Good day, and thank you for standing by. Welcome to the Tele2 fourth quarter interim report 2023 conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad and wait for your name to be advising. To withdraw a question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Kjell Johnsen. Please go ahead.
Thank you very much, operator. Good morning, everyone, and welcome to Tele2's report call for the fourth quarter of 2023. We are very happy that you are taking the time with us this morning. With me here in Kista today, I have Charlotte Hansson, our Group CFO, Hendrik de Groot, our Chief Commercial Officer, and Stefan Trampus, our Head of B2B. So please turn to slide 2 for the highlights. 2023 turned out to be eventful in many ways, and if I were to single out a few specific events beyond the financial ones, I would mention the Financial Times ranking of Tele2 as the number one among Europe's climate leaders, as well as the top spot our B2B team recently achieved in the Swedish Quality Survey, SKI, based on real customer experience.
So while these achievements make us proud, we will of course continue our work on customer experience and sustainability going forward. I'm glad to report a strong end of 2023 as we grew organic underlying EBITDA by 4% in the fourth quarter, while maintaining solid end-user service revenue growth of 3%. For the full year, we grew end-user service revenue by 4% and underlying EBITDA by 2%, which, combined with 13.5% CapEx to sales ratio, was in line with our 2023 guidance in a challenging year, largely characterized by inflation. Following strong equity-free cash flow during the year, our balance sheet remains strong, with leverage at the bottom end of our target range.
Consequently, our board of directors proposes an ordinary dividend of SEK 6.90 per share, an increase from SEK 6.80 last year, to be paid in two tranches in May and October. We're also launching a new strategy execution program, which covers the next three years. Through this program, we will simply put, shift focus from fixing legacy IT towards our go-to-market efforts, developing outstanding digital tools and channels aimed at radically improving customer experience and value. The program will also, as an effect, allow us to reduce SEK 600 million of costs over the next three years. I will soon present this in more detail. Please move to page 3. End-user service revenue grew by 3% organically, with solid performance across operations, including continued growth acceleration in B2C Sweden.
Underlying EBITDA grew by 4%, mostly as end-user service revenue growth more than offset inflationary pressures. We had a solid equity-free cash flow this quarter, despite working capital impact from seasonally high level of equipment funding. In Sweden B2C, we saw solid value-volume growth in mobile postpaid. End-user service revenue growth in connectivity was also solid, driven by fixed broadband at 8% and mobile postpaid at 5%. Sweden B2B delivered continued solid and broad-based end-user service revenue growth, supported by improving Mobile ASPU. Our team also stood out, as mentioned, in the recent survey from the Swedish Quality Index, with the most satisfied business customers in both broadband and mobile, which we are very proud of. Baltics had another good quarter, with strong ASPU-driven end-user service revenue growth and good underlying EBITDA growth. Let's look at Swedish consumers.
Q4 was yet another quarter with solid volume growth in mobile postpaid, driven by lower churn and strong sales of unlimited and family products. Mobile ASPU increased slightly year-over-year, but grew more than 2% when excluding dilution from free broadband RGUs. In fixed broadband, we saw stable RGU development in the quarter due to fewer campaigns and less discounts, whereas ASPU growth was strong, thanks to price adjustments and uptake of higher average speeds. Our digital TV, cable, and fiber business remained stable in terms of volume, whereas ASPU was slightly down due to decline of legacy add-on products. Moving to slide 6. Mobile end-user service revenue grew by 3%, driven by a continued acceleration in mobile postpaid, which delivered a multi-year high end-user service revenue growth of 5%.
In contrast, our prepaid business continued to contract in line with previous quarters, following the registration requirement since February 2023. With an impressive 8% end-user service revenue growth, fixed broadband also delivered a multi-year high, thanks to both ASPU and volume growth. End-user service revenue for digital TV declined by 3%, mostly driven by continued decline in the legacy DTT business. Now moving to B2B. We continue to execute on our successful B2B strategy, and all customer segments are contributing to the solid end-user service revenue growth of 2%, or 4% underlying when adjusted for a one-off deal in solutions in Q4 of 2022. Our copper decommissioning has now approached 90% completion rate. Mobile net intake amounted to 3,000 RGUs in Q4, alongside continued ASPU improvements.
The macroeconomic situation continues to affect some of our customer groups more than others. However, with moderate impact on our overall business. Then let's move to an overview of Sweden. End user, sorry. End-user service revenue growth for the total Swedish operations ended at 2%, driven by both B2C and B2B. Underlying EBITDA turned to 3% growth, mostly as higher end-user service revenue exceeded inflationary pressures and continued margin pressure from product mix changes as legacy services are declining. The cash conversion of 58% is reflecting full year CapEx of sales of 15%. Let's continue with the Baltics on slide 10. The total number of Baltic mobile postpaid customers continued to increase in the quarter. Organic ASPU continued to grow at a healthy rate, largely driven by Lithuania and our more for more strategy, price adjustments, and prepaid to postpaid migration.
