Welcome everyone to Telia Company Q4 2022 results presentation and strategy progress update. With that, I will hand over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours.
Thank you, Sam. Welcome everyone to the Q4 call and the strategy progress update. We will start with Allison Kirkby, our President and CEO, and Per Christian Mørland, our CFO, taking us through the Q4 results. Thereafter, they will be joined by our COO, Rainer Deutschmann, to take us through the annual strategy update. I expect this call to take about the presentation to take about 45 minutes. Thereafter we'll go to Q&A. No time to waste. Allison, please go ahead.
Good morning, everyone. As you would have seen this morning, our full year financials show that we continue to make good progress on our plan to make Telia a better company for all its stakeholders. At the same time, it's clear that it has been a challenging year with significant macro headwinds and a few disappointments. That means we did end the year with what I would say is a mixed set of results. Let's start with a run-through of the quarter, which did contain some of those macro-driven challenges that we saw last quarter as well. Service revenue growth continued, but at a slower rate of 0.7%. Most markets did continue to grow, and we were positive in both the consumer and enterprise segments.
Mobile was again strong with a 3.1% growth for the group and growth in all our markets for mobile. Of course, Sweden B2C and TV, media were soft. Transformation efficiencies continue to materialize, and in the quarter we managed to reduce OpEx, excluding energy, just shy of 1%. EBITDA declined 2%, driven by higher energy costs and softer trends in the aforementioned TV, media, and Swedish units. Operational free cash flow was weak, coming in at SEK 400 million and materially below last year's level, explained mainly by a lower contribution from working capital, which P.C. will get back to. The structural part of cash flow was, however, rather unchanged versus last year, as EBITDA was flattish, and we remained at peak levels of CapEx investment in the quarter.
With weaker cash generation combined with the second tranche of the dividends and the end of the share buyback program, leverage increased to 2.35x . The majority of the weaker cash generation in the quarter is, however, due to macro impacts that will subside or be mitigated over time. In addition, we had some phasing of inventory and investments across the year. Because of that, and because we still remain on track with our strategy, our financial framework for substantial value creation remains, even if it's a bit delayed. The board therefore intends to propose a dividend of SEK 2 per share in line with the floor of our dividend policy. Let's look at the markets now and start with Sweden.
As you can see here, revenue remains sometimes slightly negative as growth in mobile, TV, and broadband was not enough this quarter to offset the continued legacy fixed telephony pressure. Also there was a temporary weakening in business solutions in the enterprise space. TV, and to some extent also broadband this quarter, included a negative impact from the black screen situation with Viaplay, a situation that was resolved during December. Despite legacy headwinds continued an unchanged pace and the Viaplay situation, we still saw underlying service revenue growth of around 1%. EBITDA was down in the quarter, driven by the softer revenues, higher energy costs, and a lower pension refund that we were expecting. These unfortunately offset another good quarter of cost transformation and OpEx reduction. Moving to the KPIs for Sweden. You see here continued growth in mobile ARPU, supported by pricing initiatives.
There's less roaming and insurance upside this quarter and a slightly smaller subscriber base, mainly driven by the loss of some seasonal mobile broadband subscribers. The broadband subscriber base increased on the back of very strong growth in fiber, especially on our own network, and more than compensated for the decline in DSL. By the end of the quarter, we only had 100,000 subscribers left on this network, keeping us well on track for the shutdown by the end of 2026. In TV, we continued to see a solid subscriber base development, but the ARPU decline from the already mentioned black screen situation with Viaplay.
With that dispute now behind us, we now have a broader set of content for our aggregator position, with the support from a SEK 150 price increase on our sports package introduced during this quarter, we should see an improved ARPU development going forward. Moving to Finland, we had another quarter of improved service revenue development, with mobile growing 3.8%. This marks the sixth consecutive quarter of improvement in our Finnish mobile business. In addition to this mobile development, we also had an improved situation on the fixed side in the quarter. EBITDA, however, continued to be negative as higher energy resulted in a SEK 90 million headwind in the quarter.
Underlying EBITDA growth was slightly positive, which is an improvement compared to what we've seen for the past few quarters, and a good proof point that the turnaround in Finland is having an impact step by step. The mobile subscriber base declined slightly as we continue to focus less on the low end of the market. ARPU continued to improve, supported by our chosen value-focused strategy. Finally, enterprise also improved for the fourth consecutive quarter and even turned to a slight growth. Moving to Norway with another quarter solid service revenue development increasing 3.2%, with mobile and fixed both growing at similar rates. Enterprise at another impressive quarter, growing by 7.4%. EBITDA increased, supported by the top line momentum which more than compensated for a higher cost level all attributable to energy.
Continued good service revenue and from it financial momentum in Norway that will be further supported in 2023 from the recently announced transaction with Fjordkraft, under which their 143,000 mobile customers will move to our network during the second quarter. The Lead Market had another excellent quarter with top and bottom line growth across all three units. In Lithuania, mobile grew double digits and fixed grew almost 5%, and the flow through to EBITDA was excellent, growing more than 13% despite continued headwinds from higher energy. In Estonia, performance was also strong, with service revenues growing 5%. Like in Lithuania, it was broad-based, with mobile growing almost 8% and fixed growing almost 4%. As you can see, EBITDA growth, similar to Lithuania, exceeded the service revenue growth despite inflationary and energy cost headwinds.
Ending with Denmark, you see here flat service revenue development, but good mobile growth and significant cost takeout, resulting in an impressive EBITDA growth of 21% for the quarter. We were particularly pleased with Umlaut recognizing Telia's mobile network as the best in Denmark's top four cities. Finally, to the TV and media unit, where service revenues decreased by 2.7%. Advertising was slightly down despite double-digit growth rates in digital advertising, but we do continue to have a challenging development in pay, declining almost 9% from a challenging competitive environment. EBITDA declined by SEK 103 million, reflecting mainly the decline in revenues and to some extent, a somewhat higher content cost level compared to the same quarter last year. This was all in the pay segment, and in fact, TV4 had its most profitable year ever in 2022.
