Elisa Oyj (ELISA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Elisa's Second Quarter 2024 Interim Report Analyst Meeting and Conference Call. I'm Vesa Sahivirta, Head of Investor Relations. And now we have quite a familiar team, CEO, Topi Manner for the second time; and CFO, Jari Kinnunen, who has been here quite many times. And regarding one milestone, I just want to say that this is 100th interim report at Elisa for me. And last 41 of those actually has been the best ever in company's history in a year-to-year comparison. So quite a great continuous improvement indeed. So -- but now to the agenda of the day, we start the presentation, followed by Q&A. And Topi will start the presentation. So I'll give the word to Topi. Please go ahead.

Thank you, Vesa, and good day, everybody. And by the way, Vesa, congratulations for the 100th quarterly report. That's quite amazing, I must say. And also, the 41 quarters of improving results for Elisa, that is certainly noteworthy as well. So thank you, everybody, for joining this Q2 call of Elisa. The main headline for our second quarter this time is that our earnings continued to develop well, and we also started to see improving performance on the B2B side of the business, which, as you would remember, in our case, includes our home market corporate business, both in Finland and in Estonia, and then the International Digital Services part of the organization, which separately enjoyed a revenue growth of 21% on a year-on-year basis during the quarter. So looking at the Q2 highlights, our revenue increased by 2% and EBITDA was up by 4%. So if you would be looking on the decimal basis, then the EBITDA improved with a couple of decimals in comparison to Q1. Mobile service revenue increased by 4.7%, so in line of our mid-single-digit growth expectation for the mobile service revenue. As stated, we saw improving signals and improving performance in business-to-business side of the business. And also the B2C segment continued to develop strongly. In International Digital Services, the revenue increased by 21%, as mentioned, that was boosted by the small bolt-on M&A that we have been doing during the first part of the year. If we look at the organic growth for IDS on year-on-year basis, that improved to 7%. And we reiterate our target of double-digit organic growth for IDS during the full year of 2024. In Finland, the postpaid churn remained at the same level at 15% in comparison to previous quarter. And then the postpaid subscriptions grew by 42,000 approximately. Of that, M2M and IoT subscriptions constituted 47,000 subscriptions. In terms of the fixed broadband, the subscription base increased by 600. And just recently, we also made 2 small acquisitions of fiber networks in northeastern part of Finland and in the eastern part of Finland from Kaisanet. We continue to enjoy good 5G momentum. And at this point of time, the network covers more than 64% of the Finnish population. At this point of time, we are also differentiating our subscription offering positively from competition as we, during the quarter included the 5G standalone functionality for all of our new subscriptions, both to consumers and corporates, actually, as the first operator in Europe. And with respect to guidance, we are reiterating our full year outlook as part of this report. So with respect to EBITDA, the growth was driven by the Mobile Service revenue as well as efficiency. There were actually several components impacting the revenue growth. The main growth drivers were related to mobile and fixed service revenue and -- as mentioned to IDS. In terms of the decreases, the business disposals of Videra that we sold at the end of last year and the discontinuation of Viaplay cooperation. They both impacted revenue negatively but both actually improved profitability. Also, the service number regulation change impacted revenue negatively and the same goes for equipment sales. In this economic environment, with the sluggish sentiment among the consumers and corporates alike, consumers and corporates are prolonging the interval of changing their phones. And also the average price of phones is decreasing, thus impacting equipment sales negatively. Interconnection was also changed driven by regulation. But here, we would need to remember that, that change is EBITDA neutral as asymmetric reduction is made on the cost side as is the impact on revenue. When we look at the EBITDA, that was driven by Mobile Services, the mentioned business disposals of Videra and Viaplay, and also the efficiency improvements that we made earlier during the year that now start to bear fruit to some extent during the Q2 and then to full extent on the coming quarters. Our EBITDA landed at EUR 190 million. And the EBITDA percentage on a year-on-year basis increased to 35.1%. Mobile Service revenue, as mentioned, was up 4.7%. During the previous quarter, we still had a tail impact of earlier made price increases impacting the MSR growth, that was not the case during Q2. So the number of 4.7% is to a large extent -- to a very large extent, driven by 5G upselling. ARPU growth was 5.5% during the quarter, pretty similar growth, both on consumers as well as on corporate side of the business, yet again driven by 5G upselling. When we look at the competitive landscape at this point of time, that is largely the same as it was during the first part of the year, but we do see some campaigning in 4G at this point of time. So competition remains normal, keen, tight as normal. The churn was basically stable at 15%. When we look at the segments, the consumer segment, as stated, continues to perform strongly with EBITDA growth of 5%. When decomposing the revenue development, we will need to take into consideration the Viaplay discontinuation as well as the mentioned impact on equipment sales as well as interconnection. When we look at the EBITDA percentage, the 41%, and if we look at that on decimal basis, that is one of the best, if not the best EBITDA percentage that we have had over the years in consumer segment. So profitability-wise, delivering strongly. In terms of corporate customers, as stated, we started to see a pickup during the quarter. Companies, especially at the large end of the spectrum, start gradually to invest to connectivity, to software and to IT services. And we start to see first signals of that improving outlook. The revenue increased with 6% and EBITDA improved with 2% after a couple of challenging quarters during the past 12 months. The revenue growth was driven by -- especially by fixed services and mobile services and also the IDS side of the business. The business disposals and the regulatory changes, as well as the equipment sales will need to take -- be taken into consideration also when analyzing the revenue growth on B2B segment. The EBITDA percentage on B2B decreased with the notch to 26%, driven by some large bit lower-margin deals. Looking forward, we see a stable outlook for the EBITDA margin in B2B segment. So basically, no change there outside of some quarterly fluctuation. Looking at our strategy, we are all about building a sustainable future through digitalization and our key strategic focus areas remain the same. We want to increase mobile and fixed service revenues. And here, especially the 5G upsells and continued investments in fiber play a big role. In terms of growing digital service businesses, IDS growth improving is definitely important. And then taking