Hello, everyone, and welcome to this very special Q4 2023 interim report, analyst meeting, and conference call. I'm Vesa Sahivirta, Head of Investor Relations. This is special because this is the last one of CEO Veli-Matti Mattila, who has been heading Elisa more than 20 years, and this is his 82nd interim report. Amazing, isn't it? I'll take an opportunity to go a little bit back to history and show you how we presented our strategy execution and its 3 focus areas when we started in 2003 with Veli-Matti and this strategy. Here, and the right-hand side, you can see where we are now. Integration of one Elisa meant very much efficiency improvements and getting profitability up. Nowadays, this includes also many quality improvement issues.
Strengthening market position in the core markets meant a lot of domestic consolidation and improving our telco business. Now it's more like a increased mobile and fixed services, and as you know, our mobile service revenue growth is best in class in Europe. New markets has had a many different kind of phases, and nowadays it's focusing on growing our digital services and software businesses. This very successful genius strategy execution has generated, on average, 15% total shareholder return annually against industry average of -1%. But now, let's move on the Q4 report. CFO Jari Kinnunen is here as well, and Jari will elaborate more on financials. But, let's go to the presentations, and, Veli-Matti, once more, please go ahead.
Thank you, Vesa-Pekka, for very interesting introductions. So welcome, I'm really glad that we got also a lot of people on site here. We believe on hybrid working, including at Elisa, also people being physically together, so it's also good to share now our Q4 results, really having people a lot of on site. But let's go start with the highlights from fourth quarter. Last year, our revenue was pretty much on last year's level. We had some divestments that were impacting the revenue development, but also there was clearly some headwind from the macro environment, especially in the B2B business. But overall, we were strong on our EBITDA, growing 3.4%.
Mobile service revenue was also steadily moving ahead with 4.4% growth. In the international digital service businesses, the revenue declined 8%, resulting really from the customer delays in projects. Projects that they already had ordered, some projects, but also some orders got delayed to the months ahead. And the reason, of course, is this high interest rate and the whole macroeconomic situation. In Finland, our postpaid churn increased slightly from Q3 to 15.4, but still remaining at a somewhat decent level comparing to the previous years that what the level approximately has been. Post-paid subscription grew by 24,000 altogether. Machine-to-machine and IoT subscription really growing by 45,000. The fixed broadband was relatively stable.
The subscription base was increasing by 1,300, and the good momentum with 5G continues. Our network covers now 92% of Finnish population, and the geographical coverage build-out progress is progressing according to the plan. Our board also has made the decision for proposals to the annual general meeting. Among others, the dividend proposal, which is EUR 2.25 per share, which is providing a good increase in the dividend. Moving forward, when we look at the whole year, the whole year, we 2023, we had 2% revenue growth. Of course, the telecom business what is very much in our revenue portfolio is of course relatively defensive in these kind of macro changes.
But we are not totally immune, and as said, mainly in the B2B side, we saw some headwind for the business, but still we were able to carry 2% revenue growth, which is a good result in this industry, and 3% EBITDA growth. So overall, the earnings per share also growing by 1%. For earnings per share, of course, the interest rates also impacted the development somewhat, but still, we were able to make a best ever earnings per share. And CapEx was growing to EUR 284 million altogether. There was some growth. CapEx to sales was 13% for last year, but if we take the average for 2022 and 2023, and the CapEx per sales was maximum 12%.
Our medium-term target, needless to say, already now, but I say it already now that the medium-term target for CapEx per sales maximum 12% is intact. Mobile service revenue, we got 4.7% growth, the mid single-digit growth that we were expecting, and guiding, soft guiding, earlier last year. Had some mobile subscription growth, also in the fixed broadband, and the churn level was lower than we have seen earlier, and there was also data growth.
Then going to the fourth quarter and a little bit more in revenue, the positive impacts, of course, came from the mobile services and fixed services, and we saw a decrease in due to these divestments and also IDS business, as well as equipment sales was somewhat lower. We saw also consumers to be saving a little bit in their equipment purchases. For us, from the profit point of view, doesn't create too much problems because it's a low-margin business, but it impacted, of course, a bit also to the revenue. Mobile service revenue, of course, the continuous upselling of higher speeds, upselling to 5G, and some product price changes have impacted positively to the mobile service revenue growth.
EBITDA, especially in the fourth quarter, it was really the productivity and efficiency improvements and of course, growth on higher-margin businesses like mobile service revenue that that created a positive impact to the EBITDA. If we move forward then to the segments, in the consumer segment, we had 1% revenue growth. The domestic and other digital services were creating some negative impact. The change of our partner in the streaming services for Elisa Original content during the year to Ruutu+, owned by Sanoma, is positive for us from the profit point of view, slightly positive, but the revenue kind of share in that contract is a little bit different, so it it created some revenue reduction.