Our full focus for this business unit now going forward is to consolidate C More into TV4 in Sweden and MTV in Finland in the coming 12-18 months, so that we in the end have fewer TV assets with a lower cost content play that is focused on leveraging the growth potential in the digital ad space, where we continue to grow at a double-digit rate. Now I will hand over to P.C. to take you through the quarter's financials.
Thank you, Allison. Let me quickly take you through the Q4 and then I'll come back on the outlook here later in the presentation. Starting with service revenue. As Allison has gone through, we have service revenue growth of 0.7% from all units except Sweden and TV Media in this quarter. Core Telco service revenue growth is 1.2%, driven by growth both in the consumer segment but also in the enterprise segment. TV Media says 2.7% from lower pay revenues, taking total growth down to dimension 0.7% quarter-to-quarter. Total service revenue growth for 2022 ended at 2.1%, well in line with our outlook of low single-digit growth. Moving to OpEx. OpEx is reduced by 0.9%, as mentioned, or SEK 58 million in the quarter.
If we exclude the effect from pension refunds, OpEx decline is -2.5% of SEK 155 million in the quarter. The reduction is driven by lower resource costs from 700 fewer resources since the fourth quarter last year. Despite inflationary pressure, we have two years into our transformation journey, reduced our net OpEx by SEK 1.1 billion. Total EBITDA is -2% in the quarter, driven by decline in Sweden, Finland, and TV Media, partly offset by growth in Norway, Denmark, and the Baltics. Core Telco EBITDA is -0.6%. If we exclude the SEK 280 million increased energy cost in the quarter, core Telco growth is actually 3.1%.
TV Media EBITDA is negative SEK 105 million in the quarter from service revenue pressure, dragging down total EBITDA for the group to -2.0%. Total EBITDA for 2022 ended flat versus last year, in line with the outlook given in Q3. If we exclude the increased energy cost, EBITDA growth would have been +2.5%, well in line with the low single-digit outlook. Total cash CapEx in Q4 is SEK 5.3 billion, in line with Q4 last year. Elevated CapEx in Q4 is due to phasing of around SEK 0.5 billion Of investment from 2023 into 2022. This relates mainly to mobile network modernization and 5G rollout, transformation, and security investment.
Despite a continued challenging global supply chain situation, we have been able to stay on track and actually now slightly ahead of our investment program to modernize our mobile network, dismantle our legacy infrastructure, and to transform Telia to a much more digital company. Cash CapEx on a rolling basis has increased slightly to SEK 15.4 billion or 16.9% of net sales. Cash CapEx excluding a SEK 0.4 billion impact from FX ended at the high end of the range at SEK 15.0 billion. Moving to cash flow. Operational free cash flow ended at SEK 0.4 billion in Q4, down from SEK 1.4 billion in Q4 last year. Reported EBITDA minus CapEx is flat versus last year. Cash is lower due to phasing, with interest costs being quite stable.
Other in the graph is as expected, impacted by lower pension contributions versus the very high level recorded in Q4 last year. Working capital was slightly positive in the quarter, less than what we expected. This is mainly driven by two factors. Inventory levels are unfortunately still at elevated levels due to lower sales than expected, combined with some higher incoming inventory. The global supply chain situation has made inventory planning and steering much more challenging. The second factor is Vendor financing. Our Vendor financing balance ended slightly lower than expected due to longer time to onboard new suppliers. Both of these effects are phasing between 2022 and 2023. Total cash flow for 2022 ended at SEK 5.7 billion, with the structural cash flow at SEK 6.5 billion.
Total cash flow has been on a declining trend due to increased CapEx, elevated inventory levels, and lower contribution from vendor financing. As guided in Q3, we were not able to generate total cash flow to cover the minimum dividend commitment of SEK 7.9 billion. This is driven by macro implications, with the biggest item being the SEK 0.8 billion increase in energy costs. This is combined with more than SEK 1 billion of phasing our investment of working capital, as mentioned between 2022 and 2023. On leverage, total net debt increased SEK 8.9 billion in the quarter. This is a result of our limited cash flow contribution in the quarter, combined that we completed the final part of the share buyback of SEK 1.8 billion. We executed on the second tranche of the dividend payment for SEK 4.2 billion.
We have reduced our hybrid capital, impacting net debt by SEK 1.2 billion, in addition to leasing and FX effects on our debt. Due to these factors, net debt ratio has increased to 2.35x , still well within the target range of 2.0x-2.5x . With that, I hand back to Allison.
Thanks, P.C. Let's now move directly into our annual strategy progress update as we now enter the third year of our Better Telia strategy. Rainer will follow me, and then P.C., and I'll close out at the end. Just a reminder, two years ago, almost to the day, we launched our new purpose and strategy in order that Telia would become consistently and sustainably better for all our stakeholders, customers, employees, owners, and ultimately the societies of the Nordics and the Baltics. We believed then, and even more so now, that as the market leader in one of the world's most digitalized regions, the demand for safe, reliable, high-speed networks would remain high and that going forward, Telia would play a fundamental role in the digitalization of society in a safe and secure way.
Our strategy therefore set out to build a more agile and more resilient Telia that would reinforce our position as the most trusted and secure digital infrastructure and service provider in the region. Back then, we shared a set of growth levers and a resulting financial framework that would lead to substantial value creation. Coming from a situation with multi-year declining revenues in all our Nordic markets, we shared the levers that would return us to low single-digit revenue growth. We also shared how our bold digital transformation would simplify, digitalize, and automate our operations and deliver SEK 2 billion of OpEx reduction in the first phase. How we were going to modernize our networks and our technology platforms and combine with the other levers after a period of investment lead us to a growing EBITDA and later on a growing structural and operational cash flow.
How are we doing two years into the journey? Well, despite a multitude of headwinds that we could not have predicted at the time, and unfortunately hitting us in the peak investment year of 2022, we do believe that our strategy is delivering. I'll get back to the headwinds in a minute, but let's first look at what our strategy has delivered so far. The ambition of the inspiring our customers pillar of our strategy was about returning Telia to growth, and we have. We've returned all our Nordic markets to growth after multi-year decline. Mobile growth has accelerated to 4%, with Finland contributing to that growth after years of decline. Our fiber revenue base, growing at a double-digit rate per annum, is now 25% higher than it was two years ago.