a bit longer perspective, we see opportunities for growth in digital services revolving around the needs that our customers have in their homes. And secondly, also in corporate IT services. In terms of improving efficiency and quality, we continue to leverage the strengths that we have in continuous improvement in the culture of excellence. And then suddenly, we'll be focusing on the efficiency and productivity of the business also by means of utilizing AI and automization going forward. The migration to higher speeds continues. This is a source of sustainable growth for Elisa. And when we look at now the penetration of higher speeds, which we define as speeds higher than 200 megabits, the penetration is 55%. And customers do value speed, and they are willing to pay for it. And they are happy when they get it. That is clearly witnessed by our customer satisfaction surveys and Net Promoter Score, where there's a marked difference between 4G customers and 5G customers in favor of the 5G customers. Currently, 59% of the smartphones are 5G devices, meaning that there's potential for us to grow in our penetration also in terms of the device landscape. If you look at the trend line of the penetration closely, you would see a slight uptick during the past quarter. And that uptick is basically accountable for the corporate 5G sales gaining momentum. So, so far, especially the large companies have been somewhat conservative in terms of taking 5G into use due to the overall macroeconomic environment and they have been trailing back the consumers and the SMEs. But now we see that bigger companies are starting to convert their subscriptions to 5G. And as stated, that is the source of the uptick and an encouraging signal for the sales going forward. We have a leading position in 5G in our home market. And we are increasing our investments and meeting the customer demand in terms of fiber network. As stated, our current 5G population coverage is already over 94% in Finland and over 76% in Estonia. And when we look at the average billing increase when customers transfer from 4G to 5G, that remains intact, namely being EUR 3 per month increase when customers take the 5G subscriptions into use. And as stated as the first telco in Europe, we have now included the 5G standalone functionality to our new subscriptions for consumers and corporates alike. So in this one, we are clearly a front runner on a global telco space. With the 5G standalone, which we call 5G+, customers are getting a better quality network, more resilient network. They are getting better speeds. They are getting better energy consumption that translates into better battery life in their phone. And also 5G network enables new functionalities like the slicing functionality that we are utilizing, for example, in our fixed wireless access offering. So here, we are clearly differentiating from our competition and from the global telco space as a technology front runner. As mentioned, in the fiber space, we made 2 small acquisitions, buying 2 fiber networks in eastern and northeastern parts of Finland from Kaisanet. With that, we added some 14,000 homes passed and some 6,000 homes connected. So this is an example of additional measures in addition to organic growth that we are doing around the fiber business. In our IDS part of the business, due to the sluggish macro environment in -- during the past 12 months, companies have been a little bit prolonging their projects. And while we have been having a strong order backlog that has been impacting our revenue development. But now during the quarter, we start to see these project implementations picking up speed, and that is visible in our revenues. So IDS revenue increased by 21% and the growth was boosted by the small acquisitions that we made during the early part of the year. We have a good order backlog and also good order intake. And as stated, we are reiterating our target to have double-digit organic growth during the full year of 2024. We have always expected that growth to be somewhat backloaded during the year. When we look at Elisa Polystar separately, it's worthwhile to note that during the quarter, we successfully renewed the quality and data security certificates in that part of the business. And we do have a good degree of order backlog as well as order intake. In IndustrIQ side of the business, we successfully completed the Leanware acquisition. And we have, at present time, a strong order intake in that part of the business. In distributed energy storage, the start-up that we have within the company around energy solutions, we actually included the solar energy utilization that DES solution. And we also got the first customer to utilize it, namely Alcom, which is the local telecom of Aland Islands in Finland. In terms of domestic digital services, when we start from entertaining services around the consumer side, it's worthwhile to note that this year marks the 10th anniversary of Elisa original series and also our Money Shot series that is actually the 40th original series won an award in Cannes Festival earlier in June. We also added MAX as well as MTV Katsomo+ to our streaming service portfolio, thus improving our offering to all of our customers. We also did a small cleanup of our business portfolio by selling Elisa Kirja, Elisa Book to BookBeat. When we look at the corporate digital services, namely IT services, we clearly have strengthened competitiveness. AI and automization are increasingly now incorporated to our IT services to those that we offer to our customers but also to our own service production. We have strong customer interest for our gen AI use cases, and we have a good track record of bringing tangible benefits to our customers that also enable scalability in our customers' business. Our use case funnel for AI is growing rapidly. So that's a very encouraging signal. And we also have first AI solutions deployed in our IT end-to-end user service production improving scalability and productivity in our own business. Geopolitical uncertainties are driving at this point of time. The demand for cybersecurity services and there, we are well positioned on the market with differentiating product and service. And that is really visible in the intake of new customers in this part of the business. One of the highlights for the quarter was that the Time Magazine listed world's most sustainable companies in partnership with Statista. And in that ranking, we landed on a position of #66. So Schneider Electric was ranked as #1. And in our close proximity, we had very well-known international brands. For example, Microsoft was ranked #64 and Puma was ranked #67. We were also ranking the best Finnish company in terms of sustainability according to Time Magazine and Statista. So this is a testament of the consistent systematic work that has been done around sustainability in Elisa over the years and something to be proud of. And then to wind up with our outlook and guidance. As stated, we are reiterating our guidance. So we expect the revenue to be at the same level or slightly higher than in '23. And the same goes for EBITDA. We expect that to be at the same level or slightly higher than in '23. As for CapEx, we have some quarterly fluctuation. But for the full year, we expect to stay within the bracket of 12% to 13% CapEx of revenue. So with that, I will hand over to Jari, who will go through his slides before we take the Q&A. So thank you very much.