As we have said, we have some EUR 15 million-EUR 20 million less revenue from this Ruutu cooperation compared to Viaplay, but it is slightly better in terms of the EBITDA for 2024. We have got a good start with that cooperation. Also, there has been some interconnection price reductions by the regulator, impacting somewhat negatively to the revenue. In the consumer segment, EBITDA was 7% positive, showing good strong productivity improvements in that business. Corporate customers, as said, was hit a bit more by the macro environment, and the revenue was slightly down, -1%.
Mobile and fixed services contributing positively, but then, international digital services, domestic and other digital service also, due to the Videra divestment, and, then also equipment sales and interconnection and traditional fixed line services contributing negatively. EBITDA was minus 3% for corporate customers, but that, that, segment, one can say that except this macro impact, the segment is really making good progress forward. We continue with this three strategy focus areas at Elisa. We have had great results from increasing the fixed and mobile service revenues, also increasing the business in digital services, and of course, improving quality, and through that, improving our productivity and profitability, and we believe we have still a lot of potential in that. And as you...
Some of you may have noticed our advertisement in the biggest newspaper of Finland today in the front page. We were also selected as the among the hundred top most sustainable companies in the world, and our mission to create sustainable future through digitalization is paying results. In mobile, the migration to higher speeds continues. We have now over 100 Mbps. Those kind of customers now surpassing a 50% level. They are not all 5G customers, as you certainly know. There are also 4G customers in that speed category. But clearly, customers are appreciating the higher speed and also they are more satisfied. Our 5G base is growing in a constant pace.
Also, the smartphone penetration is going up. 53% of all the devices are 5G devices in our base. Looking at the 5G, as said in Finland, the population coverage has reached 92% and continues to grow, and in Estonia, we have 75% population coverage. Our capability to commercialize unique capability, a unique way to commercialize 5G continues. On average, more than EUR 3 per customer, what we are getting from 5G customer, than from the 4G customer. That development continues. We have also brought the 5G standalone network network technology available in the capital market area for consumers.
There's clearly emergence of some applications taking advantage of the smaller delay, smaller latency, and also some better capabilities to guarantee quality. It is gradually coming. There's a bit of lack of still devices, customer devices which comply with the standalone 5G capabilities. But of course, that is also another kind of ingredient that is in 5G, providing us with other earnings model possibilities in the future, and now it is emerging in the networks. We also successfully completed the first calls in Europe over the cloud-based 5G network, so we are continuously also experimenting, testing, and piloting, and then deploying later on the new network technologies, cloudifying, making more software capable of our networks.
And, we were first operator as well to shut down the 3G network. So the 3G, which was really the strong hit and kind of thing in the year 2000, around that... Everybody remembers those some of those auctions, but it was a strong hit, and it has been a good technology, but it came into its end of its life cycle, and we were the first operator to get that network shut down. And, it, of course, has provided us with cost savings and also released frequencies to be used more effectively in 4G and 5G. Our fiber network also expanding based on the customer demand.
We have seen a little bit more demand on the market for fiber, of course, created by a bit more activity in the market by more players. We have now nearly 40 locations that we constructed during H2 last year. We acquired also in the year-end Elenia in Central Finland, Tampere region and Northern Ostrobothnia providing us a bit more fiber customer base. We have fiber construction announced over in over 450 new areas in the coming years. So there's a good complementary broadband offering with fiber now coming more into play alongside with 5G. As earlier said, this macro environment really had impact to IDS's revenue growth.
Unfortunately, the year-on-year growth didn't reach more than 2%, due to the fact that especially H2 customers were delaying their projects, as said. However, when we went towards the year-end, we saw the activity to come back, and we got the record order intake and also order backlog in Q4. And overall, we continue to say that our target is really keep this double-digit organic growth. The target remains, and reasons for that is that we really are competitive. We have a strong sales funnel. We see strong interest by customers, and when we get hopefully a bit release from the macro side for the customers, we are sure that this market will be moving ahead.
The digitalization, automation with the help of machine learning, AI capabilities that Elisa is providing, they are needed in all areas of our customer bases. In Polystar in particular, we also had the different Polystar companies more integrated together and with the product portfolio synergies, we have successfully got new customer wins during the quarter. Two new automation customers and a major expansion with a European operator also, what we received during the quarter for Polystar. As an example, in industry, for example, we made a deal with Mitsubishi Logisnext Europe to modernize their company manufacturing operation. It's a forklift truck factory, one very good opening, and also, we had very solid recurring revenue growth in fourth quarter.
In our distributed energy storage, new business venture, it has got a very good start for its first year, and we are extending its reach in Finland's electricity reserve market. We were also approved by the grid operator, Fingrid, for the Frequency Containment Reserve for Disturbances market, in addition to the Automatic Frequency Restoration Reserve market, where we already have been accepted. So this new way, how we are helping the renewable energy to be more effectively utilized by customers, this clearly has been successful, and we are growing our base of batteries and that way increasing our business with that technology. And also, as you see, we got acceptance to be in other markets as well, so the business models are very interesting here...
