Good day and thank you for standing by. Welcome to the Tele2 Q1 Interim Report 2025 conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To register your question, please press Star Star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our speaker today, Jean-Marc Harion, President and Group CEO. Please go.
Thank you and good morning and welcome to Tele2's reports call for the first quarter of 2025. With me here in Kista today I have Peter Landgren, our Group CFO, and for Sweden, Peter Scherman, our Chief B2C Officer, and Stefan Trampus, our Chief B2B Officer. Please turn to Slide 2 for a brief recap on our transformation plans and progress so far. 2025, as you know, is a transformation year for Tele2. Our objective is to build a faster, simpler and more agile Tele2 by coming back to Tele2's original challenger culture. I am happy to present you today the progress we have made over the first quarter of 2025 to simplify organization, control our cost and prioritize our investment. We have reduced our workforce by more than 450 positions at group level by the 15th of April. We have reopened and renegotiated 20% of our largest contracts.
We have implemented a new cost governance to scrutinize and challenge all our expenses and we have now a new leadership team in place. Even more importantly, our cultural shift, especially our cost consciousness focus, is strongly supported internally and I want to take this opportunity to thank all Tele2 employees who actively contribute to get us back to the original Tele2. Please turn to Slide 3 for some financial highlights. I'm happy to report that our Q1 equity free cash flow has been improved already by the first steps of our ambitious transformation program with the additional support of some one-offs. End user service revenue grew by 1% in Q1 driven by the Baltics' excellent performance.
We are facing some headwind on the top line in Sweden where our revenue growth has been burdened mainly by the migration of Boxer off the terrestrial network with a higher revenue impact than expected. On the other hand, we have had a solid start to underlying EBITDA with 6% growth in the quarter largely due to the speed of our transformation. The first workforce reduction has been implemented earlier than expected in the Baltics, most of the restructuring has been executed in January and February. In Sweden, we have registered some early workforce savings already in Q1 due to consultant and voluntary leaves. Nevertheless, it's important to remember that the ongoing workforce reduction that will be executed during this year has only a limited impact. In Q1, equity free cash flow amounted to SEK 2 billion, supported by some temporary items that we will detail later.
In a nutshell, so far so good, but we are only at the beginning of our journey. The largest part of our transformation work is still ahead of us and we keep focusing on operational optimization. Meanwhile, we reiterate all the components of our full year guidance and let me add two comments on the development of the company. During our transformation, we continue investing to improve our customers' experience. Our 5G network, whose rollout will be complete by year end, already offers the largest broadband reach in Sweden. The strengthening of our distribution channel plays a key role in our transformation and we recently completed the revamping of 32 stores and we also opened four new stores in Sweden including in Stockholm. In terms of sustainability, we are proud that our climate A rating with CDP was reaffirmed once again.
We were also ranked number one in Sweden and among the top 40 companies worldwide in equity gender equity ranking. Please move to page four for more details on our results. As I said, end user service revenue grew by 1% organically in Q1, mostly driven by the Baltics, whereas organic underlying EBITDA grew by 6% driven by sharp cost control across all operations and the top line growth in the Baltics. Our strong equity free cash flow included a few items subject to reversals, namely working capital and CapEx timing in addition to a tax refund. Peter will walk you through the details in a moment. Our leverage stands at 2.2 times ahead of the proposed first dividend payment in Sweden.
Consumer end user service revenue declined by 1% as our growth in core connectivity was upset by a significant decline in Boxer TV following the decommissioning of terrestrial distribution at the beginning of the year. In Sweden, business end user service grew by 1% alongside with continued solid mobile LG growth. Underlying EBITDA in Sweden grew by 3% thanks to ongoing cost optimization efforts. The Baltics grew end user service revenue by 7% with strong growth in all markets. Underlying EBITDA grew by a massive 15%. The turnaround in Estonia continued to produce good results also in this quarter. Let's move to Slide 6 for more details on Swedish Consumer Mobile end user service grew by 1% driven by 3% in postpaid, partly offset by continued decline in prepaid. Fixed broadband grew end user service revenue by 5% mainly due to solid ASPU growth, while Tele2 TV remained largely stable.
End user service revenue for DTV declined by 10%, largely driven by Boxer TV migration for full year 2025. We now anticipate Boxer revenue to be roughly SEK 225 million below 2024 with a slightly negative year on year impact on EBITDA. Looking forward to the rest of the year, we count on our recently launched TV Hub 2.0 service and the revision of our content portfolio to improve the profitability of our TV business. Let's look at consumer KPIs on slide 7. Mobile postpaid ASPU declined slightly in this seasonally low quarter in which we also executed price adjustments similar to Q4. ASPU declined by 1% year on year driven by increasing IFRS 15 fair value adjustment due to family discount and an increase in the customer base with handset installment plan excluding the fair value effect.