When looking at the Baltics financials, the ASPU growth, combined with some volume growth in mobile postpaid, led to 8% organic end user service revenue growth for the Baltics as a whole, driven by Lithuania and Latvia. Underlying EBITDA also grew at 8% organically, as end user service revenue and somewhat lower energy costs exceeded inflationary pressures. Cash conversion remains at excellent levels and reached 74% by year-end, thanks to strong underlying EBITDA, despite full year CapEx of 10% due to ongoing 5G rollouts. With that, I hand it over to Charlotte, who will go through the financial overview.
Thank you, Kjell, and good morning, everyone. Please turn to page 13. So first, a few comments on the group P&L. In Q4, total revenue grew by 2% organically, whereas end user service revenue grew slightly more than 3% organically. In Q4, we had a revenue increase of SEK 13 million from international roaming year-on-year, hence, roughly in line with the contributions in the previous couple of quarters. Underlying EBITDA grew by 6% in SEK terms, and close to 5% organically. The underlying EBITDA grew slightly more than 4% organically, mostly as the end user service revenue growth, more than offset inflationary pressure and continued margin pressure from product mix changes as the legacy services decline. In Q4, we had SEK 11 million tailwind from energy year-on-year.
As you can see on the slide, our net financial items increased by SEK 80 million year-on-year due to high financing costs for outstanding debt. By year-end, we had a debt mix of 66% fixed rates and 34% floating rates. With that follows, for every 1 percentage point rate change by our central bank, our annualized financial expenses on loans with floating rates moved by around SEK 19 million. During 2024, we have some SEK 4 billion maturing, of which the majority is fixed and matures during the first half of the year. Then finally, the income tax was decreased due to higher taxable profits and, increased, due to higher taxable profits, and because last year was positively impacted by tax reductions related to investments made during the pandemic. Let's move to the cash flow.
CapEx paid increased in Q4 compared to last year due to continued high CapEx levels and the first tranche of the recently acquired spectrum in Sweden. Changes in working capital were negative in Q4, as expected, mainly driven by seasonally high levels of equipment funding, leading to a modest positive working capital for full year 2023. With that said, one of our focus areas a year ago was to reduce our inventory levels, which we have achieved following a reduction of some SEK 400 million. Another focus area was to improve the invoicing process towards Net4Mobility related to our network modernization. Here we have made tangible progress in 2023, albeit partly offset by new investments as we continue our 5G rollout. Working capital remains a priority for us, also going forward, and our ambition is to keep working capital cash flow neutral in 2024.
Net financial items paid increased due to higher interest rates, both on loans and leases, and coupon timing. Taxes paid declined, predominantly due to tax refunds related to year 2022. All in all, our equity-free cash flow for Q4 ended at SEK 0.5 billion, slightly above last year's level. Over the last 12 months, we have generated SEK 4.7 billion of equity-free cash flow, corresponding to SEK 6.8 per share, and consequently, in line with the dividend payments during the year. Let's move to slide 15 for our capital structure. By year-end, economic net debt amounted to SEK 25.6 billion, hence unchanged compared to year-end 2022. Our leverage ended at 2.5 times, which is in the lower end of our target range of 2.5-3x .
With that, I hand over to Kjell to introduce the next phase of our strategy execution.
Yeah, thank you very much, Charlotte. I'd like to use the opportunity to take a little bit longer perspective. As you may remember, I have been here for a little bit more than three years, and over these last three years, we have spent a lot of time working on integrating different parts of the business. Historically, of course, we consist of Tele2, Comviq, Com Hem, Boxer, and those with a long memory will remember that we also, many years ago, bought the TDC operations in Sweden. All of these brands typically have their own stack and their own billing, and over the last two to three years, we have made a huge effort to consolidate these assets, these legacy platforms, into two, one for consumer and one for B2B. Internally, we call that the legacy consolidation.
The good thing now is that, this spring, when we put these things together, we will start freeing up capacity to what we internally refer to as the development opportunity, where, we will be more focused on, developing, customer experience, new go-to market, digital channels. All of these things lead to improvements in the way we interact with customers, into improvements in our cost base. Of course, the focus on value is also a substantial change that we have been through over the last few years. Historically, quite a lot of focus on volume, now more on value, and you're starting to see it in the numbers. We are also starting to see it in the customer loyalty.
So I feel that we are now at, we're turning the page on a new chapter for Tele2, and we will look into the strategy execution program on the next page. I would like to highlight that this is all about creating customer value. This is about creating great digital channels. We already do a lot of the customer interaction in Comviq digitally. We want to be doing more of that in the Tele2 brand. And we, of course, wanna help Stefan in running B2B with the best tools available, and that is a primary target for us going forward. Self-service is, of course, an important part of the customer's interactions with us. We wanna dedicate more time and effort to developing these solutions. And as we always say, we are well on the way.