In this business, we aim at, of course, getting our technology to be implemented by other telecom operators. We have really good strong discussions ongoing, but also this creates interesting opportunities for consumer market later on. When we look at the domestic digital services, there has been solid performance. Our entertaining video services, we launched a new platform for Elisa Viihde Plus service in the end of October with new technology, and it has got a strong start. There's an improved experience to discover and enjoy all movies, series, and sports. So it's a really great user interface for all kinds of content.
As said, since October last year, Elisa Viihde Original series, they have been available in Ruutu+ streaming service, and all four new series that was released in Q4, they were among the most watched list in that service. So the cooperation with Ruutu+ has really got well off the ground, and it is really so that our Original series, they are really fitting well, and they get good, let's say, marketing and so by Ruutu+ and Sanoma Corporation. Three Elisa Viihde Original series are among the Golden Venla finalists in five different categories. This Golden Venla is a similar as the Emmy Awards, so that's in Finland, and we are proud that our Original series and the quality of those are really recognized.
In IT services and solutions, really strong development there. First, demand for cybersecurity services has increased during the fourth quarter. For example, our experts have been successfully supporting multiple customers, large customers with major digital forensics and independent response cases during fourth quarter. Really, really important high-value activity. Also, our detection and response-related cyber resilience services are still the most sought-after capabilities by customers. And there has been also a very strong demand for Elisa's generative AI capabilities and other AI solutions, and we also have been acknowledged globally by Microsoft Ignite event and Microsoft. We have been among the few companies that very quickly have been able to deploy with additional software elements the Microsoft GenAI platform for customer benefit.
We have really, in production, many customer cases utilizing our applications, in GenAI platform of Microsoft. Really, interesting, growth opportunities towards the future. And underlying the core capability of artificial intelligence in Elisa, where we have a 10+ year track record. We are building sustainable future through digitalization, and here are the ESG key indicators that and targets that we have set and the development. In our mobile network, we are improving our network efficiency. Going forward, we are on track to target. Our population coverage with more than 100 Mbps speed connections is also on track, moving towards the target.
We have had some challenges in the kind of balancing the genders in supervisors, but we are very determined to get the female part of the or share of supervisors to grow up. The patent portfolio is growing nicely at Elisa, and our innovations in different software businesses utilizing AI are creating really a strong development in patent portfolio as well. We have also got many recognitions for our work to create around the business and also create sustainable future. For example, MSCI rated now us to the highest level with triple A. We became to be the among the 100 most responsible companies in the world in the latest Corporate Knights Global Hundred list.
We have been included in Sustainalytics' 2024 ESG Top-Rated Companies list, and also Financial Times European Diversity Leaders ranking has included—we are included in that. So among other recognitions, this and for Elisians a lot of inspiration to work for sustainable future forward. We believe that the real activities and these recognitions, they really are also benefiting our business. They are benefiting also the shareholder return when we focus the right way and develop the right way, the business towards the sustainable future. Finally, about the outlook and guidance for 2024. The development in the general economy includes still many uncertainties.
The growth in Finnish economy is still expected to stall, and, in particular, the uncertainty relating not only to Russia's war in Ukraine, but also the other conflicts. And, and then also, as inflation, energy prices, and global supply chain risk, they will continue, and competition remains keen. We have the expectation our revenues to be same level or slightly higher than 2023, comparable EBITDA to be at the same level or slightly higher than in 2023, and CapEx will be at 12% or to 13% of revenue. We see that we may have with the 3G frequencies use it so much to that we may have a opportunity to accelerate our investments to 5G a little bit.
That might be a really good commercial opportunity for us, as well as this digital distributed energy storage. We may be willing to accelerate it for really good financial reasons, and those are the reasons why we say that 12%-13% of revenue. But like I said, the medium-term target of 12%, max 12%, is intact. Now, I give the word to Jari. Jari?
Right. Thank you. Let's start with profit and loss, and Q4 continued good positive developments and best-ever Q4, as was the case with total financial year 2023. Revenue was quite flat in Q4, impacted by divestments of Videra, as well as change in streaming cooperation agreement. Excluding those effects, revenue growth would have been 1.5%—approximately 1.5%. Other changes in revenue, interconnection and visitor roaming was -EUR 2 million. There was interconnection price change beginning of last year. Also equipment sales were lower than year before, -EUR 4 million. In corporate customer segment, service revenues growth was EUR 1 million, and mobile and fixed services growing.
Negative impact in digital services, in, as well as traditional fixed voice. In consumer segment, service revenue was increasing by EUR 5 million. Mobile services growing, and 5G developing positively and contributing to and driving the growth. Digital services were impacting negatively as well as traditional fixed voice. EBITDA comparable EBITDA growth was 3.4%, EUR 191 million. Margin improved to 34%. Reported EBIT includes one-off depreciation approximately EUR 6 million relating to shutdown of 3G network. And excluding that comparable EBIT growth was 3.7%. Comparable EBIT margin improved to 21.9%. Financial expenses were EUR 3.5 million higher as a result of higher interest rates.
