Elisa Oyj (ELISA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to Elisa's Second Quarter 2022 Conference Call. I'm Vesa Sahivirta, Head of Investor Relations. And here again, we have a very familiar team: CEO, Veli-Matti Mattila; and CFO, Jari Kinnunen; as well as some audience and my colleagues. Also following the normal practice, we start this meeting with the presentation, followed by Q&A. And Veli-Matti will go through the main highlights of the report and Jari will focus on -- more on financials. And I think we are now ready to start so I give word to veli-Matti, please.

Thank you, Vesa, and welcome to the interim report second quarter 2022 review on my behalf as well. Let's get started by the highlights from the quarter. Our -- we had another very good quarter, basically in all of our business areas performing really well. Revenue growing by 8% and our comparable EBITDA was up by 4%. As many of you remember, in our medium-term targets, our financial targets include a revenue growth target to be above 2% and the EBITDA target to be above 3%. So clearly, we are working and focusing on delivering to the targets as we now have performed again in the second quarter. Mobile service revenue was increasing by 7.2%. And in Finland, we had the postpaid churn decreasing to 15.3%, when it was 17.2% in the first quarter. We had growth in the postpaid subscriptions by 52,300. Of which, machine-to-machine and IoT contributed approximately half of that. In the fixed broadband subscription base, we had a decrease by 6,600. There was one larger customer case in the consumer side that we were losing some times, and this was one time decrease. But overall, we can say that the fixed broadband market is quite flat and good market itself. And of course, important thing is about the 5G. We can clearly say that the momentum continues very well. Our network coverage is increasing, now being 81% of the Finnish population in over 180 towns and cities. And additionally, of course, it's very great that we have been able to start as the first operator in Estonia with the 3.5 gigahertz frequency, the 5G service delivery. And that is also meaning that the momentum will be built -- is being built in Estonia for 5G as well. As you see, the revenue growth has been good over the quarters. Basically, mobile and even fixed services contributing to the growth. Digital services very strongly, and equipment sales very well during this quarter as well. Our EBITDA growth is based on revenue growth, but also our continuous focus on efficiency in different parts of the Elisa's operations, so it is very important for us based on the quality-driven productivity improvements to drive efficiency step-by-step forward with continuous improvement, but also, sometimes, with larger improvement projects. We are using AI and automation also to help ourselves to be continuously improving the efficiency. Mobile service revenue continues to grow. Of course, 5G upselling contributing very well. But also, our value increasing price product changes where we have slightly higher prices time to time to different cohorts, that also plays a good role. And even if the competition, especially in the 4G, subscription market continues to be very keen, we had a slight reduction in churn and also the visibility for the competition is such that it will remain keen going forward as well. When looking at our segments. We had 6% revenue growth in the Consumer segment, basically all the other parts of the business contributing to the growth. But of course, the regulatory price-driven businesses, like the interconnection business, is going down. And of course, traditional fixed line services, that is something that continues the decline. EBITDA was 4% for Consumer segment. In the Corporate side, correspondingly, revenue growth was 11% and EBITDA 6%. And we saw especially very good growth in the international digital service businesses. We continue to execute our very well-known 3 focus area strategy. And we foresee very good opportunity and -- in all of the 3 focus areas to generate value for our shareholders. And also, we are very firm to execute our mission. In 5G and in mobile side, we see that the smartphone penetration overall and 5G smartphone penetration is going up, enabling us to continue the upselling of higher speeds, including 5G speeds, to our customers. And as with this data, you can see, continuously, our customers are also in higher and higher speed subscriptions. Like I said, the coverage of our 5G network continues to grow. And we have the largest coverage of the operators in Finland based on the studies -- recent studies. Also, we continue to make more money with 5G services comparing to non-5G services. More than EUR 3 is sustained. And this is kind of coming from the fact, of course, that customers also are more satisfied. Based on the Net Promoter Score measurements that we continuously do, customers are perceiving to have more value from 5G, better customer experience. And that makes them happy to pay, on average, more than EUR 3. In Estonia, like I said, we started the 5G network, with a good spectrum that we achieved as a first operator in the auction. And the new spectrum is really used now to build the network in Estonia as well. And the first impressions are great also for the 5G momentum in Estonia. And we also continue to make records in different kinds with 5G. We had a record 5G uplink speed, 2.1 gigabit per second, in live demonstration with Nokia and Qualcomm. And of course, this paves the way to ultra-high-performing low-latency services. And our digital service businesses continue their progress -- their success also very well. In the domestic side, our entertainment video business, we continue to provide high quality, very good original content, original series. The Man Who Died, for example, which was launched, become among the most viewed content at Elisa Viihde Viaplay. We have also produced other content there. And the entertainment video business, even if the market is quite competitive, we have a very good position there and continuation. In IT services, the demand for hybrid cloud services continues. And we were recognized them on the most capable service providers in hybrid cloud orchestration. In the international digital services, Elisa IndustrIQ is making great steps forward with the joint offerings. For example, we were chosen by a utility company, Enel, based on camLine setup and Elisa IndustrIQ software, becoming the business partner, support their capacity expansion for solar panel production in Italy. Also, regardless of the tough market situation, geopolitics challenges in the market, Elisa IndustrIQ was able to grow strongly year-on-year their revenues and order intake. Elisa Polystar acquired Cardinality Ltd, it's a U.K.-based global supplier of cloud-native data management, service assurance and customer experience analytics. And this award-winning platform complements very well Elisa Polystar solutions to provide full network-wide automation solution with cost benefits to communications service providers. And Elisa Videra is really taking advantage of the increasing demand for hybrid working solutions now. And for example, SSP at U.K. as well as the Finnish government ICT center Valtori, chose Elisa. Valtori having even 80,000 -- up to 80,000 users for the video conferencing services that Videra provides. Our Elisians are really getting a lot of purpose for their work by executing our business, which really creates sustainable future through digitalization. As highlights, we were recognized as one of the 16 out of 150 top-performing digital companies by the recent green and digital companies, monitoring emissions and climate commitments report by the ITU, International Telecommunications Union. Also, for the second consecutive year, we were among the Financial Times' Europe's Climate Leaders list. And of course, we continue to provide our support in Estonia and in Finland for the Ukrainian people in need, for example, with the prepaid subscriptions. And as we have said, we report quarterly basis the main ESG indicators on our sustainability target setting. For example, the network energy efficiency is continued its improvement. Our population coverage for more than 100 megabit connections is increasing. Proportion of female supervisors also increases. And our patent portfolio is developing really well with our innovative solutions that are developed, especially in regards to our software business in international software business. And about the outlook and guidance, we see that the growth in the Finnish economy is expected to continue. However, the outlook for GDP growth has deteriorated from the beginning of the year. There are increasing levels of uncertainty related to Russia's war in Ukraine, such as inflation, energy prices and global supply chains. Competition in Finnish market remains keen. And we reiterate our guidance that our revenue will be at the same level or slightly higher than 2021. Same thing with comparable EBITDA, it will be at the same level or slightly higher than in 2021. And CapEx will be maximum 12% of revenue. Now I give the word to Jari to continue. Please.

