Good morning, everyone, and welcome to Elisa's 2023 Capital Markets Day. I'm Vesa Sahivirta, the Head of Investor Relations. Today also with me is Kati Norppa from Investor Relations and Group Treasurer Juha Kervinen. We are also available for discussions with you during the day. We have five presentations today, so let's take a look on the agenda. We start with the group presentation followed by Consumer Customers presentation. After a short break, we continue with Corporate C ustomers, International Digital Services and Financial presentations. After each presentation, we have approximately 10 minutes for Q and A, and after all presentations we spend more time with questions and answers. Now let me welcome our first speaker, CEO Veli-Matti Mattila. Veli-Matti, please.
Good morning, everybody, and welcome to Elisa's Capital Markets Day on my behalf as well. I'm really pleased and happy to see you all here in our event, and I highly appreciate that you have made the time investment to learn more about Elisa. The objective today is first to give you more information, how Elisa has done during the past two years, also to share with you the great opportunities we have in our strategy. I have with me strong, experienced Elisa team to further elaborate these great strategic opportunities. I will start with the performance review, followed by a review to the markets that we are operating in, we will take a look on the strategy by which we can continue to create sustainable profit and growth.
Finally, I will walk you through with our updated medium-term targets, and then I will go also to my priorities. Let's now move to the first topic. I would like to start by explaining you the way that we are generating sustainable profit and growth. We have a comprehensive way to look how we create value for all of our important stakeholders. If we can create value for our customers, engage Elisians, Elisa employees, have positive impact to the society, we believe that then we can also have the best way to create unique financial performance for shareholders. Why this approach is meaningful, why it's important to point out? We believe strongly that this way of creating sustainable value is more competitive and more resilient to the shareholders. We have a strong track record of improving our customer satisfaction.
We are measuring it with the Net Promoter Score, Elisa level, brand level Net Promoter Score, which is combined from the consumer unit, business unit and B2B business unit results, revenue weighted, and we have had a good progress. In 2021, we had a slight dip. Again, we are moving forward with continuous improvement, continuous development. We have also succeeded well with our employee engagement, having the engagement in a high level and also during the COVID period, which has been pressuring the engagement, we have been able to sustain that on a good level. Of course, our ambition is to improve further on to belong to the top 10% of organizations in engagement going forward. Sustainability is a large, bright, broad topic.
United Nations has listed 17 sustainable development goals with 169 targets. We are of course, according to our mission, a sustainable future through digitalization, we are making a lot of, we are making choices, we are designing our products and services really to create sustainable future. We have also focused to create sustainable future in four areas: digital, social, environmental and economical. In order to really create impact, in addition to the all of the activities that we do to push forward the sustainable development, we have also selected four distinct KPIs, which we started to report on a quarterly basis. We have had also very good track record and development on improving the safe, reliable, digital environment by increasing the high speed connectivity in Finland.
We have had a very good progress on improving the number of supervisors, female supervisors at Elisa to create more diverse workplace. Also we have had good development on energy efficiency and innovations as well. Our financial performance has been very competitive. Our revenue has grown clearly above the industry average, as well as our EBITDA. Our EPS growing 7% more than our revenues has also made it possible to continue the industry most reliable dividend growth, now already ninth year in a row. We are well on track to meet all of our medium-term targets to the end of 2023. Revenue growth, our target has been more than 2%. Revenue growth has been 6%.
For EBITDA, our target has been more than 3%, and our 2020 through 2022 result has been 3.6%, and we have very well complied also to our CapEx to sales and capital structure targets. I am really proud of Elisians, Elisa employees, that they year after year can deliver the results according to our targets, create growth, create great development for the future growth potential. That's it for the performance review. Let's now move to the markets. We are operating in a digitally advanced and attractive markets. In our domestic markets, Finland and Estonia, they are really well digitalizing, which creates, of course, great opportunities for our business.
Our regulators are forward-looking, which makes it possible for us to optimize and balance with their demands on one hand, also our business plans on the other hand. In the international software businesses, we have great demand drivers, great needs from the customer bases, whether it comes to the telecom software business or to the industrial software business. In our traditional markets, the telecom market and domestic and other digital services, we have great sizable markets and also good growth rates. They are creating continuous, good, gradual growth opportunity for us both in revenue and in profit.
Even higher than higher than that, we have growth in the international software markets, where our telecom software business growing by 6%, the market and the industrial software market growing by 11% expected going forward. They are creating really exciting, significant further growth opportunity to Elisa. This completes the part of the market overview in my presentation. Now we can move to the strategy. Elisians are getting and feeling a lot of purpose with our mission, a sustainable future through digitalization. We are also very excited and inspired by our vision, which is leading us to execute with high ambitions that strategy where we have three focus areas. Let's move to the first one, where we can show and tell you that the upselling model, business model in mobile data continues to work.
Our unlimited speed tier-based pricing is working really well. We are providing customers higher speeds and better latency. With that, customers are getting better user experience, which makes them happy to move to the higher levels again and again, and also paying a little bit more to us. The upselling business model continues to work. We, of course, have done some price increases as well, but when comparing the prices in Finland in the mobile data, they are very affordable to the European level. We are expecting mid-single-digit MSR growth in 2023. Also good development for MSR thereafter. The same thing, of course, continues, the upselling model work continues in 5G.
We clearly see that 5G customers are more satisfied than 4G customers, and that makes them willing to pay more, more than EUR 3 more on average per month, when they move up. Also we are increasing our addressable market by building wider coverage, and the network coverage for 5G has doubled during the past two years. Also, we are selling more and more 5G devices to our customers. At the moment, the share of 5G devices in our customer base is reaching 40%. Many of you probably will remember approximately five, a bit more than five years ago when there was a lot of discussion about the business models and business opportunities for 5G. We were talking about human impatience at Elisa.
We were having the view that customers are pleased for the faster speed that 5G can provide, and that way customers are happy to pay for the better experience. There was also many other thoughts on 5G business models, but we were quite sure about this, and I'm happy that our assumptions for the business have been proven. This is also the 5G momentum is making it possible for us to give you the guidance for this year for MSR growing mid-single digit for this year and also outlook for the future, it looks good. Fiber offering is also complementing our means to provide customers fast broadband connectivity. COVID time and remote working during COVID has somewhat increased the customers' appetite also to get fiber, and we are, of course, capitalizing that opportunity.
We are building gradually our network in mostly in urban areas and densely populated suburbs. Of course, the build-out that we are doing on top of our great fiber infrastructure is getting also competitiveness with the synergies when we are selling both to consumers and to the large B2B customer base of ours. We made a survey among Elisa's customers about the preference for fiber provider, 41% said that they are preferring Elisa to be their fiber service provider. 53, 5 3, 53% of customers whether didn't know yet or they didn't yet have interest to the fiber. We believe that of that 53%, we can also have at least 41% to prefer Elisa, which means then that approximately two-thirds of the customer base are preferring Elisa as their fiber provider.
We have a very strong position when the fiber demand gradually is increasing. We have also additional revenue streams on top of the fixed and mobile revenue, especially in the areas of security and IoT. Combined revenue for security and IoT services in B2B and consumer side is reaching EUR 70 million with a 20% growth rate with a very healthy EBITDA level. Of course, the uncertain geopolitical environment, also the understanding of the importance of cybersecurity, as well as the very good development in IoT ecosystems, is further increasing the potential for us to grow these additional services. Why this EUR 70 million is important? It is evidence that there are additional revenue streams that operators can have on top of the broadband revenues that are, for example, in Elisa, growing themselves well, as well.
This is it for the first strategy focus area. Let's now move to the second strategy focus area of Elisa, to the digital services. We continue to have good growth in our domestic and other digital services. Elisa's entertaining video services have grown 10% to EUR 180 million approximately, with EBITDA level slightly having pressure because the market has, at the moment in the video services, really intensive competition. Our strengths lies in our high quality Finnish and three Estonian original content, and also our broad capability to provide basically all kinds of contents to our customers. Of course, our aim is to have, with the scaling impact to improve the profitability going forward for the entertaining video business. The IT services and solutions business has also grown 10% to approximately EUR 140 million.
EBITDA level still being around 5%, but also with our intelligent automation and AI capabilities, and with the scale, we can also get the EBITDA to grow. In visual communications, after the COVID period, when basically only the cloud-based video conferencing services were growing, now when the hybrid working has started and people are coming back to the offices, the types of multi-device, multi-technology integrated video conference solutions are much more in demand, which is exactly our Videra's competitive capability. Videra has also started to get back to growth with 8% growth to EUR 25 million approximately. We have great growth opportunities in the traditional domestic and other digital services, but more excited we are about the international software business growth opportunities.
We have, carefully and, determinedly, step by step, grown these two businesses, Elisa Polystar and Elisa IndustrIQ, and they are reaching, they have reached, EUR 82 million in revenues. In two years, they have been growing 44%. Last year, we had 35% growth, organic growth last year was 22%, which is clearly more than the market growth. Among the revenues, we have high share of, growing recurring revenues, EBITDA is close to breakeven. With the scaling and also, other developments, we are improving, the profitability of these businesses. According to our plan, the burden for Elisa level EBITDA is not any more negative around 2024, 2025.
We are really technology leader based on our more than 10-year track record and capability we've developed in AI and analytics. That makes us different and competitive in these new markets, software markets for telco and industrial sector. We have high ambitions to grow with these businesses. We are really excited about the opportunities, and we aim to continue the strong double-digit growth, organic growth, as well as we are planning to accelerate further the growth with M&A. As we have discussed many times that we, and we have made the promise to increase the disclosure of these businesses. Today, we are giving you the revenue numbers for these businesses two years back, quarter by quarter.
Starting first quarter this year, we start to provide you the revenue numbers for these two businesses combined on a quarterly basis, separately from the other digital service businesses. This is it for the digital services. Let's move now to our third focus area in our strategy. Elisa's results can be explained many ways by the right, good strategy choices we've done but very much the explanation behind Elisa's success is the way, the unique way we are operating and developing Elisa. This unique approach, which we call Elisa Business System, has its bedrock on our culture and our values. We are truly customer-centric, and we have long-term systems thinking in Elisa's culture.
We are really looking at the situations, from outside in, from customer's point of view, whenever we are making decisions on any development of our processes and activities, or in regards to our products and services development, always from the customer point of view first, and customer perceived value point of view. We are working for the long term. We try to avoid quick fixes. We want to create sustainable long-term solutions when we develop Elisa. Second, important thing in Elisa Business System is the continuous improvement and innovation capabilities. We have more than 100 shared practices that we have been developing over 12 years' time. We have productized those practices, show that they can be more easily shared, and deployed throughout the organization, including the acquired new companies joining Elisa.
