Good morning, everyone, and welcome to Elisa's Second Quarter twenty twenty Conference Call. I'm Vesa Sahibirta, Head of Investor Relations, and here is a very familiar team with me, CEO, Veli Matty Mathila and CFO, Jari Tinmunen. We start this call with a presentation followed by Q and A. Veli Matty will go through the Q2 report or the highlights and Yari will then focus more on financials. I think we are ready to start, so I give word to Velimatti, please.
Thank you, Weser, and welcome on my behalf as well to Elisa's interim report review for the second quarter twenty twenty. We had another good quarter. Going forward, we had steady development continuing, our revenues growing by 2%, and comparable EBITDA was up by 3%. Mobile service revenue was at the same level as last year on the same quarter. And of course, the substantial decrease in the roaming revenue that was due to COVID-nineteen travel restrictions impacted on mobile service revenue.
If we hadn't had these restrictions on traveling, the mobile service revenue would have approximately on the Q1 level. Postpaid churn decreased to 16.4%, especially due to the fact that the people have been less visiting the shops of ours and competitors. That has, of course, had an impact on the churn. We had postpaid mobile subscriptions base growing by 26,000 and fixed broadband customer base increased by 1,000. We continue to roll out our five gs services.
Now we are in more than 30 cities in Finland. And under our five gs networks coverage resides already more than 1,000,000 Fins. So five gs is going forward in Finland very well. The revenue was growing based on the Polystar acquisition for the most, but also the equipment sales and the revenues in Estonia was growing. Like I said, roaming revenue decline had impact on mobile service revenues, but the four gs and five gs upselling continues very well.
And we have done also some product changes. Our continuous improvement with providing productivity and profitability improvements, of course, contributes to our EBITA improvement and also our revenue growth has contribution to that. In regards to the competition, it seems that the campaigning continues and the competition remains keen in both in the consumer and corporate segments. If we look at the segments separately, consumer side is growing had a growth of revenues 1% and EBITDA growing by 6%. In the corporate side, we had revenue growing by 3%, but EBITDA was down minus 3%.
The decline in roaming revenues was impacting more on the corporate side than in the consumer side. We continue to focus on three areas on our strategy. We see a lot of potential to improve our results in each of these three focus areas. And the upselling continues. Now we see the smartphone development and penetration continue to grow.
So we have 86% of the customers now using a smartphone, of which 98% are four So the amount of customers having smartphone is increasing in our base step by step. We have also now 74% of the voice subscriptions in four gs speeds at least, but we also see that the amount of customers in the lowest speed tier in the four gs is going down, meaning that and proving that the upselling in the is working in four gs domain as well as now when we are getting customers more and more to five gs. The proportion of data bundles also continues to grow. So the change of the business model from consumption based to fixed fee subscriptions is continuing also step by step. And we see, of course, a good demand for the unlimited data bundles where we now have very good roaming opportunity for customers in the domestic prices in the EU and EEA countries.
In five gs, ELISA is leading the way. We have launched in 31 cities, and we have also made capacity expansions in several areas in the capital area of Helsinki. And we have also provided widest selection of five gs devices lately, Samsung Galaxy A51 and Motorola products as well. And we continue to introduce new devices. And of course, the development is favorable that we are getting less and less expensive devices, meaning that the larger audiences become more interested in five gs services while they are able to get the devices with the price level that is suitable for them.
Later this year, especially in the fourth quarter, we start to see really already, let's say, mass market price level devices. The data usage year on year growth was 40% in second quarter, and we have very well been able to meet the capacity demands and increase demands without any extensive CapEx increases and so forth both in Finland and Estonia. And of course, we are driving sustainability with different innovations. For example, we have the first liquid cooling five gs base station in the world introduced. And we also told that we have a target to be carbon neutral at the end of twenty twenty, I.
E. This year, being the first operator doing that in Nordic countries. In the digital services, there's a lot of activity in the domestic services side. Our Elisa Witte IPTV service, the Witte ITO, the streaming part of our Elisa Witte IPTV and Wi FiRPlay films series combined now that offering in Finland. We have the bundle available since June 30.
