Tele2 AB (publ) (TEL2B) Earnings Call Transcript & Summary

Good day and thank you for standing by. Welcome to the Tele2 Fourth Quarter Interim Report 2021 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Kjell Johnsen, CEO. Please go ahead.

Thank you, operator, and good morning, everyone. Thank you for bearing with us. We seem to have a little bit of technical issues with the operator system, but here we are. So welcome to the Tele2 report call for the fourth quarter and the full year of 2021. Today, I'm very happy that in front of me, I have Charlotte Hansson, our new Group CFO, sitting here in Kista. And of course with me here, Hendrik de Groot, our Chief Commercial Officer; and Stefan Trampus, our Head of B2B. So today, we will walk you through the results of the quarter and the full year, the progress that we made in 2021 and the outlook for 2022 and beyond and we'll do a Q&A at the end of it. 2021 was yet another year with impressive results for the group and I would like to start by highlighting the achievements and strategic initiatives that we've taken. So moving to Slide 2. So despite the challenging year with headwinds stemming from the COVID-19 pandemic, we were able to lift and deliver on our guidance for 2021 by growing end-user service revenue by 1% and underlying EBITDAaL by 5%. This was done by continued strong performance in the Baltics as we were able to achieve both ASPU and volume growth while maneuvering through an unpredictable pandemic. In Sweden B2B, we were able to reach stabilization in Q3 and we see yet another strong quarter today. In Sweden Consumer, we continued our more-for-more strategy and saw strong performance within mobile postpaid and fixed broadband while we were able to mitigate the decline in Digital TV. At the same time we executed on our business transformation program, which ended the year with an annual run rate of SEK 500 million, in line with our target. During the year, we took a major step in our FMC strategy by creating the new premium Tele2 brand through the consolidation of 2 of the most iconic brands in Sweden and with that, we concluded the first phase of our FMC strategy. I'm very happy to see the results in Sweden B2B that Stefan and his team have delivered during the year. When we presented a new B2B strategy on Capital Markets Day, I was optimistic and excited. But it pleases me now to say that they have overdelivered on my expectations for the second half of the year in 2021. This improvement is not merely done through our new SME mobile portfolio, but we see improvement across all segments as we are now able to show the second consecutive quarter of growth for a business that was declining by high single digits a year ago. In September, we announced the sale of our stake in T-Mobile Netherlands, which was the last step in consolidating our international footprint. I'm very impressed by the results the team has shown there during the last years and the value that they have created and we were able to achieve a very good valuation for the company. We expect the transaction to be completed soon and once it is done, we intend to distribute all of the proceeds to our shareholders. Tele2 is a strong cash generative company, and as I said during the Capital Markets Day, one of our mid-term target is to have the best industry shareholder return. With the equity free cash flow that we have generated this year -- or rather last year, the Board intends to increase the ordinary dividend by 12.5% to SEK 6.75 per share. This puts us comfortably within our leverage range and as we generate more cash and grow our underlying EBITDAaL throughout the year, you should expect us to relever the balance sheet to remain around the midpoint over time and distribute that cash to our shareholders. And with that, please move to Slide 3. We started 2021 by witnessing negative impacts from the pandemic with the primary headwind being lower international roaming revenue. However, during the year, we've seen roaming gradually returning and we are now experiencing a tailwind albeit at a lower level than before the pandemic. At the same time, we've been able to build a solid foundation for growth throughout the year, which we have seen tangible results for since Q2 2021. In this quarter, we see a continuation of this and we were able to grow end-user service revenue by 2% both including and excluding roaming adding up to a 1% growth for the whole of 2021. In Q4 we decided to take our foot off the gas a bit in terms of commercial spending. Since I became CEO of this company, you have heard me talk about the importance of balancing value and volume in the consumer business in order to achieve sustainable growth in the long term. During the first half of '21, we focused on monetizing the increased demand for data by our customers by executing on our more-for-more strategy. In the second half, as society has opened and market activity picked up, we shifted focus to invest more in market. As Q4 normally is a quarter driven by high activity through campaigns, we decided to take a more active part in the market compared to the year before. This hampered some of the underlying EBITDA growth in the quarter but creates value for the long term as we balance the value and volume in our customer base. This coupled with FX headwinds in Sweden and increased inflation, particularly in the Baltics, resulted in an underlying EBITDAaL growth of 1.3% in the quarter. Since this was in line with our plan and clearly communicated, we are able to land spot on within our guidance for the year as underlying EBITDAaL grew by 5%. As a result, we saw strong cash generation during 2021 with equity free cash flow growing double digits to SEK 5.8 billion for the year. In Sweden Consumer, we see continued strong performance in broadband and mobile postpaid end-user service revenue on the back of our more-for-more strategy. With investments in the market, we were able to see strong net intake in mobile postpaid resulting in the customer base growing year-over-year. The renamed Tele2 Play+ continues to show solid performance and we also launched our first [ Slim ] offer now in January further future-proofing our role as a player both in linear and OTT universe within the TV business. Sweden B2B saw the second consecutive quarter of growth driven by mobile volume growth, solutions and slight tailwind in roaming. The mobile volume growth is driven by all segments. Activity within the solutions space continues to pick up despite some challenges in the supply chain. The Baltics continued to perform well driven by both volume and ASPU growth in Lithuania and Latvia resulting in strong end-user service revenue development. During the quarter, we saw some elevated costs driven by increased commercial spending in order to sustain the growth, but also through higher inflation rates primarily impacting energy costs. On a positive note, in Latvia, we were able to secure spectrum in the 700 megahertz auction and at fair prices, which now enables us to start the full rollout of 5G within the country. So let's move over to Sweden Consumer on Slide 5. During the quarter we saw strong mobile postpaid net intake and as a result, we were able to grow the customer base compared to last year. Postpaid ASPU increased by 2% driven by price adjustments made previously in the year and slight tailwind from roaming. Price adjustments made earlier in the year continued to impact the fixed broadband ASPU, which grew by 1%. We saw a stronger quarter in terms of new sales within fixed broadband. However, this was offset by higher churn in the base as an effect of historically high sales periods in which customers are now rolling off resulting in somewhat lower net intake. In digital TV cable and fiber, we see continued contribution from Tele2 Play+, which helped ASPU grow by 3% in the quarter. We continue to see a negative intake, which hampers end-user service revenue growth. Moving on, on Slide 6. ASPU and volume growth in mobile postpaid led to an end-user service revenue growth of 2% for mobile postpaid and 1% for total mobile. We see continued end-user service revenue growth in fixed broadband of 3% driven by both ASPU and volume growth. Total end-user service revenue for digital TV declined by 4% in the quarter primarily driven by continued decline in the legacy DTT TV service due to a declining customer base. And moving on to B2B, next page. Mobile net intake continued to be strong in the quarter driven by new contracts both within SME and large segments. The mobile ASPU declined in the quarter by 4%, but we clearly see improvements from the levels witnessed at the end of last year. Continued mobile volume growth and strong growth in the solutions business was able to fully offset the decline in the legacy fixed business resulting in Sweden B2B growing end-user service revenue for the second consecutive quarter with 1%. Now let's turn to Page 8 for a Sweden overview. End-user service revenue was flat in Sweden as growth in Sweden B2B was offset by a continued decline in the legacy services within Sweden Consumer. Underlying EBITDAaL was flat compared to Q4 2020 as the contribution from the business transformation program was offset by FX headwinds and increased commercial spending in the quarter within Sweden Consumer. We continue to see strong cash conversion of 64%, but at slightly lower levels compared to previous quarters as we ramp up networks investments related to the 5G rollout. Now moving to Baltics, Page 10. In the Baltics, we continue to see strong volume and ASPU growth in Lithuania and Latvia as we are able to monetize data through our more-for-more strategy and a slight tailwind from roaming. In Estonia, we also see strong ASPU growth driven by price adjustments while volume growth was hampered by promotional activity from competitors leading to elevated churn in the quarter. Moving on. Naturally this ASPU and volume growth resulted in strong end-user service revenue in the quarter and we saw growth of 14% for the Baltics. Underlying EBITDAaL grew by 7% in the quarter as the strong end-user service revenue growth was partly offset by a slight pressure from rising inflation rates, primarily impacting energy costs and higher commercial spend in Lithuania and Estonia and I would add also an adjustment in our -- an accounting adjustment related to handsets. But with that, I'd like to hand over to Charlotte, who will take us through the financial overview. So welcome, Charlotte, and I hand it over to you.