As ASPU grew by 1% for Q2 Q4, we expect the price increases introduced in March to drive postpaid ASPU up again. Fixed broadband added 1,000 RGUs in Q1 whereas ASPU grew by a solid 5% due to price adjustment. Our TV business lost 25,000 RGUs in the quarter entirely related to Boxer in this first quarter without terrestrial distribution. During the last few weeks we have renegotiated some content contracts including a new partnership regarding global streaming service Max and we launched a new flexible TV package offer with upgraded TV experience with TV Hub 2.0, making our entertainment proposition even more attractive for streamers and cord cutters. Please move to Slide 8 for Sweden Business in Q1. Sweden Business reported 1% end user service growth. Growth across our IoT and large segments was partly offset by the micro segment which is particularly sensitive to economic conditions.
Mobile grew by 1% driven by our IoT business and solid LGU. Growth in SME and public, however, partly offset by an IoT-related network outage. Mobile ASPU was mainly impacted by a change in consumer mix. Year on year, solutions grew by 2% whereas fixed declined by 3% as a result of the continued stabilization following the copper closure. Tele2 IoT was once again recognized in 2025. In 2025, Gartner's Magic Quadrant for managed IoT connectivity service worldwide ranked among the top 15 in the world and the top 10 in Europe. Please move to Slide 9 for Sweden Financial. To summarize, our Swedish end user service revenue was flat in Q1 as growth in business was offset by the slight decline in consumer. Underlying EBITDA grew by 3% thanks to sharp cost control and ongoing renegotiation of large contracts.
The cash conversion has improved to 60% over the last 12 months and let's move to Baltic financials on slide 11. I want to underline the excellent performance of our Baltic operations which have delivered very strong top and bottom line growth in Q1 in the Baltics. Total end user service revenue continued to grow at a healthy 7% in Q1 with solid performance across markets supported by previous and recent price adjustments. All markets grew underlying EBITDA by double digit in Q1 leading to 15% growth for the Baltics as a whole in addition to top line growth. Strict cost control and workforce reduction have contributed to this excellent result. Cash conversion increased to a strong 76% during the last 12 months reflecting increasing EBITDA margin. Let's move to slide 12 for Baltic operating KPIs.
All markets delivered positive postpaid net intakes in the quarter with a special kudos for Tele2 Estonia turnaround. It is important to note that the prepaid base in Lithuania was impacted in Q1 by the introduction of prepaid SIM registration. As a result of this registration, the drop of 138,000 prepaid RGUs is due to churn of inactive users, prepaid to postpaid migration, and significantly lower gross intakes in the market. Blended organic ASPU increased by 7% with healthy growth rates in all markets driven by more formal strategy, price adjustment, and continued prepaid to postpaid migration. With that I hand over to Peter who will go through the financial.
Overview. Thank you Jean-Marc and good morning everyone. Please turn to page 14. First a few comments on the group P and L. For the quarter, total revenue remained unchanged while end user service revenue grew by 1% organically driven.
The underlying EBITDA grew 7% and underlying EBITDA after lease grew by 6% driven by the end use of service revenue growth in the Baltics and sharp cost control across the group. Items affecting comparability increased by 100 million year on year to SEK 287 million in Q1 largely related to redundancy costs connected to the workforce reductions concluded mid April. Net financial items decreased somewhat year on year due to lower average interest rate on our outstanding debt down from 3.2% in Q1 2024 to 2.9% this year in Q1. We had a debt mix of 60% fixed rates and 40% floating rate. Let's move to the cash flow on slide 15. Amortization of lease liabilities decreased by around SEK 50 million mainly due to a SEK 90 million reclass from working capital. Adjusted for that, our ongoing network expansion continued to increase amortization levels year on year.
Capex paid decreased by around SEK 160 million due to lower investments. Changes in working capital were mainly impacted by elevated redundancy provisions related to the workforce reductions and a seasonal decrease in equipment receivables. Net financial items paid decreased slightly due to lower financing costs for our outstanding debt. Taxes paid and received decreased by around SEK 200 million thanks to a tax refund of around SEK 280 million this quarter. Last year included settlements of taxes paid of SEK 93 million related to previous years. All in all, equity free cash flow added up to SEK 2 billion in Q1, an improvement of SEK 730 million year on year. It's certainly a very good start to the year. However, with support from the tax one-off temporary tailwind from working capital and somewhat low capex intensity, equity free cash flow per share over the last 12 months reached around SEK 7.4 per share.
Let's move to slide 16 for our capital structure. End of Q1 economic net debt amounted to SEK 24 billion, some SEK 2.2 billion below full year 2024 thanks to the cash generated in the business. Now in Q1 our leverage ended at 2.2 times underlying EBITDA after lease, which is below the lower end of our target range of 2.5-3.0 ahead of the proposed dividend payment a few weeks from now. Adjusted for that dividend, pro forma leverage would have been 2.4 and with that I hand over to Jean-Marc for some comments on our 2025.
Guidance.
