Elisa Oyj (ELISA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Elisa's Fourth Quarter 2024 Analyst Meeting and Conference Call. I'm Vesa Sahivirta, Head of Investor Relations, now I am going to say that we are very familiar team here, CEO, Topi Manner; and CFO, Jari Kinnunen. We have also some audience here in our headquarters. We start with a presentation followed by Q&A. And first, we take questions from the floor and then from the conference call lines. And then we are ready to start, so I give word to Topi, please go ahead.

Thank you, Vesa. And yes, today, everybody here in the room as well as participating remotely, and welcome to this Elisa Q4 earnings call. Let's get right down to business and look at the Q4 '24 highlights. During the quarter, our revenue increased to 2.9%. Of the quarters during '24, full year of 24, this was the best quarter in terms of revenue growth, driven by strong growth in our IDS part of the business and also increase in mobile service revenue. The comparable EBITDA was up 3.3% during the quarter. Mobile service revenue up 4.1% and as stated, for international digital services Q4 was very strong. During the quarter, our revenue increased on a year-on-year basis when compared with Q4 '23 with 77% supported by M&A. Organic growth on year-on-year basis for Q4 was 27%. And with that, we were able to deliver double-digit organic growth for the full year in the IDS part of the business as we have been indicating during the course of the year. In Finland, post-paid churn increased to 20%. In Estonia, churn was clearly lower. It was around 10%. Postpaid subscriptions increased by 12,400. We saw some increase in fixed broadband subscription base. And on the overall, the 5G upsells and the overall 5G momentum continues. At this point of time, our network covers 95%, 96% of the population in Finland. And now our Board of Directors is proposing to AGM a dividend of EUR 2.35 per share and this, assuming that it will be approved by the AGM, this would be the 11th contrive year of increasing dividend in Elisa. So looking at the Q4 numbers in a bit more detail. The revenue during the quarter was EUR 580 million. And as stated, this was the best quarter in terms of growth during the year. And on the overall, in the IDS part of the business, also to some extent, in home market corporate business, we started to see some pickup towards the end of the year, especially in December. And as stated in IDS, the revenue growth was very strong. EBITDA landed at EUR 198 million, EBITDA percentage being stable when compared to Q4 '23. Mobile service revenue was mentioned 4.1% in terms of growth. And then when we look at the ARPU development, that was plus 5%, very much driven by 5G upsells. And that 5G category of the market has -- that upsells has been pretty much intact during the quarter. Whenever we upsell from 4G to 5G, the average billing increase is more than EUR 3 per subscription, and that number has stayed constant between the quarters. We did see during the October, November and especially during the Black Friday weeks, quite intense campaigning related to 4G subscriptions, and that is reflected in the churn number on the Finnish market. However, now at the start of the year, when we look at the competitive situation, things are a bit calmer. What we need to remember is that seasonally, 4G is always -- seasonally, fourth quarter is always the quarter when churn level is the highest typically. So then looking at the business segment by segment. In consumer customers, EBITDA growth continued with 2.4%. And in the corporate customers, we saw strong revenue growth, almost 7% and strong EBITDA growth with plus 5% and a little bit more. This was largely driven by the strong quarter in IDS. But -- I mean, we started to see sort of a pickup in corporate segment during this summer, and that has now materialized. But the shape of the curve during the fall was a little bit different than we anticipated at first, Q3 was slower because we saw some deals being moved from Q3 to Q4, and now we saw the pickup during Q4. And the order intake during Q4 was also encouraging, meaning that there's a quite good starting point for this year when it comes to the corporate segment and especially IDS. So then looking at the full year numbers, what is notable is that with the sort of good continuous improvement practice that we have in Elisa, our EBITDA as well as EBIT hit the all-time high during 2024. So for the full year, we saw 4% comparable EBITDA growth. Revenue was close to EUR 2.2 million with 0.5% increase. EBITDA percentage on full year basis increased with a little bit more than 1% unit from the previous year. And the earnings per share -- comparable earnings per share was EUR 2.35. CapEx, CapEx to sales ratio was 13%. As we had indicated during the year. We saw some temporary good business cases for justifying a little bit more CapEx spending. And therefore, the 13% CapEx to sales ratio was materialized according to our plans. Going forward, for '25, we will be coming back to the level of 12% in terms of CapEx to sales. With mobile service revenue, we passed the EUR 1 billion mark. And the full year churn was 16.8%, which is pretty average, if we take the sort of long history of mobile churn average for, let's say, past 10 years. So in Elisa, we continue to consistently eminently execute our strategy, increasing mobile and fixed service revenues. Now we saw, for example, the fixed service -- the fiber revenues and fiber take-up, gradually starting to increase. We expect that to continue going forward. We started to see clear momentum building in IDS part of the business with digital service revenues. And then during the quarter, in the difficult operating environment that we had, especially in Finland and Estonia in terms of the macroeconomic development, we did some progressive cost efficiency measures. We have our practice of continuous improvement in terms of efficiency and productivity. We accelerated some of those initiatives during the year. And we will continue to do so during '25, especially leveraging AI in our processes. So costs and productivity, together with revenue growth, are a focus in terms of strategy. Migration to higher speeds continues. So the 5G upsells continues the linear trend that we have been seeing in the past. And when we look at the speeds above 200 megabits, the penetration for those speeds is now 58%. And during the quarter, there was a 2% unit increase in that penetration. What is perhaps noteworthy is that the smartphone penetration, the 5G devices penetration in our home market increased to 65%. So there's a marked increase during the year in that penetration. And this, of course, is an important enabler for our continued 5G upsells. As mentioned, the average billing increase for 5G upgrades is over EUR 3 and that figure has been constant between the quarters. All of our new subscriptions today are 5G stand-alone subscriptions, what we call 