We're building a great 5G network, where we, for regulatory reasons, basically have to replace everything that we have in Net4Mobility, and that will be done by the end of this year. Next year, we will replace SUNAB with our own new network. After that, we'll be down to demand-driven investments, which will be lower costs and lower CapEx. Then when we talk about strategy execution programs, they typically are labeled cost programs. I would like to emphasize that at Tele2 now, the SEP, as we call it, is a value-led program, which has cost saving as a consequence.
But we're gonna follow up these cost savings that we have identified meticulously over the next two years, and we're gonna save those SEK 600 million, and they will be saved in a fairly equal way over the years, actually, maybe a bit more than a third in the first year. So this is all about reshaping customer journeys. It's about optimizing our go-to markets, and of course, as an effect, we're gonna realize these cost savings that we have identified. Which leads us over to the guiding section, where we, for 2024, uphold a similar growth level at 3%-4%. We'll be growing 1%-3% on EBITDA, and we expect the CapEx of sales to remain unchanged at 13%-14%.
This is a reflection of the heavy network investments and also intensified customer-centric transformation, which comes with some upfront costs. For 2024, we can also say that we currently estimate an energy cost headwind around SEK 90 million year-over-year, of which SEK 35 million relates to the energy support received in 2023. So this is in the numbers. We expect a slower Q1, with roughly flattish organic underlying EBITDA year-over-year. This is due to factors as yearly indexations on OpEx items and the fact that we are between two cost savings programs. Some of the phasing of the expansion cost, of course, comes in due to good sales last year. However, we are executing front-end loaded price increases, which should contribute meaningfully from the latter part of Q1 and even more, of course, throughout Q2. So expect a better Q2 than Q1.
Our midterm outlook is unchanged for low to mid-single-digit organic end-user revenue growth, mid-single-digit organic underlying EBITDA growth, as we will benefit from new levels of efficiency and value creation from the strategy execution program. In 2025, we expect 13%-14% CapEx to sales, driven by the final stage of the major 5G expansion in Sweden. As we have to shut down the SUNAB 3G joint venture by the end of the year, the spectrum that is allocated to SUNAB will, by that time, be moved to Net4Mobility, so we'd have to execute that change during 2025 from a regulatory point of view. From 2026, we expect, and we are fully committed to CapEx to sales, that comes down to historical levels of 10%-12%, as our network will return to being completely demand-driven.
With that, I'll hand it over to the operator for Q&A.
Thank you. Dear participants, as a reminder, to ask a question, you need to press star one one on the telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again... To ensure everyone has the opportunity to ask a question today, please limit yourself just to one question. Please stand by, we'll compile the Q&A roster at this moment. And now we're going to take our first question, and it comes from line of Andrew Lee from Goldman Sachs. Your line is open. Please ask your question.
Hi, good morning, everyone. I had a question just around the EBITDA growth, compared to the end user service revenue growth. So I guess investors this morning were positively surprised by the end user service revenue growth you're aiming for or guiding in 2024, but were negatively surprised, certainly relative to that, with the underlying EBITDA growth. Kjell, you went through a couple of the headwinds to EBITDA just a couple of minutes ago. You mentioned energy cost headwinds of SEK 90 million, among other things, and some yearly indexations of cost savings. But I wondered if you could break down the cost headwinds a bit more clearly in 2024, because it's obviously quite anomalous for a fixed cost telco to have such poor operational gearing.
And then maybe if I could just ask a follow-up, we're just trying to understand how your midterm outlook of mid-single digit EBITDA growth compares or balances with that low EBITDA growth in 2024. Like, is your mid-single digit midterm outlook what you hope to get to in the midterm, or do you still think you can average mid-single digit growth in the medium term? Thank you.
Thank you, Andrew. Yeah, so we're clearly planning for moving to mid-single digit later in the period as we are guiding for. And obviously, we see mid-single digit coming in in Q4 2023. Now, the task is, of course, to make sure that we do that throughout a full year and without having this quarterly variations that we see. I think it's partly down to the model that we have and many other telcos with more for more, where you have some roll-off, and then you start doing it again next year. That gives you a slower start to the year. We want to even out that thing.
Of course, we do still have the cost increases from inflation in the OpEx space coming in in the early part of this year. We see that that should abate over time. So it's just a transition into making sure that we can do pricing at the time that corresponds to other cost increases in the business. And of course, we'll be benefiting from the improvements we do in the program. The program is not only about saving costs in terms of internal costs, it's also about spending less money on external retail and commissions. And we have moved more over to a subsidized model, where we see more customer loyalty, where we have customers in binding, which gives us a chance to have longer customer relationships.