Of course, the Business System from the practice's point of view also is continuously evolving, and we are able to take great practices from the acquired companies. The third important element in our Business System is that we are investing in people and cultivation of leadership. Willingness and capability to learn is truly important at Elisa. Of course, taking courses is important, but we really talk about everyday learning. Everyday learning, we mean that we are learning every day from our work and our job. We are learning from mistakes and successes, we are learning through experimentation and reflections, and we also use systematic models to evaluate our, and validate our learnings.
Elisa leadership is very much about coaching style, and it is about that leaders have responsibility to make it possible for Elisians to grow themselves, to develop themselves, help them to improve their thinking as individuals or teams. Of course, Elisa Business System includes many more common business management practices as well. Why this Elisa Business System is so important? As I said in the beginning, it is really one big reason why Elisa continues to do record results, why Elisa continuously improve. It is about systematic long-term development with a customer orientation. It is also something which is a bedrock for our future development, future success. It is also quite unique, so that it is quite difficult to copy for competitors. What can we achieve, for example, with Elisa Business System? What are the results?
Here we have some results, what we achieve when we develop our activities and processes and ways of working in our network operations. We use also many times technologies to amplify the changes for our processes and practices. Here we can see how automating our network operations, network planning and operations, we have been able to automate over 200,000 actions per day. That is a great increase in productivity, leading to profitability improvement. 200,000 actions per day just with these developments.
There are many, many more things that we can do the way we with Elisa Business System develop our network operations. This is this kind of developments, which I now gave one example, of course, they are contributing, for example, to lower, to better energy efficiency and also our capability to continuously take care of good development of our CapEx levels and OpEx levels. Also, another example is from the customer-facing part of the, of our operations. For example, with chatbots, voice bots, and predictive care, we have resolved in 2022 500,000 cases. Half a million cases solved with these capabilities, and there's, of course, a lot of potential left. Many times companies who are driving productivity improvements or profitability improvement, they start from headcount reductions, big announcements of headcount reductions.
We have been discussing many times that that's not the approach Elisa has. Our approach is to develop with customer quality in mind, our practices, ways of working, also utilizing technologies leading to productivity improvement. Of course, in Elisa's Business System, the focus is also in people. When we have need for less people in certain processes, when we have done good development, we already have taken the best care we can for our employees to be developed to new things, new works, new positions at Elisa, or we do our utmost to find new positions for those Elisians somewhere else outside Elisa, if that's the case. It's a very, very different approach to continuously, year after year, develop productivity.
Of course, these continuous improvements, they are not only leading profitability improvement, they also are improving customer satisfaction. As you can see, our customer effort score is clearly above the industry top quartile. This completes my presentation in regards to the third focus area in Elisa's strategy. Finally, I can now tell you about the updated medium-term targets to the end of 2025. Revenue growth target we have as before, more than 2%. For EBITDA growth, compound annual growth target for 2022 through 2025, more than 3%. CapEx to sale, maximum 12%, and capital structure targets are also intact. Same thing with the profit distribution. Our profit distribution policy stays intact 80%- 100% of net result.
In summary, I can be very happy to share with you and also with the elaboration of my colleagues, the great opportunities we have in our strategy with all the three areas of our strategy. With the MSR development, with the development of fixed revenues, as well as the additional revenues, also the great development on our domestic and other digital services, and also the exciting opportunities, strong opportunities we have with the international software services, as well as the Elisa Business System, continuously developing, continuously improving, creating productivity, but also improved customer satisfaction. They are really, what we are happy to more elaborate to you. Thank you for your attention, and I'm more than happy to answer to your questions. Please. Please, if you can take the mic, please.
Thanks. Nick Lyall from SocGen. Thanks Veli- Matti on the presentation. Some good numbers in there. On digital domestic services, I had a question. The CAGR seemed to be 2020 to 2022. I was just looking at the new split out. Thanks for the new split out in the Excel sheet at the end. It's, you know, last couple of quarters, the growth in domestic digital services has been a lot lower than that. I think 2% or 3% in the last quarter. What's the sort of outlook for domestic digital services growth on the top line? In terms of margins, is there scope for improving those margins if the scale isn't increasing, or are those the sort of 5%-10% to 15% margins we should expect for that business in future as well?
Well, the growth expectations, we are really not giving you even soft guidance for the growth of the domestic digital services. I can say that the entertaining video market, that's currently under very heavy competition, also with the price competition. We have seen that in the results of international players. I'm expecting that we have some growth in the entertaining video market, but of course, great potential to improve the EBITDA. When we look at the IT market, there we are not at all the biggest player in the market, and there's a lot of drive for companies for digitalization. We have differentiative, automation-based, AI-based solutions. I see slightly higher growth opportunity for that domain, including also then the profitability improvement.
For visual communications, for the other services, we have a great outlook now as well to grow step by step when the hybrid working is increasing. You're welcome.
Thank you.
Sami, please.
I have two questions. Firstly, on the IT services and solutions, EBITDA margin is only 5%. Do you see ways to improve this going forward, or is it more like a sales tool for corporate telecom services?
No, yes, we have a visibility for improving the margin. We can improve the margin. We see that by growing the business, it is scaling. Also, we have unique capabilities in automation and analytics using AI that is also helping our production to be even better. What we noticed is also that the telecom customers who are also buying IT, they are more profitable for us.
Maybe a second question on International Digital Services. You're reporting now healthy, more than 20% organic growth. I think in the previous events when you've been disclosing financials, organic growth hasn't been that strong for this unit. What has changed? What are you doing differently now?
I'm not sure if we have disclosed the growth numbers that much, organic growth numbers, but maybe we have, but in a quite, let's say, inaccurate way. Certainly, we have got traction with these businesses. We have great Elisa capabilities. We have developed more than 10 years in AI analytics that we in Elisa also develop further on. They are fueling the good growth that we have also had in the acquired companies. We have got good setup already by now in both businesses with the acquired companies. There is, of course, further opportunity to complement the offering with some acquisition and also have the demand.
Of course, Henri will elaborate this more in his presentation, of course, because we are very much, also addressing the new developing markets of solutions to these segments when AI and analytics is more used, the customers are also getting more accustomed to those, and that also fuels the demand.
Thanks.
You're welcome. Okay.
Sorry.
Yeah, yeah. Yeah, go ahead.
Yeah. Can you hear me?
Yes.
Yes, Artem Beletski from SEB. Actually, two questions from my side. The first one is relating to IoT and security business, some interesting numbers you showed to us today. How do you see, so to say, growth opportunities in this business? Are there any means to also accelerate it going forward? Because the business is actually quite profitable.
We have grown now in the past two years 20%. Without giving any soft guidance, we see good growth opportunity with these businesses going forward and, I mean, based on those demand drivers that I explained as well.
The second question is related to International Digital Services and what is your, so to say, M&A approach going forward? It looks like that over recent couple of years, you have been focusing on this type of smaller bolt-on acquisitions within this kind of two verticals, what you have there. What is your approach going forward? Is this still the way, so to say, how you view acquisitions, or are you prepared to do something bigger?
As I was saying that our aim is to continue strong double-digit organic growth, that's the idea for us that we are accelerating that with right kind of acquisitions. Whether they are bolt-on or a bit larger remains to be seen, but the main thing, of course, is that we can complement very well the offerings that we have in these two businesses so that they have capabilities to continue strong organic growth. Henri will, of course, give more elaboration to this.
Hello, hi.
Yeah. Yeah, please.
Hi, Siyi from Citigroup. Just two questions on your guidance. On your guide for 2% growth in revenue and 3% growth in EBITDA, it seems it's a reverse trend compared to what you have reported. You reported 6% on revenue growth and 4% on EBITDA. Just want to understand your thoughts about this improved operating leverage on your guidance. The second question is also about the guidance. You're still targeting a maximum 12% CapEx to sales, you also said that the fiber is a very good business in Finland now. I'm wondering why you think you should cap your CapEx because it seems like you could actually invest more in building out fiber to capture the revenue growth on that side too.
Okay. Well, first, our EBITDA guidance is absolute EBITDA. Even if the margin, i.e. then operating leverage, if you will, is important, and we are following that, our main target is to grow EBITDA and then EPS and profit. But saying that, we of course have our International Digital Service businesses scaling up. As I said, that we expect that IDS business is not giving negative impact to Elisa level EBITDA 2024, 2025. And also our businesses, we see that we can, with the growth, continuous gradual growth, also gradually improve the margins in different businesses. To the CapEx, in Finland, however, even if we see customers interested in fiber, there's no wild outbreak in the demand.
There's a slight increase in the demand due to the experiences at home when working during the COVID time, and there are multiple people. That, of course, is fueling somewhat the growth. Still in Finland, we have unlimited mobile data, and 20%-25% of the households are really happy for the mobile broadband, where we also have complementary great solutions to the fiber in terms of 5G broadband. With the routers or even with the fixed wireless access when we use external antennas, which are, of course, a bit more cost effective for customers who want to choose that way. Is it there somewhere? Yeah.
Hi, it's Matti Riikonen, Carnegie. Couple of questions related to the IoT and security business. Could you just remind us what these services actually include? You said that there would be corporate and, private customer services. Are they kind of third-party services that you are selling or is it something your own IP in it?
Telecommunications company, offers a diverse range of services catering to both consumers and corporate clients. These services encompass various aspects of modern life, from personal safety to business efficiency. For pet owners, Elisa provides innovative gadget solutions that enable them to track their pets' movements, ensuring their safety and well-being. The increasing use of cameras by individuals is also supported by Elisa's offerings, enhancing personal security and monitoring capabilities. Security, in general, is a key focus for Elisa. The company offers robust cybersecurity protection for both consumers and corporations, addressing the growing threats in the digital landscape. While collaborating with partners for certain products and services, Elisa also develops a significant amount of its own content, leveraging its internal expertise. A core strength of Elisa lies in its ability to deliver managed services centrally with high effectiveness. This is achieved through the strategic application of its advanced AI and m achine learning capabilities, which optimize service delivery and operational efficiency
Okay. Thank you. The second question relates to, was this IoT and security part of your digital services package or revenue when you had the previous CMD in 2021? I'm just thinking, was it included in some other category at that time, or is it a new one that you have added now?
no, it was more included in the telco side.
All right.
I'm not 100% sure was it everything because there's, of course, small changes. in the kind of major parts, it was more telco side than digital services.
All right. Fair enough. Thank you.
You are welcome.
That's all from me.