Thank you, Peter. Following the first quarter, we remain confident in our capacity to execute our transformation and our ability to deliver on our 2025 guidance, which we reiterate on all parameters. We target low single-digit organic growth on end user services revenue, including around 1 percentage point drag from Boxer. As said in Q4, Swedish consumer has executed back book adjustment in Q1, with the majority realized in March. The Baltics will continue to benefit from pricing going forward, both recent and those implemented from summer last year. We are well on track to deliver on our mid to high single-digit organic growth on the underlying EBITDA.
Following workforce reductions in the Baltics and in Sweden we have reduced more than 450 positions of the 600- 700 full time equivalents that are planned for the year. In 2025, our CapEx to sales ratio will be in the range of 13% during this final year of intense 5G network rollout. We continue to expect a midterm range of 10%-12% from 2026 onwards. I hand back to Peter for some additional comments regarding 2025 before we open up for Q& A.
Thank you. Jean-Marc. A few comments on the P& L for 2025 regarding one-off items. We currently assume around SEK 500 million of restructuring costs this year, of which SEK 288 million was reported in Q1. On savings from workforce reductions. Please remember that roughly 80% of our workforce costs impact OPEX, while the remaining share impacts CAPEX. Also, I repeat what Jean-Marc just said about the Boxer effect. For the full year 2025, we currently anticipate Boxer revenue roughly SEK 225 million below 2024 levels and with a somewhat negative year-on-year impact on underlying EBITDA. A few indications on the cash flow for 2025. In Q1 we will pay the final roughly SEK 370 million for the Swedish spectrum licenses that we secured in 2023 on changes in working capital.
Despite the positive development in Q1, we still do not plan for any major impact on a full year basis and on the timing of financial items paid. Last year's phasing between the quarters is indicative also to the 2025 phasing with higher payments in Q2 and especially Q4. Let's finish with some words on taxes for the full year 2025. We currently estimate net tax payments of around SEK 1 billion, including the SEK 280 million refund we received in Q1. Looking forward, our normalized P&L tax should be in general around 20% of profit after financial items. Our annual taxes paid should be over time some SEK 300 million higher than our normalized P&L tax, referring to non-tax deductible amortization of surplus values from acquisitions. With that I hand over to the operator for Q&A.
Thank you. As a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. Please stand by while we compile the Q& A roster. We will now take the first question from the line of Andrew Lee from Goldman Sachs. Please go.
Ahead. Yes, good morning e veryone. Thank.
You. I had two questions. Firstly on the Swedish end user service revenue growth outlook and then secondly just on your cost cutting. On Sweden you saw a negative inflection in the first quarter, which you laid out was partly driven by Boxer headwinds and the IoT outage in business. You obviously kept the low single digit guide for FY2025. Could you just give us a bit more clarity just on what gives you the confidence in this? Maybe talk through the building blocks to improving the Swedish end user service revenue growth through to the end of the year and maybe include some commentary on the Swedish consumer pricing environment. You obviously commented on your own price rises on the cost cutting.
Any help you can give us in terms of understanding the amount of drop through cost savings from your headcount reductions you've made in Q1 or already in Q2 would be really helpful. If you can't give specific numbers around that, maybe on a broader basis. If you could just help us understand the amount of cost savings that are dropping through from the headcount reductions or anything that's getting in the way of those cost savings making it through to the bottom.
Line. Thank you.
Thank you for your question. I believe that Peter is the right person to answer your first one about the evolution of consumer revenue in Sweden in the rest of the year. Peter will take over the second question about the cost cutting. Peter, if you look at.
The first quarter, we have seen a decline in Boxer in particular that was a little bit larger than we planned. But we have still seen a healthy growth in the core connectivity which is mobile and broadband. Going forward our pricing is always front loaded. We have executed pricing in March that went through and therefore since from Q2 and onwards you will start seeing an impact. We have executed pricing on broadband and mobile on about 80% of the base. There's a little tail to remain for the rest of the year due to bindings and we will likely get the pricing on entertainment, meaning on TV, larger in quarters. So you will see from next quarter the impact of the pricing and you can do the.
Comparisons.
Now, to your point about the market dynamics, I think it's still got net positive. We see pricing across the b rands.
Both on the front books and on the back books. These numbers are this time lower than what they were in previous. That's due to also low inflation in the country. But we see, you know, there's quite a significant promo activity now on the market, including, including sales in activity in external retail, which is something that all the operators will need to review going. Forward.
Okay, Peter, on the cost cutting.
Yes, thanks for that question. I would say like this that first I think we should remember there's some savings that has already been materialized in Q1, as Jean-Marc pointed out from consultancy leaves and voluntary leaves. Some help already there. From mid-April we will see the benefits, reap the benefits in the financials of the more than 450 positions that Jean-Marc mentioned, about 100 of them roughly in the Baltics and the rest in Sweden. From mid-April we'll see those benefits. Maybe just keep in mind that we also have salary increases in Sweden coming in from mid-April. That's worth note. Thank you.