So it's a quite fundamental retake on the model. Tele2, the brand Tele2, did not use, for example, handset binding before. That's something that we have actually had to spend some time to reintroduce from an IT perspective. We see very positive effects of it. We see the majority of our sales are in some sort of binding, and of course, the base is increasingly becoming bound to us, and we see churn coming down. On the cost side, beyond that, we do have a program here that will lead to some reduced internal costs. That is something I'd like to maybe also speak a bit more about at a later point in time. There are internal processes that we should go through in a proper way before we communicate too much around it.
But the plans are very clear and robust in terms of what we're going to achieve.
Kjell, can I just, just a quick follow-up? So, you see, you're talking about energy cost headwinds and then cost indexation for inflation. But, given you're saying that you're gonna get, you know, a third of your SEK 600 million savings in Q4 2024, sorry, or, or a bit more, that cost inflation sounds like it's quite high. Like, what, what exactly is going on there with your cost infla- your OpEx inflation? Like, how big is the OpEx inflation or what, what kind of is the absolute headwind you're anticipating? Because it sounds like it's possibly high.
Andrew, I think it's an important qualification here. When I say we're gonna realize a third or more, then I talked about the exit run rate. So of course, it would come gradually throughout the year in different parts of the business. So the full year effect, of course, will be less, but we will carry it with us into next year.
Thank you. And just on that inflation, so what exactly inflation, are these inflation headwinds you're assuming? Because it sounds like it's quite a high degree of inflation to get to that 1%-3% EBITDA.
Well, if you look, if you look at a couple of practical things, for example, when you adjust salaries, you have a carryover into next year. This year, the agreement with the unions in Sweden is for an increase of around 3.3%, so that comes on top when it's pure labor costs. And then, of course, yes, it's clear that some parts of the equipment that we have been buying, not, I'm not talking about network equipment, but other things that, I, I'm not talking about 5G equipment, but other things that are coming to our network has had price increases due to the, the currency that had significantly weakened and the general inflation. So that's what we are compensating for in the business. And we are well underway with that, and we see-
... that we are going to be able to do that as well. It just comes in some steps.
Okay. Thank you, Kjell.
Thank you. Now we're going to take our next question. Just give us a moment. The next question comes from the line of Oscar Rönnkvist from ABG Sundal Collier. Your line is open, please ask your question.
Thank you. Good morning, everyone, and thanks for taking my questions. So, just on the 2025 CapEx outlook, I think you mentioned a 3G network closing. I assume that was already somewhat expected when you put out your previous CapEx guidance this summer. So just wanted to check if you could elaborate on what has changed between then and now, which have caused a different outlook for 2025. And also, if you could expand on the mix please, if the higher 2025 CapEx is purely on mobile network investments. Thank you.
I think we just probably need to do—we should have done an even better job at communicating it. Because I think we have been clear that in 2024, we are swapping everything in Net4Mobility . In 2025, we need to replace SUNAB because basically, SUNAB as a company, will have no spectrum from the first of January 2026. But I do see and understand that people had put in an expectation of CapEx coming down towards the end of 2025, and then we need to communicate better. But if you look at it in the grand scheme of things, it means that this job is done a little bit faster.
It means that we can be more careful in our demand-driven CapEx in 2026, and coming down to 10%-12% is a quite a very low number that you will not find almost anywhere else in Europe. So I think we're getting our CapEx story completely and firmly into place within the guidance that we have delivered now. Even at the peak CapEx, we are probably 3 percentage points, 2-3 percentage points lower than many of our competitors. But point taken, if people had the impression that there would be a lower CapEx than what we've said now, then our communication should be better.
Got it. Thank you very much, Kjell.
Thank you. Now we're going to take our next question. The question comes from the line of Andreas Joelsson from Carnegie. Your line is open, please ask your question.
Yes, good morning. Just a question on prices. A general question, basically, because 2023 was a year when the sector as such, probably had to look into prices more than usual. What, what's the key learnings from 2023 and into the future when it comes to pricing? And also just a clarification on the cost program, is that a net target, or is it a gross target? Thanks.
Right. I'll take that one, Andreas. It's Henrik here. Around the pricing, I'll hand over to Charlotte on your second part of the question. On pricing, we have implemented in 2023, very much in line with what we've been saying earlier in the last year around, you know, cost development and some of the offsets of that. And I think what, you know, you asked for the key learnings.
I think the key learnings are that in terms of if you want to successfully implement pricing, which I guess last year we've done quite well, and you see the full effect in our Q4 numbers, that you know, the customer base is quite resilient in terms of accepting pricing, as long as you know, the perception of the service is good and it's fair. And in that sense, we have been spreading the pricing quite a bit more than we have done in the previous years, where we had a very much a specific more for more pricing strategy, where we took certain cohorts of customers. So we've been spreading out the pricing more fairly. And I think in that way it turned out to be also more sticky.