EPS 2% growth to EUR 0.61. Some of these, or all these, divestment items have impact also this year compared to 2023 in profit and loss. Videra divestment impact will be approximately EUR 20 million. Streaming cooperation partner change impact between EUR 5-15 million and EUR 12 million. Both of these are, in terms of EBITDA, slightly positive compared to last year. We have also regulatory changes relating to corporate numbers, which will impact negatively to revenue between EUR 5 million and EUR 10 million. EBITDA impact from this regulatory change is slightly negative.
We will continue our productivity improvement, continuous productivity improvement development and measures. In the beginning of the year, we will have some accelerated productivity improvement projects ongoing. And as a result of those projects, we will book approximately EUR 5 million one-off expenses in Q1 EBITDA. In Estonia, good revenue growth continued, 8.1%. Equipment sales and mobile services growing. EBITDA was positively developing, lower growth compared to revenue, 1.2%. Equipment sales growth with low margin impacting and also inflation impacts, especially higher salaries. In mobile subscription base, there was a slight decrease, postpaid base 800, and prepaid 1,200 decrease.
Churn, mobile churn continued at low level, 10.1%. Q4 reported CapEx was EUR 109 million, and excluding licenses, leases, and acquisitions, EUR 91 million. Whole year CapEx to sale was 13%, and taking the average of past two years, 12%. Main CapEx relate to 5G, as well as fiber and other network investments, and IT investments. Cash flow, Q4 comparable cash flow was EUR 73 million, 15% lower than year before. Net working capital change, although it was positive, but it was less positive compared to year before, and higher CapEx impacted negatively. Positive impact from higher EBITDA and lower CapEx.
Comparable cash flow for the whole year was a record high, 12% growth or EUR 40 million increase to EUR 361 million. Positive impact from net working capital changes, higher EBITDA and lower CapEx. Negative impact from higher CapEx and higher interest. Operating EBITDA operating cash flow conversion in Q4 was 53%, and for the whole year, 2023, 62%. Solid balance sheet and financial position is continuing. Net debt to EBITDA was 1.7 times, inside the target range, 1.5-2. Equity ratio was 41.6%, well above target range 35%.
The average interest for interest-bearing debt was at 2.2% level, and return ratios continuing at good level. Return on equity 29.7%, and return on investments 18.7%. Also, with the distributions, there is a continuation of growth and board is proposing to AGM EUR 2.25 per share dividend, which would mean 4.7% growth and 10th consecutive year of dividend growth. Proposal includes two installments, EUR 1.13 in April, and EUR 1.12 in October. Proposal would mean payout ratio of 95% and dividend yield 5.4% against the share price end of last year.
Additionally, there is a proposal for maximum 5 million shares buyback authorization, and again, showing a long-term strong commitment to competitive shareholder remuneration. Now I give word to Vesa, please.
Thank you, Jari, and now we move on Q&A, and we ask first question from the audience. Sami, please.
Okay, thank you. Sami Sarkamies, Danske Bank. Congratulations, Veli-Matti. I have three questions, taking these one by one. Firstly, on CapEx. Can you elaborate what drove the CapEx to sales increase last year? You've been managing this quite prudently over the years, so there must have been some sort of surprise. And then why do you think it's going to be temporary, as you're also guiding for the possibility for 13% CapEx to sales also this year?
Well, there was no surprises. It's just that, we basically saw some commercially viable additional investments. And, when we looked at that, we keep our guidance for max 12%. When we take a look of a bit less investments 2022, then we decided that we go for it, because it really was commercially viable. For this year, as explained, the 12%-13% is really because we see, again, there might be, for the time being now, for this year, because we got this frequencies freed up from 3G, we may be willing to accelerate a bit the 5G investments for good reasons. Same thing with the distributed energy storage, which is really exciting opportunity now when we got also to the other reserve market.
That's why it is maybe commercially really viable to accelerate. There we are doing investments to batteries in our own infrastructure. The business that when we are selling that artificial intelligence based software to other telcos, there is no investments needed.
Okay, thanks. When it comes to macro outlook, I think you sounded a bit more optimistic regarding IDS. What about the domestic B2B business? Are you seeing any light at the end of the tunnel here?
Yeah. Actually, in proportion, we can say that IDS was maybe a bit more impacted negatively. In the domestic side we see... I'm as optimistic that the portfolio, what we have in the connectivity side, with including the cybersecurity, also with our IT business and the innovations in AI deployment and utilization of AI, there's a strong demand for that. But it needs a bit more release from the macro for customers to be really more active. But yes, I'm positive that once we have a bit release from the macro side, also in domestic B2B, there will be really interesting happenings.
Okay. And then finally, on IDS, is it safe to assume that, given strong order in tech in Q4, you will be able to reach that double-digit growth this year?
It is our target. Yes. Yes.
Okay. Thanks.
You're welcome.