Thank you, and good morning. Let's go first to profit and loss. And Q2 continued with good growth trends, both in revenue and earnings lines. Revenue growth, EUR 37 million or 7.7%. And inside that growth, interconnection and visitor roaming was decreasing. Interconnection prices decreased. Equipment sales -- mobile equipment sales was growing, EUR 7 million. Service revenues in Corporate Customers segment, EUR 20 million increase. Digital services, mobile and fixed services, all growing. Negative impact from fixed voice. In Consumer segment, service revenue increase was EUR 13 million. Mobile services and digital services growing. And negative impact from fixed voice. In earnings, EBITDA -- reported EBITDA included EUR 2 million restructuring charges relating to personnel reductions. Comparable EBITDA increased EUR 7.4 million or 4.3%, EUR 179 million. Comparable EBIT growth was 7.7% to EUR 113.5 million and comparable EPS growth 7.7%. Also, in Estonia, strong growth in revenue, 9% growth. Equipment sales as well as mobile services growing. EBITDA growth was 2%. Mobile subscription growth continued at 11,600 in postpaid. In prepaid, small decrease, 300. And churn continued at a very low level at [ 9.1% ]. And we were in June launching 5G services as a first operator with the new 3.5 gigahertz frequency in Estonia. Then moving to CapEx. Reported CapEx, EUR 67 million, including license -- Estonian 5G license that we did win in the auction in this quarter. And the purchase price, EUR 7.2 million, was also paid in this quarter in June. CapEx, excluding licenses, lease agreements and acquisitions was EUR 53 million, down from EUR 64 million last year. And the whole year guidance, 12%, is unchanged. Main CapEx, still, 5G rollout continuing as well as other network and IT investments. Cash flow. Reported cash flow was EUR 82 million. Comparable cash flow, EUR 81 million, a year ago, EUR 101 million. Negative impact from the license -- Estonia 5G license, EUR 7 million. And net working capital change, which was EUR 14 million; and a year ago, plus EUR 19 million. So change of -- net working capital change, EUR 33 million. In this [ EUR 40 million ], main change or main contributor was increased receivables as a result of strong sales in Q2 and partly -- due dates in those sales is in Q3. And of course, those receivables then in Q3 are positive in terms of net working capital change when they are paid. Then moving to capital structure and financing. Capital structure well in target. Net debt to EBITDA as a result -- was high as a result of dividend paid in Q2 or higher end of the range, 2x net debt-to-EBITDA, and expected to reduce in the second half. In terms of financing, maturity profile is healthier. And average interest expense, below 1%. From the outstanding debt, approximately 75% is at fixed rates and approximately 25% at variable rates. Also, return ratios continued at a good level, and return on equity, 31.1%, and return on investments, 17.7%. And now I give word to Vesa, please.