Convergence is progressing, especially in our home market, with triple play households up almost 20% in two years, and we are now the aggregator of choice to more than 1 million TV subscribers. Rare for an incumbent telco, enterprise is now growing across the group, with Sweden Enterprise posting its first full year of revenue growth in two decades. Rainer will talk you through what we're doing within our infrastructure and our transformation under the connect and transform pillars. I want to mention that we're ahead of our 5G rollout plan. Our fiber and coax homes passed keep growing. The legacy network sunsetting has accelerated. In enterprise mobile networks, one route to monetizing 5G, we're now a clear market leader. As you know, we've set up the leading Nordic tower platform in partnership with Brookfield.
On transformation, I'll let Rainer share the progress, we remain on track towards our SEK 2 billion OpEx takeout by 2023, with SEK 1.1 billion already realized, and that's despite inflationary headwinds that we didn't predict at the time. Finally, we're delivering sustainably. We now have a group-wide approach to making pricing work in a higher inflation environment. We've reduced OpEx, not least by workforce reductions of around 2,000 or 10% of our workforce. Sustainability is fully integrated into our strategy, and we've made substantial progress. For example, our CDP score at A- is up from D in 2018. 35% of our supply chain emissions are covered by Science-Based Targets. We've exceeded our target for digital inclusion one year early and received an EcoVadis platinum medal. More important, we are leading the digitalization.
We are the leading digitalization partner, the energy sector, the defense sector, and the many civil contingency agencies, proving that Telia is increasingly the most trusted and secure digital infrastructure provider in the region in an era where sustainability, security, and digitalization are the key societal needs. While we're happy with that progress, we have, as you know, also faced some significant challenges, which I do want to touch on. The pay TV landscape has been very difficult. We have also scored some own goals, sorry about the pun, by failing to fully monetize our rather expensive Champions League rights. We've been challenged by rising inflation across our cost and CapEx base, setting us back around SEK 1 billion in energy costs alone. Supply chain disruptions have caused difficulties in planning, executing customer projects, investments, and on inventory.
Rising interest rates mean both higher financing costs and short-term fluctuations in our vendor financing program, which has been a significant tailwind to cash flow in an earlier era at Telia. It's also been a barrier to completing some of the infrastructure deals we're working on, but I have no doubt those deals will come back on the table again. Let's just reflect all of this hit in a period where we were at our peak investment of the modernization and transformation of Telia. We didn't have a lot of wriggle room. Looking forward, what are we doing to now mitigate the challenges? Well, in October, we announced that we're merging our loss-making streaming business, C More, into TV4, our ever-stronger market leader in Sweden and into MTV in Finland.
This will save significant content costs and restore profitability in TV and media starting in 2024, make it very clear that our core telco business is only an aggregator going forward. We are accelerating our pricing initiatives and our transformation to offset inflation both in our revenue base and in our cost base. You know, just so you know, on pricing, we've already announced increases across mobile, broadband, and TV, both here in Sweden and Norway, which are kicking in already during the quarter. To gain extra momentum, we've also this quarter initiated the next round of workforce reductions of 1,000 FTEs and FTCs. For the full year, we're therefore targeting a total reduction of 1,500, which is a 50% increase on the last two years.
On supply chain, while bottlenecks and lead times are still an issue, we are taking action, and we expect to drive down the inventory that has built up. On financing, we've already done all of our near-term refinancing needs and secured most of our vendor financing volume for next year. All in all, despite that 2022 did not become the year we'd hoped for, our strategy remains. We're continuing to execute on our plan, and I know Rainer will now share, as we've done before, how we're progressing on the underlying operational KPIs and lead you through our progress that's transforming Telia towards a more lean and efficient digital telco.
Thank you, Allison. Let me lead you through the progress in our transformation. As in the past two updates, I've always shared with you transparently also the underlying drivers. You can see where we are heading and where we are. We are ahead in our network modernization. Recall, in late 2020, we had embarked on a major renovation, concurrently modernizing our 4G network and deploying 5G coverage in a single-site visit approach and with standard configurations across our footprint for best CapEx efficiency. We are proud that we have been able to safeguard the modernization, overcoming COVID and supply chain related challenges. In fact, we have front-loaded our rollout, and thus we have in 2022 crossed the peak rollout, as you can see on the left hand side of the chart. In the further years, we will reduce the intensity and focus on Sweden.
We saw, as you know, a late 5G auction and hence a later start than the others. As a result, we are actually happy, very happy with our network quality, providing across the Group 70% 5G coverage and even ahead of plan. In Sweden, we have crossed 60%. In Norway and Finland and Lithuania, we've even crossed the 80% population coverage mark. We are the clear network leader in our region. With number one positions in Sweden, Lithuania, Estonia, and further improving positions in our attacker markets. In Norway, we are the clear 5G leader. As Allison said earlier, in Denmark, we very recently gained network leadership in the most important Øresund for city.
As you can see, we have built a strong network foundation to monetize based on our capacity, 7x, and the leading 5G position, spectrum position that we have gained in the region. Best networks are only as useful as they are used and monetized. Hence, we actively drive key connectivity products, and we leverage our digital sales and service capabilities. As you can see on the left, we have increased the 5G devices on our network to now 30%. With about 80% of all new devices being sold in our market being 5G, we see significant potential in the next years. Likewise, our strategy to complement our fixed broadband network with fixed wireless offerings pays off, demonstrated by a 59% increase of fixed wireless users to now almost 400K. We build on our digital connectivity foundation.
We have been, as Allison also mentioned, a pioneer since early days in enterprise mobile networks, combining high throughput, low latency with utmost reliability and security. We have to date commercially contracted more than 65 sites, and we do serve critical customers with critical applications such as in mining, public transportation and so on. Likewise, we have also doubled our connected devices on IoT. We see steady growth in value-added IoT services, so beyond connectivity, and we continue to grow our leading position in smart public transport. Our transformation delivers steady improvements in our digital sales and service capabilities, as you can see on the right-hand side, essential to monetize our products at lower cost to serve.