5G+. And that means that through the new sales, the penetration of 5G+ subscriptions is picking up every day. We continue to be a technology leader. There was a number of technology firsts during the quarter. For example, together with Nokia, we trialed 100 gigabit speeds for production fiber as the first one in Europe. So that was definitely a good development, and good to see. We also were the first operator in Europe to test Cloud RAN, an important development and stepping stone toward a 6G age. And then also on the backbone network, we deployed new and higher speeds. So technology leadership remains to be important element of our strategy. Then moving into IDS. As we discussed already, the revenue growth for quarter supported by M&A, especially the setup the acquisition from November was as high as 77% for the quarter. The organic growth for the quarter was 27%. So here pretty much landed as we expected. The organic growth was double digit, as we had indicated during the year. The shape of the curve was a little bit different than we originally anticipated. We anticipated sort of more step-wise linear increase during the quarter. But with strong Q4, the year ended up according to our expectations. SedApta has now been integrated, that has proceeded according to plan. And what is noteworthy is that during November and especially December, our order intake in the IDS business has been clearly positive. We have been winning also new customers basically in all geographies, and that is good. In Polystar part of the business, we did some cost efficiency measures, improving the sort of profitability posture of that business. And all of these measures are now building the momentum for IDS and that is indeed encouraging. If we look at the IDS business, and we simplify a bit, especially with set up the acquisition, we now see that we have the product and what we need to do is that we need to increase our geographical footprint and with that grow organically. We have a good customer base. We, of course, will acquire new customers, but what we will be especially doing is that we will be doing land and expand with our existing customers, and that will be supportive to organic growth. And with that, we expect that organic growth in IDS part of the business for 2025 will be, again, double-digit growth. And on top of that comes the growth from M&A. Profitability in this part of the business will improve. So for IDS, we expect for full year of '25 positive EBITDA numbers. So that soft guidance marks an improvement of what we have been stating previously. Previously, we have been stating that we would, in IDS part of the business, expect to see positive EBITDA numbers from Q4 '25 onwards. And now we are expecting positive EBITDA for the full year of 2025. Still, the quarters will be different within IDS, and there's more seasonality between the quarters in IDS business than there would be in the rest of Elisa business. Also good steps forward in developing the domestic home market digital services in entertaining new services. We formed a new sales agreement partnership with Disney+, and that has been welcomed by our customers. The sales of streaming services through Elisa Entertainment, the aggregator service, is increasing. We also -- for the third time, we organized Elisa Master's eSports event, and that attracted quite a large international audience. In terms of IT and security services, we formed a new strategic collaboration with Microsoft in building AI and hybrid cloud. This was the first of the kind in Finland. So developing customer solutions and also improving our employee competencies together, and with that, improving our competitiveness on the market. In the cybersecurity space, we saw a lot of activity around new customer acquisitions, and we won good customer relationships with big Finnish customers indicating that we truly are competitive with those services. What is perhaps notable is that we recently announced that we will be recruiting, during the course of next 12 months, up to 100 AI and software experts in Finland and in Estonia. We are changing a bit our way of working. We go for more stable teams, and we do some in-sourcing in the process of this. So it's a sizable recruitment. But what is important to note that this will be EBITDA positive right from the start because what we will be doing is that we will be going into AI efficiencies with these people. And at the same time, we will be reducing the usage of external services. And with that, this will be EBITDA positive. In our societies in Finland and Estonia, digital security is a big theme right now given what we have seen in terms of hybrid operations on the Baltic Sea, given the cybersecurity risks increasing in the society. So no matter whether we talk about consumers, whether we talk about corporate customers or public sector customers, these needs are increasing, and they are also providing business opportunities for us. One example is the pickup of mobile ID service. Banking sector experienced cyber attacks during the fall, especially in Finland and thereby, the dependency of society and consumers to bank ID has been sort of triggering consumers to seek alternatives, and mobile ID, mobile certificate, that product usage has increased with 60% during the year. So it's a significant pickup and sort of a breakthrough year for mobile ID service in Finland. We also have done a lot to block scam calls in our home market during the last couple of years, preventing as many as 23 million fraudulent calls, which is a sort of corporate, social responsibility type of activity from us. We have also seen the DDoS attacks, cyber attacks, to increase significantly in our home market. We have been able to prevent those, but this is a societal phenomenon, and as stated underscores the importance of cybersecurity and those services within our societies. And then, of course, during the Christmas time, we saw two of our data cables being cut on the Gulf of Finland, the tanker called Eagle S, part of Russian shadow fleet being suspected of that. And as a showcase of our resilience, that cut of those two data cables did not impact our telecom services at all, and we were also able to repair them very, very quickly in a matter of 2 weeks, which is a showcase of the network-related competence that we have in our company. So with all of these things, we are building sustainable society through digital security. And then we come to the outlook and guidance. As per usual, we would be guiding the revenue to be on the same level or slightly higher for next year, '25, and the comparable EBITDA to be same level or slightly higher for '25 as it was in '24. And related CapEx, as I already mentioned, from '24 level of 13% to CapEx to sales ratio, we come back to 12% in terms of CapEx to sales, and that is perhaps noteworthy in the guidance. Okay. Thank you. Now I will hand over to Jari, and then we, after that, come to questions. Thank you.