Thank you, Jari. And now we move on to Q&A part. And first, we ask questions from audience. Artem, please.

Artem Beletski from SEB. 3 questions from my side. I will take those one by one. So the first one is starting with MSR growth, which was outstanding at 7.2% in the quarter. Could you maybe provide some color in terms of your expectations regarding second half? And also, in the last quarter, you mentioned that one risk is relating to 5G upgrades and potentially iconized by consumers to do it if macro is weaken. And have you seen any signs of it actually happening during the quarter or after Q2?

Okay. One by one. The MSR growth in second half, we presume that it will be around 4%, 5% approximately. And we haven't seen any sign of the -- from the macro to influence on consumers' willingness to go for 5G subscriptions. Momentum is good. It continues to be good.

Okay. Very good. And then second one is relating to digital services. And it looks like your organic growth also has been double digit in Q2. Could you maybe talk more about sort of say, growth trajectories when it comes to domestic businesses and international? How's those ones have been developing? And whether you are -- you have been previously complaining about COVID impacts, and are you starting to see that, for example, reopening, is now boosting also the business?

Well, in the digital service businesses, like I said earlier, the international ones are growing faster. Now all the 3 domains of digital service businesses in international domains, they are growing really well. There might be -- because it's a B2B business, there might be macro dependent kind of risks, especially we think in the operator domain, we haven't experienced now. But of course, that's something to keep in mind. But the strong kind of development and the strong interest on the solutions in each of these 3 domains continues to be very good. In the domestic side, we have growth. It's a lower level of growth that we have in video entertaining and in IT services. But they continue to have their kind of sustainable growth going forward with very competitive solutions that we have.