Thank you. Let's start with profit and loss. Q2 was continuing good trend with earnings growth and EBITDA. Growth accelerated now fourth consecutive quarter enrolled. So solid performance continuing. Revenue, 1.6% growth. Also, that one improved from Q1, still negatively impacted by divestments and net impact from divestments and acquisitions is approximately 1%. So organic growth about 2.5%. Also in the reported growth impacting interconnection price change that was beginning of the year, EUR 3 million negative change. And equipment sales also impacting in both segments, like is the case with interconnection negatively EUR 6 million. Service revenue growth was strong in Corporate segment, EUR 14 million and half of that coming from one bigger corporate deal in Estonia relating to software licenses and equipments. Also services in IDS or organic growth in IDS contributing to corporate segment change like is the case with domestic mobile and fixed services and digital services as well. Consumer segment, EUR 3 million increase. In service revenues, Mobile Services growing negative impact from fixed voice and ending of streaming cooperation agreement last year. EBITDA growth was 4% to EUR 190 million margin improved from 34.3% to 35.1%. Mobile Service revenue was so efficiency measures as well as divestments from last year impacting positively to margin. EBIT growth was 4.8%. Also EBIT margin improved to 22.4%. EPS growth, 2.4% to EUR 0.50. In Estonia, strong revenue growth, 9% or EUR 5 million, as mentioned impacted by approximately EUR 7 million deal relating to licenses and equipment. The negative revenue impact from interconnection. Also in Estonia, there was interconnection price change beginning of the year. And mobile equipment sales also lower than year before. Overall, general economy situation in Estonia still somewhat challenging. And for example, inflation rate, although decreasing, is still higher than in Finland or other European countries. And EBITDA, nevertheless, continued to develop positively 1% growth. In mobile subscriptions, postpaid was slightly decreasing 2,100. Prepaid, 400. Increased churn was somewhat higher, 11.9% from Q1. Then moving to CapEx. Reported CapEx in Q2 was EUR 84 million, excluding licensees and lease agreements and acquisitions, EUR 81 million, which is the guided CapEx and it is higher at 15% from the revenues, there are quarterly variations and for the whole year guidance, the CapEx guidance, 12% to 13% from revenues is intact. Main investments continue to be in 5G network, extending coverage and in fixed side, continuing fiber investments and IT investments. Comparable cash flow was EUR 94 million, somewhat lower than a year ago, positive change coming from higher EBITDA and lower license fee payments negative impact from higher CapEx and interest. And although net working capital change was positive, but it was less positive than a year ago, so impacting slightly negative to cash flow. First half cash flow, EUR 180 million, slightly higher than a year ago. EBITDA and lower license fee payments as well as net working capital change impacting positively and CapEx and higher interest having a negative impact. EBITDA operating cash flow conversion was 58% in Q2. Then moving to capital structure and solid capital structure as well as financial position, continuing net debt in line with the target 1.8x equity ratio, 35% decreasing from Q1 as a result of dividend decision in Q2 and equity ratio then improving in coming quarters after that. Return ratios continue at good level, return on equity, 30.7% and return on investments, 18.7%. And in terms of maturities, debt maturities, there is no major maturities in the near term. Next, the fixed interest loan maturities 2026 and average interest expenses currently at 2.6%. And now I give word to Vesa, please.

Thank you, Jari. And now we move on to Q&A part, and we take first question from audience. Sami, please.

Okay. Sami Sarkamies, Danske Bank. I have 4 questions. We'll take this one by one. Starting from the corporate segment, do you have visibility on further improvement entering second half of the year? Or should we remain cautious as you benefited from this large deal in Estonia during the second quarter?