Can I just add just one quick follow up question on your commentary on Peter's commentary around the Swedish growth. Given the March price rise you highlighted scheduled, should we expect already in the second quarter that you get back that we're back at low single digit Swedish end user service revenue growth or will it take time for that to come through throughout the.
Year? Yeah, I would recommend that you take, you put what Peter said in the perspective. First, the reality of the market and second, the idea for accounting rules. Let's not forget that we need to transform the revenue growth into IFRS 15 revenue and EBITDAaL. That of course has an impact, especially in a market where handsets are binded and subsidized by the operators. The second point is of course that when we adjust the prices, and of course it comes in different form depending on the segment, we as well, and it's not only Tele2, but the operators balance the price increases with promotions and incentives, for instance to buy bundle and so on. Yes, we see a positive trend.
In a nutshell, I believe that the most positive observation that we can make on the Swedish market is that customers have now accepted that telecommunication price should slightly increase year after year to reflect on the overall cost of living, increase the salary increase and so on, which is good. Telecommunications service cannot be an exception in an overall economy where all the prices are increasing. The translation of the price.
Adjustment.
Into revenue and EBITDA growth is, I would say, always more complex than it looked like because of the promotion impact. Of course, this market remains a very vivid market and the IFRS transformation, I would.
Say. Thank.
You. Thank you. We will now take the next question from the line of Andreas Joelsson from Carnegie Investment Bank. Please go.
Good morning everyone. Just one question from me. When you go through an exercise like you have done now and looking through the costs and the processes and the organization, the experience is that you might find additional things that you can do that you did not think of initially. Just curious how these last couple of months have made you view the potential on costs and CapEx in the company over time and potentially also how you can use what you have found to turn the service revenue growth pace over time. I am not talking about short term here, but your view of those impacts that you can do on the.
Company. Thanks.
You're totally right. I believe that here I speak on behalf of the entire global leadership team in Tele2. You know, this first phase of the transformation of the company was driven across all the divisions in all the areas of the business in Sweden and in the Baltics. It was a kind of overall simplification of our organization with the systematic challenge of all our costs and systematic reopening of our largest contracts. Of course this has brought some results. You're perfectly right and we knew that when we started the transformation. This exercise has opened our eyes as well on some areas where there are still more complexity that we would like to see. This will be of course the focus for second and third step of the transformation.
Here we are going to analyze deeper some areas in order to see what we can do to improve. For instance, on the B2B we have done a lot of things to simplify our portfolio. Maybe Stefan wants to say something about that to give you an example of how we.
Proceed.
Yeah. Hello, Andreas. In the B2B business, what we're doing is to improve both capabilities, but also some profitability elements. One area that we are looking into is portfolio update where we're working on prioritizing services that support volume. In the connectivity business, we are also prioritizing services and products that have volume and economics of scale, also that provide the sufficient profitability and the margin that we see that we want to have long term. Of course, it also proves that it has a good sales potential in the long term. I would say the last thing to mention in regards to the portfolio, what we will acknowledge looking forward is that we will have product services that have a low impact on the workload. That is things that we're doing on the portfolio.
Maybe I can also elaborate a little bit other aspects of what we're doing. We're looking at IT modernization, which I was talking about during the last call that we had for Q4, where we're doubling down on modernization of our IT infrastructure, where we become more efficient in our way of.
Working, we will.
Have better customer experience with the monetization that we're doing, where we will increase quality, efficiency, etc. This will also allow us to grow more profitable when we handle our products more efficiently. It will also mean that we will focus on some products and be able to grow in a better way. A couple of things that we're.
Doing.
Okay.
Excellent. This is only for B2B, of course, just as an.
Example. Very.
Good. Thank.
You. Thank you. We will now take the next question from the line of Stephan Kafin from DNB. Please go.
Ahead. Yes, hello. A couple of questions relating to the personnel reductions. You mentioned 100 persons in the Baltics. Is that sort of the final number for the Baltics, and could you provide a split per market? Secondly, with the remaining reductions in Sweden, will that primarily happen in Q2 or when should we expect those to happen? I will have one follow-up question after, but we can take this.
First. Okay, thank you for your question. Peter is going to answer these two.
Questions. Yes, hi Stefan. We will not provide a more deep split than that. Roughly 100 in the Baltics and the rest is what we can share. Looking forward, the timing on that is something that we will not talk about right now. We take a step back and see how this will progress going forward and then we will come back with more information during the period.
Year. You know, we partly answered this second question in the.
Previous, meaning.
That what we are going to do as the next step is of course take the consequence of some of our specific simplification in some areas, and this of course will require deeper analysis and the work is ongoing but not ready yet. You had a third.
Yes. This is perhaps just a clarification. You mentioned that in Lithuania there was a deferral of cost until later. Can you quantify this impact and will this hit the Q2 numbers? I can comment on that one. Yes. It is about market timing in marketing spend where we had quite low spending in Q1 and it will come back later. We will not give any specific numbers on that. Still, underlying progress in the Baltic EBITDA. Okay, if I look at the deviation versus consensus, it is around SEK 40 million in Lithuania and is the bulk of this explained by this deferral cost. No, not the bulk of it. Besides that, it is difficult for us to comment on exactly the expectations externally. It is a good underlying result as well in.