And the key thing from that is it has sort of been an intermediate step to basically what we're implementing in 2024 and going forward, which I think we've also talked about last year, is that we're basically moving a little bit away from more for more to it's more like an annual pricing cycle. And in the annual pricing cycle, we will, you know, address all of our customer base instead of certain cohorts. And in the way we do the pricing, we take an orientation towards inflation development, so we're not hard coding it to inflation, but we're taking orientation to inflation development. And that's basically, you know, what we are implementing from 2024 going forward. This is the main avenue. We will also look at...
And with that, we're also changing our front book. So you can see, for example, our front book has the prices have been changed. Our unlimited entry offer, Snabb, has gone from SEK 399 to SEK 429, and our family offer from SEK 199 to SEK 219. And in line with that, basically, we're pricing all of the customer base for those customers that are not in binding. And that's basically, you know, on pricing. Yes, and hand over to Charlotte.
Yes.
To Charlotte.
Yes. So when it comes to the savings of SEK 600 million, as you remember, we had a cost saving program that we ended end of June of SEK 1 billion, and this will be a similar program that will be managing in the same way. So we will follow up in the same way, and so it will also, as the previous program, be a gross saving program. And I think it's also worth repeating that it also comes on the back of different initiatives that we see that we can do and in the business. So it's not a pure cost saving program, but also very much value-led, as Kjell mentioned earlier.
Thanks a lot.
Thank you. Now we're going to take our next question. And the question comes from the line of Stefan Gauffin from DNB. Your line is open. Please ask the question.
Yes. I have a couple of follow-up questions. First, on pricing again, but more relating to the Baltics. So, the Baltics has been the driver of growth over the last couple of years. A lot of that has been due to pricing. Do you still see room to drive growth through pricing in these markets? Or do you see a tougher environment due to macro? Secondly, could you-
We will take one to begin with, Stefan. So the answer to that is that we're very happy, of course, with the growth we've seen in the Baltics. I started off saying here that now the growth picture and the profitability picture of Tele2 is more balanced. We now see Sweden coming back with a stronger performance, which I think is great because it's better balanced. The Baltics came out of some years ago from a relatively low ARPU level. Prices have been increased. We have seen throughout 2023 that some of them have been almost in recession. Still, we've seen a good development.
I've been saying on this call for many quarters that we're very happy with the performance in the Baltics, but of course, we cannot expect them to run double-digit growth forever in terms of top line and EBITDA. I do see hope for continued decent, good growth in the ... A little bit different from market to market, but overall, yes.
Yes. Okay. And then just a question on the energy situation. Can you repeat on what you said for 2024? I guess that in 2022, you had some SEK 150 million in energy headwind, and then in 2023, you had energy tailwind of SEK 55 million. So what should we expect for 2024?
So I can actually take that. As you said, that we did have a tailwind in 2023 of the specific five that you mentioned. So our expectations for next year is a headwind of approximately SEK 90 million . And then SEK 35 million of that was then related to the government support that we had in 2023.
We should expect a headwind in 2024?
Yeah, that's what we said.
Yeah, but can you explain why, given the prices that we see in the market, why should it be a headwind?
It's a combination of both the volume and the prices. This is what we put in our budget. I think it's divided equally between Sweden and the Baltics. That's what we see and what the calculations that we made when we did the budget.
Okay. Thank you.
Thank you. Now we're going to take our next question. Just give us a moment. And the question comes from the line of Nick Lyall from Société Générale. Your line is open. Please ask the question.
Thank you. Morning, everybody. It was a quick one, please. Firstly, Kjell, could you, you've mentioned the IT migration as of spring. Could you just remind us what that enables you to do? Is it just cost cutting and digitalization, or do you think you'll be able to do a lot more in terms of bundling on certain brands as well? Will that, will that change the way you can actually launch brands in the market? And then secondly, in the statement, you mentioned specifically in your spiel on Sweden, that activity was higher in the fourth quarter. Could you just describe what you meant by that, and has that continued into the first quarter as well, please? Thank you.
Yeah. So, like I tried to explain previously, we basically consist of a number of different legacy brands. Tele2, Comviq, Com Hem, Boxer, TDC, with all them with systems that some of them were old and some of them were reasonably good. But whenever we wanted to do product launches, or we want to upgrade or change things, we would have to work in multiple systems at the same time. And of course, it's very, very inefficient. And then, of course, we have the world around us, the cybersecurity threats and all these things. So basically, what we have done is a quite massive consolidation of IT systems. And what that gives us is the opportunity to be faster in terms of our development....
plans, because we don't have to replicate in two or three systems before we can launch, for example, an FMC product. So it gives us higher reliability, it's easier to operate, and frees up some capacity for development for our go-to market. Something that Hendrik and Stefan definitely want, so that they can be at the top of their game also going forward. And we've spent a lot of time on that the last two, three years, to get that job done. And many telcos are not there at all, and may not be there for many years. So I think it's a very significant event, and that's why I devoted some attention to it.