Thank you, Sami. And now next one, Artem, please.
Yes, Artem Beletsky from SEB. So first of all, I would like to thank you, Veli-Matti, for all the good interactions and discussions over not just years, but decades. I guess Elisa has been really the role model for the entire industry under your lead. Maybe then going to questions, I would like to ask about the... In general, about competition situation. So it looks like in Q4, churn didn't really pick up that much. We had this bigger campaigning days, so to speak, behind us. Could you maybe talk a bit about that side?
Yeah. We had a little bit increase in the churn compared to third quarter. And as you said, we had these campaign days, so that was, of course, impacting to the fact that there was a obvious additional market activity, but maybe not quite that we expected, maybe not that quite that much. So we can say that at least Q4 we can say was quite much the same level of intensity overall in the competitive landscape.
And maybe then, second question, what you mentioned about introducing 5G standalone features to consumers and so on. So how big opportunity do you see it going forward, and what interesting is enabled by it?
Over the years, I think there is a really strong improvement of capabilities in 5G, creating really true possibilities for operators to have different kind of quality of services, meaning also premium and different kind of pricing opportunities for customers. Next year, I don't think it has a really that much of an impact... Or this year, I mean, this 2024. But going forward, it will certainly have its opportunity. And there is possibilities also with the help of standalone additions in 5G to test and hopefully also find other earnings models than just speed-based thing.
Okay. And, maybe just as the last one is housekeeping question regarding buyback authorization. I guess, the idea there is the same, so no real plan to use it?
No, no plan to use it. It's just, to be available if we need it.
Great. Thank you.
You're welcome.
Thanks, Artem. And then Felix, please.
Felix Henriksson, Nordea. Veli-Matti, congrats for a great run. I'll have three questions. I'll go also one by one. Firstly, on MSR growth for 2024, can you give any sort of soft guidance on what you expect on that similar to past years?
We see the mobile market strong, and we are expecting a similar kind of mid-single-digit growth opportunity for this year as well. And how it looks, the market is evolving, it is very positive, also longer period than just 2024.
... Great. Thank you. Then on IDS, I'm curious, how much visibility do you actually have on this, order to sales conversion now that you mentioned you did have a very good order intake in Q4? When is the timing of this translating into sales? And as a follow-up to that, what should we assume in terms of the business's EBITDA contribution for 2024?
Yeah. Well, if I start from the EBIT, EBITDA, they are still a bit negative contributors to the base total Elisa. But. And then about the orders to revenue transfer, we have a bit different situation in different customer contracts, how quickly that will take place. But the outlook, having the best order backlog, and better that we had in the beginning of 2023, and the best ever order backlog, it is giving a good outlook for revenues for IDS. But like I said, there's still uncertainties, and still there are still some customers who may delay even the ordered projects. So we have a somewhat of uncertainty for that.
But even looking and understanding these things, we are quite positive that even this year, we can reach double-digit growth for IDS.
Thanks. And then my final one goes to Jari on interest cost development. What should we expect for the coming quarters, compared to the level seen in Q4, in light of the sort of exposure you have to fixed and floating rates, and also given that one of your bonds is approaching maturity this year?
Yes. So we have, in Q1, we have one maturity and repayment of EUR 250 million. After that, we expect increase approximately EUR 2 million per quarter. And then going forward, next maturity is year 2026.
Thank you. That's very helpful.
Thank you, Felix. Then next one, Kimmo, please.
Yeah, it's Kimmo Stenvall from OP Markets. I also congratulate Veli-Matti on the great years and great numbers and great shareholder return. So then to the question on getting back to CapEx, CapEx levels that you are raising a little bit. So what kind of magnitude we are looking at in the... If we did that, you end up in the higher part of the range? So we-- Do we talk about EUR 10 million or EUR 20 million, or what kind of levels that this additional that you are maybe spending this year?
Maybe, because there's uncertainty that can we have this viable opportunities to have commercially good investments? They're a bit hard to give you a number, but we are not talking about so many millions of EUR, actually. But, of course, there's somewhere in the border for max 12, and it may be that we are going over that if we see a good chance with the 3G accelerating 5G investments due to the 3G frequencies, or then the DES that we want to accelerate, because it's a really exciting market, the DES, and but also a new market for us.
Okay. Thank you.
You're welcome.
Thank you, Kimmo. Any further questions from the audience at this point of time? No, we don't have, so we ask first question from the conference call lines, please.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Andrew Lee. Please go ahead.
Hi, it's Andrew Lee from Goldman here. Just wanted to echo the comments, Veli-Matti. Good luck for the future, and thanks for all your help over the years. Wish you all the best. Just a couple of questions, and sorry, they're relatively mundane for the last questions we get to ask on a conference call. But just on the CapEx front, lots of questions because you've had the same kind of guidance rhetoric for so many years. So get your comments. That's, I guess, what you're trying to hint at is it's single-digit millions uplift versus what 12% max would have indicated for 2024.