Okay. Very good. And the last one from my side is actually relating to your fixed business. I guess it has been actually growing for third quarter in a row and up 3% year-over-year. As we look at the subscriber base, so it is still decreasing. And I would assume that voice part is also coming down. Could you maybe talk about sort of say key drivers behind improving revenues in this business?

Yes. The fixed business constitutes of many different product areas and revenue streams. One being, of course, fixed voice, another being fixed broadband. But then we have for B2B market, for example, a local area, network solutions equipment and services. Same thing for wide area, network solutions, software defined networks. And especially in these latter ones, we have seen good growth contributing to the total so that the fixed business has some growth as well.

Currently, we don't have any further questions from audience. So we move on to telephone lines and ask first question from the conference call lines, please.

The first question comes from the line of Andrew Lee from Goldman Sachs.

I just had a question that I guess we were all asking last quarter as well. Just if you could give us a bit more color on the operational gearing of the core business. So last quarter, obviously, we had an acceleration in top line growth, that you had, some exceptional costs, including closing down into your Russian business, holiday days, et cetera. Your mobile service revenue growth has kicked on this quarter, i.e., gone up. And your -- it seems from your commentary that most of your -- the rest of your core revenue growth has at least been the same or better, but the EBITDA growth hasn't really changed. So I wonder if you could just talk through, are there any other specific headwinds to costs -- from the cost side of things this quarter? And when asked, as I'm sure you will be over the coming days and weeks about this operational gearing question again, how you would come back at that point?

Okay. Let me start by saying that there are no specific challenges that we experienced ourselves in terms of our business and running the business and efficiencies. But also, I'd like to remind that we have changed our financial target setting from a mod Elisa level EBITDA margin to EBITDA. Our medium-term target is to provide more than 2% revenue growth and more than 3% EBITDA growth. And that's what we perform. If you look at our bottom line, it is also performing really well over the line. And the reason behind is that we know that our revenue structure is changing due to digital service businesses. And we do different kind of investments to the future. We are running for the long term our business. Efficiency and margin development for each and every business is, of course, important for one, but so does also the future revenue stream development for us. And that's why the EBITDA and revenue growth are the main targets for us, not the operating leverage itself as a main target in -- at Elisa level. And like I said, we are performing according to our targets, more than 3% EBITDA growth. And that's what we are committed to with our continued growth also with various revenue streams.

But if we think about kind of the contributing factors, it appears that digital services contributing a lot of the revenue growth right now and not a lot of the EBITDA growth, or at least from a very low base. How can we get confidence that, that kind of revenue stream will start to contribute more on EBITDA? Or what's the outlook for the EBITDA contribution there to improve?

Well, if you just take a look at what we promised to deliver in financial targets and if you look at what we have delivered with EBITDA growth, and if you then dare to look at the margin for EBIT, for example, that continues to be very strong. The return to the EBIT and EPS level continues to be strong. But we are a bit different operator than the others. We are not focusing only on kind of margin at any cost at Elisa level. We developed the business for the long term so that we will have good revenue streams. And there are, of course, a lot of moving parts over the different quarters. But the main thing is that we deliver what we promise, EBITDA growth, more than 3%, and that's what we've done.

And the next question comes from the line of Nick Lyall from SocGen.

Yes. It's Nick from SocGen. It was a quick question about the other operating expense line. I mean it seems like employee costs this quarter are relatively steady, even with the one-offs taken into account. But the other operating expenses is the big riser, at least on the operating costs. I think it's about 17% up. Could you just describe what's happened in that line year-on-year, please? And why that's up so sharply? As far as I understand, there's not much in there for sort of inflationary items yet. It's more about getting back to a sort of pre-COVID level. Is that correct? And when do you expect some of the more inflationary items in the other operating expenses to kick in, please?

Okay. I'll ask Jari to respond to your question, please.