For example, based on our Telia-wide customer value management platform that we have launched, we have tripled our targeted and automated campaigns, which is essential to stabilize and increase the ARPU with our products and services. Our program to reduce reasons to call and to improve agent efficiency, call center agent efficiency, they show material effect now. For example, in Sweden, which is obviously the most important, we see in the consumer segment a 20% reduced customer call volume, directly translating to cost savings. Reducing technical debt is a key driver for efficiency and quality, as you know. I've shown exactly the same chart over the past two years, and you can see we have made steady progress in all our key programs, which we have updated you consistently on.
Copper in Sweden is down to 1,500 central offices. We keep driving out the long tail until 2026. Likewise, we are now down to 5%, sorry, of 3G voice traffic share on the total voice. We've already shut down our 3G networks in Norway and Lithuania, and all our 3G networks will be shut down by 2024, unlocking not only the cost efficiencies, but especially also enabling us to re-farm the value of the 3G spectrum to 5G. On the right side, we see that we've now retired about 70% of our legacy network systems, and our program will complete by the end of 2024, resulting in a fully virtualized and future-proof network infrastructure.
On the transformation itself, we, as we have updated you last year, transform along our 5 P's: products, processes, platforms, people and partners. The direction is straightforward: simplify, automate and scale. We consistently measure and report our progress through KPIs, which drive efficiency and quality. We simplify and scale our products, legacy out, target in. To date, we have reduced the number of legacy products by 42%, and we are on the way towards our 100% reduction target. At the same time, we now already have more than 50% of our target products deployed on common platforms. This enables efficient reuse across the group. Note that already now more than 2/3 of our common products are being reused in more than one market. We improve and automate our processes to enable zero-touch journey with better quality and efficiency.
Through our group-wide operation excellence program, we systematically drive continuous improvement, which has now materially improved our incidents by 18%, so reduced incidents by 18%. At the same time, through our automation initiative, we have increased the number of hours saved through automation and bots by 65%, and this is only the start. On platforms, same as in products, we drive legacy out and target in. We have kept our pace in legacy drive out with 47% reduction now, while at the same time we've increased the share of target platforms to 32%. The most evident success has been the launch of our transformed B2B operations in Sweden, which enabled us to reduce the order processing time from weeks to minutes. In 2023, we can now scale those products, processes and platforms for full realization.
Key to our transformation success are our people and partners. To upskill and empower our people, we invest into tools and training, and we give direct access to analytics for data-driven decisioning, covering now more than one-fourth of all our people, an increase of 55%. At the same time, we increased our nearshore workforce by 47%, and we took ownership of critical software skills, which previously had been outsourced, into our own workforce, especially on the nearshore location, which obviously much increases the efficiency. We have delivered on our plans to drastically reduce the number of different system integrators, now down 70%. Through the reduced fragmentation and increased scale, we have realized to date 200 million SEK gross savings.
As we have updated earlier, we are ramping up to the earlier committed SEK 750 million by 2025 cost savings in that area. At the same time, our strengthened strategic partnerships support our transformation and value realization, even in joint go-to-market activities. This is hard work. Two years in, I can definitely confirm our statement that we have embarked on one of the industry's most ambitious transformations here. But we have built a solid foundation which will carry us forward to scale revenues and efficiency sustainably. With this, I hand over to my dear colleague, P.C., who will show us how our revenue and efficiency drivers support our financial plan.
Thank you, Rainer. Let me quickly take you through how, you know, all of this, what Allison and Rainer have talked about come together from a financial perspective. Starting with our growth agenda and a quick update on the key growth levers that Allison touched on. COVID rebound on roaming and media that we talked about two years ago is mostly behind us now and less of a growth lever going forward. Legacy burden is still a drag, but it is expected to ease going forward, especially beyond 2023. Our core growth levers that we have talked about remain unchanged, including driving ARPU by improving mobile experience and monetizing 5G, reducing churn and improve upsell from conversion, and gradually build more momentum from new revenue streams like IoT and EMN.
We have, as we have discussed before, significantly stepped up and structured our approach to pricing in the new high inflationary environment. Our clear ambition is to be able to offset inflationary pressure by pricing measure for all our units. This includes building in CPI linkages into our B2B contracts, combined with bigger and more frequent price increases, both front and back book across our entire product portfolio. Service revenue growth has gradually improved and ended at 2.1% in 2022. Our outlook for 2023 is to grow further service revenue by low single digits, enabled by maintaining and strengthening our current commercial momentum, gradually build more strength from pricing initiatives and get more impact from new revenue streams like IoT and EMN. Moving to the cost agenda.
The key drivers, the ongoing digital transformation of our business is on track as we have mentioned. The key drivers transforming our cost base remain the same. Two-year digital transformation journey, we have seen the biggest impact on the total cost from a selected driver. Let me mention a few. Reducing and digitalizing our customer interaction, removing legacy and building common technology platforms, moving to fewer security partners, as Rainer mentioned. Reduction in overhead costs, both on group levels, but also in the business unit. If we look going forward, we expect continued impact from these drivers and gradually gain more impact from cleaning up our legacy product portfolio and consolidate into a few common products across all our markets. But also by gradually removing more manual work through simplifying, standardizing and digitalizing our processes.
These drivers, as despite inflationary pressure, enable a net OpEx reduction by SEK 1.1 billion. Resource costs over the two years is now reduced by SEK 0.7 billion, enabled by 2,000 fewer resources. In addition, IT costs have been reduced following the initiatives that Rainer had talked about by SEK 0.4 billion. Our ambition remains to deliver SEK 2 billion net OpEx reduction by end of 2023, enabled by further reduction in number of resources by 1,500 in 2023, with 1,000 already being executed now during the first quarter. Combined with further cost reduction in IT and also in marketing. On CapEx, the investment agenda that we presented two years ago are intact with some updated phasing, as we have discussed earlier today.
Key components, as Rainer has talked about, has been to modernize our mobile networks and roll out 5G, legacy reduction and transform Telia to a more digital company. CapEx in 2023 is expected to reduce to between SEK 13 billion-SEK 14 billion. This is enabled by reduced pace of network modernization after having achieved 70%-80% population coverage on 5G in many of our key markets. Lower investment in product and IT following the high levels that we booked in 2022. Our aim is though to be at the mid or the low end of this targeted range. On cash flow, structural cash flow is expected to grow from SEK 6.5 billion in 2022 to between SEK 7 billion-SEK 9 billion in 2023. Our ambition is to generate low to mid single digits dividend growth on a yearly basis.