The comment I made on the overflow from last year is basically that we had very good postpaid sales. And of course, when you work with external retail, you carry with you some of that, the commissions and these things in your books for some time, for the duration of the contracts and these things. But we are happy to take that with us, because it brings customers in, and decent ARPUs in the Tele2 brand. So it's a positive.
Okay. Thank you.
Thank you. Now we're gonna take our next question. The next question comes from the line of Ajay Soni from JP Morgan. Your line is open, please ask your question.
Hi there. Thanks for taking my question. So just I wanted to ask about the 2024 CapEx guidance. So, you obviously got a couple of buckets, such as the mobile equipment replacement, your 5G rollout. So do you think 2024 ends up being towards the high end of your range? And, just wanna understand, what risk do you see that it might end up higher than the 14% guidance, for example, inflationary pressures or, FX headwinds? It'd be good to just understand that a bit more. Thank you.
You mean the higher end of the 13%-14% range?
Yes, that's what I meant. Yeah.
Well, I think variations between 1 percentage point, that is, you know... If you have a special winter or a special summer or something like that, that's kind of the 5G rollout and these things. So we will end up within that range. But I cannot give you a decimal point where we will be within the range.
Okay, fine. But what do you see the pressures are being up towards the higher end of that range? Is, for example, inflationary costs or FX, those pressures you're seeing? Is there anything else that we should be aware of?
There are a couple of things here that is volume driven. Of course, how many base stations we swap, we need to swap all the base stations, so we have planned to do that. And then we will do limited, very limited rollout. So those are the volume parameters on the 5G. In terms of Remote PHY upgrades, that is something that we largely can steer and throttle. This year, we'll do more Remote PHY than we ever did before 2023. But we will not be maxing the potential there. And that is way of steering this.
In other areas, if we have costs increases coming up, that will be more of an OpEx issue, and we have planned for that. The CapEx guidance, 13%-14%, is something that we will come within there. The worst thing that could happen would be that we'll be too slow and come below 13%, because we really wanna get it done now with the regulatory rollouts.
Yeah, that makes sense. Thanks very much.
Thank you. Now we're gonna take our next question. It comes to line of Siyi He from Citi. Your line is open, please ask your question.
Hello. Thank you very much for taking my questions. My question is really on the free cash flow. I think in your opening remark, you suggest that the net working capital is going to be stable year-on-year. But I think in the past, you're talking about positive contributions. Just wondering, why the change? And, if possible, can you walk through, how should we think about equity free cash flow development for 2024? And maybe just leading to that, is that now it seems to focus on paying 100% of your free cash flow into, shareholder reviews, shareholder remunerations. But now we've leveraged that 2.5 x, and, just want to think, want to understand your recent thinking about, dividends going forward. Thank you.
I have to admit that I didn't quite understand. You said was something changed. I don't know what has changed.
Oh, sorry. The net working capital. I think in the past-
Oh.
The net working capital is supposed to be positive for 2023, 2024, and 2025. Just wondering why you're now expecting a flat development.
Yeah, I can start on that. I mean, clearly we-- if you look at our postpaid business in Sweden, we, we increased our number of postpaid subscribers by 80,000, and that, of course, link, is linked to our binding and handsets. So that's a very, very positive development. But it does bind some, some, working capital. With respect to the balance sheet, my, my view on that is clear. We, even with the, the CapEx, that we planned for, for this year, all other things equal, excluding any other events that we are, you know, M&A or things like that. But operationally, we expect to, to be at the lower end, of that, of that range, also end of, of this year.
So, we are in a solid position, but we think it's prudent what we have done now on to propose so that the board has proposed an increase in the dividend within the framework that we have. Did you wanna add something maybe on working capital, Charlotte?
No, I think that we, of course, we are continuing working on the working capital. That's one of the priorities, as I mentioned. But I think that we are—what we're saying is that we are seeing it to expect to see it be more neutral for the year. And as you know, this is the small variations, and it's quite difficult to foresee, but we are confident that anyway, that we are keeping it neutral for the next year or for this year, sorry.
Thank you very much.
Thank you. Now we're going to take our next question. Maurice Patrick from Barclays, your line is open. Please ask your question.
Yeah, good morning, and thank you guys for the presentation and hosting the Q&A. From my side, it's a fairly basic question. Sorry for it. But in terms of the number of sites you have in Sweden or radio sites you have in Sweden, you obviously have sites with Telenor on a JV, also inside SUNAB with its own sites. But I'm curious to understand a bit around as SUNAB is turned off, you seem to make reference to migrating frequencies to the Telenor joint venture. Do you think you'll need to roll out more physical sites to replace the SUNAB ones? Or is it more a question of just migrating more from one network to the other on
Just curious to understand that sort of need for more sites, whether it's coverage, whether it's capacity, densification, or it's more around migrating frequencies, would be very helpful? Thank you very much.