Thank you very much. I have two question. First one on 5G. There still seems to be a debate in the industry whether 5G will be a revenue driver, earning a good return for the operators or not. You're arguably in a better position than most to answer that, and I think you've given us your positive version of the story. The 5G upselling you're seeing is still basic upselling to 5G, I guess, mainly for consumers. Your local networking partner is making a big push on enterprise private networks, and they're very upbeat on that. Do you share those sentiments? Do you think this will be a major driver for Elisa as well and for the industry going forward?
Yeah, we hope it will be a major driver. Our assumption already five years back was that it's gonna come quite slowly. When one company looks from the global view, then you can see some numbers to accumulate. What we noticed that the mines and maybe harbors are the first B2B customers who can really appreciate the dedicated mobile networks with 5G. We have seen in some countries where the general coverage and service level of the operators network in some, let's say, more rural areas where they are big utilities, maybe the service level is so low that they just need to have their own network to have any kind of service level. A lot of the private cases also are based on that.
Like I said, the applications and the technologies are developing. We have the standalone 5G coming where we can play a bit more from the functionalities from the network. That is, of course, creating better opportunities, also more cost competitive solutions to run private network solutions. Our assumption again still is that it is coming gradually. We have many tens and tens cases with our B2B customers where we have tested, and this is our kind of experience so far.
Okay. My second question, I'm sure you could do without very much, but I think it has to be asked. You've answered it before. It relates to your choice of network vendor. As you said, cybersecurity is becoming more important. The geopolitical situation is changing. Finland is about to become a member of NATO. You have chosen to go with what the EU Commission describes as a high-risk vendor. For a company like Elisa, which has historically prided itself in prudent risk management, et cetera, this choice does appear increasingly odd and perhaps unsustainable. What is your thinking, and what would be the implications if you either by law or by choice, will have to make a change to that situation?
For the first, maybe I would say that as an operator, we need to be very skeptical on any vendors, products and services. There are bad people, if you will, in general, in all societies and so forth. We need to be careful on any vendor that we select that of course we are taking care of that there are no problems with the equipment. Again, if we come to this, let's say, more, let's say, vendors from the East, thinking about Huawei, we do not have Huawei in Estonia. There we made a change because the government in Estonia was very firm that it's not possible to have.
In Finland, we have the legislation that in the critical parts of the network, the, for example, Chinese vendors cannot be really used. We have only in radio network. In the radio network, as we said, less than 15% of radio network is with Huawei equipment. We used Huawei in the first place because we wanted to be providing 5G to our customers and capabilities as early as possible. They were the only vendor to have. Let's say that, of course we are managing the risk and we are complying whatever authorities and demands and regulations. I believe that it's much more important that the operator has its AI machine learning analytics capabilities good than which kind of hardware they have. Then they can really make the control. Ye ah.
Hi. Luis from Credit Suisse. Thank you for taking my questions. I have two. The first one is around mobile. You are guiding for mid-single-digit growth for 2023, and you mentioned good growth afterwards. Can you give us more granularity around what you mean with good growth? Is it mid-single digit, single digit? Also talking a little bit about this upselling process that we are seeing. My understanding is that less than 50% of your B2C base have been upsell to these 5G tariffs, and B2B has not kicked in yet. How are we doing there, and what are the expectations up to 2025? That would be the first question.
Okay. To your first question, unfortunately, I cannot give you any number to be more concrete on the MSR growth going forward. Why so? Because the MSR can be influenced quite quickly with the competitive intensity changes, also maybe with the uncertainties that we still have ahead when we have the war in Europe. We can have quite firm outlook for till the end of the year, and that's why we say mid-single digit.
Based on the drivers and based on how we see customers being more satisfied with the speeds, higher speeds that we are providing, whether it's in the 4G, in the higher speed tiers or with the 5G, based on that experience that customers really have a higher satisfaction, we believe that there's a strong momentum to continue even long after end of 2023. About the number of customers, like you certainly understood that we continue be shy about the number of 5G customers, we are very glad and happy about to share with you that we really have a strong revenue growth more than three years on average. It's not only the consumers who have been adopting.
Timo will explain a bit more about the developments in the B2B side. We have also the small, medium-sized companies being very active on 5G. Also now we see the larger companies to notice that there is really a difference for their employees, whether they have kind of 5G or not, and further for the speed. Yes.
Thank you very much. The second one is around the International Digital Services. You mentioned that you are close to a bit of breakeven this year, and that we should expect something positive for 2024 and 2025. Do you have a margin target in mind for this business in terms of a bit of margin over the next three-five years?
We certainly have internal targets. Henri will elaborate a bit more about the IDS developments, but we are really excited about the strong growth opportunity we have in the addressable market and also our capability to take clearly larger share than the growth of the markets. We have really high ambitions in terms of how this business can grow. Secondly, of course, we are not growing the revenues just or having the excitement of the growth just because of revenue growth. Of course, there needs to be profit. That's what we are aiming at. We believe that it's very important for us to optimize the development of our revenue growth and sometimes maybe invest a bit more for certain activities with the cost of, let's say, fastest possible revenue EBITDA margin growth.
We foresee they are software businesses. Software businesses can even have higher margin levels than the telco side. Of course, we have those kind of ambitions and visions in mind when we are now developing these businesses. These businesses are certainly still in a quite early stage, but we have created momentum. We have a competitive position in those businesses.
Thank you very much.
You're welcome.
Okay. Thank you very much, Matti. Thank you for questions. Now we need to move on, and the next presentation is Consumer Customers and Executive Vice President, Vesa-Pekka Nikula. Vesa-Pekka, please.
Good morning, ladies and gentlemen, and from my behalf as well. I'm Vesa-Pekka Nikula. I'm heading the Elisa Consumer Customers business. Great to be here today. I will start my presentation with financial operational results from the previous years. I will then go through the strategy of two main Consumer Customer businesses, telecom services and entertainment video services. I will end up my presentation by summarizing my priorities with this business going forward. Let me start with our performance update. We provide increasing customer perceived value, and we are able to capture our own share of it. Customer requirements for reliable and high quality services are much higher in the post-pandemic world, and we continue meet this expectation by delivering the best customer experience in the industry.
What I'm extremely proud of, we are now entering to the 10th consecutive year of growth in terms of both revenues and profits. We have further strengthened our number one position in both of our businesses. We offer the best selection of telecom and entertainment video services, and we have developed the leading position in 5G. Our home and personal telecom services are effortless to use, and they work as promised. We help our customers achieve peace of mind with a selection of digital security and IoT-based products and services. Our entertainment video services offer the easiest way to enjoy content from various sources and a diverse combination of the best fair stories from Finland and from the world. We witness significant value increases by combining two or more offerings of different area businesses.
Customers with both telecom and entertainment video services are more satisfied and less likely to leave, and this is for the performance update part. Our strategy execution priorities remain intact as we continue to implement our Elisa-level strategic priorities. Let me now elaborate on each of these three Elisa strategic focus areas in Consumer Customer business, and I start with the telecommunication services. Our mobile business continues to be driven by strong demand for faster connectivity. Our customers say they want to be entertained, work and study using high quality connections at home and on the go. Customers also say that they need high quality connection for multiple simultaneous users. Most Finnish people stream video content at least on a weekly basis, and many play mobile online games weekly.
We are also starting to see some augmented reality, virtual reality usage slowly emerging, as 4% of our customers use this service on a weekly basis. To meet these customer demands, we are continuing to upgrade our customers to higher speed tiers and thus offering a better user experience both in 4G and in 5G. Customer satisfaction growing along with the highest speeds is the clear proof of a success of our unique unlimited mobile data business model. What is most important of all, we are able to monetize it. When customers upgrade from 4G to 5G, average customer billing increases by more than EUR 3 per month in the consumer business. Our mobile customer base is transforming to 5G at a very satisfactory pace.
In fixed broadband, we see the same customer need human impatience as the growth driver. The greater the speeds, the more satisfied the customers are. The increase in remote working has obviously created further demand for high quality connections. We are able to keep our market leader position fixed broadband revenues by systematically upgrading our networks to fiber-based on customer demand. Our home program base continues to switch to both fiber and to 5G. As Veli-Matti mentioned in his presentation, the recent customer study shows that Elisa is by far the preferred fiber provider in urban and suburban areas within our own network. In these areas, our fiber availability is already more than 50%. According to the study, 41% of the customer base is willing to choose Elisa as their fiber provider, 53% still don't know yet or are not yet interested in fiber at all.
What is important also is that customers value fiber and 5G in the same way as high quality home broadband solutions. Further, we are enjoying a strong profitable growth in additional services. We have already reached almost 1 million subscribers. The growth is especially strong in consumer IoT services and digital security. IoT services offer customers peace of mind and they ensure that everything that is precious to them is safe and secure. Consumers are also increasingly concerned about data security, and we offer a wide variety of services to meet these concerns. We also offer other additional services like cloud storage, device insurance, and email services. The success of our unique speed tier-based business model has helped our telecom service revenues to grow.
Our mobile service revenue have grown more, on average, 5.5% annually, and we continue to see the human impatience as the basic customer need for faster speeds, and lower latency. This means interesting growth potential both in 5G and fiber. We are also witnessing growing demand for digital security and IoT services. Well, that's it for the telecom business. Now I will move on to the second main consumer customer business, entertainment video services business. In the entertainment video services market, yes, we are witnessing fierce competition also in Finland. However, our entertainment video services business is well positioned in the market, and Elisa Viihde is the preferred domestic service in Finland.
We continue to see growth potential in the market as well, as Finland is still lagging behind other Nordic countries in user-paid entertainment video service penetration, as well as in household spend. To boost our entertainment video business, we have commissioned more than 30 original series, and they have becoming internationally recognized. Elisa Viihde original series have already been sold to more than 70 countries. Our customers appreciate attractive content with great service, which leads to increased value creation, and a 10% yearly ARPU increase. In total, our entertainment video service customer base has surpassed 700,000 paying households. We are extremely delighted about the performance of our most recent original series, All the Sins, and its capability to travel all around the world. Let me now share the trailer of the All the Sins. Please. It's unique.
We see good potential in scaling our entertainment video service business further. We will continue leveraging the largest selection of Finnish content and our unique original series to attract customers. This is it for the entertainment video services. I will now move on to elaborate on our efficient and quality improvement activities in Consumer Customer business. We have built world-class customer service to ensure that we encounter our customers when and where they prefer. Our omni-channel customer-centric approach, measured by customer effort score, or CES, is the best in the industry. Online customer service usage continues to grow, and customers increasingly prefer self-service. During 2022, we invested in a new sales channel and further reduced the use of third parties. We are witnessing better customer satisfaction when customers use our own channels, and this is verified, for instance, by lower customer churn rates.