The.
Seasonally.
Okay, thank you. Thank you.
You, thank you. We will now take the next question from the line of Oscar Romviest from ABG Sundal Collier. Please go.
Thank you. Good morning all and thanks for taking my questions. Just the first one on your EBITDA after leases guidance. You obviously have still quite wide range of mid to high single digit and I think you already obviously delivered 6.3% organic EBITDA growth in Q1, and you have not really seen the impact from all of the workforce reductions that will also support Q2 a little bit. Can you just talk a little bit about why you keep at the lower end of that? I mean, what impact are you sort of building into that if we would see a deceleration in the underlying EBITDA growth for the next coming quarters?
Thanks. I believe that the answer comes from, I would say, a very straight and humble statement. So far, that's true that we have been fast in delivering the first results of our transformation, but to be honest, we have picked the lowest hanging fruit in the tree and now we need to go a little bit higher to catch and collect the other fruits. Of course, we are very happy and I'm very proud of what the teams have delivered in terms of cost, efficiency, contractual negotiation. Of course, as well, the largest part of the transformation is still ahead of us. That is why we are, of course, optimistic about our ability to deliver the guidance that we have committed on. We still want to remain focused on the execution and the delivery.
When you mentioned the workforce reduction, yes, we have been able to execute the first tranche, but as we were commenting earlier, we now need to dig into more detailed analysis to understand how we can rapidly simplify and improve and optimize processes in specific areas. That is why we believe that we need to remain a little bit careful because we know what we have done and we are confident that we can deliver what we have committed on. I do not want to give the impression, I do not want to give the impression to anybody that we consider it will be a walk in the park. Of course we are very happy to have delivered this first result.
As I was commenting in my letter in the quarterly report, these past few weeks have been painful for the company and for a lot of our colleagues. That is my only comment to your question. I believe that we are on a good path, but we are not there.
Yet.
Perfect. Thank you very much. Just the next question on the ASPU trends and I'm particularly looking at the fixed broadband in Swedish consumer and also the mobile ASPU in B2B. First on the broadband ASPU, we can see that accelerating from around 9% a few quarters ago down to around 5%. As you mentioned, you've done some price increases that are going to take effect from March, but you obviously did that last year as well. If you could comment a little bit about the levels of price increases compared to next year. Just looking at the ASPU trend, if we could still see that declining, given that the price increases will be slightly lower this year than compared to last year. Also on the mobile ASPU in B2B, that has fallen quite sharply as well.
I think the peak at around 7% is now down to minus 4% and you highlight that it's impacted by a change in customer mix. Just given the trend, is this purely driven by customer mix or is it something underlying with the pressure on the mobile.
ASPUV?
Thanks.
Peter is going to answer for B2C Sweden and Stefan will complete on.
B2B. I guess part of the answer is what I said before. There will be price increases have been executed largely in March, so there will be more effect visible to everyone in the coming quarters. As one, that's true for both broadband and.
Mobile.
The pricing levels, as I said, were a little. The pricing is a little smaller than what they were whatever in past years because generally the inflation has been lower in the country and therefore the adjustments were.
Lower. All right, thanks Oscar for the question.
That gone B2B if we zoom out.
A little bit, I think we start off with the macroeconomics for Swedish companies. I mean it has continued to be a tough market environment. What we've seen for some time is that many customers are struggling with growth. I can say that we see that in the reports that are coming from the companies as well, which means that they need to address their cost base. That is what they have done. It also has affected us. What we see now for some quarters is that in the smaller segments we have high bankruptcies with customers that we are churning with high ASPU in the SME. In the large segments, we see that they are doing adjustments of the existing agreements due to the reduction of employees and clean out of subscriptions.
We also see that they are downgrading to cheaper subscriptions in order to improve cost. That is what we see on the private segment. On the other hand, on the public side, we have been successful with several new customers in the last couple of quarters and these customers come with a lower ASPU, lower usage, etc. What we are seeing is a change in both, I would say, product segment mix, which is affecting both the ASPU but also the overall mobile revenue.
Development.
Got it. Thank you very much.
Thank you. We will now take the next question from the line of Erik Lindholm-Rojestal from SEB. Please go.
Ahead.
Yes, good morning and thank you for taking my.
Questions. I wanted to start on.
The Baltics, the start of the year in a very strong fashion here. Is this sort of the pace we should expect for the coming quarters?
Is there sort of more to?
Come on the cost side also here going forward? I wanted to follow up with second.
Question. There has been some renewed discussion recently about sort of a more supportive.
European Commission in regards to in market.
Consolidation. Can you give us your view?
Here? Perhaps would you welcome a further consolidation in Sweden and what would Tele2's role be in such a consolidation and also in the likes of.
That? Perhaps how do you view your...
Sort of set up in the light of this? Thank you.