I mean if we look at the sort of overall development of the economy, both on our home markets, but worldwide, I think that we are starting to see some first early signals of improvement. And when we sort of decompose our B2B segment, in IDS part of the business, we have seen the projects picking up speed, thereby us being able to account for the revenue that we have had in our order backlog in terms of the deliveries. And of course, also the order intake is improving, namely sales is improving. So improving -- gradually improving outlook in that part of the business. Then if we look at the connectivity business for B2B, as stated, the phenomenon there is that now the large companies are starting to convert their subscriptions to 5G. We also see some activity level improvement in terms of them investing to corporate networks. IT services in terms of, let's say, AI and automization-related IT services and cybersecurity services, our sales funnel is improving a bit. So in this sense, I mean, there are always bigger deals that come and go. And also the bigger deals are part of our normal course of business. We will have them every now and then. But underlying it all, there is a first signal of improving activity level.

Okay. And then continuing on IDS. How good visibility do you have on the second half? Is it mostly about delivery execution? Or do you actually need more orders from customers in order to reach the double-digit organic growth target for the full year?

I mean if we average things out a bit for the IDS business, the typical sales cycle is, let's say, 6 months. So we have a good degree of visibility for the revenue for the remainder of the year. So much of the sales is in the pocket already, so to speak. Of course, there's always a bit of timing risk in terms of how the individual projects will be proceeding and how we can account for revenue. And then certainly, especially for the Q4, we still have some sales to be done. But we reiterate our target of double-digit organic growth for IDS during the course of the year, as we have been stating before.

Yes. And then continuing on MSR growth. Is it still going to decrease the growth rate going into third quarter? I think that's when comparables will be -- sort of they will be more demanding as you implemented these pricing changes then related to fixed service numbers.

Yes. If we look at the first part of the year, during Q1, we had still some impact of earlier made price changes in addition to the speed-based upsells that we are doing. During Q2, the impact of earlier made price changes basically was not there. So to a very large extent, it was only upsells that is visible in the MSR in the Q2. Now in Estonia, during the Q2, we already conducted some price changes that will be visible during the remainder of the year. And we have some price changes in the immediate pipeline. So we see that, that will be topping off MSR a bit going forward. Still, the majority of it will come from the upsells. And we maintain our view that the MSR will experience mid-single-digit growth going forward.

And then finally, you've been acquiring several fiber assets during the past year. Can you comment on the rationale? And are you planning to make further acquisitions? Is this a way to increase the fiber market exposure without touching the 12% CapEx to sales? And then maybe finally, could you sort of disclose what's the typical price to book valuation in these transactions?

Yes. If I take the first question, and Jari, you can take the second one. I mean in terms of the fiber market, our strategy is that we want to stay on the middle of the road. So on one hand, we want to make sure that we will be keeping our long-term market share also in terms of the fiber business. On the other hand, we want to steer clear from doing our investments on the market. And currently, we are and we have already ramped up our organic investments to fiber. And we'll -- we are -- as we speak, we are building fiber more than ever. But we are topping that off with the small bolt-ons on those regions where we see possibility in Finland. And on the overall, if you look at the fiber market, I'm comfortable in terms of where we are positioned. So in our own network area, we are clearly very, very competitive in the fiber business. And we are not losing our market position. And then we are very much focusing on the fiber sales and the cross sales on top of the fiber connection that is important for us to meet our financial targets and also to improve customer stickiness.

If I continue to that pricing point of the question. So unfortunately, we are not disclosing the numbers also for competition reasons from the total, let's say, balance sheet point of view or financing point of view, these are fairly small acquisitions and they are comparable to doing the investments ourselves. So it is also accelerating our go-to-market in fiber.

So I'm reading this so that price to book is not materially above 1.

No comment.

I don't have any further questions. Congrats Vesa.

Thank you, Sami. And now, we don't have any further questions from audience. So let's go to the conference call lines and the first question, please.

[Operator Instructions] The next question comes from Andrew Lee from Goldman Sachs.

Congrats to Vesa. That's quite the achievement. I had 2 questions just on your top line growth rates. The first question is just on Mobile Service revenue growth and why it wasn't a little bit better this quarter. So if we strip out the product shift, I think the underlying Mobile Service revenue growth was about 3.7-ish percent, which is the lowest it's been for a while when there had been some comments that there would be a lag between last year's price rises and consequent revenue growth. Can you just help us understand why underlying growth trends were over a percentage point worse than we saw in the first quarter? I mean, KPIs are good. RP trends are good. Comps are a little tougher, but only by 50 bps. So help us understand why we saw that kind of a slight slowdown in growth and what you expect the cadence of Mobile Service revenue growth to be through the rest of the year? Second question was just on fixed revenue growth. You delivered plus 5% in the quarter, and that's versus a negative number in the first quarter and 3% to 4% in the second half of last year. I know there are quite a lot of kind of inorganic elements or non-underlying elements going on there. So can you just help us understand what the underlying growth was in fixed and what are the drivers of that underlying improvement?