Yes. In material and services, there was EUR 80 million increase, and that is almost completely relating to higher equipment sales. So we do have equipment sales also in other product segments than in mobile. So for example, in fixed services, in managed services, in local area networks services, in IT services or in video conferencing services. And those equipment sales, as they were increasing in this quarter. So that impacted in the materials and services increase. In other operating expenses, there was a EUR 7 million change. And there is still a COVID impact in that sense that, as we were completely remote working last year, some expenses are -- in comparison here, they are lower, and now there has been returning to the office work and some cost impact on that. And then as Veli-Matti mentioned earlier, we are also making investments in the future growth and developing business in the long term. And those expenses vary in different quarters and are included in these changes as well.

On that, Jari, is it fair to say that the EUR 49 million in the other operating expenses is mainly, as you say, getting back up to COVID, sort of pre-COVID levels? But there's no inflationary impact as such in the now for things like -- your energy is pretty well hedged, for example, and other things? So there's not really an inflationary impact we can see on the P&L as yet.

Yes. So not any great inflation impact in personnel expenses, employee expenses. There was a collective labor agreement in this quarter, and it was done at approximately 2% level for this year.

And the next question comes from the line of Titus Krahn from Bank of America.

If I may, I just have a very quick follow-up and then 2 separate questions. So just as a quick follow-up on the digital services, seeing it was already discussed before. I mean, it added 3 percentage points of revenue growth this quarter to the group. And just double checking, if you could give us any indication on how much it added on EBITDA just for the quarter. And maybe then 2 separate questions. First, very quick, on your quite impressive mobile ARPU growth, in mid-single digits. I think it's mostly ahead of most other European telcos. And assuming that that's 5G upselling and drive a lot in this, could you maybe elaborate on whether there are any other kind of main factors in there, such as added services, such as entertainment or security, which are driving this mid-single-digit growth? And then maybe as a quick last question, just given we see those EBITDA margins diverging a bit between Estonia and Finland and they're still a bit weaker compared to Finland that's stronger, is this mainly reflected -- reflecting differences in inflationary pressures in those different geographies? And how would you think this is going to play out over the second half?

Okay. Thank you for your questions. If I start from the second one. For the first, yes, ARPU development was positive. But actually, we are not so much focusing on ARPU because the number of subscriptions is a bit volatile or, let's say, it is changing. So that the ARPU is not the best indicator. We rather look at the mobile service revenue growth. But we can say that ARPU was, of course, improved as well as mobile service revenue growth by 5G momentum. We have more than 2% point kind of a contribution of 5G to the MSR growth. Of course, we have also our continuous kind of upgrade of our services with -- by customers to higher speeds also in 4G. Also, we do certain product changes where we bring more value to the customers in different parts of the product, both portfolio of mobile and with an additional price. So those are contributing to ARPU growth, but also very well to the MSR. In the EBITDA margin difference, I wouldn't say that it's that much the difference dependent on any differences in inflation rates. Even if there are a bit difference between Finland and Estonia, it's more about the -- how the development of the kind of services portfolio is moving ahead and a bit differences from quarterly developments in different countries because the quarters are not always exactly same kind, as you know. To your first question, I really -- I didn't hear quite well. You were talking about the revenue growth and EBITDA, but what was exactly? If you can repeat, please.

Yes. No worries. And sorry for that. Just given that we talked about the Digital Services segment before, which contributes, I think, roughly 3 percentage points to your revenue growth, I was just wondering if -- to double check, if you could give any indication of how much it contributed to your EBITDA growth on segmental basis.

Okay. Sorry. Yes. Unfortunately, we are not providing data on the kind of EBITDA or EBITDA growth from the digital service businesses separately. We provide this revenue side. But what I can say is that we, of course, have a good track for improved EBITDA margin in these digital service businesses as well as they grow.

And the next question comes from the line of Terence Tsui from Morgan Stanley.