And the new Elisa Vide via play streaming video service, combined service is with one kind of solution is available in the fourth quarter. This cooperation really makes us to offer the widest selection of domestic and Nordic original content, but also very good selection of international movies, classic series and so forth in Finland. We also made as a first telco in the Nordic countries and the introduction of Amazon Prime Video with the selection wide selection of four ks content to our Elsa Vida Premium service and meaning that together with the other streaming services like Netflix and HBO, we have really a widest selection of content from our IPTV platform. We have also been very innovative to provide solutions in regards to the corona COVID-nineteen situation. We have helped Helsinki University Hospital with the near real time COVID-nineteen situation awareness view.
And also, we have used our people's movement data from our mobile network, anonymous data for to help Helsinki University Hospital track and predict the spread of coronavirus. So we have basically been able to utilize our smart factory management capabilities together with our mobile network information to help the biggest hospital chain in Finland to be better managing the COVID-nineteen situation. We also have been introducing this to other hospitals in Finland as well as to cities with their COVID-nineteen management situations. And we also launched natural Finnish language automatic recognition service for digital customer service solutions, and it is a very competitive AI solution in terms of Finnish language recognition. Based on the wide, wide amount of spoken data of Finnish language that we have based on our different services.
In the international digital services area, we have made also very good progress. Again, a very solid quarter for Polystar with double digit year on year growth, especially driven by the increased demand for analytics solutions, especially in the video analytics side. And Videra also continues to make good progress, especially now when people are returning to offices. With the RAS competitiveness really plays out to combine different kind of devices from different vendors. And also, we provided the Microsoft Teams gateway, which have been in demand very well by several customers.
And finally, about our outlook and guidance. Clearly, the current COVID-nineteen situation, it will slow down the economic growth in Finland and creates still uncertainty for the macroeconomic development. Competition in the Finnish market telecommunications market remains green. Our guidance is unchanged for 2020. Revenue will be at the same level or slightly higher than in 2019, and our comparable EBITDA will be at the same level or slightly higher than in 2019.
Our CapEx will be maximum 12% of revenues. And now I'd like to give the word to Jarri. You can continue, please.
Thank you. I'll start with profit and loss statement briefly. Revenue in Q2 was growing 2%. And we had several impacts from COVID. As mentioned by Velimati earlier, roaming was one of those where we had negative impacts also in pay TV and sport contents as there was no sports content available.
There was negative impact to revenues. All in all, interconnection and visitor roaming, which is one part of the roaming, flat, Growth of 5,000,000 in equipment sales in both segments coming from different equipment sales routers, PCs, TVs and so on. Service revenues, excluding interconnection and roaming and equipment sales in corporate segment, was up EUR 5,000,000. Polestar acquisition and Polestar first consolidation impact was EUR 7,000,000. Mobile service revenue was negative in Corporate segment, very much impacted by this negative impact coming from roaming.
In Consumer segment, service revenue was flat. Mobile service revenue was growing even though roaming had some negative impacts. Domestic digital services, slightly negative and fixed traditional fixed telephone declining. Earnings wise, EBITDA improvement was 2.9%. We did cost efficiency measures, also some expenses like on traveling expenses were down from last year as well as some sales related expenses as a result of lower churn.
EBIT increased by 4.2% and EBIT margin was up to 21.9%. EPS growth was 5.6%. In Estonia, both revenue and EBITDA continued to grow. Revenue growth was 2.1% in different ARES equipment sales, fixed and mobile services. EBITDA was improving 8% as a result of productivity improvement measures.
Mobile postpaid base continued to grow Q2 by 3,100. Prepaid subscriptions went down 8,900. And churn was coming down from Q1 to 8.8%. CapEx total CapEx in Q2 was €75,000,000 and operative CapEx, excluding license and IFRS 16 impacts, was €65,000,000 up €10,000,000 from last year and normal quarterly variations making the difference for this quarter. Consumer segment, 49,000,000 corporate segment, 26,000,000.
And main CapEx areas were five gs and four gs capacity and coverage increases other network and IT investments. Also in total CapEx figure, 7,000,000 of 26 gigahertz five gs license is included in Q2. Payment of this €7,000,000 happens in five year annual installments. Cash flow reported cash flow was $835,000,000, which is down from last year, which was €102,000,000 last year. Positive impact from higher EBITDA.
And two main negative impacts, one relates to less positive net working capital change due to higher inventories. We were preparing for possible supply chain interruptions, and that was impacting to inventories. And the second impact from CapEx, as just said, this quarter had higher CapEx. Gas conversion continued to be high 61% from EBITDA. And then balance sheet and capital structure.