Yes. Andrew, this is Topi speaking. So yet again, if I take the first one and you take, Jari, the second one. So in terms of the MSR momentum, as stated during Q1, we still enjoyed the tail effect of earlier made price increases. So that was clearly one element impacting the comparison between the quarters. During this quarter, there was not that kind of sort of price increase element. But toward the end of the quarter, we already made some price changes in Estonia that will be bearing fruit during the remainder of the year. And as mentioned, we are about to conduct some price changes that will also be supportive of the MSR development going forward. And then if we look at the MSR segment by segment. I mean, now if you look at ARPU numbers, the ARPU numbers are broadly on the same ballpark, both on B2C segment and B2B segment, where the B2B ARPU has been improving a bit lately. And now, as I mentioned, we start to see, especially the large companies, migrating increasingly to 5G. So that is another element that can be supportive of MSR going forward. Coming from the source that has not been there previously. So I think that these are all the dynamics that you will need to take into account. So if I even things out, there is quarterly fluctuation. But when we look at the trends beyond the quarters, we are on track with our earlier soft guidance of seeing mid-single-digit growth in MSR.

And if I continue with the fixed services, so these decisions earlier this year, they are not impacting to fixed service revenue. But there was this large deal that was discussed earlier in Estonia numbers that is in fixed services relating to software licenses and equipments approximately EUR 7 million. So every now and then, this kind of larger deals happen. And now in this quarter, this was maybe somewhat bigger deal.

And what was driving the underlying improvement in fixed revenue growth? Stripping out that Estonian impact?

Yes, of course, in fixed services, overall, there are several different service revenues and in corporate segment, corporate networks or private networks type of services, cybersecurity type of services, which are growing specially. In cyber, overall security services are growing quite nicely and that is impacting.

So the fixed network revenue increases, the underlying bit very much comes back to the earlier comments made around the B2B segment.

The next question comes from Ondrej Cabejšek from UBS.

So maybe one follow-up, a further follow-up on Mobile Service revenue. So I understood correctly, but you mentioned that the mid-single-digit kind of growth rate is something that you're confident, not just about, not just this year, but about or for the midterm as well. And if we go back over the past couple of years, even though it's been higher than, say, 4%, that maybe some of the recent commentary would suggest. And that was driven by several things, including a lot of 4G repricing. So just going forward, you seem to indicate that today, the vast majority of the growth that we're seeing in Mobile Service revenues is coming from 5G. So just to understand, if we go into the midterm, as you're saying that single-digit growth, so it sounds like you're very bullish on just 5G monetization in general, which would be a bit different from other markets? Or is there any other driver, including like the return of maybe 4G by complete pricing that actually supports the mid-single-digit growth on Mobile Service revenues? And I'll ask the second question later.

Yes. Thank you for the question. There was a slightly weak lines, so it might be that we have missed some aspects of your questions. So if that happens, please, please just repeat the question so that we can address it appropriately. But with respect to the MSR, as stated if we start with the competitive landscape, we see that the competitive landscape is largely intact. If we look at the average monthly billing increase that we are getting when customers are transitioning from 4G to 5G, that is EUR 3 per month, and that delta remained intact during the Q2. So that tells a lot about the 5G and the sustainable source of growth that the 5G upselling presents to us also going forward with the track of 5G penetration increasing in trend like fashion and even with a slight uptick now during Q2. In 4G category, we see competition and we do see campaigning. So the market remains keen. Competition remains keen in that part of the market. Then what we need to remember that in Finland, there is a VAT change that will be affecting a wide range of services, including connectivity services and that VAT increase is 1.5%. So that price change we are conducting as from 1st of September onwards and we are introducing the increased VAT to our prices as such. That will be changing our sort of psychological pricing a bit if we take a little bit longer-term perspective into things. So summing all things up, we see that 5G upsells continues to be the main source of sustainable growth in terms of MSR and then there will be a bit of price impact also for the backlog going forward. And the interesting new phenomenon is the large companies, especially starting increasingly to migrate to 5G, which is supportive to B2B MSR growth.

Apologies for my weak line. I'll try to be a bit more clear. So the second question I had was maybe on another comment that you had maybe for the midterm in terms of improving profitability of the core business. So obviously, we have a lot of top line effects this year that improved the margin mechanically. But then inflation is easing off. Some of the recent efficiencies last quarter were mentioned that were maybe larger than expected. So just are we entering a period of, say, higher operating leverage, at least that than we've seen over the past 2 or 3 years, that is sustainable for again the midterm?

Yes. As I said earlier, so we -- our fourth quarter in a row, we accelerated EBITDA growth percentage year-on-year percentage. We improved the margin almost 1% point. Now in this quarter, we made a restructuring in Q1. And we -- of course, we continue with efficiency measures and productivity improvement measures. And at the same time, as also discussed in this call already a couple of times, service revenues, both Mobile Service revenues, as well as fixed service and digital services are expected to grow. IDS targeting to grow, as said, double-digit for the whole year and second half expected to be better than the first half in IDS. All these are, of course, contributing to earnings. And as you said, operating leverage has improved and we continue to work that also going forward.

The next question comes from Oscar Ronnkvist from ABG Sundal Collier.

So just the first one, I was just going to ask about the 5G standalone as a differentiator, both on the corporate and the consumer side, if you have any sort of early indication how it has been met by customers so far? And any specific areas where they can utilize this. So I think I asked last quarter about the corporate business and what the potential areas could be there, but also on the consumer side, do you see any sort of exceptional interest in the slicing, for instance, on how you're able to monetize that?