We are continue to automate our processes, marketing, sales, customer service assurance, billing, and delivery in accordance with the Elisa Business System. This increases the quality experience by our customers and improves our cost efficiency. By combining automation with human interactions, we have taken the customer experience even to the new level. For instance, our incoming customer service calls are first answered by automated voice bot and then transferred to the best human expertise if and when appropriate. The service is highly appreciated by our customers. This brings me to the end of my presentation. To summarize my priorities with this business going forward, our strategy execution priorities remain valid as we continue to implement Elisa level strategic priorities for Consumer-Customer business.
Our approach has proven to be successful, and I'm convinced that we have a strategy that will continue to deliver solid results also in the future. Thank you very much, ladies and gentlemen, for your attention. I'm more than happy to take any questions you may have. Ve sa, please.
Thank you. It's Keval Khiroya from Deutsche Bank and I've got two questions please. So first, one theme in the sector is about price rises and obviously, historically you have raised some of the legacy tariffs and some of the third party pricing has improved as well. Can you walk through a given so much appetite for 5G. How you think about your room to raise prices in 2023 and beyond versus what you did last year. And secondly, you have helpfully showed the speed uptake for different 5G customers. And can you talk about how data consumptions has evolved as customers take up higher speeds? Thank you.
Okay. Thanks for the question. First, if I start with this data consumption, the average data consumption or data usage in our network is about 30%, about 30% more on the yearly level. That is an average level of data that the customers are using on a more each year. Yes, we see the strong correlation that the higher the speed, the more data usage there is.
There's a quite a remarkable gap in the in those speed tiers that the indeed the higher the speed, the more data the customers are using. We see a clear and nice correlation there as well. You are quite right on that. When it comes to the price rises, yes, we have done a during the past years a many price increases to the selected customer cohorts, and we will continue to do so also in 4G as well as in the 5G in the future.
Ondrej Cabejsek from UBS. Thank you for the presentation. I have one or two questions around fiber to the home, which you mentioned is a big opportunity for you. First on the distribution or the rollout of the networks, we've seen a lot of capital from private equity, for example, coming into the market, people land grabbing certain areas, et cetera. What is your view on the model of Elisa distributing its retail product to the consumer going forward? Are you, are you more kind of inclined to spend more CapEx maybe on, you know, engaging in this game of grabbing land share? Are you maybe happy to work with some of the alternative providers that have come through?
Second question related to it is what do you think of the future of the connection fees? We've seen historically that customers have been paying between EUR 1,000 and EUR 2,000 out of their own pockets to have their homes connected, but with some of the alt nets coming in, there seems to be a change in that dynamic. What do you think of that kind of pricing model going forward in Finland? Thank you.
Okay. Thanks for the question. If I start with this, like, kind of a fiber available, as said, that we have more than 50% of a fiber coverage in our own network. The areas that we are focusing or are our urban and suburban areas. Those are of a focus of our fiber activities. Of course, as said in Veli-Matti's presentation, that we are increasingly investing gradually our fiber, kind of a rollout. As said, we have a good position already.
According to the study that we just shared, that 41% of the customers are saying that they prefer Elisa's Elisa as a fiber provider for those customers who know that they want to have a fiber at this stage. Yes, there are some new competition in the market. We don't see too much of a change in the market dynamics, however. That also kind of puts us in a position that we are most probably continue with the business model in the fiber that we have today. The last question that you had is that about this kind of opening fees.
Yes, the competition seems to be that in some areas they are even offering free of charge. We are just kind of seeing the situation area by area, region by region, town by town, village by village. They are the approaches are different. They are not the same throughout Finland. We have the customers, we have the customership, so we are pretty much on top that in what the customer in each of these specific areas are preferring. I believe that we start seeing a kind of a varied the pricing model also depending that they where customer lives and works.
Thank you. If I may have one follow-up on this, 'cause the fiber penetration today in Finland is quite low for the obvious reasons of having, you know, very good mobile networks. In the, in the same medium, longer term, do you see a situation now where the take-up in the homes passed or the Home Pass is accelerating and the say, you know, the low penetration rate is going to accelerate quite a bit from here, or do you see that continued or to continue to be a very steady kind of slow process?
Yeah. I think Finland is a bit of a specific market with the mobile market of the world as we all know. Many customers prefer also the 5G and mobile broadband connection as was shown in my presentation. Veli-Matti was saying that 20%-25% of our customers are using mobile broadband as their primary home broadband connections. Our customers are valuing a 5G and fiber pretty much on the same level that when it comes to the high quality home broadband service. I don't see too much of a too much of a changes when we go further.
Having said that, yes, we have some new players in the market, and, yeah, there's a bit more of an, kind of a hassle and rumors in the accordingly.
Okay. We take one more question and then...
Yeah. Thank you. Yeah, it's Russell from New Street Research. Just a further question on fiber, please. Sorry, is the 50% penetration across the whole network or just 50% in the suburban and urban areas?
In our own network, within our own neighbor. Mainly it is in suburban urban areas.
Okay. Got it. Okay. Thank you.
Yeah.
Could you talk about the cost to upgrade a home to fiber that it costs you in CapEx, so pass and to connect, and then the return that you think you get on that CapEx? Does ARPU go up, you know, churn go down, so, you know, therefore there's some extra kind of EBITDA as well to justify the extra CapEx that you're spending? What sort of return do you think you get on that CapEx? Thank you.
Yeah. Yeah, I think that is something that it's quite a broad question, obviously. As said already Veli-Matti is that we do have this opportunity that it's not all the consumer customers are benefit the fiber. We have, especially the big customers, the corporate customers, who are often kind of present in those same areas. We can combine those fiber offerings, serving the both customer segment. That helps us quite a bit in this when thinking of a total cost structure.
Okay. Thank you, Vesa-Pekka, and thank you for your questions. As said earlier, we have a well time after all presentations to continue with questions and answers. Now we have to move on to schedule, and we have actually a 10 minutes break. We continue 10:20 A.M. Okay, welcome back. Now we have the Corporate Customers presentations and Executive Vice President, Timo Katajisto. Timo, please go ahead.
Good morning, everyone. Well, I'm not going to talk about a somewhat rosy situation with the, with the challenging sorry, somewhat fuzzy situation with the rosy outlook, by our new services looking forward. I will do things different. In my presentation, you will hear why our performance has been good, and why I believe that we will continue to be doing so. I will start with a quick recap of our past performance and take a look at the market. I'll go deeper into our businesses to look for sustainable profit and growth generation. I will finish with my management priorities. Now to the past performance. The performance in B2B has been excellent. It's among the best in our peer group. We are well on our track to meet the medium term target set in CMD 2021 for both revenue and EBITDA growth.
Please note that these financials consist of both, domestic and international side of the business. I will now move on with the domestic side of the business. The market is good. Market offers a great tailwind for growth. The market is also healthy despite its competitive nature. Professional skills, processes, features play a significant role in our market. We are in a great position with telecom. We are a well-positioned challenger with the IT. This provides an opportunities for growth. Our strategy remains intact. Elisa's unique strategy generates sustainable profit and growth through three strategic focus areas. Next, I will explain four factors, main factors behind our good performance.
The first factor is the portfolio, 93% future-proof, out of which 67% come from the transformation phase and already 26% with the handsome profitability from the growth phase. So only 7% of services are in the legacy, as we have made deliberate choices in the past for our customers' benefit. I believe that we are in a very different position than many in our industry. This is a great platform to grow. The second factor, mobile. I mean, this is unique in B2B. 4.9% growth, out of which only 0.6 percentage points is coming as a returning roaming revenue. Our business model clearly works. Plus, in fact, the upgrade value of EUR 4 that you are able to see in the middle, EUR 4 from 4G to 5G is actually EUR 1 up from the CMD 2021.
As you are able to see on the right-hand side, there is a sizable further potential for upgrades. This really makes me confident about the future. The third factor behind our success, managed services are driving the growth in our fixed business. Overall, the growth of 2%, is really driven by the managed service that you are able to see in the pie chart in the middle, is already consisting more than 2/3 of our revenue. From the managed service, 2/3 of our revenue in fixed. Two main factors in managed services are seen on the right. Growth level on the networks, 6%. Growth level in security, more than 11% in managed services. This is not a low-margin managed service.
This is a telecom managed service, first of all. Second of all, like Veli-Matti pointed out, our production model that is very centralized for all of the customers provides the capability, together with the automation, to provide high-margin managed service. Contrary to many, we see fixed as a growth area. Now the fourth factor, IT. IT business is healthy and heading to the right direction. Our strong 10% revenue growth is being driven by all different segments of the portfolio. All different segments that you are able to see in the middle in the pie chart. Out of that fact that all of these support our profitability, our profits going forward, that is profit growth is even higher on the right-hand side than the revenue growth.
IT is a growth business, and the increasing use of automation and AI will only make us more and more competitive moving forward. Besides being a good standalone business, IT adds great value. In fact, our IT and telecom support each other. 25% of our fixed service customers have our IT as well. 25%. If you look that particular group, that's 25% on the right-hand side. It actually, we see and witness 5 percentage points higher profitability for the telecom part, i.e., the network service itself. IT adds value to telecom, like Veli-Matti said earlier on. These integrated customers get transparency, fast response and recovery, and effortless operations, and we get our share of that value.
Now moving to the third strategic focus area, let's have a look how we improve efficiency and quality with practices in our Elisa Business System. We have made achievements in all our main processes. Continuous improvement is really in our core, deep in our core. As we learn, we see new opportunities. Here you can see three examples, three examples out of many, with great results. The results on the left-hand side are telecom related, in the middle they are IT related, and in the right-hand side they are sales related results. We have achieved great results with AI and automation together with our Elisa Business System, and we are excited about the new possibilities technology has to offer.
Elisa's unique strategy generates sustainable profit and growth through our three strategic focus areas. My management priorities are clear, and they will move us forward strongly. Personally, I want to reiterate four factors behind our success. Portfolio, 93% future proof. Mobile, our long-lasting business model works. Fixed, managed services are driving the growth, and already they are representing two-thirds of the revenue with a healthy margin. IT is a value-adding growth business for us. Now, together with our highly skilled people, we will deliver in a great manner. Thank you very much, and now ready for the questions. Maybe there was the first hand.
Hi, this is Simon from Berenberg. A question on managed services revenue. I think when I look at the network services revenue, it maybe declined from 2020 to 2021 and jumped up in 2022. Could you maybe just explain that trajectory and maybe what do we expect for the future there?
Well, there is always maybe seasonalities here and there, but overall trend is growing. It's clearly growing, and that is what we see in the market, what we see and have experienced by ourselves, so that the relative portion of it is growing.