Thank you, and good morning from my side as well, and let's go through quickly. Key items in profit and loss. So Q4 was a continuation of solid, good development and revenue growth accelerated to 2.9% or EUR 16 million. And inside, that EUR 16 million, negative change in both customer segments from interconnection and roaming as a result of interconnection price changes beginning of the year, that was EUR 2 million. And also in equipment sales, both segments, negative change altogether, EUR 5 million change. Service revenues in corporate customer segment, very strong quarter and EUR 70 million increase driven by -- mostly by IDS. Also, mobile services growing as well as domestic IT -- domestic digital services, IT services growing and a negative impact as been longer time from fixed voice services. Service revenues in consumer segment growth was EUR 6 million. Both mobile and fixed services growing and negative change in traditional fixed voice. In expenses side, we continued our cost efficiency measures, productivity improvement measures. As a result of that, there was one-off restructuring charge relating to personnel reductions of EUR 6 million in personnel expenses. EBITDA -- comparable EBITDA growth continued now, 3.3% or EUR 6 million to EUR 197.6 million. EBIT change was positive 1.1% to EUR 125 million. In financial expenses, change was negative EUR 6.6 million, most of that change coming from one-off costs related to impairment booking of loan receivable amounting to EUR 5 million. Altogether then comparable EPS, EUR 0.58. In Estonia, macro economy still -- environment still challenging and inflation numbers, significantly higher than in Finland at 4%, impacting somewhat to customer demand, which is visible in equipment sales decreased. Also, negative impact for revenue coming from interconnection. Revenue decrease was EUR 3 million or 5%. However, mobile service revenue continued to grow also in Estonia. Positive development in EBITDA continued, 2% growth and margin improved to 31.2%. Minor changes in mobile subscription base. Post-paid, 200 and prepaid, 400, negative change and churn continued that low level was 10% in Q4. Q4 CapEx was EUR 92 million and guided CapEx, excluding licenses, leases and acquisitions, EUR 80 million. Year ago, EUR 91 million. And for the full year, CapEx was EUR 333 million and guided CapEx, excluding licenses, leases and acquisitions, EUR 295 million, which is in line with the guidance that we gave beginning of the year. So 13% of the revenue. And main investments continue to be in 5G, coverage increase in fixed line fiber investments and IT investments. Cash flow. Comparable cash flow in Q4 was EUR 66 million, EUR 73 million year before, so minus 9% change. Positive impact from lower CapEx and negative impact from higher interest costs and negative net working capital change. Although now in Q4, net working capital was negative for the whole year, change was positive. For the Full year, comparable cash flow was EUR 357 million, minus 1% against the previous year. Positive contribution from EBITDA and lower licenses and negative impact from CapEx, taxes and interest. Operating EBITDA -- operating cash flow conversion remains high and increased from previous year and was 58%. Balance sheet continues to be strong and capital structure in line with medium-term targets. Net debt-to-EBITDA was 1.9x. Equity ratio, 38.7%. And return ratios continue also at good level. Return on equity, 29%. Return on investment, 18.5%. In terms of interest bearing debt, currently, average interest is at 2.4%. And today, we announced the Board proposal to AGM regarding dividend, EUR 2.35 per share to be paid in two installments in April and October. And as mentioned already by Topi, so this is 11th consecutive growth year in distributions and now represents 4.4% growth against previous year. Payout ratio calculated from comparable less 100% and dividend yield at 5.6% against share price end of last year. Additionally, there is proposal for authorization, max, EUR 5 million share buyback. All in all, underlining continuation of strong commitment to competitive shareholder remuneration. Now I give to Vesa, please.

