more of a short term follow-up here. You talked about your new pricing model here in Sweden and some earlier price hikes to normal. But what sort of pricing moves and promotional activities have you seen here in Sweden from your competitors? Are they following you in your piping activities here at the start of the year?
Hendrik De Groot: I'll take that one. So in general, we do see that across the board that the prices have been adjusted also beginning of the year by competition. So I think that's the good news. And then of course the other side is what happens next once you've done the pricing. And so that's where we as an industry need to keep each other hopefully in a good balance around value and volume. So that I think is more the key equation. So everyone is moving, but what happens next? And I think what we're seeing at the moment is to an extent quite competitive environment out there, and particular to us the latter end of first quarter. We see highly discounted offers, for example, coming in. So I think we all need as an industry just to be mindful, how we continue to drive value in the market and towards our customers.
Operator: Your next question comes from the line of Siyi He from Citi. Please go ahead. Your line is open.
Siyi He: Hello. Good morning and thank you for taking my questions. I have two questions. The first one is on the B2C. I just wonder if you can just walk us through the decision making process, the magnitude of the price increase you push through every year. I guess maybe majority part of them is set based on the consumer acceptance. So if, let's say, by the end of this year, we see improved in consumer confidence and wallet, and would you think that there could be a higher a bigger hedger for price increase next year assuming that the competition also remain benign? And also I want to understand that if you have thought about price indexation on your MBU group contract as well. And then my second question is on the B2B mobile. It has been growing quite strongly for many quarters and close to high single digits. And you did mention that the competition is intense of the year, but you're still outperforming. And I'm just wondering how should we think about the B2B mobile trends going forward? Thank you.
Kjell Johnsen: Right. Let me take the first part, Siyi He, on the levels of pricing. It is, of course, clear that consumers love their services and there is always a level of pricing acceptance. We try to very much have an orientation towards overall cost of living price development and that's what we also have reflected in the pricing we've done this year. At the same time, of course, we keep a good eye on how our NPS is developing because there's, of course, a relationship between the level of pricing and the level of satisfaction and customer lifetime you get. So I think it's a careful balance and we will see as we go along what we feel is the right level. But I would not conclude automatically that there's a lot of further pricing upside because there's always a ceiling to what you want to do and we're here for the long-term customer relationship and not for the short-term gain in that sense. And I think that was mainly sort of on the consumer pricing level and stuff on group agreement. And group agreements in general, they also have price increasing price increase cost just as part of the contract they are more like contracted customers. And group agreements are typically longer term relationships. So as they come up for renewal, they will are renegotiated, but they have price increase clauses within them. But you can that is very much related to the contract length so that you cannot sort of run that on an annual basis except, of course, the price increases that are inherently included in the contract as such.
Hendrik De Groot: Let me elaborate a little bit to give you some color on how we see the development from a G2D perspective. And Kjell mentioned this in the presentation and some of you stated that in your reports as well that we have good growth on the mobile part, 8% in the quarter, similar to the previous quarter. We also stated in the report that we lost the public customer, and this is the main driver of the negative or the big driver, I would say. But if we look into the context, to put that in a context. In the last four quarters, we have lost one larger private customer and two public customers. And this last one and how it works in the public domain, it's a little bit of a hit and a miss event. There's no negotiations. We put in a tender and either it gets accepted or not. And actually, these two public customers that we lost in the last four quarters, we will make up for already this month actually where we have won a new larger public customer. So in the larger segments, I would say that there's no big shift from a market competitive perspective. And furthermore, if we look at the situation we're in, we are in a recession. We've been in that for some time, and this has prompted our customers to address their cost base, which, of course, includes the personnel costs, and that has led we've seen that in our base that we've seen less growth in existing customers on RGUs, but also that some of our customers have done customer or personnel reductions and employee reductions, which led to less our dues. I think those are the main drivers. Then looking forward then, and I was alluding to this already in the Q4 call, I think, with Keval asked me about where is big going in '24. And I said, well, the ambition is to be on the same levels on the end user search area growth as we've seen both in '22 and '23. The unknown for us is the customer demand and the customer buying power. When I talk to customers, we still see that they have a cost conscious perspective. They look at their travel. They have travel restrictions, et cetera. We see, as Kjell was alluding to, bankruptcies still increasing. We see that newly started companies is less than last year. So let's see how it plays out on the coming quarters. But the ambition is clear and the ambition is also to grow our RGU base this year as we did for the full year last year.