Yes. So, currently, the spectrum that SUNAB operates on is available until the end of 2025. There was an auction in September last year, I think it was, where that spectrum was re-auctioned, and that will then come into place first of January 2026. Net4Mobility bought back that spectrum, or part of that spectrum in that auction, and will have to operate those frequency bands as of the first of January 2026. SUNAB as an entity, will of course, then not be delivering services in Sweden, and the coverage that SUNAB has today, will have to be replaced by Net4Mobility. In itself, this actually gives an opportunity to optimize the network because there will be one end-to-end network planning.
And if you go back to our capital markets, say, in 2021, Yogesh outlined how the initial, 4G, 5G network or the, the initial network that we built, after SUNAB is closed down, will actually have a few fewer base stations than the combined Net4Mobility and SUNAB , because we can put this all together. But yes, in 2025, the rollout we're gonna do is to make sure that we, cover those coverage holes that otherwise would have been when SUNAB is, shut off end of 2025.
Okay, so there should be an expectation you will actually roll out brand new sites on new towers and locations in 2025.
Yeah, in 2025 we'll do that because, of course-
Yeah.
... SUNAB is a 3G network, and that's not gonna be very future proof. So clearly, we need to upgrade also the coverage and the technology for the coverage that SUNAB has given us. So that is gonna be done with new networks.
Okay, thanks so much indeed.
Some of it overlaps, but not everywhere.
Thank you.
Thank you. Now we're going to take our next question. The next question comes from the line of Fredrik Lithell from Handelsbanken. Your line is open. Please ask your question.
Thank you. Good morning. Thank you for taking my question as well, a detailed one. I was curious to learn more about the legislation on registering prepaid numbers in 2023. How far into that are you? How much of your base of prepaids have actually registered? And is there sort of a deadline for when this has to be completed or something like that would be interesting to hear. Thank you.
Hendrik?
I can take that one. Yeah. So, Fredrik, on prepaid, the legislation basically went into effect, you know, very much early in 2023. And, you know, from, I remember, either February or March, you know, all new customers and existing customers that wanted to top up had to be registered. So basically, the full base of prepaid customers is registered.
Okay.
As we speak today. And, you know, on that process, we've done a lot around digitalization. So, a lot of the talk about how we deal with customers, all, all fully digitalized, and it's a very sort of easy customer journey. And of course, what you're seeing basically in the numbers is, you know, on a year-on-year comparison, a bit of a more, you know, a more difficult, comparison, but as we go into this year, it will, sort of be, compared to a registered base. More applicable.
Okay, perfect. Okay, perfect. Thank you.
Thank you. Now we will take our next question. Just give us a moment.... And the next question comes from the line of Keval Khiroya from Deutsche Bank. Your line is open. Please ask your question.
Thank you for taking the question. So Q4, obviously, saw meaningful improvement in Swedish EBITDA growth to 3%. Do you see this EBITDA growth as sustainable for full year 2024 for Sweden? And can you provide some comment on how we should think about B2B in 2024? Obviously, it's been very strong in 2023. Thank you.
Starting with B2B?
All right, Keval. Stefan here. Thanks for your question on B2B. I would say that, looking at 2022 and 2023, we had, as you said, a strong performance overall, coming from a couple of years of decline. Going into 2024, I would say that we expect similar development that we've seen for the full year. Then it can vary among the quarters, dependent on some one-offs that we had. In Q1 last year, we had a one-off on fixed revenues, so the comps versus Q1 will be a little soft, or harder. But overall, you can expect on a similar development that you see in 2023.
Then the unknown is a little bit where the macroeconomics are going, and the cost pressure on customers, et cetera, and how much they can invest. And I would say that is sort of the unknown for us. Let's see how that plays out. And I think the beginning of the year will be really significant for the full year. Hope that answers your question.
Yeah, and on the timing, I mean, we already touched upon that, I think, to some extent, in terms of the timing of the annual price adjustments, in terms of when OpEx things are coming in. So I think we actually touched on how that plays out throughout the quarters.
Maybe just to add on, Kjell.
Yeah.
So as I was pointing out, that we do move to another, you know, evolving our pricing strategy, where with more for more pricing, Keval, you would typically see a more back-ended coming to, you know, into the full, into the full materiality, like we see it in, in Q4. You will probably see this coming a little bit, you know, more front-loaded, as Kjell, as you were alluding to, right? For the full effect.
Yes.
Thank you, Keval.
Yeah. Sorry, yeah, but just on that, I was just trying to work out whether for Q4, we saw Sweden EBITDA growing 3%. Is that kind of for the full year 2024, would we also see this as sustainable? I get there's the timing effects around the price raises.
I don't think we're going into detailed guidance on the individual countries. We have never done that before. So our guidance is for the whole group, and I think we will, we'll stay there.
Okay. That's clear. Thank you.
Thank you. Now we're going to take our next question. And the question comes from the line of Zahir Ramcharan from Redburn Atlantic. Your line is open. Please ask your question.