Okay. Thank you, Jari. And now we move on to Q&A, and we ask first question from the audience and comes here. Artem, please.

Artem Beletski from SEB. Two questions from my side. So first of all, what comes to MSR growth? We have seen deceleration in Q4, and looking at 2025, so there has been -- will be some mechanical impact of roughly 1 percentage point if I understand correctly of impacting this growth negatively. Could you maybe comment on MSR growth outlook for this year and versus its mid-single-digit growth guidance of indication what you have provided is still valid?

Yes. So I stated during Q4, especially during the course of October and November, we saw some intense campaigning with 4G with prices. But right now, at the year, things are a bit calmer in terms of that. And when we look forward to full year of '25, we expect to see mobile service revenue to continue to grow with mid-single digits. Q1 will be a bit lower. And majority of the MSR growth will come from 5G upsells. But we see some possibilities for price support for MSR during the full year of '25 and then additionally, from value-added services included in MSR.

Okay. Great. And then second question, what I had was actually relating to data traffic in your mobile network. So we have seen deceleration in Finland happening already previously and now it was actually down year-over-year. Could you maybe talk about the underlying trends, which are driving this, low data traffic? And for example, looking at AI elements in future, do you see any significant contribution to potential growth and so on?

Yes. So I think that there are especially a couple of things that we see in terms of data traffic. One is that we have been improving the data efficiency, especially in our Elisa Entertainment service, introducing a new codec and that sort of data compression has been decreasing the data volumes, as much as 4% units for the whole data volume. So that is a significant element that needs to be taken into consideration. Then there's some sort of volume transfer from mobile data traffic to fiber side given that more customers take the fiber and that is impacting things. So these fundamentals are there related to the mobile data volume. What you need to remember really is that our earnings model is not based on data volume. It is based on data speed. And that is significant to remember. So the data volume as such does not impact our business model more or less such. And then the 5G upsells continues to be intact because that upsell is very much linked to data speed. And what we see around the corner is that things like DeepSeek will just accelerate the adoption of AI in all shapes and forms. And AI will become also more affordable for many companies. And then that will be meaning that there will be more apps and more applications that will be using AI going forward. And in our view, when we look a bit ahead, that will offer great opportunities for connectivity needs to be increased in general, no matter whether we are talking about mobile and fiber and then especially the uplink speeds of 5G advanced providing new business opportunities and new monetization opportunities for us in the future.

Sami Sarkamies, Danske Bank. I have three questions, if I may. Firstly, starting from guidance for '25. I think it looks a bit cautious given the exit rates in Q4 and a positive outlook at IDS and at corporate segment. So what are some of the main reservations you have for '25?

Do you want to go?

Yes, there are still uncertainties relating to macro. And as we have shown, as we have seen last year, especially in the corporate side, demand was lagging and many projects were postponed and although there are some positive signs, but it is still something that is uncertain how much improvement there will be. So this is something that we, of course, we are following during the year and that's now the situation that there is certain amount of uncertainty relating to that. So overall competitive dynamics and pricing and expenses related to that one, something that is still to be seen how the developments are.

Okay. And my second question would be related to competitive landscape. How would you explain the intensified competition more recently? I mean if we look at the last couple of years, you've been raising prices quite materially. Also competition has done the same. But perhaps more recently, we haven't any more seen those price hikes but we're seeing intensified competition. So what's happening on other markets in your view?

Well, of course, one underlying related to the prices is that the inflation has been tamed significantly. And when we look at our markets in Finland, inflation rate is below 1%. So that is, of course, impacting the pricing landscape as such. In 4G, we have been seeing this campaigning. 5G is intact. And of course, I think that one of the big changes in the market in that respect has been that in the local market of Finland in terms of market shares, DNA, [ bypass, ] Telia. And that is one of the sort of underlying changes in the dynamics. I mean, if you look at the long history in the market, I think that there has been some fluctuation in the competitive picture. The churn has typically been between 15% to 20% on the market. Q4 being always seasonally the most intense in terms of competition. Our full year churn of 16.8% during '24 is pretty much the average on that ballpark in the long perspective of churn. So competitive situation fluctuates. And as stated, for the time being, we are in a bit calmer picture than we saw during October and November.