Yes. As stated, we have just recently introduced 5G standalone, i.e., 5G+ to our new subs for consumers and corporates. And it is still relatively fresh. So first indications are encouraging. If we compare our sort of pricing of the subs with the 5G plus functionality to 5G offering of the competitors, we are differentiating positively and there's a touch of price premium that we are enjoying for the moment on that one. But as stated early days, when we look at the early signals of customer satisfaction in terms of the 5G+, the better quality network, the resilience, the better speeds, better energy consumption, some weak signals of improvement during the quarter in terms of customer NPS for all of our clientele, we hit yet another all-time high in terms of NPS. So that is an accumulation of many things related to customer service but the offering around 5G standalone is one contributing factor. And then when it comes to your question of the slicing capability in particular, I think that there -- we have introduced our first slicing products, Elisa [indiscernible] is the fixed wireless access, and they have been on the market for a while. And there is some consumer pickup. But there, we don't have any sort of bigger conclusions to share at this point of time. We are keenly observing the slicing capability and considering what kind of product development we can do with that functionality.

Perfect. My next question would be just on the revenue to EBITDA impact or sort of the margin impact from some effects that we see in the quarter. So first of all, just the equipment sales, I see is continuously very soft looking at the year-over-year effect. I know it's a very low EBITDA margin. Can you elaborate a little bit on the EBITDA contribution from the equipment sales, so just we can sort of get the underlying effect from the weakness and also from the large B2B deal in Estonia. I think it was EUR 7 million, right, on revenue. So just those 2 factors, if you have any sort of color on the EBITDA impact?

Yes. So like you said, equipment sales margin or EBITDA margin is low. It is positive, but it is low, below -- clearly below 10%. Regarding this bigger deal, customer deal in Estonia around EUR 7 million. It is also because it is equipment and license retail. So it is a low margin. So therefore, let's say, contribution to total group margin is negative rather than positive.

The next question comes from Titus Krahn from Bank of America.

I've just got a couple of kind of follow-ups small clarification, if that's fine. 3 in total. The first one is just on the VAT, as you mentioned starting in September. Will you fully pass on the VAT charge to existing and new customers? Then the second question would be just if there could be any indication on the restructuring impact you had in Q2 and what you could expect for Q3 and Q4 onwards on your EBITDA? And maybe a last a bit more fundamental question. I think in the past, at least your CapEx or CapEx to sales has always been a bit more H2 weighted compared to H1. Is there any fundamental reason behind this? And why would it be different this year if we look at your guidance?

Yes. VAT, yes, we will pass that to the prices in full. So that's the first one. The restructuring impact that we did in Q1 in quarters, this quarter and coming quarters, it's in the range of EUR 1 million to EUR 2 million improvement. Regarding -- what was the third one? Sorry.

It was just on the CapEx side.

Yes. So as also said earlier, so really quarters vary. And there are various reasons why they vary. Our full year guidance is 12% to 13% is valid, and that's how we are managing the CapEx so that we are maintaining this 12% to 13% from sales.

One of the reasons for a bit higher CapEx during Q2 is the fiber build. In the Nordics, the fiber is basically built during the summer given the climate. So that is happening as of now. And in similar fashion, we are doing some sort of additional investments to our network to cater for the needs of our customers in terms of connectivity during the summertime when the mobility of customers is a little bit different than during the rest of the year. But as stated, this will be evening out during the course of the summer. And to Jari's point, we will be sticking to our CapEx guidance at the end.

The next question comes from Nick Lyall from Bernstein.

Just a couple of very quick ones, please. On the Estonian corporate contract, the EUR 7 million that you've mentioned, how much of that was booked in fixed, please? Was that all in the fixed business because that's obviously the difference between growth or decline for fixed? So could you help us with the amount so what the underlying performance in fixed is, please? And then just a very simple one on working cap, a big inflow again in the second quarter. Is that expected to reverse into the second half, please?

Yes, the EUR 7 million is in the fixed revenue. And sorry, we didn't hear the second one.

Sorry, just to check on that first, Jari. The big Estonian one-off. Was there a similar one-off at this point last year or anything else that we should think? Or is that a straight EUR 7 million off to get the underlying growth rate in fixed? How would you expect us to deal with that, please?

It's more of the latter one, so that there wasn't in last year a similar deal.

Perfect. And the second question was just simply on working cap. What was the inflow this quarter in working cap? Do you expect that to reverse into second half? Could you just explain what it is, please?

Yes, we had positive change, EUR 50 million coming from all lines of net working capital receivables. Sales receivables were lower, accounts payables higher, change in inventories slightly positive. And well, we continue to work on efficiencies also relating to working capital. And for example, inventories are something what we are looking to be more efficient and we are not happy at the current level.

The next question comes from Jakob Bluestone from BNP Paribas Exane.

Jakob here from BNP. I've got 2 fairly quick clarification questions. Firstly, on your broadband net adds. You reported about just under 1,000 broadband adds. But you also mentioned that the acquisition of fiber companies included 6,000 new customers. So just to be clear, is the like-for-like growth in your net adds 1,000 or minus 5? And then secondly, on your postpaid net adds. If we look at finished postpaid net adds, excluding machine-to-machine, they went from about minus 20,000 to minus 2. So just to understand, what drove that improvement? I think in previous quarters, you've talked about things like sort of 0 ARPU customers and data-only customers with low ARPUs. So you could maybe just help us understand what's actually going on with your paying smartphone customers.