Net debt to EBITDA was 2%, in line with 1.5 to 2% target range and equity ratio, 35.9%. Return ratios continued at a good level, return on investment 17.1% and return on equity 29.11%. Regarding financing, we did extension one year extension regarding committed revolving credit facility of €130,000,000 from June 21, extension to June 22. And cash or liquidity situation remains strong. End of Q2 cash and unused committed credit lines were EUR $374,000,000.
And now I would give a word to Wesa, please.
Thank you, Yari. And now we move on to Q and A part, and we ask first question from the conference call lines, please.
Thank you. Our first question is from Andrew Lee from Goldman Sachs. Please go ahead. Your line is open.
Yes. Hi, everyone. I had a couple of questions. First on revenue trends, kind of trying to get a sense of the revenue trends on an underlying basis or ex the COVID impact. Have you seen any real change to those trends in Finland stripping out the roaming impact and any other COVID impacts you've had versus last quarter?
And
have
you seen any intensification in competitive pressure in the last quarter? And then second question was on B2B risk. You've clearly got higher B2B and SME exposure than most of your peers, at least in terms of revenues. How concerned should we be on this as far as you can see? And what are the key metrics you're monitoring to check on B2B revenue risk?
All right. Thank you. In terms of the revenue trends, basically, there's not so much change on the underlying trends except the COVID a few COVID kind of impacts. Our upselling of mobile speeds continues in four gs and also in five gs. We also contribute to customers with the fixed broadband.
There has been quite much demand now for further speeds and capacity by customers who have been doing a lot of working from home and also otherwise a need for communications. But also in the digital services, we see clearly a good demand for more content, especially the Finnish and Nordic content and so forth. But then as we have detailed the COVID impacts, negative impacts to revenues come from the travel restrictions impacting the roaming quite strongly, actually. And of course, when the sports has been on break, the some of the pay TV revenues have not come in due to the sports being on break. Also, there are some small revenue streams that have got impact from the COVID.
But overall, the revenues and the revenue development has been like before. Then about the competitive pressure. We haven't seen so much change on competitive situation since first quarter. It has been fierce. Of course, the exception has been that the traffic to the shops has been lower.
It has, of course, now come back quite much. We are almost to the same level for the visitors in our shops than pre COVID. So there is, of course, possibility for a bit more shop based competition to come forward. We'll see. But otherwise, we have had quite keen competition like we have earlier had.
There's no big change on that in the second quarter in both segments, Consumer and B2B side. Then in terms of expectations in regards to B2B side, of course, we for the first, we have a bit different dynamics when it comes to small and medium sized customers and entrepreneurs and larger customers. We have a bit less representation in those verticals where the corona has hit most, hotels and restaurants. But of course, the uncertainty for the second half exists there. There is, of course, negative impacts to many export companies, for example, in Finland, and we will hear a bit more about the views that the companies are presenting in their second quarter results.
But of course, we have our scenarios done for what kind of impacts they might have. The GDP development in Finland overall is around 7% minus now. We expect maybe a bit more decline for this year in our kind of basic plans. But it is, of course, very much a question that how much savings programs the companies might do. We haven't seen that much yet an impact on us on that.
But of course, we follow-up very much about the layoffs, how much layoffs companies might do. We have this temporary layoff kind of regulation in Finland. We follow that. Of course, the consumer data from the credit card utilization and so forth, we do follow many indicators. And based on that, of course, we can anticipate what kind of developments there is.
For second quarter, we didn't see that much of negative pressure in the B2B segment for the business. And also but like I said, the second half is something which where the uncertainty exists. And of course, there is some pressure. But from the past kind of crisis, we know that communication services are in demand anyhow. There might be some reduction in the demand based on layoffs.
That's exactly what we follow-up. But also, now when everybody understands that there will be a live after COVID, and important thing is to digitalize further the business, We have a lot of different solutions that have been on demand, and we have innovated, like we explained in our report. So there will be also positives and opportunities based on the COVID, maybe more than without COVID in the digital transformation of companies.
And our next question is from Tara Sui from Morgan Stanley. Just
picking up on the comments around robust service revenue trends. You mentioned some of the headwinds being less fins traveling abroad. I'm just wondering, when you think about you talked about the shape of the recovery and thinking that telecoms are going to become more important in the future, what sort of pace of recovery do you think you'll see? Are you expecting another couple of quarters of sluggishness? Or do you think actually the rebound could be quite quick in, say, Q3 and Q4?