Okay. And my final question would be on the organic development in Q4. So if we would exclude acquisitions, what kind of growth rates did you have on the plan and EBITDA on an organic basis?

I mean if we look at the organic basis, when we take the acquisitions out and so forth, I think that we would be roughly at 1.5% mark in terms of the underlying revenue growth.

And what about EBITDA?

EBITDA?

There's only minor impact. Yes. So the revenue impact is like Topi said, that's net of disposals and acquisitions.

Yes. And maybe finally, you are expecting positive contribution from IDS on EBITDA level already this year. Were you profitable in Q4 already at IDS?

Yes. We are not really disclosing that number, but let's say that our cruising altitude for this year is the way we would like it to be.

Felix Henriksson from Nordea. I also have three questions. On mobile service revenue growth, it's at now 4% in Q4, stripping out the product reclassification impact 3% or so, but you're still counting on getting back to mid-single-digit growth off the back of the 5G upsell. So could you describe a bit about the continued potential for 5G penetration. I mean you have 58% penetration in your base on the higher than 200 meg subscriptions at the moment. What's the realistic penetration rate, for example, if you look at the previous technology cycles?

So as stated that 200 meg penetration, 58%, that includes all 5G subscriptions and then also a portion of 4G subscriptions. That linear trend you have seen, that continues. And we see that to continue for years to come. So the number of 5G penetration device in terms of devices is increasing all the time, and therefore, the underlying need for speed and the enabling element from 5G devices is there and we see that to continue.

Okay. Fair enough. And on your post-paid subscription market share, I think you lost about 25,000 subs, excluding machine-to-machine and IoT subscriptions in Q4. And you've sort of previously stated that you plan to defend your market share and keep that sort of stable. What's the level of conviction regarding that statement going into 2025? And how do you sort of plan to defend your subscription market share without sacrificing the price point?

Yes. So as stated, we will be keeping our long-term market share. So one thing that will be interesting to observe on the market is that what will be happening to the market of mobile broadband connections. The fiber take-up is increasing. In Finland, more and more fiber is being built. Currently, we are in the land c*** game pretty much, but also the Internet connections related to the fiber are gradually increasing. And with that, we have seen some transfer from mobile brand broadband to fiber. And I guess that, that is a market phenomenon that will be there. This is not a significant phenomenon. But when you sort of single out, when you break down the subscription development, something to take note of.

Okay. Fair enough. And then finally, how should we think of the operating leverage and EBITDA margin improvement for 2025? Because correct me if I'm wrong, it sounds like you're doing quite a bit on the cost base regarding turning IDS positive, looking into AI capabilities and then also continuing personnel reductions here and there. How should we think about that?

Yes. So we will be doing a lot of continuous improvement in terms of efficiency and productivity. We will be further leveraging AI going forward also in terms of efficiency. And you are quite right that IDS moving into positive territory in terms of EBITDA is definitely a lot about revenue growth, but there is also an element of synergy capture between the purchases that we have been doing in IDS. So we are not -- we are definitely not sitting idle in terms of cost efficiencies.

Okay. Any further questions from the audiences? There seems to be no questions. Why don't we go to the conference call lines and ask first question from the lines, please.

[Operator Instructions] The next question comes from Adam Fox-Rumley from HSBC.

I had a couple on the outlook and then one on the operations, please. Your -- historically, you guided for a max of 12% CapEx in 2023, and you -- I think 13%. In '24, you guided to 12% to 13%. But actually, you've come out with 13.5% today. So I'd just love you to talk a little bit -- you always guide to this top -- or have frequently guided to this 12% of sales. But is that really a maximum? Is it 12.5%? So that we're really confident on your cash flow forecast. And then secondly, on the outlook. I know that you guide for EBITDA and you don't guide any lower than that, but EPS is clearly very important in the context of the dividend payment. You're up to [10% ] payout now. So can you just talk about your expectations for EPS growth in 2025, please?

Right. Regarding CapEx, it is so that guidances, the previous year, it was between 12% and 13% without the CMOs. And previously, before that, it was 12% -- rounded 12%. So that's the guidance. I hope that is clear by that. Then regarding EPS, like you said, we are not guiding the lines below EBITDA separately. What we can say that in terms of interest expenses, changes last year compared to changes '23, '24, and going forward now for this year, the change is less negative this year, year-on-year change compared to what it was last year.