Thank you. Peter Kurt Nielsen, ABG. It's not often we hear management saying that the B2B market is a good market like Elisa. What do you think is behind that? I mean, there were certainly concerns when a DNA ownership changed that there would be increased competition in the B2B market. The way you talk about it is still a good market. Could you explain a bit what's driving that? I'm just curious, the growth in managed services and high margin, again, not something we normally hear. Where's this growth coming from? Who are the customers, and how come you can generate healthy margins within this, which I think traditionally has been a low margin business, not for Elisa, but for others? Thank you.
Right. First with the first part of the question. We feel very competitive, what is the offering, what we offer. That is also very topical for the needs of today's corporations. As they need to renew their platforms, as they need to kind of look for better productivity levels, I think that there we are very competitive. Like I said, out of the market that it's rational that professional skills, processes, features play a role. This is local market. I mean, Telenor is playing with the local capabilities, what they have. Again, I think with these three elements, we feel very confident about the kind of current situation and competitive.
On the managed services?
The managed service, really it's rather the bigger and the medium-sized companies in our case where the money is at. Like I said, that the those companies are looking for the, for somebody to take the ownership of the challenging area that they have. It's very difficult for them to manage those areas. The security is obviously, and cybersecurity, to name the kind of, top one maybe, is really on everybody's lips currently. So, these are the kind of drivers there. And it is still a kind of a telecom service. It's not the kind of installation managed service per se.
Are you seeing demand for 5G, for private networks, or is it still too early, like Veli-Matti said?
It's always healthy to kind of agree with the CEO. It's I obviously share the kind of idea what Veli-Matti put in place. There are certain elements in the global space that definitely there are coverage related facts for the, and Veli-Matti pointed out mines, and harbors and potentially some others. In a way, that is one application. There is edge related applications for some industries to kind of have a look on it and so forth. That there are certain use cases where the companies really need it and it adds value. For those use cases, we've been very competitive.
We have had dozens of different pilots with the customers, but yet still the kind of big scale implementations maybe in Finland, we don't see it. If we are looking globally, not that many either. It's coming, and we definitely hope that it will come. More and more, how much then, that is the question.
Sami Sarkamies from Danske Bank. Could you please comment on the pricing environment? You're facing cost inflation. You need to raise prices. It seems to be happening on the consumer side. How is it in the corporate business, have you been able to push through price increases and what are sort of the competitors doing on that front?
Well, I'd rather not comment on the competitor side, but definitely in our own game, like in the consumer's side, we have been doing. Definitely we are kind of trying to add all the time, more and more add value for our customers. If we are able to kind of add more and more value, then definitely certain portion of that value is then coming back to us. That is the kind of a main motivation to kind of go for it. Obviously, in some smaller segments, in some cases, even bigger ones, we have been doing kind of just a price increase for the back book or front book related.
That is really not the one that we are after so much. Now, this situation with the inflation has been obviously significant and we need to kind of work with it also with the cost effectiveness in mind.
Okay. The main way to tackle inflation is to sell more, but it is a bit difficult to get paid more for the same value.
I didn't say maybe that one, but it is in our toolbox, definitely. We have been doing it. We have been doing it, yes.
Okay, thanks.
Yes, please.
Yes. Thank you. I have two questions. The first one is coming back to the chart you were showing about the upselling opportunity in terms of speeds on mobile. Why do you think the corporate customers are not taking the higher speeds we are seeing in consumer thus far? That's the first question.
Well, I think that, like Veli-Matti said, the smaller companies have done it very much so, like in a consumer space. The bigger companies, they differ in their approach. They differ. There are bigger companies that has fully kind of launched 5G service for the use and are happy with it. Those are very big companies as well, and so forth. In a way, it's gradually coming, but it's coming a bit maybe with this lower pace with the bigger companies.
Are you seeing like a ramp-up in early 2023 in terms of adoption into higher speeds, or they are not there yet?
Well, maybe not giving that kind of a guidance that where are they at, but you know well.
Okay. Thank you. The second one is on the fixed business. If I were looking at the charts, both the managed services, which are 2/3 of the revenues, are growing. If you combine them on a blended basis, it's 7%-8%. High mid-single digit. The overall business is growing at 2%. I guess that the other 1/3, is declining at double digit. Can you give us a little bit more of color on how you are seeing those businesses evolving going forward?
Well, I think that what we, what I said there is the fact that that is driving the growth still in a way that the blend is visible, basically what I've, what I showed. There are definitely within the legacy part portion, also fixed related services. We are not saying that those wouldn't kind of come down. PSTN is one, obviously.
Okay. Thank you.
Hi, it's Matti Riikonen, Carnegie. A couple of questions related to the IT services. We have experienced the boom in digital IT services in Finland, probably elsewhere in Europe as well. Now, there are clear signs that the demand is slowing down, and you seem to be quite optimistic about your future potential. What makes you think that you would be in a position to outperform competition so well?
Well, I think that, depending on the market that what we are talking about, consultative cases and development cases, software development, they are a bit different compared to, for example, what we are strong is that we are kind of looking the, where we are producing a kind of productivity gains for the companies for them to operate. That, for that, at least we see together with the kind of a Gartner and other analysts that are kind of behind our numbers are seeing healthy growth numbers. Clearly, in a way, I'm not saying that we are winning the market that much, but at least on a level of the market, if not more.
Okay, good. Secondly, your margin in the business in IT services has been fairly low, and Veli-Matti already said that you have, of course, ambitions to grow it. What would be the means? Are you satisfied with the fact that it is already a profitable business combined with the telecom offering, so that combined they are a good value to you, and is that enough?
I think that it was coming strongly through already in the previous presentations that we want to We have the tools and means and will to improve also the profitability level of it. It is a good addition now already that it adds profit levels, profit to the company in absolute terms. Very well.
Okay. finally, what kind of impact did COVID have on your, this particular IT service business? Easier or more difficult?
For us, in the IT side, the telco was maybe the one that's seeing more of the COVID, like I said, about the kind of roaming returns and such. IT didn't see that much, no.
All right. Thank you.
Okay. Thank you, Timo.
Thank you.
Thank you again for the questions, and now we move on again. The next presentation is International Digital Services and Executive Vice President Henri Korpi. Henri, please.
All right. Good morning on my behalf as well. My name is Henri Korpi, and I'm responsible for something we call International Digital Services at Elisa. My presentation today consists of five parts. First, I will introduce you a little bit deeper into the business of ours and then share a few data points of our recent performance. We dive a bit deeper into the businesses themselves, to Elisa Polystar and Elisa IndustrIQ. After that, I will share with you a interesting startup in Distributed Energy Storage that we are running and that is gaining traction and is a good example of our continuous innovation based on our core capabilities. At the end, I will conclude with my priorities going forward. That's the plan for the n`ext 10 minutes or so.
We are in business of delivering value to our customers from the data that they have in their operative systems. We serve two distinct customer groups: telecom operators as Elisa Polystar and industrial manufacturers in certain selected verticals as Elisa IndustrIQ. We help our customers to extract data from their operative systems, make sense of that data, draw insights based on that data, and automate their processes and decision-making based on that data. Ultimately, we expose the data, create value to our customers, and capture value for ourselves by selling and delivering software applications on top of our platform. As Veli-Matti pointed out, our revenues grew last year to EUR 82 million with annual growth of 22%. Even more important, roughly 2/3 of our revenues were of very high gross margin software product revenues, growing at the pace of 24% year-on-year.
The rest,1/3 , came from services, meaning delivery services, third-party software and hardware, and growing 7% year on year. The large share and the high growth of software revenues makes our business highly scalable, and we believe that our underlying profitability will continue to develop positively going forward. However, as Veli-Matti already pointed out, we are still in investment phase. We are planning to invest, if not all, but most of the increased profits back to the business to accelerate our growth even further, at least in the short term. Now let's dive a bit deeper into the businesses themselves, starting with Elisa Polystar, that is in business of making self-driving networks happen for our customer telecom operators. Elisa Polystar serves a sizable and growing market for analytics and automation software for telecom operators.
The growth of the market is driven by operators' investment and rollout of 5G cloud networks and the simultaneous cloudification and automation of the surrounding operational support systems and processes. At the same time, most telcos face significant cost pressures driven by inflation and the high energy cost. That amplifies our opportunity as our solutions help our customers to reduce the cost of operating their networks and enhances the end-user quality in those networks. Elisa Polystar's revenues grew last year at the pace of 22% year-on-year, and almost 70% of those revenues came from those high gross margin software products. Elisa Polystar employs currently a little bit more than 400 people in 11 countries and is also working with a significant partner network.
Elisa Polystar offers to its customers a modular set of software applications or use cases on top of our platform that enable our customers to gradually move towards fully self-driving, closed-loop automated networks that enable our customers significant cost savings in their network operations and at the same time enhance the end-user quality of those networks. Our customer base is steadily growing, and our customers are generally really happy with our solutions. A good example of what we, in practice do and enable for our customers is one of our largest customers, Vodafone, that we are helping across the European footprint of 11 markets to replace more than 100 legacy IT applications with our DataOps and analytics tools in performance management field, helping them to save in their cost of operation and enhancing their end-user quality. That's about Elisa Polystar. Let's move to Elisa IndustrIQ.
That is in a very similar, or one could even say, in the same business than Elisa Polystar, but for a different customer group, the industrial manufacturers in certain selected verticals that we help by making intelligent manufacturing happen for them. The addressable market for Elisa IndustrIQ is very large and growing rapidly. The manufacturers in our selected verticals face common challenges that are driving demand for advanced analytics and automation into the factory shop floors. In addition to those common challenges, the manufacturers in our most important and largest vertical, the high tech and semiconductor manufacturing, face the changes coming from the geopolitics, meaning the separation of the value chains in U.S., China and Europe, which means increased investment into production capacity in all continents in that vertical, which in turn means long-term added demand for software tools like ours.
Elisa IndustrIQ's revenues grew as well, a little bit more than 20%, last year on year, and 2/3 of these revenues were from the high margin software. Elisa IndustrIQ as well employs more than 400 people in 12 countries and is working with a fast-growing network of partners. Similarly, as Elisa Polystar, Elisa IndustrIQ is offering its customers a modular set of AI-powered software applications, enabling increased efficiencies, reduced costs, and higher quality in the, in the customer's manufacturing operations, enhancing our customers' competitiveness in their respective markets. Our customer base is rapidly growing. Typically, we work with our customers in a way that we start with one or two processes in one or two factories, and then we grow inside the customer to add new processes and new manufacturing facilities or factories across the customer manufacturing footprint.