And then secondly, I just had a broader question around equipment vendors in Finland. I'm sure you saw the announcement yesterday by the U. K. Government. Maybe you can just update us what the Finnish authorities are thinking about the use of Chinese equipment vendors.
Okay. Thank you for the question. In terms of the MSR, like I said earlier, the without travel restrictions impacting to roaming revenues, we would have had Q1 level MSR. What kind of development is going forward, it really depends on the travel restrictions, how they will be taken out and how people start to move again. And like also we went through, it is it has more impact in the corporate side than in the consumer side.
And then it remains to be seen how the travel will come back again. And there's, of course, uncertainty that everybody understands. And we have, of course, our own, let's say, scenarios of that. But there is an uncertainty that we cannot kind of put any kind of number in front ourselves. Of course, some point in time, we will see more traveling and roaming revenues to come back, but we are not giving any guidance when that might happen.
Saying that, the underlying selling of speeds and also our capability to make product changes exist exactly like before COVID. In regards to the equipment vendors, we also have a new legislation in Finland going on. Our government is proposing legislation overall, many different things. And in regards to the equipment vendors, there is a part that relates to the national security. And there is, of course, a it is based on already a previous legislation in Finland.
We have had meaning and saying that if we have devices in our network that are causing problems and troubles, they have to be taken out, very clearly stated, which has not existed in hardly any other countries' telecom regulation. We have had that. And now it is kind of further developed for this new regulation in Finland that if there's something that is creating risks for national security, the devices need to be taken out from the network. So that's the definition. There is, of course, no vendor mentioned or any country of origin of the vendor mentioned.
It is about the national security, and it is then up to the Finnish kind of Finnish authorities to define which they see in the critical parts of the network, which this means. So in the critical parts of the network, today, we use only Ericsson and Nokia, which are kind of felt as domestic players in the Nordic countries. In the radio part, which is not the critical part of the network, we, of course, use other vendors as well.
Great. That's very clear. Thank you.
You're welcome.
And our next question is from Sami Sarkimis from Nordea. Please go ahead. Your line is open.
I have a couple of questions regarding segments. Starting
from
the Consumer segment, EBITDA was quite a bit stronger than expected. I assume this related to lower marketing spend and customer acquisition costs during Q2. Can you elaborate on how you will be able to keep the current low level? Or is it so that now once consumers start to move again, also the sort of marketing spending will normalize?
Okay. Well, our marketing spend has not been so much lower. It's about the customer acquisition cost in terms of the sales side because the volumes have been a bit lower. Of course, if the volumes sales volumes will go up, then the cost side will go up. But underlying development in overall with unique Elisa way to improve productivity with our continuous improvement, that is the main driver how we drive the development of profitability at Elisa, and that continues without any problems.
And we do see a lot of potential in consumer for consumer business as well as for the corporate business to improve our productivity in many areas, in terms of the automatization, but also by utilizing improved processes and less reducing waste and so forth. So that is an area where there continuously exists a great potential we execute going forward.
Thanks. And then
continuing on the Corporate
segment. On that side, EBITDA was quite a bit below expectations on in revenues. Was it driven by business mix with higher share of lower service sales? Or were there some extra costs in Q2?
Like I said, one of the main drivers was really the reduction on roaming, which impacted more to the corporate segment and its profitability. There's nothing special in the corporate side other than that. Also, the continuous improvement in customer satisfaction as well as the productivity continues in the corporate side. Of course, the quarters are a bit different going forward. There are some variations, but overall, the development is kind of promising in the corporate side as well.
Thanks. That's very helpful. And then I have one more question to Jari. I think you said that Polestar revenues were €7,000,000 in Q2. Can you also disclose the EBITDA or EBIT figure for Q2?
To be exact, 7,000,000 was the change annual change from last year. EBITDA impact was in the range of 1.5.
On top of what you booked a year ago?
Yes.
Yes. Thank you. I don't have any further questions.
Our next question is from Peter Kurt Nordson from ABG Sundal Collier. Just
a couple, please. Firstly, do you anticipate that the roaming impact in Q3 will be similar as we've seen in Q2, I. E, sort of close to a minus 2% on service revenues? And then just could you elaborate a bit on your five gs rollout? What's the time frame?
You're at 30 cities now. When do you expect to sort of complete that? And are you seeing any positive indications as of yet? Or is it still too early? And then just a quick one finishing off, please.