Just wanted to try and understand how we should think about you retaining your 12% CapEx to sales medium-term target. Should we therefore expect CapEx to sales to go back to the 12% max level in 2025, or could it go even lower so that your average CapEx to sales over the period of your medium-term guidance gets to that 12% level? Any kind of color around trajectory into 2025 would be helpful. And then second question, just on IDS. So I guess you hesitated a little bit when I asked a question earlier about getting back to double-digit growth this year. Could you just talk to your confidence levels there? I mean, clearly, you've laid out you've got greater, you know, a great order book backlog. But clearly, the problem is...
It seems like it's just the problem is just postponements rather than, you know, cancellations of contracts. But how do you get that confidence that you can get to double-digit % this year? Thank you.
All right, thank you, Andrew, for the questions, and comments as well. In terms of the CapEx, as you may remember, there has been some years in the history when we also saw great commercial opportunity to lift up for 13%. We've done that and then returned to 12. So saying that and remembering that, we have this medium-term target of max 12% intact, that's what's gonna continue. But this year there might be another year now that we have a commercially, financially viable extra opportunities to accelerate a bit versus what we had planned earlier. Then to the ideas, the confidence level is basically stronger now for two reasons.
One is that we have the record order book in the beginning of the year. And secondly, we see in some of our customer segments that there's really kind of pent-up demand coming, that there are certain customers who need to kind of invest to the certain of the solutions that we have in certain industries. So, and overall, we believe that this interest that we see, we have seen for our solutions, which are helping customers to improve their productivity, profitability, safety, and so forth, quality among others, that we will get to the back to the track of double-digit organic growth.
Thank you. Just, can I just ask a quick follow-up just on the CapEx side? Is fiber build or the need for fiber build a meaningful pressure or contributor to your CapEx uplift?
Not really. We have, of course, proportionally, done a bit more fiber investments, now, but it's, it's not the reason. It's really the additional potential opportunities that may make us to kind of increase, increase, over max 12 this year.
Thank you. Thank you.
Okay.
The next question comes from Ondrej Cabejsek from UBS. Please go ahead.
Hi. Thank you for the presentation, and let me join everyone else by congratulating Veli-Matti Mattila on a very successful career at Elisa. I have two questions, please. One, a bit of a follow-up on CapEx, but more from the perspective of free cash flow overall. So if there's a bit of an increase in CapEx going into next year, is there also potential, for example, in terms of improving the run on working capital going into 2024, i.e., diminishing the impact of overall, you know, free cash flow expectations that we have for 2024? And then just a question on the operating leverage in the business.
So clearly you've seen, despite the weakness in IDS, which would have maybe indicated the opposite, you've seen an improving operating leverage momentum overall on EBITDA over the past couple of quarters. So how should we think about, you know, 2024? And can you maybe explain in that regard the cost drivers related to IDS? For example, there's a big sales target or commissions component related to the sales, where revenues, you know, having clearly been off in the past couple of quarters, contribute to better profitability, or what are the kind of cost levers in IDS specifically? Thank you very much.
All right. Thank you, Ondrej, for comments and questions. I let Jari to respond to your CapEx cash flow question. But in regards to the operating leverage, as we discussed, we haven't seen any problem in our operating leverage, even if the kind of Elisa level numbers might look like and indicating a bit for that. The reason is that as we discussed, that yes, we have a strong development in mobile service revenue growth, which is a higher margin business, but again, we have also invested in new business creation for future, which, of course, on the OpEx side, has been kind of giving a bit more negative there.
And then if you look at that in the operating leverage point of view, at Elisa level, it has been somewhat negative. But then again, if you look at Q4, we have improved even in Elisa numbers. If you compare the growth of mobile service revenue and then EBITDA, percentually, there is some growth. Then going forward, I'm very confident of Elisa's capability to be cost conscious and cost effective, but especially to improve productivity. We have a unique platform, which we call Elisa Business System, by which we contribute to the profitability with the longer term development of productivity. With the process improvements, with the streamlining of processes, with the automation, with utilization of machine learning and AI, we have that capability in all parts of the operations which are contributing.
So there's no doubt that our productivity wouldn't be improving going forward. But when we also build, and we want to build the future growth, and in the beginning, if you think about the IDS business, it is kind of in an investment phase a little bit. But that's what we do, and we want to provide that growth in the future. And that looks actually good, as I have said, about the order backlog, but still that business is quite small. That is not contributing to the operating leverage kind of criteria so well now. But if we take a look, for example, the gross margin for this IDS business, it is really comparable to the industry software businesses.
It is just that the selling G&A and those kind of things, they are proportionally a bit too high at the moment, and we want—we need to invest a bit on that to take our good share of, as a first mover in those AI-driven markets for operators and industrial buyers. But, like I said, summarizing that, we don't think we have problem in operating leverage, but if you take a look just the numbers outside, I think also there will be improvement in that at the yearly level going forward. But Jari, please, for the first question.