And then related to depreciations, I think it would be good to mention that during '24, year '24, we did many small bolt-on acquisitions, spending more than EUR 130 million to these bolt-on acquisitions. And they, in turn, of course, impacted the depreciations a bit. In '25, the outlook is that the capital allocation to bolt-on M&A will be lower than in 2024 and with that also, of course, impacting cash flow.

The next question comes from Ondrej Cabejšek from UBS.

A couple of questions for me, please. I guess on the fixed side, if you could, I know you commented on it, but just give us a bit of more color in terms of the trends within that line. I know you mentioned, for example, fiber currently growing pretty well. So that is one area, but then also I was curious, for example, in the potential -- one of your competitors has been talking about the situation around the entry into [ NATO ] and as you mentioned, several of the kind of geopolitical issues and -- around cables and then other security issues. So is there a chance that the fixed revenue side is impacted positively from some of the potentially higher demand for security kind of solutions from both the enterprise as well as the government? That's an area of focus for me. And then the second one, I wanted to talk about the CapEx side of things, and you already mentioned that obviously, CapEx is coming down next year. Part of your CapEx over the past couple of years was allocated to distributed energy systems. So if you can talk about how that business -- I guess it's early days, but what kind of growth opportunities you are seeing from that now that, that project has kind of completed, I would think?

So first, related to fiber. So if we talk about fiber, in consumer context, there's a growing need among consumers and for the time being, we are focused on the land and expand on those areas where we have high market share within a country. And the next phase clearly will be -- that we will be focusing on take-up of the actual Internet connection. Our expectation is that eventually, we will be seeing a 60% take-up for the Internet connection for the fiber that we have been building. To your point, related to the overall digital security environment, among corporates and public sector organizations, we start to see some movement related to them focusing more on their connectivity and then that might be boosting some of the sort of fixed line businesses. So this is an emerging trend. And then how that will pan out, we will need to come back to separately. And I don't know whether you want to comment the CapEx side.

Could you repeat? What was the question regarding CapEx?

Sure. So on the CapEx side, part of your -- the reason why -- or I guess the big reason why your CapEx was higher than usual kind of 12% trend over the past couple of years was the investment into distributed energy storage systems. And I wanted to ask just for confirmation if this kind of project is complete now, and what kind of return or revenue opportunities you are seeing there and with the kind of future of that business? Because that seems to be one of the other kind of say, noncore areas -- or adjacent, rather not noncore, but adjacent growth areas next to the digital services side that could help growth in the future as well.

Yes. So there is now this year's CapEx to this. But there is -- that's correct compared to last year. And of course, inside the total CapEx amount, there are differences between investment areas between the years and this kind of allocation happens. This business and revenue and earnings impact are still very small. It's still a start-up phase 1 good almost say, but it is growing nicely and with high growth rates, and it is a scalable business in that sense that it is based on the own software developments. And not only in our own usage in our own assets being batteries in the network, but also applicable -- use in our customers' assets. And we are of course, as we published already last year, we are selling this as a service to other operators. So there are several earnings model, several customer fronts relating to this development.

So overall, should we see -- given some of the regulatory impacts this year on the fixed side, we've seen impacting negatively, should we see growth in the fixed service -- or say, fixed revenue line in general going forward, again, you think?

Yes, we see fixed broadband customer demand increasing and fiber demand increasing and that demand, we'll be responding with fiber investment. And as mentioned by Topi, it is a longer-term business case where we are targeting more than 60% penetration as years go by. So definitely, revenue -- positive revenue expectation from fixed broadband going forward.

The next question comes from Siyi He from Citi.

It's Siyi from Citigroup. And I have two questions, please. And the first one is on the fixed. I just want to dive a little bit on the fiber -- your thoughts on fiber investment. I hear you said that there is a strong demand for fiber and also you're targeting 60% of the penetration in the longer term. And given that it's in Finland, land grab period, I wonder you're thinking of why you're not actually spend a little more money on fiber rollout? And maybe you could also comment, what's our competition like from the alternate that's also building on fiber? And the second question is on mobile market competition. You have been always commenting that the competition is quite keen and I see this kind of promotions from time to time. But your churn in Q4 has -- is now the highest over the last 5 years. And I'm wondering if you can comment that -- what has changed in the market this time?