Given the volatile and uncertain macroeconomic landscape, we choose to be a bit conservative and have 2023 outlook at flat to low single digit growth. CapEx is expected to come down from the peak level in 2022. Interest cost is expected to end around SEK 1 billion higher following the higher interest rates that we saw and expect for 2023. If we zoom in on working capital, our ambition and our aim is clearly to keep it stable for the year. Inventory is expected to come down significantly from the elevated levels in 2022. On vendor financing, our ambition is to maintain the balance on level with 2022. We have already secured three quarters of this, with the remaining one quarter being work in progress and targeted to be secured in the coming months.
Due to phasing, we will see a quite negative impact on vendor financing in Q1 2023 before the mitigation start to take full effect. To summarize our outlook, service revenue to grow low single digits. EBITDA to be flat to grow low single digits. CapEx in the range of SEK 13 billion-SEK 14 billion, and the structural part of cash flow to be between SEK 7 billion and SEK 9 billion. On balance sheet and dividends, management and the board are fully committed to maintain a strong balance sheet and maintain the targeted leverage range and rating target. Further, the board stay committed to the dividend policy and propose to the AGM to distribute an ordinary dividend of SEK 2.00, paid in four equal tranches. With that, I hand back to you, Allison, to summarize the presentation.
Thanks, P.C. I will try to summarize our progress and way forward without repeating myself. Basically, we are a large complex business in what has become a challenging market environment. We've known from the start that achieving our ambitious goals would demand grit, determination, focus and perseverance. Today is a reminder of that. However, having returned Telia to growth, expanded our digital infrastructure and especially 5G faster than the others, passed our investment peak and built the foundations for improved operational momentum and cash conversion going forward. I remain absolutely confident that we're on the right track with the right plan to create substantial value for our owners in the coming years. Let's now move to questions.
Certainly. At this time, if you would like to ask a question, please press star one on your touch tone phone. You may withdraw your question at any time by pressing star, the pound key. Once again, that's star one. We'll go to our first question from Andrew Lee with Goldman Sachs. Please go ahead.
Good morning, everyone. I had a couple of questions. One, just on Sweden and your outlook for that market, yourselves in that market. Secondly, on the free cash flow drags below structural free cash flow. Just on Sweden, your service revenue growth, as you highlighted, was impacted by the Viaplay outage in the fourth quarter. What's your outlook for growth in Sweden for your business in 2023? Specifically taking into account competition, do you still expect to be able to put through more meaningful price rises this year to offset cost inflation and drive growth? That's the Sweden question. On the free cash flow drags, centering around vendor financing and the hybrid capital refinancing.
You went some way to doing this P.C., in the last couple of slides. How can you, or give us confidence that we don't see free cash flow drags from these in 2023? Thank you.
Thanks, Andrew. I'll take the Sweden question and leave the free cash flow questions to CEO P.C. The outlook for Sweden, I, you know, yes, the Viaplay dispute did cause some disruption to our underlying momentum in the quarter. Some of that will still be an impact in Q1. Outside of Q1, we expect to get back to low single digit revenue development in Sweden again, like we've been seeing. You know, there is great continued underlying momentum in the broadband business, as you see. Another SEK 50 pricing increase going out now, which starts to play benefit us during March and into April. The TV momentum, we've got more content now in our aggregator platform.
We've taken SEK 150 pricing in the quarter, that will benefit us coming out of this quarter as well. Looking at the opportunity to better monetize mobile, we've got some pricing moves going on in mobile as well. I expect that Q1 will still be a bit soft, but we'll build momentum in Q2 onwards as all the pricing kicks in, as we start to really, you know, monetize 5G because we're well above 50% pop coverage now. We continue the great momentum that we have in the enterprise business, where we're selling in a broader range of digitalization services, and I said, particularly to support the energy and the defense sectors, where we're seeing great demand. Low single digits development, but it will be from Q2 onwards.
Yeah. I can take the working capital question. Just to be very clear, our ambition or our aim is to keep this flat in 2023, so it doesn't become a drag. If you note on the slide, we say equal or potentially down. The reason for having that is we just want to be very open and transparent that, you know, we haven't fully secured everything at this point in time. That doesn't say that we are not working to, you know, close the remaining uncertainty and deliver working capital, you know, that doesn't become a drag on the total cash flow.
The fact for us, you know, to be able to be confident to say that is, number one, the inventory, I think we have quite good control. It just takes some time to get the effect out, and we'll be working with that systematically throughout the year. That should be a positive development. There are no other elements of the working capital that we expect any big movements on. We can then zoom into the vendor financing and the development on that. As you know, when the interest rates peaked up during 2022, it gave us a challenge that we suddenly saw, you know, a shortening of our payment terms. We have been mitigating this in with two things.
One is, of course, to go back and renegotiate the discounts on existing suppliers. This is going quite well. We have progress on that, but it takes some time to get through all of those contracts. The second part is, of course, to onboard new suppliers to the program. We also have good traction on that. If you combine those two, we ended a balance of SEK 11.4 billion in 2022, slightly higher than 2021. We actually expect now to maintain that balance. We have already secured three quarters of that balance when we end, you know, exit 2023. Now we have a sort of a clear portfolio initiative to close the remaining one quarter.
If we do that, we don't expect any drag on working capital, and we can keep you updated during the year on this. Also, as I said, there will be a phasing in in the year of 23, but there will be a negative development in the first quarter and then gradually see the mitigation take full effect and, you know, at the end of the year on the balance same as this year.
Thanks, P.C.
As Andrew, we are much more in much more control of this situation now, have much more visibility. We are ahead of where we were this time last year in securing the balance. Our aim is for a neutral effect over the course of the year. That's our aim.