Thank you, Kjell, and good morning, everyone. Before we begin with the group financials, I'd like to give a quick take on my first impressions on Tele2. During my first week here, I can see that in the last couple of years, Tele2 has built a solid foundation to become a leading telco in the Nordic and the Baltic region. This includes investing and developing an organization that can create sustainable growth, best industry shareholder return and lead in sustainability. The group leadership team that I've joined includes several individuals with a long expertise of the telco industry, both domestic and international. And after working in several different companies outside of the telco industry, I believe I can contribute with an outside perspective in order to improve and excel the already fantastic results that we have seen as we will -- which we will continue to see going forward. It's our job now to show that we can deliver on our mid-term ambitions and illustrate that we are a growing company. Please turn to Page 13 in the presentation. As in previous quarter, we have created this slide to show the revenue breakdown of our segments excluding roaming to illustrate that we are a company that is growing despite the tailwind from roaming. Like Kjell said, consumer postpaid continues to perform well as price adjustments made previously during the year and volume growth contributed to the end-user service revenue growth. Total Sweden consumer end-user service revenue declined by 0.6% in the quarter excluding roaming as growth in mobile postpaid and fixed broadband was offset by decline in legacy services. In Sweden B2B, we see continued strong momentum in mobile and solutions offset by a decline in fixed legacy services and total end-user service revenue remained stable despite roaming being excluded. In the Baltics, the strong performance continues resulting in 13% growth primarily driven by higher ASPU and volume growth in Lithuania and Latvia. For the group, this led to an end-user service revenue growth of 2.3% in the quarter excluding roaming. We now see that roaming revenue is starting to come back in a material way as outbound roaming increased by SEK 25 million in the quarter compared to Q4 2020. However, this is still not close to the roaming levels that we saw prior to the pandemic. Please turn to Slide 14 for the group results. Underlying EBITDA grew by 1% organically in the quarter driven by end-user service revenue growth and contribution from the business transformation program. However, this was partly offset by higher commercial spending, primarily in Sweden, but also in Lithuania and Estonia and FX headwinds in Sweden. We also see high inflation rates impacting the costs primarily through higher energy costs. Items affecting comparability of minus SEK 117 million in the quarter primarily stemming from restructuring costs taken in the quarter, which releases -- relates to the continued execution of the business transformation program in Sweden. The decrease in net profit for continuing operations compared to Q4 2020 was primarily driven by the closedown of the operation in Luxembourg, which had a positive impact on the results by roughly SEK 3.3 billion in Q4 2020, but with no impact on equity. There's also higher amortization of the Com Hem brand compared to last year following the brand merger in Q2 2021. So let's continue with the cash flow on Slide 15. CapEx paid decreased to SEK 971 million in the quarter driven by higher network investments related to 5G in Sweden. Working capital was strong in the quarter as we saw 3 separate items that had a positive impact. Firstly, we settled a receivable in the quarter of roughly SEK 325 million. Secondly, the timing of an accounts payable was favorable in the quarter, but we expect to see a opposite effect in Q1 2022. Thirdly, we see continued contribution from external handset financing in the Baltic. Taxes paid declined compared to Q4 2020 primarily driven by preliminary tax in Sweden for the year 2020, which was repaid in the quarter. All of this led to a quarter with remarkably strong cash generation of SEK 1.8 billion in equity free cash flow. For 2021, our continuing operations have thus generated SEK 5.8 billion or SEK 8.3 per share. Please move to Slide 16 to go through the capital structure. Economic net debt rose by SEK 0.2 billion in the quarter as we paid out the second tranche of the ordinary dividend of SEK 2.1 billion. However, this was largely offset by the strong cash generation in the quarter. At the end of the year, leverage was 2.5x, which is still in the lower end of the target range of 2.5x and 3x. With the proposed 2.5% increase in ordinary dividend for the financial year of 2021, we will comfortably be within our range and we remain committed to maintaining leverage around the midpoint of 2.5x and 3x over time and relever the balance sheet as we grow our underlying EBITDA in order to distribute excess cash to our shareholders. In addition to the ordinary dividend, we also intend to distribute the full proceeds from T-Mobile Netherlands transaction as soon as the transaction is closed and we have received the cash proceeds. With that, I will hand over to Kjell.