Just had a couple of questions, please. Firstly, on FWA, fixed wireless access. Can you just give us an update of the progress Elisa is making here? Where you see the greatest opportunities? The second question was just around the one-off costs and the restructuring. I know Elisa in the past haven't been big fans of big restructuring programs. But the last time you did, the one-off cost was actually just only in Q4. How do you think about future reductions in personnel going forward and these restructuring costs evolving over time? And then lastly, just a very simple question about the 2022 guidance. So basically, I know you've like to guide conservatively in the past. But when do you just upgrade the guidance for 2022, if you're tracking a bit ahead of it, both on revenues and EBITDA? So just wondered your thoughts around that, please.

Okay. Thank you for the questions. In regards to -- if I heard right, the first question, regarding the fixed wireless solutions. We do see that there is a good demand for those. It's not the mainstream part of, for example, 5G subscriptions, but it is a good add-on to many customers. Some customers upgrading their like 4G fixed wireless or 4G broadband solution they may have in rural areas or so, and they change to a 5G fixed wireless. And then we have just new customers who, instead of quite expensive fiber solution, they'd rather take the fixed wireless with 5G. So it is a good add-on, not the major mainstream part of 5G, but it is a good add-on in 5G, if you will. About the restructuring, yes, it's a bit unfortunate that we cannot really forecast upfront the restructuring costs since we still continue to be rather with a continuous improvement. But sometime, the continuous improvement-based projects, they are leading to restructuring in so many parts of the operation at the same quarter, that as a lump sum, then they create, for example, this kind of restructuring costs as we've had. What will take place in the future, certainly, there will be similar kind of things happening. Sometimes, during different quarters that they are not so well visible. Sometimes, we have to book them really as a restructuring cost. But the main thing is that our way to improve efficiency is the continuous improvement based on quality-driven improvements in the operations really, in the processes, streamlining, cutting waste, automating. And this kind of improvements, they, of course, lead to a reduction of work in those parts of the operations. And sometimes, they lead to a reduction of employees. Sometimes, these employees, they are just moving to new tasks. So all in all, as you can imagine, it's a bit difficult to kind of forecast that, and -- because it's not driven by the target of reducing certain amount of people. It's rather driven by the fact that we are improving the service quality, improving the flow and cutting the waste. And the end result is then what the end result is in terms of restructuring by cutting employees -- number of employees. And to your third question, sorry, now I already lost what your third question. If you can repeat the last, please.

Just on the guidance, you're tracking well ahead of the 2022 guidance...

Well, we are confident with our guidance. But as I said, in our report, we also see the risks in regards to geopolitics, and of course, still a bit of the COVID developments. And these uncertainties, of course, we need to take into account while thinking of whether to upgrade or not our guidance.

The next question comes from the line of Peter Kurt Nielsen from ABG.

Just 2 quick questions. First, just returning to the 5G. I know you said in early meet that we're not too focused on outlook, which I understand. The EUR 3 premium on 5G services seems to have been stable. You mentioned that it recourse for quite some time now, which is, of course, a good news. Can I just ask? As you're seeing 5G penetration increases perhaps more to the mass market, do you think there'll be any need to adjust 5G pricing? Or can you maintain that premium and still see a whole increase in 5G penetration? Obviously, you're not in control of what your competitors do, but I just like to hear your perspective. And then can I just ask? I think you responded to a previous question. Did you say that you were happy with the momentum, with the changes in margins, profitability, contribution from digital services? I know you're not giving the numbers. But are you seeing a positive momentum in terms of driving margins in that side. Is that what you said?