A good example of such a customer is Continental, one of our largest, who we help across the whole manufacturing footprint of theirs in over 50 factories in four continents, across multiple processes. That's Elisa IndustrIQ and Elisa Polystar. Let's turn to one interesting internal startup, Distributed Energy Storage, that is, or DES, as we call it, that is gaining traction. It's a good example of our continuous innovation based on Elisa's core capabilities, at this time on the capabilities of AI and optimization of very large distributed assets. It's also a good example of how we make Elisa's mission, a sustainable future through digitalization a reality in, when developing our business.
Distributed Energy Storage startup is turning the reserve batteries located in our base stations into a very large, highly distributed AI-powered virtual power plant, providing flexibility to our own electricity buying by enabling us to charge the batteries when electricity is cheap and use it to run the base stations from the batteries when electricity is expensive, i.e., providing cost savings for Elisa. Even more important, we provide flexibility to the electricity grid system as a whole by participating in the extremely fast-growing electricity balancing markets and generating a totally new revenue stream for Elisa as well. We are doing this in our own networks in Finland and Estonia, and we have already signed the first deals with other telcos to help them to do the same in their respective markets and networks.
One can say that there's genuine interest towards the solution among our peer telcos, as it provides a clear financial benefits for telcos in form of cost savings and in form of new revenues from participation into the fast-growing balancing markets. At the same time, we are contributing to the whole society by providing much needed flexibility to the electricity grid system as a whole, and enabling on our part the green transition, the transition to increased use of wind and solar in electricity production. My priorities going forward are threefold. First of all, we continue to invest to accelerate the organic growth of our businesses. We see a clear opportunities, clear positive demand drivers ahead of us.
In addition to that, we implement Elisa Business System to, in time, achieve efficiencies across the businesses that we have formed by combining our internal startups and the companies that we have acquired. Second, we continue to look for good, healthy, growing companies to join Elisa Polystar and Elisa IndustrIQ to accelerate our growth even further. Third, we continue to innovate based on Elisa's core capabilities to seek new growth opportunities. By doing this, I believe that we have a good chance of contributing significantly to Elisa's ambition to grow digital service businesses. That's it. Thank you for this opportunity to share our progress, and I'm ready to answer any questions you might have.
Hi, it's Felix Henriksson from Nordea. I have a couple of questions. Thanks for the presentation. Firstly, you mentioned that you're basically in the short term planning to invest all your profit into growth. I just wanted to touch on the topic of where are the biggest investment needs. Is this money going towards R&D or towards the sales and marketing push to require to gain market share?
Both of those and some others also. I do believe that we have quite a solid offering. We will add more stuff into the offering with the resources that we already have and possibly with acquisitions. From the kind of OpEx view point of view, the largest investment will be in sales.
Thanks. It sounds like you have an ambition to, you know, outgrow your underlying market. Could you perhaps give a bit more color on this? Is this sort of coming from the fact that the market is still fairly unpenetrated, or are you sort of planning to capture share from these bigger competitors that you highlighted in the slides as well?
I guess that the main answer is in the core capabilities that we have combined to the businesses that we have acquired. So the AI and automation capabilities that have developed originally for Elisa. Now we are in a position that we have already combined them to the offering and enhanced the offering of the companies that we have acquired as our plan was, and now we are enjoying the momentum of that being a forerunner in the and being ahead of the competition in the areas because of those capabilities.
Thank you.
Titus Tan here from Bank of America. Just a very quick question on Polystar. Following up maybe, when you talk to the o ranges of the world, Vodafone, they're all quite established players, for them, it's basically some decision on outsourcing versus insourcing capabilities, which is quite an important part of the business. How are those discussions ongoing? Is there any part of the business which is maybe easier to sell to them, some part of the business where they're more reluctant to cooperate with you in the Polystar segment?
Well, we are quite focused with Polystar on the kind of network operations side. You are quite right that there are kind of main competitor actually is the managed service of provided by the big network equipment manufacturers or some other companies in the world. The many of the telcos who have outsourced their operations to those companies have done it couple of rounds of those, and now they are faced with the fact that to get the cost lower and get the quality higher, it is becoming more and more difficult. Now many of those large companies have decided or are contemplating of taking it back to them.
With in, with kind of help of the kind of tools that we are providing, we enable them to take the grasp of the operation to themselves, again.
Yeah. Very clear. Thank you.
Artem Beletski from SEB. Two questions from my side. The first one is relating to Polystar. Could you maybe describe how much your, so to say, software stack has grown or increased over recent years? I guess revenue potential per operator has increased quite significantly.
I can actually use the slide that I had briefly here to answer that question. Yeah. Originally, when Elisa started approaching the area we were in the radio access network automation. That is the Elisa's original automation domain with the operations automation following. Through acquisitions of that we made, Cardinality pretty much created as the DataOps offering. MLOps was internally built. Analytics came from Polystar and Cardinality. Transport automation came from FRINX. Network monitoring was capability of Polystar. We've kind of created the whole spectrum of offering by combining the offerings of the companies and what's been kind of developed inside Elisa. We are quite happy with what we have today.
Now we have, what is not in the picture we have here, the kind of a platform functionalities making it possible for customers to buy stuff across the silos, if you wish.
Yes, this was very helpful. And the second one is related to Distributed Energy Storage business and what are your thoughts there? Do you see potential eventually to go beyond operators? Looking, for example, at automotive sector and so on, and what this business would require? Do you see that you have enough of in-house resources or does it need also to some M&A activity?
First of all, we have to kind of a start with the fact that it's start-up. It's a fairly small team that is currently working with it. It was very natural for us to start from the telco for many reasons. I don't go more deeper into those, but there are standardization reasons. There is the kind of we know the telcos, we can test it in our own production and stuff. You are absolutely right. There are opportunities in other verticals as well, and we are currently investigating them and have already set up small teams to make some experimentations on some other areas. Let's see.
Quick follow-up on that if it's possible. It's quite clear. What is the benefit for you? how you monetize there. What comes to other operators, what are basically pricing models you're looking at?
Well, we are, I said, it's still a startup. We are experimenting on that field as well. We have signed a couple of the first deals and are now kind of deploying it to some of our peers. We'll have to see whether those models that we have deployed now are the right ones and the permanent ones. Other than that, I don't want to go deeper into kind of opening up or how the business model works yet.
Hi there, I'm Nick Lyall from SocGen. Can I just ask a couple of pretty naive questions to be fair? I mean, the first one is how do you get to break even in your EBITDA number for 2024? Is that more or less set in stone because of synergies already or are there many risks to get there? The second one is the naive one. I'm a telco analyst, so all this growth stuff in softwares is pretty far-fetched for me. In terms of the margin you end up at ultimately, what given your split of businesses, what sort of margin is sensible for the business? I think in domestic it's 5% EBITDA margin, which seems very low given the sort of things you're talking about here. Thank you.
Let's start with the margin. Margin, I think that the, as Veli-Matti pointed out, the expectation that we have here as these are highly scalable because of the kind of, they are pretty similar to telco in that sense that there is a fixed cost of developing something and then you invest into selling it. The fixed cost doesn't grow that much with the customer base. It's highly scalable, and it's now the question is how large we can grow it, and that dictates pretty much the margin. The largest enterprise software companies have at least similar type of margins as telcos. Whether we will be able to achieve that in the long term, hopefully.
In the short term, your first question. Some of the companies that we have acquired lately are growth companies that are clearly in an investment phase, that are clearly kind of negative in terms of EBITDA. The operation could already be EBITDA positive. As said, we have made a conscious decision to invest into growing our sales effort, growing our sales channels, growing our partner channels in order to be able to scale it further because we see that there is the opportunity of getting good margins as we go forward and grow the business.
I think I skipped the queue. Thank you. Ondrej here from UBS. Just following up on question on the margins because you showed total addressable markets, I think, for 2030. What is it that by 2025 makes you think you're gonna maybe stop reinvesting to some degree into scaling the business? Why not, you know, take it all the way to, I guess, the end of the decade where I think more and more of these applications will have their addressable markets?
Our current plan for that is that as Veli-Matti said, is that it'll turn cost positive during the next couple of years. It's the current plan, and we constantly as is according to our general practices, that we update our plans on annual basis and even more frequently if needed. We are flexible with that situation. Our current plan is that this will turn into positive because of the growth that is continuing.
Positive, but maybe, you know, getting to margins that you kind of, said would be similar to the core telecom business, is that more of a, say, end of the decade situation or?
Absolutely. Yes.
Just in terms of headcount for both of these businesses, I mean, do we expect excluding any acquisitions that it's largely marginal growth in sales and marketing or, you know, in maybe two, three years' time do you need to sort of double the number of employees from 400 to 800 or something like that?
We expect the headcount to continue to grow, but in an organic manner, in a milder pace than the revenues. As we are, as said, we are investing more to the sales and developing our channels than the development itself. That is where the scalability comes from, that we don't need to reinvent the wheel for every customer. The software business by nature is such that we sell the same stuff all over again to different customers. Obviously, there is the delivery services part, but we are utilizing more and more partner networks for that.
All the R&D staff are largely already in the businesses that you need?
Well, obviously, we are growing also the development, but not anywhere near to the pace of our revenue growth.
Okay. Thank you, Henri.
Thank you.
Thank you for your questions, and we can continue after the last presentation, which is starting now, and it's financials and CFO Jari Kinnunen. Jari, stage is yours.
All right. Good morning. My presentation agenda is follows. First, I will go through performance update briefly. I will talk about achieving medium-term targets, then about capital allocation, and then about reporting. There are some changes coming in reporting, and finally, my priorities going forward. Let's start with the first section. Since the last Capital Markets Day, strong financial performance has continued, revenue growth 6%, very much driven by mobile services. As heard in today's presentations, very good strong demand for 5G services, also digital services growing. Also going forward, we expect that growth continues. EBITDA operating cash flow conversion remains high at 65% level, and return ratios high, return on capital employed consistently best in comparison, 17.7%. Underlying good efficient usage of invested assets.
A strong revenue growth, also translates well into earnings and cash flow generation. Last year had several negative or challenging changes in operating environment that also impacted OpEx. We had impacts through high inflation energy prices. Also, we did invest in the own sales channels and reducing third-party channel. Also, there was a returning to the office work from remote work and expenses, office expenses and personal expenses, higher than year before. Nevertheless, although this challenging environment, last year was a record year, best ever, in terms of revenue and earnings, 6%, more than 6%, revenue growth translating to more than 7% EBIT and EPS growth.