Operator: We will take our next question. Your next question comes from the line of Usman Ghazi from Berenberg. Please go ahead. Your line is open.
Usman Ghazi: Thank you so much for the opportunity. I've got two questions, please. Firstly, just on the network side, on the mobile network slide that you had shown where you're going from around 12,000 sites as of today to just above 9,000, despite rolling out kind of 5G mid band to 90% of population. I just wanted to, and the question was, my understanding is 5G mid band spectrum has roughly half the propagation of 4G mid band spectrum, right? So, can you explain how is it that you're able to deploy 5G mid band coverage to pretty much the same coverage layer as 4G and yet reduce the number of sites by the extent that you've indicated? So that was the kind of first question. And then second question was just going back to the working capital. Obviously, Q1 is that a good development. Why is it that you're maintaining a flat still a neutral guide for working capital, is this conservatism? Or is there something else to be expected whether it be CapEx etcetera through the second half? Thank you.
Kjell Johnsen: I think Yogesh did also better than me on the network. I guess we are talking now about the population coverage and area coverage, but please you can do it much better than me.
Yogesh Malik: Thank you. And I think we have to look from a point of view when we say the target network, Golden Grid, in a way that we have to use all the frequencies, low frequencies, 700, 800, 900 mid band, 2,123. But also, I think we have to think about 1,800. And if you then layer 35, then everything put together, we design the grid. So it is depending upon the areas. And as you saw in the slide, we want to densify the urban areas and we want to utilize the spread of the spectrum in other areas. So today, SUNAB is 2,100 and we have other frequencies in Metform. So we are consolidating and hence we can both rationalize and densify. With densification, we can eventually prepare the network for deeper private networks at a later stage. So that is the rationale behind it.
Kjell Johnsen: And I think one thing that often we don't talk very often don't talk about is that when it's 5G, everyone is excited about that. And for many of our customers, I would say probably still more than half our customers, they don't have a 5G enabled phone. And what we are doing at the same time when we build 5G is that we're doing a massive upgrade of the 4G capabilities. So a lot of our customers who don't have a 5G phone are getting a massive improvement of their services from us even before they join the five-year train. But okay, let's leave it out. Working capital, Charlotte?
Charlotte Hansson: Yes. Thank you for the question. I think that, of course, we're happy with the Q1 results, but it is very much a temporary or a seasonal result, you could say as well. We do have the restructuring cost that we took in the quarter, and of course, that's something that was paid out during the year. So that's very much a timing. I think that's the one that we really moved it, yes.
Kjell Johnsen: So regarding flat for the year on working capital.
Charlotte Hansson: Yes.
Kjell Johnsen: That's flat for the year. Yes. Because of the timing differences here. So we just want to be very transparent about this, not to create any illusions. So, with the Tele2 model, a great cash flow coming through anyway.
Operator: Thank you. There are no further questions. I would like to hand back to Kjell Johnsen from closing remarks.
Kjell Johnsen: Yes. And thank you very much to all of you for joining. I hope it was helpful to you that we extended a little bit extra time to talk about our network and IT. That's a super exciting journey where we are really at the front when it comes to both consolidating IT and building a brand new 5G network. Many people use overlay networks. And if people try to do a mix, we're going all the way with a clean new network, even including how we link up the base station. So that's cool. We have a good first quarter. We think many of these trends are strong and sustainable, and the Tele2 model with a shared network resources shows again that it can deliver good cash flows filtering all the way through. Hence, our balance sheet is really strong. So we look forward to the next round, and thank you very much for taking the time with us today.
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