Thank you very much, Charlotte. And then please turn over to Slide 17 where we'll go through the business transformation program. So far, we have reached an annualized run rate of SEK 500 million with savings of SEK 115 million affecting the P&L in the quarter and SEK 355 million for the full year and we are now entering the last stages of the transformation program. These last stages include 3 major operational improvements within the business; decommissioning the 3G network, improve efficiency within our consolidated IT and technology organization and decommissioning our remaining IT stacks once we have migrated all customers. Firstly, the close out of Sunab, which we have already started, will increase the efficiency within our mobile network and reduce the amount of sites that we have as we consolidate towers and move frequencies into one company, Net4Mobility. Secondly, when Tele2 and Com Hem merged, we realized certain synergies within the technology department by merging the fixed and mobile network organizations into 1. When Yogesh joined the company, we further consolidated the technology and the IT department into one organization in order to improve collaboration within that organization, but also with the commercial units. From this, we expect to realize further synergies. And thirdly, we have so far already decommissioned 2 of our IT systems and in 2022 we will carry out the major IT migration elements, which will yield the largest cost savings and vastly improve operational efficiency. When we consolidated the Tele2 and Com Hem brand, we created a new IT stack on which new FMC customers are put. Now the job is to migrate existing customers on to that IT stack as we currently operate different brands on different IT stacks. With all customers on one IT stack, we will vastly reduce the internal complexity, simplify the product portfolio and reduce the time the customer spends with customer service. This is of course not an easy job. We have already started migrating our first customers with successful results. However, in order to secure quality in all these complex projects and enable stable commercial momentum, we will extend the deadline from end of 2022 to end of Q2 2023. This is purely a matter of timing in order to optimize our ways to deliver on our mid-term ambitions. We're still confident that we will achieve the target of at least SEK 1 billion in annualized run rate savings by the end of the period. At the same time, we are able to guide on mid-single-digit growth in underlying EBITDAaL despite less contribution in 2002 from cost savings, which I will talk about on the next slide, demonstrating the long-term growth journey that we have embarked upon. This is about saving costs, but it's also about building sustainable growth and we need to balance those 2 things. So moving to Slide 18. I'm happy to announce that we can now guide for the full year in accordance with our mid-term guidance. We expect low single-digit growth in end-user service revenue and mid-single-digit growth in underlying EBITDAaL for 2022 compared to '21. We expect CapEx, excluding spectrum and leases, to be in the higher end of our range of SEK 2.8 billion to SEK 3.3 billion driven by investments primarily in our mobile network as we ramp up the 5G rollout in Sweden and the Baltics, but also investment in the fixed network through remote-phy. For end-user service, we expect to continue the momentum that we had since Q2 '21 by making all countries contribute to the growth as we leverage the continued performance in the Baltics and return to growth in Sweden. We expect Sweden B2B to continue the positive momentum that we have seen during the second half of '21. This does not mean that we will grow Sweden B2B every quarter during the year, but our aim is to stabilize and grow the business for the full year. In Sweden Consumer, we expect the momentum in mobile postpaid and fixed broadband to persist through our more-for-more strategy. We also expect to see continued momentum in the Baltics to provide support for the entire group. The end-user service revenue growth will filter down to underlying EBITDAaL and we will continue to execute on the business transformation program. The program remains back-end loaded in the year and we expect to reach the majority of the remaining annual run rate in 2022. As I pointed out, during the first half of 2021, commercial activity advertisement was significantly reduced during that part of the year and we have now focused on bringing sustainable growth back in the second half and this leads to some investment in the market. This, coupled with the phasing of the business transformation program, will result in year-on-year underlying EBITDAaL trends to be more favorable from the summer of '22 as we will continue to invest during the year. We today also reiterate our midterm guidance similar to our guidance for '22. In this guidance, we aim for sustainable growth for the group with continued contribution for all countries while the business transformation program will continue to give tailwind to underlying EBITDAaL up until the first half of '24. For CapEx, we expect to be at the high end of our guidance during the peak of the 5G rollout and we will gradually reduce CapEx spending as we complete the 5G rollout and improve the operational efficiency through the business transformation program. So then please turn to the next slide for the key priorities going forward. In Sweden, we will continue to ramp up 5G investments in order to increase customer satisfaction, which will support our more-for-more strategy within the mobile business. Similarly, on the fixed side, we see the upgrade with remote-phy as an opportunity to increase capacity and speed in order to maintain reliable growth in our broadband business. We will continue executing on the business transformation program to deliver at least SEK 1 billion of savings by the end of Q2 2023. In Sweden Consumer, we will continue to balance value and volume in order to build sustainable growth while gearing up our capabilities to address the 1.3 million non-FMC households. We will also continue to build our premium brand in order to increase customer satisfaction that we can monetize through reduced churn or price adjustments on the back of product improvements. In Sweden B2B, we will continue the turnaround that we have started during the second half of the year by executing on our new granular approach with clearly defined segments. In the Baltics, we will continue to build on the performance that we've seen and execute on our mobile-centric convergence strategy through more-for-more offers in order to make sure that we can sustain the growth. With the 5G auctions now concluded in Latvia, we will start to ramp up the 5G rollout while preparing for the auctions in Lithuania and Estonia. At the same time, we will continue to develop and explore FMC capabilities. And lastly, we aim to close the T-Mobile Netherlands transaction soon and which we intend to distribute all proceeds to our shareholders once the transaction is closed and we have received the proceeds. Tele2 is a growth company at heart and we are witnessing positive results from our strategic initiatives, which demonstrates the viability of our way forward. I am confident in our ability to succeed and deliver on our 2022 and mid-term guidance and excited to continue building sustainable growth. And with that, I'd like to hand it over to the operator so we can do a Q&A.