You. Okay, Peter is going to take the first question about the Baltics and I will answer with him about.
Consolidation.
Yes. Hi Erik, thanks for the questions on the Baltics. I think we can see now in Q1 a quite strong top line growth with support from all markets and those solid customer take on postpaid over time and also those pricing activities different facing in each market but helping growth now in Q1. On top of that, our Baltic colleagues are quite fast in executing on saving initiatives in an impressive way leading to this growth of 15% year on year. Organically I do not think you can count on that. Should be even more. It is a great quarter with 15% growth and we cannot count on such a great delivery every quarter. Good start of the year in the.
Baltics.
To answer your second question about the consolidation, I will not elaborate more than I used to do in previous exchanges with all of you. First, we are focusing on the execution of our transformation plan and this is all what matters for us in the short term. Second, in Sweden if a consolidation is on the table, we will of course pay a special attention to the consequences on the competitiveness in the market and which remedies have to be granted to the remaining players in order to keep the competitiveness of the market at the level it is today. Saying that I do not believe that the consolidation would happen anytime soon in Sweden, but I may be wrong. Regarding Net4Mobility, we are working with Telenor on the completion of the rollout of our 5G network.
As I said, the quality of the network is promising, extremely promising. We have already today the largest 5G broadband reach in Sweden when the rollout is not complete yet. This is of course a key investment for us to deliver this quality of network. Of course, we need to prepare for the future because after the end of the rollout, we will need to make sure that network mobility will not only deliver the best network quality in Sweden, but as well the most cost efficient quality. That, I would say, is more for.
2026.
Perfect. Thank.
You. Thank you. We will now take the next question from the line of Frederic Littel from Handelsbanken. Please go.
Thank you very much and thank you for taking my questions as.
I have two of which the first one is really a follow up on both. Jean-Marc, your comment about renegotiating.
Large contracts and then also Stefan, you.
Commented on your B2B.
Segment. You're looking to focus more on.
Product and services with low impact on the.
Workload. Would you consider sort of.
Leaving some partial revenues behind in order to improve your efficiency or as part of improving your efficiency in the organization in general and maybe also in Stefan in the B2B world? Would be interesting to.
Hear. The second question is really just housekeeping, networking.
Capital. You had a positive effect from.
The redundancy provisions in Q1. Should we expect that sort of to continue in Q2 or was that the bigger chunk that came in and thereby start to reverse in Q2 or should we expect it to reverse from Q3? Thank you.
You. Okay, I will let Peter answer the second part of your question. Let me take with Stefan the first one. Definitely. In the overall renegotiation of all our contracts, we focus on the profitable growth rather than revenue without profitability. That I would say is equally important when it comes to all the areas we are scrutinizing. One good example of that is the decision we made about Boxer. Of course it impacts our revenue and marginally our EBITDA in 2025 for a very small amount. It is a necessary move. We made the decision, the conscious decision to decommission the terrestrial distribution because it was becoming loss making. We knew that of course we would be in on the revenue side.
We have made such a bold move as well, not alone, together with other operators to announce years in advance the decommissioning of the switch off of 2G and 3G in the country because we know that the technology will go to an end. It is extremely important that we keep in mind the gross margin of every single activity. We have renegotiated a number of content contracts, for instance, in order to increase the profitability of our content distribution. B2B is no exception. Stefan, you may answer the question on.
B2B. No, to elaborate more on that.
Frederick.
Yes. I mean what we're doing is reviewing the portfolio, which means that we will sunset some services and products. This is something we've done in the past. As you might recall, last year we closed down the copper services that we had in order for modernizing our portfolio. We have a broad portfolio. We have long contracts with our customers which have led to that. We have been ending up with a really broad portfolio. This is something we are working on. We will sunset some services products by end of the year. We will simplify the portfolio. At the same time we are doing as I was referring to, we're doing IT modernization and also automation initiatives.
We will become more efficient on handling some of our products and services, which means that we will be able to grow profitably with some of the products that we have today. Yes, you will.
See a.
Change in regards to portfolio, but then it won't be sort of a revolution as.
No, it's an.
Evolution. Evolution. Very clear, thank you.
Yes, on your question on working capital and specifically the severance provisions, the majority of those provisions will start to be consumed mid April. April, meaning then that it's working capital as you were.
Indicating. Okay, that's.
Perfect. Thank you. Very.
Clear, thank you. We will now take the next question from the line of Joshua Mills from BNP Paribas Exane. Please go.
Ahead.
Thanks for taking the questions. Both of mine were on the B2B trends on slide 8, if that's possible. The first one was just regarding the IoT related network outage. Could you give a bit more color about what happened with that and whether the issue is fully resolved or we should expect to see any spillover effect into the second quarter? The second question is just around the pricing strategy in B2B on the standalone contract. I think you gave some useful color on the consumer price increases you're pushing through. How are you doing this on the B2B side? Is there any more color you can give about the timing of the B2B price increases as well?
Thanks very.
Much.