So if we start from the fiber, if we speak about FTTX and when we look at the areas where we have strong mobile network coverage, where we have strong market share, our fiber coverage in those areas is already 85%. So there's still some land, grab game going on, but the bulk of it, we have been addressing. And in terms of competitive situation, I think that when we look at our sort of competitiveness versus other fiber builders, especially the specialized fiber builders that are often private equity backed, we have two. One is that our service model is very transparent and simple for customers. We combine the fiber and the Internet connection and that customer service simply works and customers understand the service that they're getting. We are getting good feedback out of that. Another one is that when we sell the fiber and the Internet connection, 50% of our customers also take our entertainment pay TV service. So we have more sort of additional revenue on top of the fiber and the Internet connection coming from bad sales, and that is also where we differentiate. So our business case is simply better in those terms. And then related to the mobile question, during fourth quarter, especially in October and November, the price competition with 4G subscriptions was more intense. So the churn is related to pricing. When we look at the quality of our service, the quality of our products, we see that being in shape. Actually, at the end of the year, our customer satisfaction measured with Net Promoter Score was all-time high. So our brand is strong. We have clear preference on this market. Our customer service is good. So in that level, our competitiveness is in good shape. So the competition is related to pricing. And during Q4, we steered clear from the most aggressive pricing by competitors. Going forward, we will make sure that we will be keeping our market share in this space.

The next question comes from Joshua Mills from BNP Paribas Exane.

I just want to come back to the slowing and reversing volume growth we saw in the quarter and look at it from an opportunity perspective. So my questions would be, firstly, does this lower -- volume growth mean you can actually bring CapEx down more substantially in the medium term? And perhaps you can give us some thoughts about that. And secondly, with the new capacity that's being freed up, do you see the opportunity to push more aggressively into the wireless broadband segment or tailor your offers there to perhaps increase data allowances or be more aggressive with certain customer cohorts would be interesting?

So on the first one, on CapEx or the sort of correlation between data volume growth and CapEx, the answer would be yes, that, of course, we're keeping a close eye on this one, and there might be a possibility for reduced CapEx in terms of mobile networks. We continue to strengthen our mobile network. So there will be CapEx in that space. But on the margin, we will be, of course, optimizing our CapEx on mobile networks. And then, sorry, the last one, the last part of your question was, what was that?

Yes. Just with your existing network being -- it looks like underutilized now with data volumes slowing, are there more aggressive moves you can make into the mobile broadband or fixed wireless access space to try and monetize that excess data capacity on your network in the near term?

So on that one, I mean, we, of course, continuously keep on developing our offering and our business model. And wherever we see opportunities, we want to offer better products to our customers and take advantage of the opportunities that we see on the market. So that is perhaps the general level answer and then we will need to come back to specifics as we move forward during the course of the year.

The next question comes from Ajay Soni from JPMorgan.

Just a couple from me. The first around mobile service revenue. So I think in 2023, you did around 5%. And then I think trend down organically from around Q2 where it fell to around 3.5% and then below 3% in Q4. So it kind of appears that the trend has been worsened throughout the year and made not just siloed to Q4 itself and where you saw more competition. So what gives you confidence around actually turning this around towards your mid-single-digit guidance? And it kind of appears that there's maybe slightly less runway on the 5G upselling than there has been in previous years, so that's the first one. And the second was just around IDS. You mentioned there might be seasonality throughout the year. But you've also said you've got quite good visibility of your orders. So for 2025, could you give us some indication of how that double-digit organic growth is split across quarters? Or maybe if you just have an idea for H1 itself, given the visibility that you've talked about before?

So first of all, related to the mobile service revenue, I think we don't agree with your statement that there would be less runway for 5G upsells. We see that 5G upsells to continue with the linear trend going forward as it did during the Q4 as well. And then related to the confidence of mid-single-digit mobile service revenue growth, we do have opportunities out there. 5G upsells continued being one of them. Added -- value-adding services included in MSR is another one. The mobile ID is a case in point. That increased with 60% that take up during the course of the fall in Finland. And then as I mentioned, when we look at the full year of '25, we see some opportunity for pricing really big changes by strengthening our offering and with that, providing value to our customers. And then the IDS shape, if you take that.

Yes. Yes. Yes, indeed, there has been, end of last year, positive developments in IDS was visible in Q4 numbers and also in sales funnel, order book development. So that gives us confidence for the double-digit growth rate. Of course, there are differences between quarters. There is more fluctuations between the quarters and some seasonalities. But for the whole year, this double-digit organic growth is what we are targeting and there is good situation in terms of order book for the beginning of the year.

The next question comes from Ulrich Rathe from Bernstein.

First on the -- I have a couple of questions. First on the CapEx, the cutback. I'd like to sort of turn around, address the question a little bit. You have that right tariffs already, upsell, which you are talking about is the growth driver, speed tiers requires a better network. So you need to provide a tangible benefit for customers to actually see the higher speed. Is 12% capital sales enough to continuously upgrade the network, not necessarily from a capacity perspective, but really for some perspective of providing the headroom for these higher speeds that actually end up with the customers, say, in the daily experience? That will be my first question. The second one is on the guidance. There was a question earlier about whether you're maybe slightly cautious, you said uncertainty is high. So is it fair to say then that the outlook that you are giving here today is not the midpoint of the range of possible outcomes, but that you've essentially taking it a bit cautious? And then my third question is, you mentioned a EUR 5 million loan receivable impairment. Is that from one customer? Or is that an aggregate number across a number of accounts? And if yes, is that essentially a reflection of macro issues? Or would you attribute this to other issues?