[Operator Instructions] The first question comes from the line of Andrew Lee from Goldman Sachs.

I just had a couple of questions focusing around the cost base of your business because I guess that's where the greatest investor focus is today. So just firstly on the costs in the quarter and that you highlight will continue into the first half of 2022 in terms of sales and marketing costs. Is that purely phasing or do you think there's a sign there that the cost to compete has gone up in the market? And then second question is just around your mid-term cost-cutting, which you have pushed back by 6 months, which one of your peers KPN did yesterday as well. Just wanted to try and understand has cost-cutting or cost efficiencies become harder or has COVID changed the scope of that cost reduction? Trying to understand a little bit more why the delay and the key reason for the question really there is we're trying to think about whether you can continue to create further efficiencies further out than the middle of 2023 and trying to understand how much scope there is for long-term greater efficiencies in the company.

Let me start and I would invite maybe 1 or 2 colleagues there. Let me take the second one first on the mid-term cost-cutting. If we were single-mindedly focused on cutting costs, we could have done the transformation program by the end of '22. But what you see is in the second half of '21, we're actually able to get back to meaningful growth in Sweden and I really would like for Stefan and Hendrik to not have too many freeze periods where they have to -- where they are limited in their approach. And I'm quite confident that that brings more value, especially in the medium term, getting the business back to growth rather than fast-forwarding this cost-cutting program. To deliver on this, we will definitely do it. There is no doubt about that. But from a value perspective, I think the sequencing that we are putting now where we are taking the loss of the big migrations in the first quarter of '23 is a better one for our overall business. And we talk a lot about the sales and marketing costs and of course, this is just a sign of a market becoming more normal again. So we have comparisons where there were very low levels, you saw we had a huge uptick in our EBITDA in the first part of '21. And then of course since we are very, very transparent in the way we go to market and operate with you, I could have made a bridge to you easily that would take us back to the consensus of 3.7% by pointing out individual elements related to an IFRS adjustment we've done, the electricity cost in the Baltics and some exchange losses and we'll be back at what the consensus was. But this is how we are. We are maybe a little bit too brutally honest with ourselves. So let's not overdo the sales and marketing. I don't know, Hendrik, do you want to add a few comments to that?

Yes, Kjell. Andrew, thanks for the question. So on the sales and marketing costs, as Kjell was saying, we, of course, need to look at where we are in the fourth quarter against early in the year also from a return to normality point of view and that, of course, brings you in general to a little bit of a normalized level also on your marketing and sales cost. And then within that, the fourth quarter is typically a very high trading season. We do a lot of the promotions, a lot of the handset and device sales and actually we have done -- we've performed quite nicely in the quarter I would say, particularly on the mobile postpaid side. And then on your question, how will that translate into next year, I would say as long as we get out of -- let's say back to normality and out of COVID, you will see of course a normalized run rate again. But within that, the fourth quarter is a higher cost quarter. And I also would like to point out that a lot of that commercial cost is driven by acquisition cost and not as much as marketing cost, which I saw in some of the commentaries, because we've of course also been able to get some transformation savings on to our marketing spend by moving to one brand. So there's a lot more related cost to volumes.

Okay. Can I just follow up on the longer term. So what you're seeing in the company at the moment, does that give you confidence that there's further costs or efficiencies to go after post the mid-term plan? Or do we then rely on operational gearing to drive the growth forward?