Yes. Yeah, we definitely see solid cash flow development continuing also this year. And you mentioned net working capital, and we continue to work with more efficient net working capital as well this year. And now we have reduced inventories during last year, as an example of the positive development and the measures that we've been doing that have been contributing to net working capital. And if you take a whole year, last year, there was quite a good development, and there is still potential to improve there.
Thank you very much. Just one quick follow-up and similar to Andrew. So on fiber, so you outlined all of these areas where you'll be, you know, or have been upgrading fiber. Can I just ask, from your perspective, is it still the case that customers for the most part are paying for these connections, or is there a bit more competition in the market that you're not kind of immediately recouping the CapEx into new areas because your, I know, ultimate competition is trying to do this for free currently?
Well, we have a bit different competitive situation in different regions in Finland, and somewhere the competitive situation is such that the kind of the installation fees are lower, and in the other areas, it's a different thing. And going forward, of course, once you have started with the business in some area, and then you get add-on customers, there's quite... It is quite sure that the, then the later coming customers, they pay installation fees.
Thank you very much.
You're welcome.
The next question comes from Siyi He from Citi. Please go ahead.
Hello, good morning. Thank you for taking my questions. And also I want to start with congratulations to Veli-Matti, and hope you all the best outside of Elisa. Thank you very much for your contributions over the years. And Mike, I have two questions and one quick fact check. And first question is, I wonder if you can talk about the competition you see in Finland, the B2B market. I mean, and also, when I look at the ARPU development, I think B2B ARPU is flat year-over-year, this quarter, and your competitors also reported, like, flat 1%. And I just want to check what you see in the B2B market and why is that, the 5G monetization is not as strong as in the consumer market?
The second question is, sorry to go back on the IDS. I think in your Capital Markets Day today, you mentioned that you expect IDS to be breakeven by 2024 and 2025, and part of the reason is you think some of the investment that you made in the past can get lifted. I just want to check if that is still the case, and how should we think about the investment that you're gonna make in IDS going forward? And finally is for Jari. I think you mentioned that there could be some one-off impact of EUR 5 million in Q1 EBITDA. I just want to check if that's the case and what is relating to it. Thank you.
All right. Thank you for your comments and question, questions. First, about the competition in B2B, yes, for I guess, very well-known reasons, for all of you, we have one competitor who time to time is using price to win customers, and that impacts in some instances in the corporate market in terms of then for the ARPU. Like we have said earlier, we are not compromising our market share there. We are also responding time to time to these situations, because it is easiest thing for us to keep the customers. We have other competitive factors which make customers to stay, or for create capability for us to win the customers, among others, our higher quality, clearly.
So, there is sometimes a bit more headwind due to the-
... price competition in the corporate side, but still, we have seen also, a lot of rational behavior by competitors in, in that market. But, there is no big change. It is, those known reasons why we have one custom- one, one competitor who, who plays that, every now and then. IDS, yes, we see that the break-even target is still to have till the end of, 25, the break even for, for, IDS, and, that's, that's the kind of, target, intact. Jari, please.
Yes, the one-off in Q1 was approximately EUR 5 million, and that's, that is current estimate and relating to productivity improvement measures that we are doing. Also, including reducing number of employees, cost relating to that.
I see. Thank you very much.
The next question comes from Oscar Rönnkvist from ABG Sundal Collier. Please go ahead.
Thank you. Hi, all, and thanks for taking my questions. Congratulations, Veli-Matti, on a successful career. I haven't covered you for too long, but I recognize the impressive work that you have achieved during your tenure. So, just, on the question, my question would be on the dividend and any potential comments on what the board sees. So just cash flow, including lease payments, not covering the dividend in 2023. So just how to think about the balance between dividend and the leverage going forward, and if you're keen on keeping the sort of 5% dividend growth pace, even if lacking dividend coverage from free cash flow, given the comfortable leverage. Thank you.
Okay. Thank you for your comments and questions. I will just briefly start, and then I'll let Jari to complement my response. For the first, again, the distribution policy, 80%-100% of net result, is intact. There's no question about that. Our distributable equity and all of that, we have no... We're very comfortable on that. Now, giving the outlook of same level or slightly higher, and with the way we have been able to move forward with our result in the past years, that should kind of create quite the same outlook for the dividend the future as we have had earlier. But, Jari, if you want to elaborate a bit.
Sure. So, on top of that, of course, we have low net debt. Currently, in the middle of the range, target range, 1.5-2, so a very solid, solid balance sheet. Comparable cash flow from the last year is pretty much equal to dividend, so it's covered by cash flow.
Perfect. Understood. Thank you very much.
You're welcome.
The next question comes from Ajay Soni from JP Morgan. Please go ahead.
Hi there. Thanks for taking my question. I just wanted to ask a bit more around the CapEx buckets. As obviously, you've got slightly higher high guidance range this year, and you're mentioning 5G and energy storage. It just feels like the latter would not just be a one-year effect, and so it feels like this continues for a few more years. If you've got any comments on that, that would be useful. And then just the second one on the Finnish consumer, I think you kind of mentioned that the macro there is maybe a bit more negative, and maybe the consumer is under pressure. So do you think this impacts your ability to increase prices this year at all? Maybe we see a step down in your price increases relative to 2023.