Thank you. That's much appreciated. Thank you. Can I just ask a quick follow-up? just one on the hybrid capital refinancing. How should we think about any kind of process of that in 2023? That was also a drag on net debt. P.C., you mentioned that the vendor financing was being managed by a mixture of your renegotiations and adding more vendor financing. What's the kind of mix in terms of the support to the vendor financing balance? Is it more renegotiations and less additional vendor financing or the other way around? How can we think about that? Thanks.
The biggest portion on the vendor financing is to renegotiation of the existing vendors and contracts. We are able to secure some new vendors, you know, coming into the program. On the hybrid, you should not look at that in 2023. The, the leverage effect is already done. There's no further changes planned on our hybrid capacity. We just adjusted it down to make sure we get full credit from the rating agencies, on our hybrid capacity after some of the structural changes that we have done, in the past two years.
Thank you.
No changes going forward, planned.
Great. Thanks.
We'll take our next question from Titus Krahn with Bank of America. Please go ahead. Your line is open.
Good morning, everyone, thanks a lot for a detailed presentation and for taking my question. Just maybe following up very quickly on the operational free cash flow outlook, I definitely understand that the current macro situation is quite challenging to really guide on some elements, but still feels like the range is relatively wide. Maybe could you talk a bit on where you would expect the largest fluctuation between the different elements? Then maybe also on your EBITDA guidance for the next year. Again, it is quite difficult to really assess all the impacts that. Could you maybe give us an updated outlook of what energy impact you see in 2023? I don't think you kind of updated that as part of the presentation.
On the wage side, how are negotiations going with the unions and what wage inflation in Sweden we're maybe to expect?
Okay. Why don't I kick off and then, once we get to more structural cash flow, I'm going to delegate that to P.C. Yes, we've given a wide range on structural cash flow guidance for the year, and that is very much driven by, you know, we are still in uncertain times. Our ambition is clear. Our ambition is to grow service revenue low single-digit, EBITDA low single-digit. We're coming off of peak investment levels, and that's why you get a range of seven to nine on structural cash flow. Why are we being cautious? Well, if you look at EBITDA, we've got our outlook is flat to low single-digits.
Because whilst we have an ambition to grow low single and very much low single in core telco, we have to recognize that we're still in an environment where there could be a major recession. We don't know yet, and that could particularly impact our advertising business. And that and if there is an impact on the consumer, you know, we need to recognize that in our guidance, and we need to plan for a scenario that the consumer environment might be tough. So we need to plan for flat EBITDA, even although our ambition is clearly to grow it and our underlying plans are to clearly grow it.
At the same time, now that we're off of our peak investment levels, we are, you know, we will now be steering down CapEx, because we're ahead of plan in our 5G rollout and a number of the transformation initiatives are now kicking in. The big benefit in our cash flow generation next year is really coming off all those peak levels of CapEx. From an energy point of view, the outlook is better than it was three months ago, and we have assumed in our plan that it will be higher than this year over the course of the full year to the tune of SEK 300 million. If you recall, three months ago, it was SEK 600 million. It's still volatile. You know, we still don't know what the winter will look like.
We still don't know what the war in Ukraine might do next. Again, that's all factored in to this full SEK 7 billion-SEK 9 billion range. Then on the wage side, what you're seeing in the Nordic markets is a much more reasonable set of expectations from the unions. You know, we are seeing in the range of 3%-4.5% is the starting point for the negotiations. Baltic is clearly higher because they're living with higher inflationary rates, but no worse than last year, high single digits. Those negotiations kick in in the spring, and we are well covered for those ranges in our plan going forward. P.C., I don't know whether you want to pick up on other elements of operations we have.
No, I think you covered it, and if you combine with my answer to Andrew, I think we have covered it. I can just add on the salaries. We've been guiding earlier, you know that we in 2022 have around SEK 400 million pressure on the salaries, and we expect in 2023 to have around SEK 600 million. That is still a good kind of estimate of where we end up, even if you don't have, you know, all the answers at this point in time.
Okay. Very clear. Thanks a lot for that. Maybe a very brief follow-up just on the CapEx guidance. How should we think about cash CapEx, whether it's reported one? I think now you guide on reported one compared to the cash you guided for in 2022.
Yes. Maybe I can take that. You're right, we are changing now the guidance. We have also introduced an outlook statement on structural cash flow, which of course includes the cash CapEx component of it. I think in a way the cash CapEx is still a part of our outlook set as such. We have SEK a few hundred million difference on between the cash and book in 2022, and we don't expect any material difference for 2023. We just want to align with the industry and make sure that we have a CapEx outlook which is in line with the activities in the year. Since we anyway capture the cash CapEx component in our structural cash, we felt it was more easier to move to book CapEx in going forward.
Great. Thank you so much.
We'll take our next question from Peter Nelson with ABG. Please go ahead.
Thank you very much. Good morning, guys. Allison, just a question. Your comments on, you're making some fairly strong comments on your failure to monetize the Champions League rights in particular, and for you to focus on being a content aggregator going forward. Could you elaborate a bit on why do you think you have failed to monetize these rights? Is it simply not possible, or is it, an internal sort of a failure by Telia? What are the broader consequences of this and your comments, Allison? Sounds like you will not bid for the rights the next time they're up for renewal. Does this have any broader implications for your TV and content, strategy?
Can I just as a follow-up, as your question on the cash flow for next year to this year for the pension fund contribution, what should we expect going forward here? Thank you very much.
Thanks, Peter, and thanks for the questions. Yeah, I've been, you know, since the very beginning, I was clear that I wanted to understand whether we could monetize the TV media asset and its investment in Champions League. You know, why have we failed to monetize Champions League? It was a very expensive right in the beginning. You know, I am not sure that Telia is best at monetizing content, if I'm really honest. Our TV media unit is good at monetizing content, but monetizing content at an investment level that they can get a return on.
That's why we have made the decision to consolidate C More into the very sound and successful TV4 and MTV business going forward, to expand TV4 and MTV into offering HVOD, AVOD, and SVOD services, but with the right content costs going forward so that we can return that business to the level of profitability it was doing off before it got into some of these rights. By making that strategy very clear, I can focus Telia on being a great aggregator. What's the broader implications? I think it's no different from what you've seen in other markets.