Okay. Thank you, Peter Kurt. The 5G price increase that we have or the price increase we have with 5G, customers moving to 5G, how sustainable that is, I'm quite confident that as long as we don't have any kind of change in the price competitive situation in regards to the 5G market, which has been quite rational, we really do provide additional value so that customers are willing to pay. You never know about when we move more and more to mass market, how it really evolves. But as we see now, the momentum continues to be good. And we are not anymore talking about just the early adopters who are going to 5G in our customer base. But we are working, of course, in many ways that our customers really maybe even can save some money in other areas of their spending when they put a bit more money to 5G. And that way, it's justifiable to even that way to pay more. But customers continue to be more satisfied based on our data. And that also leads to opportunity to get more money. In regards to the question about margins and digital service businesses, as we've discussed earlier, these -- overall, they have lower EBITDA margin level than telco services. But -- and also, as we have been quite early in the face of developing these businesses, especially now the international businesses, of course, due to that fact, the margin has been a bit lower. But we see positive development there that we can get the margins up, but also to the level where they should be in those respective businesses. And of course, there are also opportunities in the Elisa IndustrIQ and Elisa Polystar going forward. Because they -- basically, our target is to have them more and more as software businesses. So sometimes, it may even evolve that the margin levels we see there are higher than in telco. I'm not promising anything, but as -- so that you understand that there are opportunities in these businesses while we get them to grow and operations to be developing as we have as our goal, there are also very interesting margin development opportunities. But as said earlier in the other answer, we are working for the long term in developing our business. Delivering the results that we have set to our medium-term targets, financial targets, but we are working even for long term to make sure that we have good revenue streams, interesting margin opportunities in the future.

And the next question comes from the line of Adam Fox-Rumley from HSBC.

I had some 2 clarifications, please. So firstly, on the fixed line revenue year-on-year improvement, you mentioned that you're doing local area networking, wide area network business. Are you able to talk about the kind of margin that, that business generates? And does it change through the course of a contract? So for example, is it low upfront because of the cost of equipment? Or does that get smoothed by the accounting chart application? That would be very helpful. And then secondly, I wanted to ask about your depreciation outlook, because you guys have been investing consistently 12% of sales. It's been there for a very long time. You've got a new kit going in. There are no changes to the policy as far as I can see. But I don't quite understand why it's falling in absolute because that act in itself is doing a lot of work for your EPS growth at this point in time.

Okay. Thank you for your questions. In regards to the fixed network business and when we have a local area network, wide area network businesses, the margin, of course, changes a little bit based on how much equipment sales in different quarters we have in relation to those businesses. There are is a service business and continued service business in regards to those, and then there are equipment sales. So the margin may vary. Then again, we have more and more software-defined network solutions, global solutions to customers, which also increase -- or let's say, it creates another margin profile to the picture. So overall, there is, of course, an average margin that we could say for these services. But it is also changing a bit depending on which kind of projects we have ongoing. Overall, of course, we know that, traditionally, if we take a local area network, wide area network, those businesses have somewhat lower margin than, let's say, fixed voice business that we do have and so. But we think that the margin levels, including the software-defined networks, is a really healthy margin in the fixed network side. And Jari, if you could please respond to the depreciation question.

Yes. So I would argue that depreciations have been fairly stable level. And as you said, we have invested 12% from sales longer time. And of course, different CapEx areas, they have different depreciation time. So it's not a straight line. But overall, now for example, this quarter, there was EUR 700,000 difference in depreciation. And we've been last year pretty much in the same level in quarterly depreciations as we are now 60 -- EUR 66 million, EUR 67 million level. So sometimes, some equipments are coming to the end in depreciation, and then it is sort of replaced with another equipment that -- and sometimes, it might have a different depreciation time. So these kind of changes, of course, are there. But overall, it has been fairly same level.

And the next question comes from the line of Ondrej Cabejsek from UBS.

I had a couple of questions, please. First of all, can you just tell us, as you did in the past quarters, what the contribution of 4G to the overall MSR growth post this quarter? Can you then talk a bit about just how competition is looking at -- or looking like in Finland? And specifically, we've heard from Telia that they would be reorganizing basically their distribution and trying to make a lot of their sales in-house as opposed to the more aggressive or higher commission, lower value, higher discount, say, third-party channels? Are you seeing that? Are you seeing the pressure on individual discounts recede a bit in the market? And third question from me, please, just your assessment of any risk in terms of a new entrant in Estonia through the current 5G auction.