Thank you very much.
All right. Thank you. Yeah, for the CapEx, as discussed earlier, it is just for this year when we see that there might be additional investment opportunity viably- financially viably, that interest us to go ahead, which would make us to go beyond 12%, and those are the acceleration in 5G due to the released 3G frequencies, and the other opportunity might be in the distributed energy storage because that business is really starting-- has started really well. So that's it, and the medium-term target of max 12% is intact. For the Finnish consumer market and get possibilities to do price increases, we have done, as we have said, over the years, cohort by cohort basis, some price increases.
Of course, we have provided more value also at the same time. I believe that is kind of continuing. We are generating additional values to the customers, and then we are making some fine-tuning cohort by cohort basis. The other price increases remains to be seen what takes place in the market.
... Ajay Soni, JP Morgan, your line is now unmuted. Please go ahead.
That's great. Thanks very much.
Thank you.
The next question comes from Jakob Bluestone from BNP Paribas Exane. Please go ahead.
Thanks for taking the question, and if I can also echo the comments from others to Veli-Matti to say thank you and congratulations for your service over the many years. Just following up on the CapEx point, just hoping you could maybe elaborate a little bit. How do you think about the payback from these investments? Do you think it's something which could lead to an acceleration in either revenue or EBITDA growth or both, within the next couple of years? Or should we more think about it as just sort of sustaining the current run rates? Thank you.
Okay. Thank you for your comments and also the question. Well, of course, when we think about the 5G investments, you know, we have been succeeding with the mobile service revenue growth. So of course, we are looking at being able to accelerate that maybe with these investments. Then the other thing is the distributed energy storage. We have already sold energy from the batteries last year, and of course, by increasing the amount of batteries, if we see that a kind of good from the timing point of view and many other aspects are there. If we see that, of course, then we can accelerate the increase of revenue from that source as well.
Thanks, and best luck.
The next question comes from Usman Ghazi from Berenberg. Please go ahead.
Hi, thank you very much for the opportunity. I've got two questions, please. The first one was just on fiber. We're hearing a little bit more from GlobalConnect, where they are rolling out fiber a bit more aggressively in Finland now. And I'm just wondering, you know, how you saw that development, and, you know, especially in light of the acquisition you've made as well in late 2023. So that was the first question. The second question was just kind of going back on the CapEx for the distributed energy project. So just want to clarify, you know, so did...
If this project goes on into 2025, would that mean that your CapEx range stays at 12%-13% for 2025 as well? Or are there compensating things in 2025 that will see CapEx go back to a maximum plus percent, even if this project is, you know, running into 2025? Thank you.
All right. It was a bit hard to hear exactly what you asked, but I tried to respond. Ask again if I didn't respond to your question. In regards to fiber and some of our competitors, you mentioned one in the question. Well, the market is a bit more lively, having a bit more competitors than we traditionally have. That's okay. It's creating a bit buzz in the market, and it's also good for us. I have no comments on our competitors' activities. We have our strong position as the biggest fiber infrastructure in Finland. Overall, we are—we have been very well taking our share of the market for of fiber.
We are focusing on our own fixed network regions, where we have fixed network, and we have very strong customer preference to buy from Elisa. So we are, we are kind of moving ahead with strong plans, and the outcome what we reached this year has been really good. In terms of the CapEx and this, like I said, this is for 2024, and our CapEx guidance is intact for going forward, max 12%.
Yeah. So just to follow up, I mean, the medium term, obviously, you know, that is clear that that is a max 12%. I'm just wondering, if this project on IDS extends into 2025, would that require the CapEx to be at 12%-13% even in 2025 before it steps down, or is that not going to be the case?
We don't see that taking place at the moment.
Okay. Thank you.
Welcome.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Thank you for the questions. Just to check if anyone from the audience has still one question. No? Then I'll give Veli-Matti some closing words, please.
All right. In the end, I would like to thank all of you very much for the follow-up of Elisa. It's important for us that we have strong follow-up for us and like you have done over the years. And of course, all of your analysis you are doing for us, it's really helpful, of course, for the investors and for the market, but also it is important for us, and it is, of course, inspiring for us. And of course, we have had over the years excellent dialogue with all of you, so I'm really thankful for that. And I'm leaving Elisa now in a very good spirit and mood and because Elisa is in a good position.
We have great people at Elisa, and the very good results that we have got over the years is, of course, because we have very good people at Elisa. We have great, exciting opportunities to continue to grow the revenue. There are many exciting opportunities, and our unique platform, which we call Elisa Business System, is really giving us opportunity and Elisa opportunity to continuously improve and also innovate years to come. So, I'm leaving really in a good mood, Elisa, and once again, thank you all.