Start the last one, that was loan receivable related to one associated company. Then about guidance. As said earlier, there are these uncertainties, market environment, macro environment. And as we go on during the year, and we see how the environment is developing and how the performance numbers are developing we, of course, might come back to this one. And that has happened in the past years several times. Regarding CapEx and mobile network, I understood that was the question, and capability to maintain quality if that was the question. Indeed, It's, of course, important in the business model that we do have speed-based price tiers that there is quality and speed when customers move to other price tier, meaning higher speed, that experience is improved. And we, of course, make sure that, that happen, and we monitor network capacity and speeds and do investments in those places where it's needed in order to maintain the customer satisfaction. And it is currently so that most satisfied customers are those ones who have the highest speeds, even though they pay a premium price. So that is the business model is confirmed. And going forward, we do allocations of CapEx between different areas according -- well, customer satisfaction and needs. And altogether, we are confident that going forward with 12%.

Yes, indeed. And one thing that we should remember is that we have already advanced quite far in the 5G stand-alone update of our network.

Can I throw in one quick clarification only. I think I know the answer, but the comparable guidance is not organic, right? This is not excluding M&A. Comparable is including an M&A uplift. Is that right?

Guidance is organic.

Excluding M&A impact?

You mean new -- if it needs new acquisitions, that's not what we mean.

The next question comes from Andrew Lee from Goldman Sachs.

I just had some clarifications at this point. So just first clarification was on -- your comments to that it will be breakeven for the whole of 2025. Are you including the EUR 10 million EBITDA contribution from sedApta acquisition in that analysis? And if so, if you excluded sedApta should the rest of your IDS business, prior to sedApta, be EBITDA positive for the whole of 2025 as well? And then the second question, and sorry, keep coming back to mobile service revenue, but just as a clarification on all your helpful comments through the call. I think you mentioned that first quarter will be slower growth for mobile service revenue growth. Could you just explain a little bit more about why on that? And then, I guess, what people get to in various ways is if the competition remains as it is right now in Finland, do you think you can get back to underlying 5%, i.e., mid-single digit, but 5% mobile service revenue growth in 2025?

So first of all, on the IDS bit, actually, could you please repeat the IDS questions so that I can straight ahead address that?

Yes. Yes. So your previous IDS guidance that you made for a couple of years was that you'd get to breakeven for IDS at the end of 2025. Post that, you've bought sedApta, which brings in EUR 10 million -- roughly EUR 10 million of EBITDA contribution. So your new guidance of IDS will be breakeven for the whole of 2025. Is that simply reflecting the sedApta acquisition? Or is it reflecting improved underlying performance across the rest of your IDS business from a profitability perspective?

Yes. So first of all, I think that the EUR 10 million EBITDA contribution from sedApta is overstated, so that is a lower number. And then the IDS soft guidance is for the totality of IDS, including sedApta. And we expect that to be on positive territory for the full year. So that is the improvement from our previous soft guidance that was pointing out that we would be EBITDA positive from Q4 onwards, Q4 '25 onwards. So in IDS...

Is it an organic improvement or just -- or is it just an inorganic improvement? Have things actually got better from an organic perspective...

There will be organic improvement in IDS as well. But at the same time, we will need to remember that we will be investing in sales and marketing when we go to new markets with our current products. So if we would want to, we would be able to make IDS clearly profitable right now without these growth investments related to go-to-market. But excluding that, there will be support from M&A like sedApta and there will be also organic profitability improvement in IDS. And then related to the MSR, I think during the course of Q1, we estimate that there will be less support from pricing to MSR and also some of the value-added services most likely will be gather speed during the full year of 2025. So Q1 will be predominantly about upsells to -- 5G upsells. But on a full year basis, we see some opportunity for strengthening our offering, providing customer value and with that, some support from pricing measures.

So on a full year basis, if things remain as they are, everything else equal, should mobile service revenue growth be 5%, i.e., raised from the kind of sub 4% on an underlying basis it's been on the last three quarters?

Yes. Well, yes, the guidance is mid-single digits.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

All right. Thank you for questions. Thank you for participating in this event, and we look forward to seeing you in our Capital Markets Day in March, of course, after Q1 results, again. But for now, thank you, and have a nice day.

Thank you.

Thank you.