Any comments on the agreement you signed recently with Net on your IPTV business? Any did you see this as a positive driver for this business, which was already doing reasonably well?
Thank you, Peter Kurt. In terms of the roaming, we, of course, have uncertainty, which relates to the traveling starting back again. In our views and plans, we see that and we have taken into account that the roaming will be quite much down in third quarter and fourth quarter. But we, of course, knowing that, have reiterated our outlook. But in terms of the roaming revenues, our anticipation, what we have in our plans, is quite much the same.
But it may be different because we are we don't have the crystal ball for when the travel will come back. Five gs, yes, we continue the build out of five gs network. It's not going be ready this year even if we continue quite actively. But we have already now a good coverage. More than 20% of Fins are under our five gs coverage.
And the experiences have been very good. The first movers of the customers have taken the service really well. And of course, the important driver are the devices, the handsets being more affordable for the mass market, which we will see in the especially in the fourth quarter this year. And we see higher ARPU with the five gs customers than four gs customers. So there clearly is potential to improve the revenues mobile service revenues by upselling customers to five gs as we go forward.
When the momentum really starts to take place, it remains to be seen, but it looks promising. In terms of the IPTV and our cooperation with the NENT and WiAPLANY, it is, of course, planned to provide growth further growth for our good portfolio of video services in IPTV. And the early indications that we've noticed, the customers have taken really well the combined offering. And it is a situation where we provide more value to the customer, and we can charge also a bit more.
Super. Thank you very much.
Thank you very much.
And our next question is from Pani Lathamaki from Danske Bank. Please go ahead. Your line is open.
Thank you. I wanted to ask about mobile churn. Two questions basically. Firstly, do you expect the mobile churn to increase again when people kind of return to the physical stores to look for the under the counter offers? And then secondly, can you give any indication on the profitability impact of changes in churn?
Like what does one percentage point of churn mean to your EBITDA? Or could you give any indication of the subscriber acquisition cost per subscriber? Okay.
In terms of the churn forecast, we are not giving any forecast for the churn. What we know that the people have been visiting now shops again more. We are almost on the level where we were before. Whether the churn will tick up based on that remains to be seen. We are prepared for any kind of scenario, if you will.
In terms of the profitability impact on churn reduction, we have not disclosed any numbers. But of course, it has positive impact to the profitability if the churn is down. But like I said, we have many other drivers to improve profitability as well.
Thank you.
You're welcome.
And our next question is from Adam Foxconn Lee from HSBC. Please go ahead. Your line is open.
Thank you very much. I have two questions, please. Your release firstly highlights a government proposal from June on changing the maximum contract length to twelve months from '24 and also capping some business number charges. You mentioned in the statement that there's some financial impact expected on Elisa and apologies if I missed it earlier in the call. But are you able to provide any kind of indication of the levels of that kind of impact?
And then secondly, just coming back to the combination of ELISAVIGIA with Viaplay and other services. From a strategic perspective, does that say something about the standalone viability of that product? Was there a challenge there? Is there a growing influence from outside brands like Netflix and others? Or was it just more advantageous to both parties to be a bigger player in the space?
Thanks very much.
All right. Thank you. In terms of these regulatory changes, we base our strategy very much on customer satisfaction and understanding the customer value. And that's why we are very happy that this reduction of kind of contracts from 24 to 12, and especially the clear demands for informing the customers that customer would easily know how long contract they have and how many months they may have left. We are not building our business on fooling customers and kind of making them to stay sticky with us even if they are willing to know and understand their contract length.
So this regulation is really making it easier for customers to understand, and then customers can choose based on the experience that which provider they take. So this is good. Financial impact of that, we believe that it will be positive going forward gradually, but it's, of course, not an event that at once makes a difference. But for the long term, and I believe that it is really good for the consumers to have kind of capabilities better to choose there and be knowledgeable, the service provider contract lengths. And we are not trying to fool the customers.
We are driving for customer satisfaction. In terms of the other change, I ask Yari to respond to that small change that exists for these business number chargings. And finally, about your question about this wire play. It is, of course, a move and one step in Elisa's clear strategy in terms of IPTV and content provision. We have our quite long quite some time ago kind of plate strategy that we are working on and executing, and this is a very good one step forward, how we provide the widest selection of content to our customers in Finland, especially having a focus in Finnish and Nordic original contents, but having also very wide variety of other contents available from one single very easy to use service, Elisa Vite.