Yes, the broadband or the acquisition of the fiber networks happened in July. So these additions are coming in the subscription numbers in Q3. So they were not in Q2 numbers yet. Regarding mobile net adds, yes, the situation improved in Q2 compared to Q1. We had, well, one could say somewhat more internal focus in Q1 as we were doing this restructuring during that quarter. And more focused on the marketing and sales in Q2. The thing that you mentioned is low use its subscriptions. They are still something that are reducing and impacting to numbers. But as said in Q2, the gains was much better than in Q1. And of course, we continue to take care that. We are not losing in terms of subscription market shares.

The next question comes Siyi He from Citi.

I have 2, please. And both questions is on mobile. I just want to circle back to some of your opening remarks saying that you see there are some pickup in terms of -- when it comes to 4G campaign in the market, which you seems quite consistent across Europe that we see low end of market competition pick up. I am just wondering how cautious you are that the current campaign would not lead to the market return to what we saw 2 years ago when it comes to 4G promotional tariffs? And you also mentioned that you are looking at some price increases in Finland. I'm just wondering if you can just elaborate of what type of price increase do you expect more mass market price increases or that or you will stick with your cohort based price increase strategy that you stated in the past. And my second question is on corporate. I think corporate mobile ARPU has been growing 4% for the second consecutive quarters. And in the past, the growth was quite muted. And I was wondering, given that you see the corporate starting adopting 5G, should we think that this should be the reasonable run rate that we should think about the development of corporate mobile ARPU going forward?

Yes. If I start from the last one. So yes, yes, we see encouraging signals on corporate 5G sales. And the corporate ARPU has been picking up on the quarter. So there's a slightly improving outlook for that one going forward. As stated on the back of the overall economy, showing first signals of improvement. We see corporates starting to invest a bit. In connectivity, in software, in IT services, and that is visible across the B2B segment when we look at the underlying development of things. And then with respect to price increases, I think that we largely exhausted what we have to say in this one. So during the -- towards the end of Q2, we did some price increases and we communicated some price increases in Estonia that will be visible going forward. In our immediate pipeline, we have some measures. We will be transferring the VAT change in Finland in full to our prices from first of September onwards. Other than that, we cannot comment on possible future price changes. And then could you please remind me that what was the first part of your question.

Yes. I'm just asking that I think you mentioned that you see some pickup in 4G campaign. Just wondering how do you see that developed? And would that be how it potentially could impact the market dynamics and whether we could return to a more competitive landscape that we saw back in 2 years ago before the 4G price increase happened?

I mean, largely, we see that the competitive landscape has been staying the same during the course of the fall. We do see this fall campaigning, 4G campaigning as mentioned, but no material shift. And basically, all of these factors boiled down to our view that we will be seeing mid-single-digit growth in MSR going forward. So that is basically the bottom line of our commentary.

The next question comes from Adam Fox-Rumley from sell-side analyst.

It's Adam from HSBC here. In your opening comments right at the top of the call, you mentioned earnings improvements. Clearly, we're seeing that, at EBITDA, but it's far less significant at EPS when we look at the first half, which looks largely to be down to financial expenses. So I wondered if you could just talk about your confidence in EPS growth for this year, whether or not the recent refinancing has changed, how we should think about your financial expenses? And then a very quick clarification on the points you were making around 5G standalone. What is -- in device terms, what's needed for a standalone subscription? Should we effectively be expecting another adoption curve of standalone devices to sit below that 5G adoption curve?

Well, if I start with the EPS and net financials. So there was in Q2 EUR 2 million increase in net financial expenses, including share of associated company profits and this mostly due to higher interest rates as we've been refinancing in the past fixed rate loans that been at the lower rate. Now we do not have short-term any refinancing regarding lower fixed rate loans. Next ones are coming 2026 and the short-term commercial paper loans or bank loans are already priced at the current interest rate level because they are variable -- at variable rates. So that's the situation. And for the coming quarters, as we said -- I believe we said already earlier in Q1 that we expect EUR 2 million to EUR 3 million -- this year, EUR 2 million to EUR 3 million quarterly increase in net financial expenses. So that is unchanged.

And related to your question around 5G standalone. At this point of time, we will need to remember that there are only a couple of handfuls of devices on the market that can handle 5G standalone. And they are all Android phones as we speak. So iPhone does not have the 5G standalone functionality at this point of time. We would expect this to improve in terms of the device capability going forward and that certainly will also improve the commercial feasibility of 5G standalone going forward. So we are really a front runner in this space, also vis-a-vis, the device manufacturers. So therefore, it would be too early to say that it would need to be a category of its own. But it is an additional dimension that will be supportive of our increase in 5G penetration.

The next question comes from Ajay Soni from JPMorgan.