You see us focus more and more on building the right long-term partnerships with distributors and owners of content and making that content easily available on our platform so that customers can pick and choose the content that they want to watch on whatever streaming service or whatever AVOD service or whatever linear service at any point that they want to. That is our priority, and it's a trend that you've seen in other markets. That's what we will continue to do, and we'll focus TV4 and MTV on having the right content for their domestic champion, national champion status. You'll have seen. Sorry, just I want to add, you know, in the final agreement we made with Viaplay, we're now offering some of our Champions League matches to Viaplay. We're starting to move away from that exclusivity that Telia tried to monetize uniquely.
That's also showing that we want to build a broader relationship, and a better long-term relationship with these content owners. P.C., on cash flow.
Hi, Peter. you should expect, and we expect to have central contributions of SEK 900 million in line with what we saw in 2022.
Super. Thank you very much, both. Thank you.
We'll take our next question from Stefan Gauffin with DNB. Please go ahead.
Yes, hello. I would like to stick with the TV and media business, which are reporting very weak numbers. I mean, you had or this business had SEK 1.5 billion in EBITDA before Telia acquired this business. Now, it ends with an EBITDA below SEK 300 million. And still the TV4 business is doing better than ever. The problem is clearly on the pay TV side, which you also allude to. A little bit on... First of all, is it clear that owning the TV and media business is beneficial for the overall core Telia business? Secondly, what savings will you see from consolidating the pay TV business into the linear TV business?
Can you also explain what you mean with just a content aggregation focus? Does that mean you will not really invest in owning content going forward? Thank you.
Thank you, Stefan. Good question. Is it clear that it's beneficial for Telia to own the TV media unit? I think first of all, we just need to get that business back to the kind of EBITDA it was throwing off before it made an investment in very expensive content rights that has not been able to monetize. That is what is driving the big shift in the EBITDA development. As you rightly say, TV4 is better than ever, and that's why our strategy now is to future-proof TV4 for the future by giving it the right level of content to put onto AVOD, HVOD, and SVOD proposition. Let's continue to capture some of that digital growth and get more recurring revenue from customers going forward.
I think once we've done that consolidation and got the EBITDA and cash generation outlook improving again, then time will tell whether I can extract more value by owning the TV media business or retaining the TV media business. In terms of the savings, because the savings don't really come in until 2024, Stefan, I don't want to, you know, overpromise at this stage. Clearly we will, the end of the very expensive rights that we have, end in the spring of 2024. Let's see how we evolve our content slate between now and then. That will be the big benefit of the savings alongside some OpEx developments that will come in the latter part of this year and going into next year. This year it's a year of transition. We're investing in new tech platforms.
We still have to see more brand support until it is fully merged into the TV4 and MTV business. It's a 2024 benefit, not 2023. What I mean by content aggregation, I said it's like what other markets have done. We'll be no different from other incumbent telcos that have the biggest reach and the biggest distribution and the best play for all of these streamers to actually be able to reach customers through.
Okay. Thank you.
Thanks, Stefan.
We'll take our next question from [Louis Lacour with Credit Suisse.] Please go ahead.
Hi, thank you. Thank you for taking my questions. I have two, please. The first one is something I'm just trying to understand how market dynamics are evolving. We have seen an acceleration in service revenues, mainly driven by mobile and specifically by ARPU. Just trying to understand how you saw the quarter in terms of market dynamics. Now that we are one month into Q1, what you are seeing and your expectations into 2023. The second one is just trying to understand a little bit your decision on cutting the dividend at all. I mean, cut is basically 2.5%, which is basically material. I'm just willing to understand what drove your decision on making the move. Thanks.
Okay, thanks. Let me take. I think the market dynamics haven't really changed so much in the last quarter. I guess we've just had particular softening in TV media. I've mentioned the Viaplay dispute in Sweden. I think as we look into next year, we will continue to take the action that we've been taking this year to drive ARPU development across mobile, broadband, and TV. We'll continue to push convergence and, you know, growth of new services, particularly in the enterprise space with security and IoT. Over the course of the year, you know, we expect to see, you know, so low single-digit, you know, similar service revenue development to what we've seen this year. We do, however, expect it to improve during the course of the year because we've annualized some pricing.
As I said, we ended the year with a soft Sweden consumer, that, you know, probably we won't start to see recovering until March onwards because of the pricing action that was taken. Just very quickly across our markets, we have not yet seen any, you know, any consumer impact from rising inflation. We monitor it very closely. You know, Q4, there's always less roaming, so we didn't see the roaming uplift that we had in quote Q3. We have, you know, clearly seen a little bit less VAS services like insurance, coming through in the quarter. You know, our underlying strategy and considering no yet significant change in consumer spending power in our market says that we expect very similar market dynamics for this year.
What you will see during the course of the year is obviously our inflation rate linked contracts will start to benefit our enterprise segment, where we've already got those contracts rolled out on a material basis, and that's particularly in the Norway enterprise segment. In terms of the dividend, our policy is clear. It's a floor of SEK 2 and an aim to grow in line with underlying earnings development.
Our earnings did not grow and our cash flow clearly went down this year, because of peak investments and some of the, you know, the kind of supply chain savings that we mentioned earlier, the decision was taken that it was right to go with the floor of our dividend, rather than to show growth in the dividend, because clearly, you know, we want to link the dividend to cash, underlying cash generation going forward.
We'll take our next question from Maurice Patrick with Barclays.
Next question. Hi, Maurice.
About the CapEx outlook, maybe for the medium term. If I recall at the time of the strategy update.
Maurice.
Can you hear me again?
Yeah. Maurice, could you start again? Yeah.
Oh, sorry.
If you can just start the question again. We missed the beginning of it.
No, no worries. It's a regular problem for me. If we think about CapEx into the medium term, not just 2023. If I recall, you talked about 15% CapEx of sales once we were through the peak of the transformation investment. Now you're talking about SEK 13 billion-SEK 14 billion, maybe even the lower end of that. It seems there's still some transformation effort still going on. I mean, how should we think about, like, the medium term CapEx level? Is SEK 13billion-SEK 14 billion the sort of right number for the next few years? I can't imagine there's any dramatic new products and services coming out a bit early for 6G and the replacement for fiber. How do we think about CapEx over the next few years would be helpful. Thank you.