It really has nothing to do about the stand alone or not stand alone viability. It is based on our strategy that we are executing. And as you may have noticed, we also have Estonian original content. So we really provide we are the kind of very strong provider of local content, and that's the kind of competitive advantage we have in addition to very wide selection of other contents. But Jari, please, you can respond.
Yes. Relating to business number changes, it's still proposal as the whole act. And it will be if coming into force as proposed starting from December 2022. And of course, we will prepare ourselves if the proposal goes through as proposed, for example, doing product changes, which will mitigate the direct negative impacts. So we expect not any major financial impact as a result of this change if it goes as proposed.
Okay. Thank you both very much.
And our next question is from Sia Hoop from Citigroup. Please go ahead. Your line is open.
Hello. Hi. Good morning. Thank you very much for taking my questions. And I have two questions, please.
And first one is on the B2B competition. I think one of your competitors have won this very large contract from HASL earlier this month concerning about 175,000 more customers. I wonder if you'll be able to comment on Elisa's potential whether Elisa has any potential subscriber or financial exposure to this contract? And if so, what could be the trajectory of the impact? And my second question is on the mobile data consumptions.
It looks like that the consumption has accelerated to 40% year on year growth from Q1 and continuing Q2 this year. And just wondering if you can talk us through the drivers behind it, are there mainly from the early five gs adopters?
All right. Thank you very much. Yes, you're relating to one of the kind of B2B contracts on the public side. We the impact for us is less than 40,000 subscriptions that are something that we will, due time, lose to our competition who won the whole contract. These customers are very low ARPU customers.
Price for this contract was very low. The financial impact is less than €1,000,000 for us during the quarter. So it's not a major event for us, even if the kind of subscriber numbers look quite big, but it is really low ARPU and low price customers. On the contrary, we have a very good track record on winning in other customers with higher ARPUs in the B2B segment. In the mobile data consumption, it is really the COVID-nineteen kind of increased demand that has created a bit acceleration in the mobile data consumption.
That's the main driver. And of course, while selling higher speeds, the data is also moving in the larger volumes.
Clear. Thank you very much.
You're welcome.
And our next question is from Stephane Goffin from DNB. Please go ahead. Your line is open.
Hello. Was it me? Hello?
Yes, please. Yes, can
you hear me?
Yes, please. Yes.
So I have a couple of questions. First of all, can you quantify the pandemic impact from loss of sports content on Pay TV this quarter? And is that up and running now fully in Q3? And then secondly, you had increase in inventories due to pandemic. Do you expect that to come down to normal levels in the coming quarters?
All
right. The pandemic impact, we are not really disclosing details of that. But of course, for this quarter, the sports content being very low in revenues, it had certainly some impact to the numbers. But it is, of course, something that we expect gradually to come back when the sports now has started again. Even without audiences, it seems that people are willing to watch from the pay TV channels these live sports.
The increase in inventories, yes, it is. It was really done for the fact that we are prepared to deliver if there will be supply chain challenges due to COVID. And of course, due time, it will be going to the normal levels.
Okay. Thank you.
You're welcome.
And our next question is from Keele Pamagadi from Exane BNP Paribas. Please go ahead. Your line is open.
Hi. It's Keele from Exane. I've got two questions. Firstly, do you see scope for further price increases this year, back book and mobile? And the second question is, is there anything specifically you spent more on this quarter in CapEx?
Okay. Thanks for your question. Let's say that the product changesprice increase is a kind of continuous tool that we utilize. Also, I believe, in the second half, we find always different ways to provide more value to customers to justify some of the price increases. And some of that will take place this second half of the year.
In terms of the CapEx, second quarter, we had a bit more mobile network investments now in second quarter. But overall, the CapEx guidance remains the same for the full year.
Thank you. Very clear.
You're welcome.
Our
next question is from Abhilash Mahakar from Berenberg.
This is Abhilash Mopazu from Berenberg. Firstly, just to follow-up on Adam's question earlier about the change in contract length. Am I right in thinking that the large majority of your customers are already on sort of flexible contracts? And so with this change from sort of twenty four to twelve months, is that something that will probably impact more of your competitors rather than you? And then second question, just sort of following up on your comments from five gs a bit earlier.