Our business model facilitates consistently good growth in earnings and cash flow generation that also are higher than peer group median. Our long-term strategy and strategic choices and operational performance also are visible in financial KPIs and revenue growth, EBITDA growth targets 2% and 3% more than exceed. Long time CapEx to sales 12% target also achieved long time. Capital structure net debt to EBITDA between 1.5x-2x, and equity ratio more than 35% also achieved and retained long time. That was the performance update section. I will now move to achieving medium-term targets, starting with the revenue. Our business portfolio supports well our revenue target. More than 80% of the total revenue is in growing service revenues.
Mobile more than 40%, as heard today. Strong customer drivers, customer demand for 5G services continuing, upselling, upgrading to higher speeds continuing. Also product price changes continuing to future growth, and also additional services expected to grow further. In digital services, domestic digital services, as heard also today, entertaining, both entertaining and IT services expected to grow, mid-single digit or higher type of growth ambition. International digital services continuing with high ambition, clearly a strong double-digit growth rate ambition going forward. In fixed services, in corporate segment, managed and professional services expected to grow, whereas fixed traditional voice is only 2% from the total and is approaching end of life cycle. Also, EBITDA has clear growth drivers, and all strategic focus areas contribute to EBITDA growth.
Telecom service revenue, high quality revenue, high-margin revenue, and high contribution to EBITDA growth. In digital services, domestic digital services growth contributing to improving profitability. As heard today in international digital services, growth acceleration is planned and currently there is negative impact as we are in investment phase, negative impact to group EBITDA. Through organic growth and bolt-on acquisitions, we expect growth coming from digital, international digital services going forward to EBITDA as well. We will continue with cost efficiency and productivity improvement measures with automation and AI, machine learning in different processes, customer service, customer service processes, sales, improving productivity further.
Also, we are continuing with the ramp-down of old technologies, 3G, copper networks, and reducing electricity expenses or maintenance expenses. Reducing a number of network systems and IT systems going forward is also providing benefits in expenses. Overall, we will continue with our strict OpEx disciplines going forward. Good example of Elisa Business System and our systematic continuous improvement can be seen in how dealing with energy and electricity. Long time there has been many developments for energy-saving features, new technologies introduced in the network, and own innovations for energy efficiency, and very exciting innovation introduced in Henri's presentation, Distributed Energy Storage as a most recent ones.
All these contribute to clearly more efficient network, energy-efficient network environment compared to industry average. Apart from operational improvements in the energy efficiency, there has been long time hedging policy against electricity pricing fluctuations in place. For this year, approximately 90% of own electricity usage is hedged. In the second quarter, we will start with new wind power 10-year purchase power agreement with prices that were agreed two years ago. Also this contributes to sustainable and renewable sourcing of energy future. Growing EBITDA and high cash conversion also contribute to cash flow growth as well as CapEx to sales at 2% level.
Last year, cash flow was negatively impacted by net working capital change and license payments altogether EUR 43 million, whereas year before these two were EUR 8 million. We do not expect the same to be repeating going forward. This is also contributing to expected cash flow growth. That was achieving medium-term target section. Now I will go to capital allocation starting with CapEx. New medium-term targets also include CapEx to sales target at 12%, which has been long-time target and also achieved, which is clearly lower than sector average. There are many drivers behind that. One is right timing. We pay a lot of attention to customer demand and allocation of CapEx according customer potential.
We have a multi-vendor strategy in order to maintain and reach best possible commercial conditions, and many own innovations also contribute to this. Very good example of all these features can be seen in mobile network and dealing with high usage and capacity. We have one of the highest data usage in the mobile network per subscription and are dealing this with one of the lowest CapEx in the industry. 5G rollout is progressing in Finland. We have more than 85% population coverage. In Estonia, we started second half last year and currently 70% population coverage. Although as a percentage from revenue, CapEx is low. However, in euro terms, in Finland, CapEx is highest, and the same is with EBIT.
Efficient CapEx also contributes to return ratios and return on capital consistently better than comparison. We will also continue our acquisition policies and value creation-oriented focus and seeking opportunities in international digital services, domestic IT and telecom service domains. Looking ways to accelerate growth, increase competitiveness, and of course, prerequisites are that there are clear value creation sources and opportunities. We intend to retain distribution capabilities intact and capital structure and ratings unchanged. New midterm targets also include capital structure targets, net debt, EBITDA between 1.5x-2x , equity ratio higher than 35%, which has been, again, followed long time. Also we aim to maintain solid investment-grade credit ratings.
They've been also in place, long time, whereas industry has been in the downtrend. In terms of financing, in order to maintain maximum flexibility, use multiple financing sources as well as diversified maturity profile. From the interest-bearing debt, approximately 80% is currently at the fixed rates. The debt level, 1.7x net debt to EBITDA, clearly lower than comparison to peer group median, and so is the case with interest expenses from the free cash flow currently at 3%. Distribution policy was announced today. No changes. Payout ratio continuing between 80%-100% from earnings. There is strong track record, nine consecutive years of growing distributions, on average 5.7% growth.
Not only is the dividend growing, but can be viewed to be reliable because of low debt and high cash flow coverage. The same can be seen also in dividend per sales trends at the right-hand side of the slide. That was the capital allocation section. Now I will move to reporting. ESG, long time part of the culture and operations, and also reporting has been there and developed over time many recognitions and rewards received. Climate reporting among the top Nordic companies and recently a CDP climate reporting rating was increased to A- . Long time assured corporate responsibility reporting is in place more than 10 years. Next week we will publish and announce 2022 report including EU taxonomy ESG KPIs results.
Apart from annual reporting, last year ESG indicators were included in quarterly reporting as well. Last, at the latest, loan agreement did include sustainability-linked KPIs. Also, sustainability finance framework was launched to be used in future arrangements. We will make changes in quarterly reporting from Q1 onwards and start splitting digital service revenues into two, international digital services containing software businesses, Elisa Polystar, Elisa IndustrIQ, and secondly, domestic and other digital services, including entertaining video services, IT services, and visual communication. In this slide, we can see 2022 numbers with the new split. International digital services growth varying between 30% and 50%, and organic growth between 19% and 31% per quarter.
As heard a couple of times today, there is high ambition to continue growth in International Digital Services, and we really hope that this change and added transparency will help to follow the development and progress of this business. Finally, my priorities in three main strategic focus areas continue growth in telecom services with efficient CapEx, high earnings, and cash flow conversion, digital services, increasing scale with disciplined acquisitions, and continuing cost efficiency and productivity improvements and efficient capital structure going forward. Now I'm ready to take questions.
Thank you. It's Keval Khiroya from Deutsche Bank. First in terms of organic growth of your business and how should we think about organic growth? Would you be still delivering at least 3% EBIDTA growth without acquisitions. And second I appreciate you can't be very specific on what acquisitions you may do, but can you talk about how you think about the size of potential acquisitions made in the context of the EUR 120 million you spent over the prior three over 2020 to 2022 or made in the context of the size of the international revenue streams. Thank you.
Yeah. 3% EBITDA target we see based on organic growth and with the efficiency measures, productivity improvement measures. Acquisitions, this EUR 120 million in the past two years since last Capital Market Day, they've been varying between couple of millions to EUR 75 million. Really good acquisitions really contributed to the growth and progress of digital service business. As was heard today a couple of times, we will continue to seek such an opportunities to improve and progress with this domain.
Thank you.
Hello. Hi, it's Siyi from Citigroup. Just have a question on your return on capital employed. I mean, you obviously have the highest return okay in the industry and clearly above your direct competitors. Would you mind to elaborate why your ROIC is much higher and is still growing? Also, if you look out for, like, say, three or five years, do you think that Finland as a market is sufficient to have you with a higher ROIC as well as your competitors is now aiming to improve the return of the capital employed as well? Thank you.
Yeah. It's, it's about getting best out of the invested assets and about CapEx levels and then getting the returns out of the invested money and invested CapEx. It's about acquisition policies and returns from acquisitions. We've been very disciplined and value creation-oriented with our acquisitions. Then, of course, constantly improving earnings are all these are contributing to that. What was the second part?
Yeah. The second question is about Finland as a market, because you have a very high return on capital employed and your competitors is now trying to improve that as well. Do you think the market, I mean, outlook is sufficient enough to allow both of you to have, let's say, high double, I mean, 15% of the capital employed?
Yeah. There's high competition in the marketplace. There is one of the highest data users in the mobile network, high-quality networks, low prices in international comparison. If you were referring to some, let's say, regulator views, then I think regulator can be happy with what customers are getting good quality services and affordable prices in international comparison.
Sami Sarkamies, Danske Bank. I think you've been opening up the top line drivers in detail, but could you also comment on the OpEx outlook going forward in terms of the sort of key line items like, you know, salaries? Maybe more specifically, when it comes to electricity price, you're hedged for this year, how does the hedging price look relative to last year? Did you also say that you are fully hedged also for the coming few years as well?
Yeah. About salaries in Finland overall, the collective labor agreements that have been done recently in different industries, with different unions, salary increase levels have been, let's say 3.5%-4% in that range. That is also our expectation for ourselves for this year. The second one?
Yeah. It was the hedging price.
Electricity.
Hedging price.
Hedging price, compared to last year, for this year it's about a bit less than what it was end of last year. Beginning of last year of course, was still a bit lower than or significantly lower than second half last year. On average, a bit less than last year. Average.
Yeah. Thanks. It's Russell from New Street. I've got a quick question on CapEx please. Obviously you've done a very good job at keeping it at 12%, but I mean, you know, with a 2% revenue CAGR, it is growing at 2%. What are you spending more CapEx on? Is that capacity in mobile? Is that the upgrade in fixed? You know, what proportion of your CapEx is being spent on the fixed upgrade, for example? You know, going forward, you know, could there be a time when CapEx falls? When that fixed upgrade is over, you know, can you generate revenue growth, and CapEx comes down? You know, do you need CapEx to be rising year-over-year for it to generate the revenue growth? Thanks.
Well, CapEx, main CapEx goes to network and both mobile and fixed network, and IT systems, customer equipments. Currently 5G rollout and fiber investments are something that being invested, let's say significant portion of the total. Also going forward, we see that these are the main CapEx areas. About future CapEx levels, in new midterm targets, midterm financial targets, we do have 12% as a target, so we expect that level to continue.
Thank you. Looking at your 2023 guidance versus your midterm guidance, it appears that your 2023 guidance is perhaps more conservative than your midterm. Maybe if you just explain a bit, sort of are you forecasting more growth in 2024, 2025? Maybe you could just talk about that. Thank you.
Yeah, especially this year's first half, as we said in when we published Q4 numbers and gave the outlook, as we said, first half is growth is more challenging. Among the others, the electricity price being one of the reasons for that. The growth, EBITDA growth drivers, I did go through relating to telecom service revenue expectation, digital service growth expectation, and continuing with cost efficiency productivity improvements, especially with automation like we done in the past, that will produce step-by-step improvements rather than big bang in one quarter. That is the way that we will improve cost efficiency and also contribute to EBITDA growth target.