Okay. Of course Stefan is going to answer both.
Questions. Yeah. On the IoT part, this was an isolated event, a network outage that we had in Q1 and it will not flow into Q2 or Q3, etc. We took that hit in Q1. That is clear. On the pricing perspective, we have, as most of us know, a broad portfolio, a lot of different segments and the.
Contract setups looks really.
Different. Many of our large customers have overlapping contracts, subcontracts from a time perspective. It is a fragmented contractual setup. In the private segment we have indexes in those contracts and we have different kind of index clauses that we utilize for doing price increases, it is labor indexes, it is KPI index.
Etc.
Etc. This is something that we are yearly conducting price increases on and addressing these contracts. On the public segment, it is far less opportunities to do index increases and that is because we come from an environment where we had low inflationary in Sweden and when these contracts were set up, the setup of that, and that is a general thing, is very few contracts with the possibility of index increases on the public segment. As a general comment, I hope that explains a little bit how it looks like for B2B that is very.
Helpful. Maybe just on the timing of those price increases. Have you already actioned some in Q1 or is it more of a trend that comes through in the second or third quarter of the year?
Year? I would say the majority of this will be on the first half of this year. We've done already some in the beginning of the year, some will come into effect in Q2. Depending a little bit on the timing when the contract expires and depending on what product line it is, but the majority in the first half of the year. I will also say that the KPI index this year is quite low. It's a low single digit, it is 1.6%. Unfortunately, the inflation KPI was not high this year.
Year. Got it. Thank you.
Thank you. We will now take the next question from the line of Andrei Kovacic from UBS. Please go.
Ahead. Good morning everyone. Thank you for the presentation and also thank you for the improving granularity.
Around various accounts within.
Your. I think that is a well appreciated change in communication. I've got two questions please. I'll go one by one. The first one is just on the tax refunds. I believe this is the third year in a row where we have got a tax refund. If you could just please elaborate or clarify around the nature of these, where these are coming from and if you expect these going forward. I know you, Peter, said that we should be thinking about cash taxes higher over time. Does that suggest that even in the coming years there would be some kind of mitigating impacts in the form of refunds, for example, 2026, 2027 and so on.
Forth. Okay, that's for Peter. It's his favorite.
Topic. It's my favorite topic. Thank you, Andre, for that. Looking at the tax refunds, the nature of it is that we're paying, especially in Sweden, preliminary taxes during the year and then we conclude the year and there might be settlements. For a couple of years we have, as you indicate, paid a little bit too much in preliminary taxes and we have had refunds with different timing and different amounts. Going forward, I don't think you should count on such big settlements. That's not how we want it to be designed. It is, of course, highly dependent also on our performance. The better results we do, the lesser refunds we'll get. That's why we also try to indicate how you should think around long-term tax levels. Hopefully that answers.
Yes. Peter, thank you. My second question, I know we already touched upon on this call on the fixed broadband growth trend, so I was wondering more on the cost side there because obviously in the past I think there's been a lot of pressure on margins from open city network fees and generally wholesale costs for the fiber network. At the same time you are clearly deciding to kind of say maybe invest less into your current footprint and maybe outsource more. I was wondering, number one, what has been the inflation thus far.
In the cost base for the kind.
Of parts of the network that you're renting out compared to previous years and then just going forward, how to think about the, you know, the, or if you could maybe just give us some insight into how you're thinking around the, I guess, you know, Capex versus OPEX debates in areas where you're deciding to potentially, you know, as opposed to previously upgrading the network to now outsourcing more of.
Thank you very much.
Much. I would say on a general note, we believe that the regulation of, of the networks, especially on the SDU side, is taking too long. We are waiting impatiently for PTS decision in this remit because at the end of the day it impacts the customers negatively. It is true that on the wholesale side the situation in Sweden is not only complicated but for a large remit, unfair because we depend on the local decision of the infrastructure owners and this has to be regulated if we want to give access to broadband, fixed broadband to all the customers. This is a message that we of course pass to the regulation authorities and we will of course.
Stand.
On the side of our customers in order to accelerate this regulation, saying that of course, in general we have a very pragmatic approach when it comes to delivering fixed broadband services. We want of course to use our own network which provides an excellent quality. We made a decision to change our approach for the RFI upgrade of these networks. I already commented that at the beginning of the year when we disclosed our full year results. The reason is because we do not see the benefit for the customer of a systematic upgrade to R5, but we continue doing it reactively everywhere we see a need to improve the capacity of the network and when of course, it is easier for the customer to get access to our service via an existing infrastructure not operated by Tele2, we are keen to use it.
Of course, we come back to the comment I was making about the wholesale price. We need to have a fair regulation for the wholesale price, not only for SDUs, but as well in some areas for MDUs. Peter, you want.
Yeah, no, on the NDU in particular, right. We want to provide the services but today we are forced to buy the entire lines of the BIS team access products and we are waiting for unbundling of the loops. You know, yes, there's some smaller CapEx involved whenever we unbundle loop work for the customers. It should come with a saving of the CoPs and we are just waiting for BTS to actually announce this and put it in motion. We are ready and we are committed to the.