I know you typically sort of don't comment on service revenue expectations. But just sort of thinking about the last sort of year, year and a half, you've been growing service revenues at about 2% while getting the sort of final stages of the four gs upgrade cycle. Do you think as five gs starts to pick up, can start delivering higher growth rates than that? And then finally, just a very quick clarification. You sort of effectively helped us quantify the sort of roaming impact at the service revenue level.
I was just wondering if you could tell us what impact was at an EBITDA level during the second quarter, please? Okay.
Thank you for your questions. The answer for your first question is yes. We have hardly any long term contracts in the mobile subscriptions. It's our competition who has used this more as the competitive tool. We have not, because we believe on customer satisfaction driving our competition and, of course, all the, let's say, activities and developments we do to make our customers satisfied, not to fool around the customers.
The second question, five gs is picking up gradually. Like I said, it really relates to very much about the development in the handset side, which is, of course, moving ahead. We have higher ARPU with five gs customers, and we believe that there will be not only speed but also other values to customers to pay more going forward. Whether that will accelerate the kind of underlying growth rate, which we still have, of course, the growth with speed based upselling in four Whether that will accelerate remains to be seen. We, of course, have that as a target, but that remains to be seen.
The third question, I didn't quite capture. Can you please repeat your third question?
Yes. That was hopefully just a
straightforward one. What was the impact at an EBITDA level of the sort of the reduction in roaming?
Okay. Of course, the EBITDA, it had impact negative influence on impact an influence on the EBITDA when the roaming revenue was coming down. I maybe ask Jari to give a bit more details on that, please.
Yes. It had a negative impact, few millions in Q2.
Got it. Okay. Thank you.
And our next question is from Florian Henrizzi from Bank of America. Please go ahead. Your line is open.
Hey, thanks for taking my question. It's basically just a follow-up on the previous questions around the kind of impact of five gs on your ARPU. Would it be possible to give any kind of just indication or indicative numbers of what you see in terms of the ARPU uplift? Is a customer, for example, shifts from four gs to five gs? Or maybe how that compares to sort of previous cycles where your customers were upgrading from three gs to four gs?
Are you seeing sort of similar ARPU uplift? Or is there any kind of difference to that?
Okay. Of course, it is still quite early to make any kind of conclusions of which kind of value five gs brings. And especially also important to understand that it's not only one event that we move from four gs to five gs. We have several different speed layers in five gs for years to come, and there are also other performance improvements that we can sell as with the higher price to customers also benefiting and giving potential for ARPU increase. But now when we just look at the early indications that we see, we can say that at least 10% increase in ARPU can be reached with the early kind of market of five gs.
But I also reiterate that it's the customers who have moved to higher price level with price increase, they will be moving upwards with speed later on, maybe not the same year, maybe not even the following year, but later on. So our kind of model for speed upselling, it is something that we believe working on in addition to the other performance improvements, lower latency and other things that we can provide with the five gs platform.
Okay. Very helpful. Thank you very much.
You're welcome.
And our next question is from Roman Arbuso from JPMorgan. Please go ahead. Your line is open.
Thank you very much for
the opportunity. Just one question. Looking at your pricing on the website, can I confirm what is the what is the best selling product at the moment? Is it is it the 150 meg, or have we moved into high tiers into best sellers, like a 300 meg for example? And also, I've noticed that there is currently no promotion on the 150 meg.
You're selling. So the headline price of 29.9 is basically the same from day one onwards. It doesn't change.
Is this quite unusual?
I mean, would you qualify this as a relatively pricing environment if you were to compare that to history, please?
Okay. In terms of the kind of mainstream service, both 150 and 300 megabit per second, they are in the mainstream at the moment. What we do sell out in terms of this lack of promotion at the moment, it is the current situation. I wouldn't draw a conclusion that it's kind of a permanent phenomenon because the competition seems to be keen. But of course, we, of course, prefer not to have promotions ourselves.
But like I said many times earlier, we, of course, defend our position, and we are not letting anybody to kind of just buy our customers in kind of big amounts. So we will then respond. But we believe that we have a lot of value to provide to our customers, and that's why we think that our prices are very affordable without promotions as well.
Okay. So you're saying that the five gs subscription starting from 300 onwards, they're really becoming mainstream, and things are really kicking off on that front?
It is, yes.
And we have no further audio questions. I will hand the word back to the speakers.
Thank you, and thank you for questions and discussions. So it's time to say goodbye, and we wish you all a very nice summertime.
Thank you.
Goodbye.