Hi, good morning, everyone. Thank you very much for taking the questions. I just had a question on the phasing of the restructuring costs. So I appreciate the color on the exit rate for this year on the savings, but is there any detail on how those SEK 600 million of restructuring costs are sort of phased between now and 2026? And then secondly, just quickly on the lease payments this quarter, just unusually, I noticed they fell about 8%. They've been growing 5%-6% the previous two quarters. Is that just phasing and timing, or is something more structural change there? Thanks.
Well, when it comes to the phasing of this restructuring costs, it's nothing that we have guided on. But I think that we expect it to be quite evenly spread, for the time being, anyway. Then you said, you said something about leasing payments, phasing on the payments?
Yeah.
Not sure about that. Let's see,
So while we're looking into that, I mean, yeah, you should expect that we will-
Yeah, it's probably just phasing-
Okay.
I would say. Nothing else.
Okay, great. Thank you very much.
Okay.
Thank you. Now we're going to take our next question. The question comes from the line of Usman Ghazi from Berenberg. The line is open. Please ask your question.
Hi, thank you very much for the opportunity. Just had a question on the working capital commentary around, you know, being neutral. I just wanted to understand if this is conservatism or something else, because obviously the... I can understand that, you know, growing postpaid volume on handset financing absorbs working capital, but, you know, you can offset that with factoring receivables as well, right? So in this assumption of flat, are you assuming that you do any factoring, or could this be upside if you go about it with through factoring of receivables? Thank you.
Yeah, we do factoring, so, but there is a delay in terms of they come in. You have to send them the first invoice for the first month, and then after, only after that, can you go into the factoring. So, clearly, we are using factoring for our handsets. You want to add something?
No.
Right. So, is it that in 2024, there's a bit of a lag as factoring volume take up, and therefore, we should expect something positive in 2025? Or is it that, you know, you would-
... factoring is actually allowing you to achieve a neutral positive, a neutral working capital?
I mean, the factoring is, it's in according to the sales, and we had a little bit of a higher sales in Q4. So that's why we might see some of that increasing in the first quarter, as these customers are then switching on their subscription. But I think that will be phased out by other customers. So, we don't see any major impact of that. And as also mentioned previously, we are always working on our working capital, so on all different or cash flow on all different parameters. So we are still guiding on control.
Thank you, Usman. Now we're going to take our next question. The question comes to line of Viktor Högberg from Danske Bank. Your line is open. Please ask your question.
Yeah, good morning. So just a follow-up on the pricing and your ambitions for the Baltics for the year. Sweden, we've already seen some hikes. What should we call it? The index linking and strategy, will that roll out over every market? Or, any details you could give us on that would be appreciated. Thank you.
Actually, the Baltics, in general, they do a little bit different from country to country. But in general, they have a very well-functioning system around this. They especially when they have customers in contracts, they have a methodology for approaching them at certain intervals of the customer relationship, and then offering them renewal handsets and different ways of reestablishing. So that happens more throughout the year. It's not a one-time event only that happens in that space. And I think ultimately, we'll probably do more of that also in the Swedish market, a little bit down the road.
Thank you. Now we're going to take our last question for today. Just give us a moment. And the question comes from the line of Adam Fox-Rumley from HSBC. Your line is open. Please ask a question.
Thank you very much. I had a quick one on the balance sheet, please. You've been at the low end of your guidance range for a while. Have you got any thoughts on does that, that guidance range need to be adjusted? Is there any way that it could be adjusted? Does the board need to think about anything there, or would you recommend the board change it at all, or are you still happy with it? Thanks.
I think it has served us well to have a strong balance sheet during the turmoil we've seen the last couple of years. I think the board, of course, has every right and opportunity to think through what they think is the right approach for the future. But I don't wanna signal any kind of change at this point of time. I think it's a fair question, but I think it would have been a bit risky if we had been laying much higher up in the range or two years ago than we had than we did.
Now, we've been able to navigate through the turmoil with the ability to make the right decisions for the future, not having to optimize to make sure that we can come through the next couple of quarters without getting into issues with our leverage.
Thank you.
Thank you.
Okay. Well, at that point, operator, I think we say thank you to everyone for taking the time to have this discussion with us this morning. We're coming out of 2023 with a strong Tele2 that has done a lot of the preparations we need to do on strengthening our platforms. We are well on the way on the 5G. We have visibility and clarity on when we will return to a historically normal CapEx level again, with our plans in place. We see a balanced Tele2, with a stronger performance overall in Sweden. We see a strong postpaid momentum and broadband momentum in B2C in Sweden. So, and our balance sheet is, of course, at the lower end. We are increasing our dividend again.
So overall, we still have lots of work to do, but we're in position to make the right decisions for the future. So with that, I'd like to just thank you for your attention, thank you for your questions, and hope you will have a nice day.
That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.