World.
Thank you. If I may sneak in a quick follow up on that. Just on the timing from my latest understanding is that the market definition process could be finished this year, but then the actual pricing regulation could only kick in much later. Is that your latest understanding of the situation as.
I don't believe that we have a clearer or more precise view on the timing and that's part of the.
Problem.
Understood. Thank you.
Thank you. We will now take the next question from the line of Ajay Soni from JP Morgan. Please go.
Hi guys, thanks for taking my question. Just two quick ones. The first one around the wage increases you're expecting in Q2. Have you announced what they will be this year for Sweden? Because I think last year they were just a touch above 3%. The second question is around your mid term guidance. What is holding you back from adding this back into the presentation? Do you have a timeline of when you expect to reinstate the mid term guidance? Thank you.
You. Yep.
Yes, thanks for questions, Jay. On the salary increases, it's between 3.0% and 3.4% in Sweden from April, depending a little bit on how you count. Let me call it 3.4% in totality. I would say on the midterm guidance, it's more that we're right now focused on this year of transformation. Once we're getting longer into this year and see where we stand, we can come back on that.
It's much too early to say anything for the reason that I mentioned already. For the moment we remain humbly for on what is still to be.
Delivered.
That's very helpful. Thank you.
You. Thank you. We will now take the next question from the line of Keval Kiroya from Deutsche Bank. Please go.
Ahead. We cannot hear you. Hello? We cannot hear.
You. We will pass to the next question coming from the line of Siji from City. Please go ahead.
Hello, good morning. Thank you for taking my questions. I have two questions. Hopefully they're quick ones. The first one is on the KPI trends in Sweden. It seems that the trend has moderated somewhat this quarter. Just wondering if you can elaborate what key driver. I think just because of seasonality or because of there is more focus in internal transformation and looking forward, how should we think about the net add trend going forward or whether there will be some more investment that you need to do to improve the trends. Second question is really a clarification of the free cash flow movement and just adding all the comments you made, Peter, on the tax net working capital and also interest.
It seems to me that there could be quite decent 15%-20% increase in free cash flow for this year. I was just wondering if that is a correct ballpark, which you think. Thank you.
Maybe regarding the first part of your question, let me summarize what we already commented. The results on Sweden, of course, are mixed results when it comes to the top line because we see some positive trends in the core connectivity services, meaning on the B2C side, but on the B2B as well. That is sure that we are very happy with the evolution of our postpaid revenue. Fixed broadband revenue plus 3% plus 5%. In the meantime, postpaid revenue has been impacted by the decline of prepaid fixed broadband we commented on. That has to be mitigated with the impact of Boxer. That gives, I would say, a mixed picture on the Swedish side with, of course, what Stefan commented on.
B2B with different trends depending on the segment, I mean an impact of the economic constraints on the small enterprises, the micro enterprises, another picture on the development of large and public accounts. All in all we have delivered I would say quite a mixed picture on the top line for Sweden. The most important is that we secured the delivery of the EBITDAaL thanks to the first impact for transformation plan and we hope that the trend will continue especially with the impact of the workforce reduction in Q2-Q4. That saying that regarding the.
Free cash flow question, I think. Thanks for the question, CJ. I think our intention with being a bit more transparent on the different components. One of the purposes is that we can leave the math to you. I do not think we should elaborate on exactly where we land. You know most of the components by now.
Thank you very much. Thank you. We will now take a next question from the line of Felix Henriksson from Nordea. Please go.
Ahead.
Hi. Thanks for taking my questions. I have a couple. Firstly, on the SOF's guidance on restructuring items, SEK 500 million for 2025, is that number applicable for both P and L as well as cash flow? Secondly, I mean, how should we think about the ideal balance sheet set up for you guys? You're again well below your leverage target range and below even if we sort of include the first tranche of the dividend. What is the reason for operating with such a conservative balance sheet as opposed to engaging in additional shareholder?
Remuneration? Thank.
Thanks, Felix. For a question, I'll start with the respective. I would say what we specifically comment on is exactly how it will impact cash business dependent on the nature of. I can mention on the. On the. I think we have a. We have a financial policy 2.5x leverage right now. As Jean-Marc has pointed out, it's early date after the presumed dividend will be at 2.4x pro forma and tries to deliver first and then come back and see if we have any room.
For exactly. Much too early to make any other comments or. Of course.
Decision.
Okay, thank you. I had a bit of a hard time on hearing the answers to the first question. The line is breaking out a bit.
Okay, sorry for that. What I said was that the SEK 500 million in assumed restructuring cost for the full year is P and L indication and on cash flow it depends a bit on the nature of those restructuring costs. Got it. Thank you.
You. I think it was the last.
There is no more time for questions at this time. This concludes today's conference call. Thank you for participating. You may now. Disconnect.
Thank y ou.
Thank y ou. Goodbye.