Yes. That's also why we are reiterating our mid-term guidance. And there are -- I think we can say that there are cost savings, there are cash savings. The Swedish model has also quite a lot of capitalized expenses for consultants that's a bit unique to Sweden. So at the end of the day, I do see a scope for improvements beyond the program that we have now defined in terms of reduction of cash spending in the company.

Excuse me, Andrew. Have you finished with your questions?

He might have dropped off. Sorry about that. We are having some problems with the webcast, everyone. I think we can go to the next question, operator.

The next question comes from the line of Ulrich Rathe from Jefferies.

I have 2 questions, please. The first one sort of a follow-up on the earlier one. Just to clarify when you talk about the phasing of commercial events with regards to the BCS sort of change, is that the customer migrations or is it other commercial events that you're referring to? And also is this informed -- this plan informed by anything you see in the market, actions by competitors or competitive levels overall in the market, or is it simply going back to the drawing board, putting together all the plans and sort of deciding it's better to sort of shift it out by 6 months? Is it more internal or external? That's the first question. And then the second question is you mentioned during your prepared remarks that there was a little bit of a wave of contract expiries in the fourth quarter due to I suppose high sales in prior fourth quarters and then these contracts sort of expired and created higher churn. Was this -- how do you see that? I mean generally you would hope to -- not to see high churn when contracts expire. Was this sort of a normal rate and just a higher underlying contract expiry or was there a reason why more people percentage-wise of these expiring contracts decided to leave Tele2 or ask for better terms?

Okay. I will do the first one and Hendrik will do the second one. So you're basically asking why did we shift to 6 month. I actually see that as a signal of strength in the business. If we were not succeeding in the go-to-market, then we would redouble the efforts of cost to try to compensate. The thing here is that I see that both Stefan and now Hendrik has the opportunity to build sustainable growth and then it's easier to let them have a little bit of maneuvering space in the go-to-market. So it's a decision that we have made internally based on how we think we can get the most value out of the approach. So if we see the opportunity like we do now to have sustainable growth, it makes sense to give them a little bit more space and have -- don't be bogged down by too many freeze periods. So overall, I think this is good news.

Ulrich, just thanks for your questions. So first of all, just to confirm a couple of things. First of all from a commercial point of view in the consumer market, we are really executing on our value strategy, right? So we're trying to drive value into the market and of course with that also increase the overall value in the market for the industry. And with that, we're in a regular cycle that is recovering coming out of COVID with typically the fourth quarter being a very high trading season with some additional commercial spend just from the quarter itself. If we look to take this forward, then what you can expect is that in '22 we'll be able -- as we recover from COVID although we still have some weakness in the end of January and in January as we speak, we will be able to get to a better sustainable commercial rate. But not at the level of Q4 -- not the higher level of Q4 because that's a seasonality and not at the low levels we've seen earlier in '21, but we were very much focused on EBITDA in the midst of COVID. Then in terms of what happens with the customer base, we've seen that -- and I think your question particularly pertains to broadband and our net intake of [ 10% ] versus a normal rate of mid-single-digit rate and I think we've sort of been guiding that. What happens in this quarter in particular around broadband is that we had a pretty decent sales rate although we've had some impact from COVID on some of the channels that has sort of given a little bit of softening. But in particular, we've seen for this quarter that we've had campaigns that we've had over the last 2 years, a 24-month campaign and a 12-month campaign that have both rolled out and sort of ended in this quarter. And typically if we roll off a campaign, this always comes with a level of churn. So because we've had now 2 sort of these campaigns all happening in this quarter, we've seen some additional tick-up on churn and that's sort of a key driver for the rate. And that is not a continued trending, that is very much a particular event in the fourth quarter. And I would say underlying our broadband traction is still around sort of that mid-single-digit rate. And what we -- and then lastly, what we typically do in terms of migrations, we -- as we execute on more-for-more pricing strategies, we continuously move and upgrade customers to of course our new front book and of course also to our new product sets that we have. And if you mean migration in that sense, yes, that's what we continue to do as part of more-for-more.

Can I just clarify the very first question that I asked. These commercial events that you specifically talk about in the report as sort of the phasing of that and forming the delay to the BTS. What exactly are these commercial events? Is it the migration wave? Is that what it is or what is it?

Okay. So we probably could be more clear in our language. So basically what I'm trying to say is that -- let me take a historic perspective on this. My predecessor made a decision, which I think was right at the time, to focus on EBITDA and cost because of the uncertainties around COVID. Now we are at the end of this thing and we have seen that we've been able to get meaningful growth back into all main lines of our business. Then it makes sense for me and the management team to focus on getting that growth going and the commercial events that -- I mean that is that if for example Hendrik is planning a campaign in an important period of the year, we don't want him to be too restricted by constant freeze periods. So by sequencing the B2P program so that it fits well with our go-to market, we are able to do both of these things and that builds the most value for the business.

The next question comes from the line of Andreas Joelsson from Danske Bank.

A question on leverage. You have been at the lower end of the leverage for quite a few quarters now as the slide showed. Is there anything that would change that view or if I'm being a little bit blunt, what is preventing the Board from moving you to the mid of the range that you expressed?

I can start. You can take over if you want. We have had a very positive 2021 from a cash flow perspective and a couple of things have come our way that has been really helpful. We expected it and it has happened. So you see a very high cash flow generation in the business and we do remain committed to the policy. We will be reviewing this. Last year, we paid an extraordinary when we announced the second quarter. Of course I cannot say anything about what we're going to do this year, but the Board is very committed to our policy. So if we see that we will be over time trending significantly lower than what we have said, then that will be reviewed for sure. This -- we have no desire as a management or as a Board to hold back any significant amount compared to what you expect. And of course, one thing we are doing now is that we are handing out, when the deal closes in the Netherlands, the entire amount despite the fact that from a ratings perspective, some of that revenue would have been calculated by S&P as future contributions. So that's a signal of strength from our side. But yes, we remain committed to the policy and we will be monitoring that.