Okay. The contribution of 4G, of course, to MSR growth comes from the fact that customers are moving from lower speeds to higher speed even within 4G. And of course, we also do certain product changes, giving more value in a way or another to customers, and then having them to pay more. But we -- I cannot quantify the amount what proportion 4G is bringing, but it is positive, of course. There is, of course, a downside that there is price competition in the 4G domain much more than in 5G. So that is, let's say, preventing to have all the potential that we could have from the 4G customer base. But as I said, we have a good movement also onto the 5G side. And as long as we have a rational 5G market, this equation plays really well. I'm sorry that I really couldn't hear well that -- what was your second question relating to? Was it relating to some of our competition or what was it?

Yes. So I mean you mentioned discounts just now, promotional activity, et cetera. I'm just curious whether you're already seeing the impacts of what your competition said they would do, Telia specifically said they would change their distribution channel in Finland to much more in-house from third-party sales. So they would try to limit the amount of promotional activity, discounts through distribution, et cetera. Are you seeing that already?

I would say that not to a meaningful extent at least. We do see our -- both of our competitors still being in the external channels with quite strong promotions, especially in the 4G domain. So it seems to be continuing. But maybe from Telia's side, we have seen some, of course, their changes, how they operate. They are somewhat visible, and of course, may lead later on. But so far, we haven't seen that much in practice. And then you had a third question. Sorry, I didn't hear that too well either.

So the third question was related to Bite in Estonia. Do you see that as a credible risk of a new entrant to the market? Or do you think if they succeed somehow and gaining new spectrum, that would be limited to, I don't know, B2B applications or fixed wireless access? Or how do you see that risk? Is basically the question.

Okay. Yes, the Bite in Estonian market. They have been now in auctions. The auction is still ongoing. I don't think even the second slot has been rewarded to anybody. We have our first slot, and we are happy with that and moving ahead with 5G already as we speak, and building the momentum as the first operator, utilizing the 3.5 gigahertz frequency there. What will happen for the 2 remaining slots for 3 different operators remains to be seen. I wouldn't like to speculate whether Bite will be a player in the Estonian market. But what I can say is that we are comfortable on our competitive capability regardless of what happens on Bite's plan on the Estonian market.

If I may, just 1 very quick follow-up, regarding the 4G growth. And the previous quarter, as you said, it was roughly 4 percentage points of the total. So directionally, do you think that is still around there? Or is it now lower now that we've had an annualization of that surge in the 4G growth from last year?

I'm sorry, which 4G growth you're referring to?

So in -- over the past year, you've been saying that 4G is contributing roughly 4% in terms of MSR growth in Finland. So I'm just curious now that we have had an annualization of that, is that roughly still the same or is it directionally trending down a bit?

Well, I may have said about the 4G MSR in the past. But we basically -- in terms of the MSR, we have, given, let's say, indications only for the total MSR. And then we have given some indications of what 5G has been contributing to that. But we are not really stating any indication of what 4G will bring to MSR going forward separately.

And we have 1 final question from Felix Henriksson from Nordea.

It's Felix from Nordea. Most of my questions have been answered, but I have 1 more, relating to MSR growth. Could you please disclose the contribution of roaming on this quarter's MSR growth as you did in the prior quarter?

Okay. Yes. Roaming is gradually coming back. We saw also in the second quarter a bit more roaming revenue versus what we saw in the first quarter. We could say that a bit more than 50% of the level of roaming that we had pre-COVID has now returned. The traveling in Asia is quite 0, which is needed to get back to the pre-COVID levels. So we see the travel to Americas working, which is bringing some roaming. So without going now directly to your question that what's the contribution to MSR, but I can say that, of that approximately EUR 4 million per quarter, we have more than EUR 2 million now back in the roaming revenues.

And as there are no further questions, I'll hand it back to the speakers.

Thank you for all questions on conference call lines. Let's check if there is anybody in audience. No further questions here. So we see a very good reporting season while we enjoy summer holidays. But now, goodbye.

Thank you. Goodbye.