Telia Company AB (publ) (TELIA) Earnings Call Transcript & Summary

Dear shareholders, colleagues and many friends of Telia. 2021, in summary, was the year when Telia returned to growth, and that was despite the ongoing challenges of the pandemic. And while we now continue to live in what is really unprecedented times, I could not be more proud that Telia is delivering on its commitments and moving towards the better Telia that I envisioned when I became the CEO just under 2 years ago. In 2021, we grew both our service revenues and our adjusted EBITDA on a like-for-like basis, which was the first time that [ we've grown ] in 7 years. We strengthened and secured our network leadership position. We laid the foundations for a digital transformation of the whole of Telia. We remained a sector leader in responsible, sustainable business. We created the region's first meaningful tower company with an enterprise value of EUR 2.6 billion. And we ended the year with a strengthened balance sheet that fully covers our heightened investments and our progressive dividend. As is evident by the progress that we've made in the past year and the increasing demand for our services, I truly believe that Telia and our industry as a whole has never been more relevant to our customers and the societies that we operate in. Connectivity and digital communications that you can trust have become and are a lifeline in the truest sense of the word. Our ambition is to be one of the world's most purpose-driven providers of digital communications led by our purpose reinventing better connected living. And I believe that purpose is more relevant than ever. That purpose is our North Star. And as you know, we last year embarked on a multiyear journey to create a better Telia to galvanize the organization, return the company to growth and help drive and define the next decade for Telia. Our ultimate ambition is to make Telia much better for our customers, better for our employees, better for our owners and better for the societies of the Nordics and the Baltics. And it's very much underpinned by our 4 strategic priorities of inspiring our customers, connecting everyone, transforming to digital and delivering sustainably. This is our road map for how we, over the coming years, will create a better and even more resilient Telia that truly differentiates itself with our customers at the center of everything we do. So let's look at our 4 strategic priorities in a little bit more detail. The first, of course, is all about our customers. Inspiring customers is about offering them more than connectivity and providing both our consumer and our enterprise customers with reliable connectivity, combined with the services that cater to all their communication and digital needs, to enable them to achieve, engage and experience so much more. My first [indiscernible] when societies opened up last spring was to visit our many call centers to hear the voices of our customers and to see if we are yet inspiring them. From talent to Oslo and from [indiscernible] to Gothenburg, we have fantastic customer care heroes who live our values every day and who deeply care for our customers. And it's this care for our customers that has been recognized in the many customer satisfaction awards that we won during the year. Telia Sweden was ranked #1 with the most satisfied enterprise broadband customers for the sixth consecutive year. Telia Norway's OneCall were again awarded the best consumer brand in Norway. And Telia Sweden's TV service was ranked #1 by SKI for the seventh consecutive year, and that's just mentioning a few of the many recognitions that we received. The single biggest demand we hear from our customers is that they need help, help with their own digitalization journeys, and they want us to make it easier for them to bundle all their services together into one converged set of services provided by Telia. As a result, we saw a return to growth in the enterprise segment with particularly strong growth in Norway and Sweden, winning our biggest ever contracts in Norway with PostNord, the Norwegian postal service; and in Sweden with Region Skåne. In the consumer segment, through the bundling of content and connectivity, we saw households buying more than one product from us increased over 2 million, and we've confirmed an increased loyalty amongst those customers towards Telia. With an ambition to inspire our customers beyond just connectivity, we've also launched the Travel Emission Insights service, which makes it possible for municipalities and regions to determine CO2 emissions from road passenger transport, enabling better-informed decisions about specific measures that can help reduce emissions. This is another great example of how modern-day technology using data can help solve some of the greatest challenges such as climate change that society today is facing. On our second strategic priority of connecting everyone to the most trusted, reliable and efficient modern-day networks currently undergoing a major modernization of all of our networks and rolling out next-generation 5G services, while at the same time, dismantling the legacy copper and 3G networks of the past. This is a prerequisite for Telia to be able to provide the services of tomorrow, whether that will be over our mobile or our fixed networks and for both our consumer and our enterprise customers. So I'm very pleased that our overall network leadership position in the region has been confirmed again this year. This was visible, for instance, in Sweden, where we again won umlaut speed test and did so by increasing the margin versus all of competition. In Norway, our 5G network now covers almost 50% of all Norwegians, and we're on the way to be the first operator to have a nationwide 5G network by 2023. In Finland, we have received some great acknowledgment when the benchmarking company Tutela ranked Telia's network as the best in Finland and actually as the #6 network globally. And moving to the Baltics, where the rate of digitalization is increasing rapidly, we are at the forefront. As is visible for instance, in Telia Estonia, being the only operator in 2021 to have launched 5G, and after having tested 5G in Lithuania for 3 years, Telia was recently the first operator to start providing commercial 5G services also there. On the enterprise side, we've seen strong customer demand for our tailored or what we call private mobile network services. And currently, we have around 10 tailored enterprise mobile networks operational across multiple industries and 3x as many contracts have been signed. When creating these virtual 5G private networks, part of the public 5G network is dedicated to the customer's critical connectivity needs. And with distributed and sliced 5G architecture, different cloud services can be brought to the