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

Just a question related again to the transformation program, but the internal side of it. You've spoken about the market side. Kjell, on the IT migration transformation et cetera, is this running according to plan or are you seeing some issues here that sort of moves this also slightly into the next year? That was my first question. And just second one, Kjell, we are seeing a slight weakening of trends in the TV business. Could you give us any indication or qualitative comments on how do you view the TV business moving into this year?

Let me do the first and then the second one I will hand over to... So on the migrations, we have actually started that process. So one of our main brands is moving to the new platform and we haven't had any unexpected things there. Actually, it's been relatively smooth I would say. These things are never super easy, but there hasn't been any kind of red or even orange flags coming up there. So again our reasoning for the choice we've made is exactly what you see is what you get. This is our thinking. We really want to make sure that we extract the most value from the market in this process. So we are very confident about the business transformation plan, both the number and of course now the timeline that we have set, and I think it's definitely the right thing to do in terms of a value creation perspective.

Yes, Kjell. Peter, on the TV or on entertainment business, just to give you sort of some insight there. In last year's Capital Markets Day, I think it was very clearly launched and stated that our aim is to stabilize and modernize our entertainment business to also contribute to driving value for the overall consumer business and that's basically still our aim. So we -- our aim is to stabilize this business and to make the necessary adjustments so that we can really move into streaming and get more solid fundamentals in the DTV business. What you see if you look at the numbers underlying, you see at least at the revenue level that our cable and fiber entertainment business is sort of starting to stabilize whilst we still have some decline on, let's say, the legacy DTT side and that is in part coming through from the uptake we're seeing on our streaming business, which sits in the cable and fiber numbers. Again we're still early on because since we've now just rebranded Comhem Play+ into Tele2 Play, we're seeing some good growth momentum and that's also where we're now launching linear streaming into the portfolio. This is again a first step into a continued modernization journey for entertainment business that again in the end should be able to stabilize the total TV line over time.

The next question comes from the line of Stefan Gauffin from DNB.

I have a question on mobile ASPU. There was slightly weaker growth momentum on the ASPU side for both the consumer and the business mobile this quarter compared to Q3. I just wonder if that is a result of campaigning or if it's increased mobile competition or due to phasing of price increases. Just help me understand sort of the development on mobile ASPU.

Okay. Stefan will start and then Hendrik.

Stefan, thanks for the question. And on B2B then if you look at the comparison versus last year, it's true that we have a decline. But if you look on the long trend, we are decreasing that revenue or as per decline that we've seen in the B2C segment. So looking at the efforts that we're doing, keeping more disciplined around our pricing guidelines, focusing on value and making sure that we take a responsible stance in the market and we're challenging ourselves all the time to making sure that we get the right price from our B2B customers. We can see that is actually resulting in improvements. If you compare to the Q3 and Q4 ASPU, it's a flat development and also if you look at the full year ASPU, we are on the same level as we were in both Q3 and Q4. So I would say the strategy is yielding results and of course bringing in more SME customers with a higher ASPU than the key and the public sector. It works in the right direction for us in B2B. I hope that answers the question and then I hand over to Hendrik.

So I will focus on the consumer side on the postpaid ASPU, Stefan. And basically what you see from Q3 to Q4 is typically that in Q3 also this year actually still sort of in that lighter touch on COVID, we did have some good roaming revenues as you may remember from our Q3 report. So that typically drives a higher ASPU in the quarter, which then of course coming out of the holiday season has an effect on the ASPU in the fourth quarter and that I think is the main explanation. If you look at the underlying ASPU in the quarter versus last year, we've been growing by 2% and actually also versus full year strengthening the ASPU development. And whilst you may think well, from campaigning, there may be a little bit of a campaign low -- softer ASPU coming into the mix. That of course to an extent is true, but it doesn't have any effect on the overall customer base ASPU as such. So I would say it's mainly an effect from a strong Q3 driven by typically roaming and versus last year, we see a 2% growth in the quarter.

The next question comes from the line of Francesca Schild from BNP Paribas Exane.

I have one question, please, on wage inflation pressures. So how do you think of wage inflation risk in Sweden? And could you please remind us of the process for increased wage increase negotiations this year, when they'll take place and what you're projecting for the increase?

Well, the wage inflation in Sweden is pretty much determined by the central negotiation. So I don't see anything dramatic coming out of that. Those numbers are usually quite responsible. We do see a bit more wage inflation in the Baltics. That kind of goes with the overall growth that we see there in the business and the economy. So there's more inflationary pressure in the Baltics than in Sweden. Now the good thing about that is that the business in the Baltics is also pretty good at pricing their services. So I think the industry in general in Europe has struggled with focusing on this inflation adjustments of pricing and you see the -- what BT is doing in the U.K. as maybe one way of doing it. We think our Baltic colleagues have been overall quite good at it. I think probably we could be even better at this in the Swedish market. So -- but to be specific on your question, Sweden wage pressures seem to be kind of under control because they are centrally managed most of it and the Baltics is also under control, but will have a higher level.

So just on that, so do you have -- do you think that in Sweden it will be similar the increase this year to last year and have the negotiations taken place?