All right. Thank you, Jari. Sorry to interrupt, but now we actually start with a joint Q and A where the all speakers are available for your questions. Jari as well, so if you have anything for Jari specifically. Please start. All right. May we have the first question? Here we have two.
Hi. Thank you for taking the question. I just had one for Jari. I saw that the effective tax rate is lower than corporate tax rate. Are you getting some benefits from, like, innovative box? Is that to do with the startup in digital services? What kind of benefits are you getting from that from that business?
Sorry. Could you repeat?
Just in the presentation you said effective tax rate.
Yeah.
will be lower.
Okay.
just the reasons for that.
Yeah.
due to the digital services.
Yeah. Corporate tax rate in Finland is 20%. The effective tax rate has been below that, let's say 18%, 19%. Some portion of that coming from Estonian profits and Estonian earnings. There's no corporate tax unless dividends are paid. That's one reason. Then, there are some, losses in some subsidiaries that we've been used against tax profits.
Okay. Would it still change versus prior periods, or is it same?
Well, it's 20% or below.
Okay. Thank you.
All right. Next, Matti.
Matti Riikonen, Carnegie. I would like to go back to the Consumer Customers and the entertainment video services. You mentioned in the presentation that the revenue growth, excluding streaming cooperation, was roughly 4%. At the same time, the profitability of the service is a bit weaker than what you suggested two years ago. Is the kind of streaming cooperation the decisive factor for the lower profitability or is it just the overall competition in the segment? Could you describe how it works, where the prices have been declining?
Yeah. Thanks for the question. Indeed, it is that the, like, our competition is mainly in the streaming market. We have a lot of new players and Disney's and Netflix's and HBO's in the market. Really, the competition is very high there, and that kind of limits a bit of an our kind of a maneuver portfolio, how to, so to say. The cooperation with Viaplay, I think we have discussed before that, we have increased the revenues, but on the EBITDA level. It's a pretty much plus minus zero. I think that's what we have been saying before as well. That's the situation.
Okay. Then going forward, what's the policy and the process when you take new video services into the Elisa Viihde package? You have HBO, but you don't have HBO Max, and that's been a kind of anticipation that it would come. Otherwise, it's a bit cumbersome to use the service. Of course, we have other candidates as well. How do you try to implement those into the platform? Because naturally it increases the usability of the platform and probably creates stickiness, even though it wouldn't make much more profit. How does it?
Yeah. Thanks again. It's a good question there. Indeed, that we try to kind of, like, incorporate as many as those services that are created by the customers into the service. it's a bit of a cumbersome to kind of implement new service into our Elisa Viihde service or any service platform. It takes a bit of a time. That's kind of a reason why HBO Max is not implemented yet, but it will be implemented as part of our service.
As we move forward, there will be kind of a more standardized APIs, interfaces towards content providers, that it will be, in the future, much more smoother process to integrate a new content providers into our service. It's kind of a move into the right direction.
Okay. Thank you. That's helpful. Then another topic, which is the price discipline in mobile, in low-end 4G. That has been surprisingly resilient from the consumer's perspective. If you visit the stores and ask what is on offer, it seems to be holding at least for now. It seems that all operators have basically gone to the system where a couple of euros more is the limit that you're getting, at least when you are trying to get the new subscription as a new customer. Is that also part of your guidance for the MSR growth to be in the mid-single digits? It's not just 5G driving the upper end forward, but it's also kind of more stable revenues or growing revenues in the low end.
Maybe I start, and you can mess up and let Timo continue. We have limited visibility always because competitors can do what they can, and especially for MSR, quite quickly that things can change if there will be changes. Obviously, there has been quite high pressure for the electricity price increases, especially to our competitors, both making profit warnings last year. The other one do two times. Obviously that has kind of given a pressure for them to be also trying to gain with increased prices for the customers. That's how the kind of competitive situation in the market looks now. We have a high churn still, and there's a lot of campaign.
There are still free gift cards given, but there's somewhat more maybe rationality in the market. That outlook is or that element is in our outlook when we give the understanding and of that, we aim to mid-single digit this year with MSR.
All right. Thank you.
All right. The next question here. Ondrej, please.
Thank you. I have two questions, please. One on B2B specifically, and going back to, I think you showed the chart of Net Promoter Score improving quite a bit, and then I think it was a big step up in 2021. If you could explain what happened there. You know, with all of these services that you are adding on to your portfolio, going forward, do you think that the situation in the market, because as we heard before, DNA especially has been kind of open about wanting to take market share and then surprise.
Is the gap between the capabilities closing among the competitors, or do you think with all of this that you've presented today and what you will be developing going forward, the, you know, at least us kind of capabilities will actually be diverging from the pack? So that was one on B2B.
Well, thank you for the question. I think that the Net Promoter Score, how it was put there is really as a result of the kind of fact that we are looking what the customers are really kind of valuing. Second, we have our Business System as a practices, how do we do these activities to improve really the quality for our customers. Really meaningful that what are the root causes for the customer, and we are.
All the time working with those. That, I think, has been then gladly seen by the customers as well, and then it's witnessed by the NPS historical growth that was there on the chart. What comes to the competitiveness, I would say still that reiterate that we are very feeling good about our competitiveness. Like I outlined there, we see that as time goes by, the automation and AI becomes more and more relevant. We only become more and more competitive. In this regard, I still feel very confident about the future, but not really kind of undermining any competition. They do their things and they run their races, so.
Thank you. The second question that I had was on the network services. I think you mentioned that you're taking basically market share in terms of network management, in a sense, if I understood that correctly. You mentioned, I think you alluded to pricing, specifically that the vendor kind of services are maybe more expensive than yours. Is that, is there a structural reason for that? Maybe, you know, bolting on these services onto your specific, you know, experience that you've developed over the, say, past decade in terms of the network qualities that you're able to sell these at a cheaper rate? Is it structurally now that you're kind of underpriced in the competition in order to grow market share?
What is the sustainability of the growth in terms of your market share specifically?
Yeah, I guess that the question referred to the managed services as a competition in the larger customers. Our tools take a totally different approach to that, Doing the tasks, managing the network. So we are providing tools to automate it, get rid of the people as a whole. The managed service providers typically have transferred the workload to cheaper labor countries, and that is coming to an end. The competitiveness actually against that, them not being able to transfer that anywhere from India anymore, it's actually very high that you compare the cost of running it in India to cost of running it with no people.
We feel quite confident that our proposition for the telcos that want to really take the grasp on their own hands and to continue to develop their cost efficiencies is very good.
Maybe I add to that. If you look at a bit longer term, the network infrastructures and the technologies, especially the times when there was a lot of push for managed services, we were living quite different times. Now we have cloudification already taking place and capabilities to utilize the data, like Henri was explaining, to create something that was not even thought early on.
You've been quite critical to cross-border mergers. You're saying that there are no synergies in those cases. If I think about what we have heard today on the Elisa Business System, have you thought about expanding to other territories? I mean, could this be implemented in another market?
Well, it's a good point. We could elaborate that thinking, and clearly, with the Elisa Business System, we could think that. Like, we think that even with Henri's acquisitions, we have an opportunity to have additional synergies by utilizing the Business System with the acquired companies, but also, of course, learning from them and increasing the Business System to be even more powerful. There is another element for cross-border acquisitions of telco businesses that there's always quite many bidders for, and the price gets a bit high, so there's this other negative thing. At least for the time being, we haven't entertained the idea of really getting active on cross-border acquisitions in telco side. Again, like I said, in the other businesses, we can do acquisitions.
Yes.
Okay. Thank you for the presentation. It was very useful. Thank you for the improved disclosure. One question for you, Veli-Matti and then for Jari. It's been a positive story today, basically all the presentation, and the outlook is a positive one, and you delivered on the positive outlook you gave us two years ago and four years ago, and I suspect it might be positive when we meet the next time. What are your main concerns, sort of if you disregard your sort of the Russians, what are your main concerns in terms of, in terms of the business outlook that things could change for Elisa?
We always, we think that the main concern is ourselves, that, we get complacent. It is something that, every day remind ourselves that, yes, we have done great job and improved, but there's always opportunities, there's competition, there are changing environment, to keep up the curiosity, the willingness to learn. That's of course a concern that there's no slippages of that. Of course, we are human beings, throughout Elisa. That's always possibility. That's, I think, all the other things actually, I think that when we have the culture, the willingness, and the attitude to go after the new things and learn, even when challenges are coming, all the other things we can solve.
It is about our attitude and culture and to be curious and learning.
Okay. A question for Jari then. Jari, on the CapEx sales, I'm sorry to ask you about CapEx there, from a broader perspective, as you said, the CapEx sales ratio is very low.
Is also remarkably stable. The charts you showed, this is basically a flat line, which is highly unusual, to be honest. Are you deliberately managing this to be at the peak at 12% no more, no less? Do you feel constrained by this promise you've given to the market going forward? Thank you.
Yeah, it's, of course, we pay a lot of attention how to deal with that. As I said, right timing is important, and also do the allocations according customer demand, customer potential. I think that this, let's say, target has also helped in many own innovations. We've been sort of partly forced to innovate new things. For example, how to deal with high usage that we do have in the mobile network, one of the highest in the world, with capacity. There we have done lot of own innovation dealing with capacity inside the network, and also these innovations are used in Henri's business in as new services what we are providing to other telcos.
You're not feeling constrained?
I hope he feels because that's part of the purpose that we have constraints. Like Jari said that, and everybody else that That makes us to prioritize because in our business, I'm an engineer, I can say that we invent always many things to, new things to do. In our industry, we have a bit of a habit that we tend to do too many things with are not unnecessary or are not necessary and not mature or not kind of moving the needle. It is, of course, the border. It is giving us discipline and of course also constraint to make the choices and also to innovate.
Okay. Any further questions? Yeah, I think we are getting to the end of the event. Just to remind you that we appreciate the feedback. Please fill the feedback form. We appreciate that, and also maybe to mention that we have a light lunch here next door. Maybe we are going to the closing remarks, and Veli-Matti, please.
Well, for the first, I'd like to give you a big thank for investing the time to learn more about Elisa. I wish you have got some learnings, new learnings. This Capital Markets Day events are never really a places for great big news, very seldom, but I hope that you have got more understanding of the kind of opportunities we have ahead. We are excited about those opportunities in all of the three focus areas in our strategy going forward. Big thanks for you. Big kind thanks for you also for lively dialogue, good questions, and we continue the good dialogue going forward, first now with the lunch. Thank you very much, and let's close the event. Thank you.