edge of the network even closer to the customer, which improves network efficiency and further lowers the latency or the response times, making it a much safer, more reliable and totally private for our customers' unique needs. Our digital infrastructure is a unique set of assets and at the core of our ability to connect everyone. And during the year, we created a partnership with Brookfield, one of the world's largest tower operators; and Alecta, one of Sweden's largest pension funds, to help us crystallize value and build out our leading digital infrastructure position even further. With the divestment of minority stakes in our Swedish, Finnish and Norwegian tower businesses, we've laid the foundation for a tower company with an enterprise value that I mentioned earlier of EUR 2.6 billion, which clearly demonstrates the significant value that we have in our infrastructure. But connecting everyone goes beyond just infrastructure and networks to fostering broader Digital Inclusion, allowing for everyone to capture the full potential of digitalization. And I'm super proud that the World Benchmarking Alliance ranked Telia #11 out of 150 when it comes to Digital Inclusion and fourth among all of the European headquartered companies. To transition Telia into a more agile and leaner company, our third priority is transforming to digital with one of the most ambitious transformation agendas in the industry. When we come out the other side, Telia will have gained scale and efficiency and become a much leaner operator that serves its customers in a smarter, simpler, more digitalized and better way. The transformation is being carried out as we speak and day by day, it is gaining momentum and benefits. During the year, we have retired over 20% of our legacy products and legacy systems, and we've tripled the share of new products that use a common, more scalable technology platform to more than 40% of our products. This will ultimately, over time, reduce cost, accelerate our speed to market and modernize all of our product offerings. So far, we have saved more than SEK 250 million of IT costs, which are structural and sustainable reductions, and they're being generated through that decommissioning of legacy systems and products as well as through the consolidation of the many IT vendors that we used to work with. The impact of transforming to digital for our customers is already evident. And I'd like to call out one example in our TV and Media business where we've seen consumption on digital channels such as TV4 Play grow 35% during the year, enabling a growth of more than 20% in our Swedish digital advertising revenues that are back to and almost above pre-pandemic levels now. So in this first year of transformation, as I said, we have laid a strong foundation that will help us realize the ambition to improve customer experience and reduce our operating expenses by SEK 2 billion by 2023 and by another SEK 2 billion by 2025. The fourth and final strategic priority is delivering sustainably, which for us represents how we will create value for all our stakeholders by being a financially, socially and environmentally strong and resilient company that consistently delivers over time. Resilience is a cornerstone in our partnerships with all our stakeholders, whether it be from governments to authorities or from large pension funds to individual private shareholders or from consumers to enterprise customers and for societies, more broadly, as they all rely on the safety and reliability of our networks and our business and trust us to deliver on all our promises to them. During the year, alongside reducing our cost base, we've strengthened our balance sheet and improved capital allocation by exiting noncore businesses and focusing our business around the Nordic and Baltic region that we're proud to operate in. We have also reinvigorated the development of our workforce with close to 4,000 of our colleagues actively learning software skills and our top 220 leaders having access to intensive leadership development to help them build the leadership skills required for Telia to successfully deliver on our strategic ambitions. From an ESG perspective, during the year, we worked with our suppliers to ensure they adopt science-based targets, resulting in suppliers representing just over 1/4 of our total supply chain emissions adopting such reduction goals by the end of last year. And we started a pilot around smart battery energy storage with the energy storage solution provider, Polarium, to help optimize network energy usage, reduce electricity costs and contribute more resilient electricity infrastructure. I am very proud to be able to say that we are already climate-neutral in our own operations, but just as proud to also highlight our efforts in reaching more than 600,000 seniors, children and small medium enterprises with our Digital Inclusion initiatives to ensure that no one is left behind in the digital society. So summarizing the first year of our new strategy, I'm delighted with the important progress we've made and the strength of the foundations now in place that, combined, are boldly moving us towards a better Telia. These foundations in particular, have given our Board the confidence to commit to a progressive dividend policy, which is one of the most forward-leaning in the industry and will provide for attractive shareholder returns over the years to come. In addition, on the closing of the Sweden Tower transaction, it is proposed to return the proceeds as extra remuneration to our shareholders later this year. Looking forward, yes, we have made solid progress in many areas, but I'm also humble to the fact that there's plenty more that needs to be done over the years to come to ensure that Telia delivers for all of our stakeholders consistently, reliably and sustainably. But in the meantime, I'm super grateful for the confidence and support we have from all of our shareholders on our journey ahead. And I'd also like to take this opportunity to thank my Telia colleagues who have gone through great lengths to keep businesses, people and societies safe, connected, informed and entertained during the pandemic and also now during a time of geopolitical tension. Looking ahead, I could not be more excited about the unique role I believe Telia will play as societies and economies rebound. Our responsibility in connecting everyone could not be clearer as these last 2 years have emphasized. And with us, again, meeting and collaborating in person, I have no doubt that the next leg of our common journey will progress at a great pace and deliver value for all our shareholders and all our stakeholders. So thank you all for listening today. Next year, it will be in person. And in the meantime, let us all do what we can to create a better tomorrow for our world.