I think we can -- you can expect overall those agreements to end up in the area of 2%, maybe 2.5%.

The next question comes from the line of Pontus Wachtmeister from SEB.

On the marketplace focus on Sweden and in regards to everything spoken about before, the positioning in networks and your 5G position and the JV with Telenor. Can you describe to us just very top down how important that is going forward in terms of having a good position in 5G and the perception in the market of fast and strong networks and investments in those and are you aligned with Telenor in that space?

Pontus, I should really thank you for that question because it's something I love to talk about. We have a quite unique position in European telecoms with our network cooperation with Telenor. So we run some part of Sweden on our own network, but most of it through Net4Mobility and that gives a great advantage because we have the scale advantage and we have also a very good spectrum position. So when we -- when the whole 2G, 3G, 4G market consolidates into one 5G market, that is actually a net positive for us at Tele2 because the combination of Net4Mobility and our own network will mean that in terms of base stations and spectrum, we will have the strongest position in the market. Because right now we are operating with network cooperations with Sunab, with Telia, we have Net4Mobility, we have our own. When we consolidate all of this into one with one network planning, we will have the biggest reach and we'll have a great spectrum portfolio. So we can't wait to get through this because it will, if anything, strengthen our position towards both B2B and B2C consumers in the Swedish market.

Okay. And it's becoming more important towards the consumer you feel or is it because in the beginning people weren't just aware of it. Now if you just see the efficiency, it's more of a divider in the marketplace.

Yes, I think we have a good 4G network now. But the good news is that when we're moving over to the next technology and we can replan the network, we will be able to have better reach with fewer base stations because we're not sharing in multiple relationships here. So that whole planning has a significant efficiency in it. Actually, I think Yogesh described that very well at our Capital Markets Day. So there is a clip out there that describes how that journey goes. So it's something that we are really looking forward to.

And maybe to add to that, Pontus, I think if I look at the typical consumer behavior and uptake on for example new phones and handsets, you see quite a lot of the phones that we have been shipping also in the fourth quarter are 5G ready and that's sort of making its way into the market quite quickly. So there's a natural uptake by the market.

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

I wanted to ask kind of a slightly general question about the way you're thinking on phasing of customer growth. From my perspective, today's results show the machine is kind of working, you can turn it on when you choose that allows you to dip in and out of the market to optimize your return on spend. But are you saying from today that you prefer kind of maintaining business momentum so it's slightly -- it's better to have a slightly smoother approach to customer growth through the course of the year or is it really just that you're kind of correcting for what was a very unusual first half last year? And then I wondered slightly following up on that previous question whether you're -- on a question on CapEx. You've begun the big ramp-up in spend. I wondered if you could just say a few words about how that's going, whether you're seeing any issues or any areas where you are ahead of plans, that kind of thing.

Okay. So looking at our positioning in the market, I'm very happy to see that we have a much higher accuracy now than we had when I joined and that is because a lot of people have worked hard on getting their data right. One of the reasons why Stefan is successful in B2B is that they do much better analysis now. They used to be very -- B2B used to be very volume driven if you go back in time. Now they are much more accurate about the customer needs. They have a much more interesting and relevant discussion with our big -- large customers and solutions customers and that is how they can provide value to these customer relationships. One of the things we want to get out of our business transformation program beyond saving cost is that Hendrik in cooperation with Yogesh will work much more with big data, be much more accurate in our go-to-market. Tele2 has a history of being a very successful challenger and that was great in a growing market and where you didn't have sort of huge long tail. Now we are a converged FMC player who need to be much more accurate and that level of accuracy has increased a lot. And what Hendrik brings to business here, he brings many things, but one of the things he brings is a deep understanding not only of mobile markets and not only of broadband markets but also the TV side of the business. So the whole picture comes together. And for us to be more surgical in our approach between value and volume, we need more and bigger data and that's what we're getting into place. That is one of the key things that is happening. And on the rollout of the 5G, it's moving ahead. We actually were able to do a little bit more towards the end of the year than we expected so that momentum has really picked up. So we think a lot is going to be built out in '22 and the main momentum will be done and finished by '23 with of course some build-out in '24. So the guidance for our CapEx, you have it, will be at the upper end, clearly; but we have transparency on that, we have visibility on that. It's looking pretty good.

If I could just follow up on that first question. In terms of the staff requirements to become better and more capable with big data, is Tele2 seen as a place where that is a great career option to be able to have that opportunity?

I'll start and then if you guys want to chip in, please. One of the things that I did after coming here was to move the big data resources out from being more of a staff function to being directly in the line of business. We have people here who are truly capable and they are actually quite motivated now because they are much closer to where it happens. They're much closer to the business so they have really quite a lot of energy in putting into their work and it seems like they're coming up with a big value-add. Do you want to add something, guys?

Well, from a B2B perspective, I would say that in the past in Tele2, we have underinvested in the business intelligence side. That is something that we are changing and which we started already next year with a program in becoming more data-driven and, to Kjell's point, in different manners of running the business. We will continue to do that also this year. And I think the cooperation that we have with the units within our technical organization, with the skills that they bring, the cooperation between the commercial and technical parts, that will yield better control and better performance and execution going forward in all aspects and not just commercial I would say, but also from a customer experience perspective and a production perspective. So really, really looking forward to that.