I just got a couple. Another one on 5G standalone, you kind of addressed the hardware question just now. I was just wondering whether you think customers would actually pay for the service. I mean, I think it's priced down extra EUR 13 per month, which seems like a pretty significant premium. So just wondering how you plan to like commercialize that because it seems a pretty decent step-up. And then another follow-up on the CapEx question, which you mentioned that fiber CapEx kind of happen more during summer. So does this save you or maybe the peak coming more in Q2, Q3? Is that the kind of CapEx phasing we should expect in a few years assuming that your fiber rollout start to step up a bit more?

If I take the first question, and Jari will take the second one. So I think that the price points that you are referring to with respect to 5G standalone relate to our really premium subscriptions, that do have the 5G standalone functionality. But on top of that, they have very, very high speeds up to 1 gigabit of speed, and those price points are there. But those subscriptions are premium subscriptions. So they would not be selling in large volumes. Now what we have been doing to our new subs offering is that we have incorporated the 5G standalone functionality to all of the speed tiers that we have in consumer. So that means that there is a slight increase in price, if we -- let's say, if we, for example, take a 300 megabit 5G subscription. So with 5G non-standalone, the price point was EUR 32.99. And with 5G standalone functionality, it's EUR 1 more. So this is how you should be looking at it, so across the speed tiers.

And relating to CapEx, as mentioned earlier. So quarters are really different. And for the whole year, we are confident that we will be in line with 12% to 13% sales guidance and there are these differences relating to fiber or mobile -- 5G mobile network rollout in different quarters and different times of the year. But as said, 12% to 13% for the whole year is valid.

The next question comes from Felix Henriksson from Nordea.

I have a couple of follow-up ones. Firstly, just on the corporate ARPU. I think back in your latest Capital Markets Day, you stated that the average billing increase from B2B 5G migration was about EUR 4 as opposed to the average EUR 3 as a whole. Are you willing to reiterate that message? Is that still the case? And secondly, I think, Jari, you mentioned IDS as a positive contributor to operating leverage for the second half of the year if the growth there materializes. Can you confirm that IDS will indeed be a positive contributor to earnings and operational leverage for the second half of the year, especially in light of the fact that I think we understood that the business is still EBITDA negative for 2024?

Yes. If I start with the last one. And yes, as is the case with revenue. So its second half weighted, similar is with earnings. So there is during the year better EBITDA in the second half compared to first half. So the answer to your question is yes in that sense. Regarding ARPU uplift. So this EUR 3 for the whole company level is what we are reiterating and confirming. So EUR 3 ARPU uplift when customers are moving to 5G. We are not making segment specifications on that.

The next question comes from Usman from Berenberg.

I just got 3 questions, please. The first one was, I guess, on the Mobile Service revenues. I know in Q1, there was around EUR 2.5 million of artificial boost to Mobile Service revenues because there was some reallocation of revenues from fixed into mobile in response to this special numbers regulation. I just wanted to kind of confirm if there's a similar impact in Q2? Or was that just a Q1 -- was just a Q1 item? The second question was just looking at the EBITDA development by consumer and business. I guess I mean consumer seems fairly well on track to continue doing mid-to-high single-digit EBITDA growth. Corporate, who's been a drag, seems to be coming around the corner. So if consumers doing mid-to-high single digit and corporate is doing low single digit, I mean at a group level, it seems like you're well on track to be doing kind of something like mid-single-digit growth in EBITDA. Is that -- is there any kind of -- is that the right way to think about it? Or is it that it's too soon to pronounce kind of the cream of corporate EBITDA and trading headwinds over the coming quarters? Any color on that would be helpful. Then just on the third one on the fiber acquisition that you're doing. Are there many other opportunities in the Finnish market where you need to potentially ramp up this activity in the coming quarters?

Yes. Regarding Mobile Service revenue and the impact on -- from the corporate network regulation change and new products, it's roughly similar to Q1 in this quarter. And regarding EBITDA. So we have for the company level in our midterm financial targets higher than 3% EBITDA growth, and that is what we maintain currently as a target. And those things that you mentioned, they are there according what we said regarding consumer and corporate customer segment slightly improving performance and sort of early indications also regarding the latter part of the year. Fiber opportunities, of course, it is difficult to say when and if they are coming, we -- if they are coming, then we taken a careful look and the disciplined look on those so that the price and the value creation opportunity is good. There has been several other transactions in the past apart from what we've been doing. And we have seen also a value creation point of view transaction where we didn't participate and we would not participate.

Just are you seeing activity in this space picking up? Or is it just similar levels?

Yes, probably there will be fiber assets on the market. Difficult to say what the extent and when, but it seems that there are some assets in different parts of the country that could be on sale in coming future. But as said, when, that's hard to say.

And as stated, we have been now during the -- a little bit more than past 6 months, we have been doing a couple of these minor asset deals on -- small asset deals on fiber. And of course, that could be an indication of the overall market for asset deals becoming a bit more active but we will need to live and we will need to learn.

Okay. It seems to be that we don't have further questions from the conference call lines. Thank you for that, and thank you for participating. Now we will go to the summer holidays. But my colleague, Juha, is here available for further discussions with you in the coming days, if needed. But now have a nice summer.

Thank you very much for your participation. Enjoy the summer.