Maybe, Adam, just to add to this from a consumer point of view. I think customer value management, you'll probably pick it up also at other operators, is really a way to go as you go into a converged strategy. That's where we still have a lot of opportunity and mileage to go. And as Kjell was alluding to earlier, the IT transformation is quite essential to get that done so that we can really not just have the data, but also act on it through how we build propositions, how we get the intelligence to the channels and et cetera. So we're in full motion of that and there's clearly a lot of potential still to be -- to come out of this as we go through 2022.

And the last question comes from the line of Abhilash Mohapatra from Berenberg Bank.

I just wanted to come back to the comments around driving improved top line growth in Sweden, please, in context to the guidance. In 2021 obviously group service revenue growth of 1%, but all of that was driven by the Baltics with Sweden declining 0.5% and Q4 actually softening a bit. So just to confirm within the 2022 guide, what are you assuming for Sweden, please? It looks like consensus has around 1% growth for Sweden in both consumer and business. Is that something that you're comfortable with?

Well, I can start. First of all, I think it's very important to see the trends over time here. So going from a quite significant negative trend in B2B to being a stable business was what we said we would do and we've done it. So -- and then of course, we want to take it from there. Stefan and I and others will work hard to deliver meaningful growth there also. And then of course we have seen volumes picking up a bit in consumer. So our ambition is that all the main lines of the business meaning the Baltics, B2C Sweden, B2B Sweden should be delivering to the overall growth momentum of the company and then of course it will vary over time where the biggest contribution comes from. Clearly in the short term, it will be the Baltics. Anything you want to add or…

No, I think you put it well. I mean during the year, we set the strategy for B2B with specific cornerstones that we shared with you at the Capital Markets Day. We are delivering on that strategy to the full extent and that's our focus and also to be consistent in regards to the strategy and these cornerstones with segmentation being digitization partner, operational excellence, et cetera. And we set the ambition to make a major trend shift during 2021, which Kjell just mentioned I mean we have delivered on that. And then we are on the path of having the ambition to be stabilizing the revenue growth that you saw in the last quarter. And hopefully, that answers the ambition that we have. And going from minus 7% in 2020 to that level that we see now with 2 consecutive quarters with positive growth. We're proud of that delivery, but we're not satisfied. We will push forward going into the future.

Okay. Then we have Nick or we are...

And the last question comes from the line of Nick Lyall from Soc Gen.

A quick question, please, just on 2 things. Just I was looking at the [indiscernible] -- the sort of end of 2021 [indiscernible] survey. Could you just explain why that is or is not a true reflection of the sort of network quality and should we be concerned about your ability to close the gap on Telia's mobile prices because of that? And then secondly, apologies if I missed something because I got cut off a couple of times, but I take your point about the broadband campaigns annualizing. But if you're able to remove that, would we see in the numbers you're making some headway by taking share from Telia because of the rises in broadband prices? Could you just explain the sort of background to the market on the fixed side and the broadband side in particular and what sort of share you might be taking ex those end of campaigns, please?

So I'll do one and maybe Hendrik does 2. So what you are highlighting is an opportunity for Tele2. We have a good network today and then of course there will always be surveys. There have always been surveys as long as I've been in this industry. But what I tried to say on the previous question is that going into this setting up the 5G networks where we can have one network under our own control and not have multiple cooperations. The cooperation in Net4Mobility is tested over time, it works really well. We are in a good relationship with our partner there, with Telenor. So 5G brings the opportunity for us to capitalize on that gap that you are pointing out because clearly we moving forward with Tele2 becoming a converged player, quality player gives us a chance to lift ASPU over time. So when we come out end of '23 and early '24 with great coverage and great spectrum and a very strong 5G proposition, that gives us an opportunity to equalize some of that gap that you are pointing out. So it's a good opportunity for us.

And Nick, it will be an opportunity to carry on that growth momentum I think also through more-for-more on the mobile ASPU for us as such. And then on the fixed side just to briefly comment on that, underlying I think we have still a good trend. Of course, you need to look at the total market of course where we've gotten and if you look traditionally versus where we are now, we do have a mature and quite penetrated market. However, the campaign momentum that I was alluding to is that of course you need campaigns to an extent to drive your net adds on the one hand. But on the -- but in this quarter in particular, we've seen just 2 of these sort of quite successful campaigns coming out -- rolling out and that has been that specific effect. So yes, you need campaigns to drive it. Of course, these need to be well sort of planned and scheduled that you don't have these sort of effects that we've seen in this quarter in particular, which we're doing as we go forward. And as we also execute on the FMC strategy and we will be able to as we have been alluding to, get more out of the customer base and customer value focus, we will also be able to address some of the churn levels and see some churn reduction. So a continuation on driving sort of campaigns that sort of are well planned in combination with really driving the FMC momentum throughout 2022, I think will give us a good underpinning for our broadband business going forward.

Dear participants, thank you very much for all your questions today. I would like to hand the conference over to your speaker, Kjell Johnsen, for the closing remarks.

Thank you very much, everyone, for joining us this morning to go through the full year of '21 and our outlook for '22. I'm very happy that we could close the year on a relatively high note with basically living up to the guidance increase that we gave you in July of last year and that we are now sitting with a guidance that is higher than we had 12 months ago. We have increased our dividend by 12.5% and we are recommitted, of course as we always are, to the dividend policy and the capital allocation. So things are looking good. We're going to deliver on our transformation program and we're going to make sure that that does not interfere with our ability to drive growth momentum also in the Swedish market. So we're making these judgment calls and I'm pretty positive about the outlook. So thanks for joining us today.

That does conclude our conference for today. Thank you for participating. You may all disconnect. Have a nice day.