Hi, Maurice. I can answer that. I think he basically answered your question. I think, you know, the SEK 13 billion-SEK 14 billion is a good range to also have beyond 2023, even if we don't have, you know, the same level of details for those years. It's kind of been part of our plan already. We are now because we spend a bit more than we thought we would be able to do in 2022. We are able to take down 2023 a bit more than what we have been guiding on before, and actually then go below the kind of 15% of sales that we have been guiding you towards. Then we expect to stay on that level also in 2024 and beyond.
Great. Just a very quick one for Rainer, if I may. You talk about a 7x capacity increase of 5G versus 4G. Is that spectral efficiency or is that just total capacity?
Thanks for the question. Remember the network capacity increase is actually not only coming from the 5G, but also we have modernized the 4G into a much more state-of-the-art network, so it's a combination. Clearly, clearly, the spectrum efficiency is the key driver for the capacity increase. We, I think, still have even more room because the spectrum acquisition that we have done obviously is even larger than what we have now deployed. Going forward, if we need more capacity, there is still room to even further increase. The 7x capacity increase is available.
We see to the point of fixed wireless as a bit of a link because the fixed wireless business is growing actually fairly nicely, with the updates also we have given in Norway, new propositions, we launched as a self-install. That capacity will be also required to complement the fixed network into using the mobile. Yes, it's specifically the spectrum efficiency that is helping us here.
Great. Thank you very much indeed.
Thanks, Maurice.
We'll take a next question from Ondrej Cabejsek with UBS. Please go ahead.
Hi, thanks for the presentation. I've got two clarifications and one question, please. In terms of the clarifications, I wanted to ask in terms of the content renewal. You mentioned that you will have more clarity on it in 2024. Just wondering because the UEFA content or the Champions League content you acquired exactly three years ago. For three years, I was wondering that the, the auction must be very imminent. If you could confirm that, please. What, what would the content renewals in 2024 exactly be related to? The second clarification just on CapEx. You mentioned, SEK 13 billion-SEK 14 billion as roughly the, you know, outlook, beyond 2024.
I was just wondering if that is, the absolute number that you're targeting or if the implied kind of say 14% of sales is the level because obviously you have a medium-term ambition of growing, service revenue. To just acquire 330 to acquire three in terms of the absolute versus relative would be helpful. Then my question, really on Sweden consumers, you basically spoke about inflation not really yet having an impact, as far as you can see on the, on the consumer in Sweden. Just to understand the softness, that you've seen in the Q4, especially I guess in terms of mobile, really not the competitive environment. I know Telus, for example, was talking about, you know, good traction with the unlimited plans.
It is more of a competitive situation that you think you'll be able to correct with, 5G, you mentioned as being a big driver in price increases or what exactly is the source of that softness, in Sweden in particular? Thank you.
Okay. Thanks, Andre. I'll try to take those clarification questions. Anything left on CapEx, I'll pass it back to P.C. Content view. Yeah, the big one is Champions League, ends in spring of 2024 for us. I imagine the auction, the auctions for that next round of Champions League, I guess, will happen at some point during this year. The timetable is varying by market, and I'm sure they will want to pick a moment where they think they can extract the most value. Yes, it'll be soon, but let's see how soon. The CapEx, at this point in time, we're aiming for an absolute SEK 13 billion-SEK 14 billion range.
Outside of, you know, we've made that clear for 2023 and based on the outer years, P.C., has already clarified that is a good level for us to assume looking forward at this point in time. I'll let him finish off on CapEx after I've answered your last question on Sweden B2C. Yes. You know, what really happened to us in the fourth quarter is, you know, there was a distortion in our underlying broadband and TV trends because of the Viaplay dispute. If you look at mobile, we didn't really see a lot of change in the quarter versus prior quarters. You know, not surprised that Telus too are seeing good traction on unlimited. Unlimited is a popular tariff for us as well.
You know, our focus is continues to be much more a convergence focus. The, you know, the big opportunity for us is to continue to cross-sell mobile into our fixed base, and continue to get more services by household and by individual. Yes, 5G unlimited plays a role in our mobile strategy as does pricing. Convergence plays a very important role because of the best network status we have on both mobile and on our fixed infrastructure, and also with having the broadest range of content aggregation. Yes, you know, no signing of, you know, I've living between Sweden and the U.K. gives me a very good insight into the consumer sentiment between the two countries. It's a very different environment here in Sweden. There's much less dialogue about consumer squeeze, recessionary pressure.
It seems to be our population just gets on with it, which is very, very different, from the U.K. population. But that, you know, that being said, we, you know, we're super sensitive to, you know, the macro environment around us, and that's why we're being quite cautious on our guidance for next year. P.C., do you wanna follow up on the CapEx please?
Yeah. Maybe just to give some flavor and connect it also to the question from Maurice. You know, why do we believe that 13-14 is a feasible range even beyond 2023? You know, if you build on what Rainer has been talking about, by the end of 2023, we have most of the network modernization on the mobile and the 5G rollout behind us. Meaning that we then have done a massive modernization and a front loading of the mobile network investment in these three years that we have been talking about for a long time. That we also, you know, added a lot of capacity in our network.
That means that we can, you know, continue to reduce our investment into the mobile network until there is at some point becomes a technology shift and, but that's further out. The second thing is, you know, that Rainer Deutschmann also talked about our progress of building, you know, reducing the legacy and building common products and platforms will enable us to be more CapEx efficient going forward than what we have been in the past. Keep in mind, you know, what we are doing now, we are actually also investing to remove that legacy and to build those common platforms. That will help us over time. As before, you know, there are no big peaked footprint expansions in our plan.
If there is any opportunities, we will then pursue that together with partners or in what kind of other structure vehicles and not do the full investments on our own. Combination of those, we still think that that's a good run rate beyond 2023.
That's very helpful. Thank you very much.
We'll take our next question from Steve Malcolm with Redburn. Please go ahead.
Yeah. Good morning. Thanks for taking the questions. Three if I may. First up on interest cost P.C. I think you said that interest costs will be up SEK 1 billion year-on-year in 2023. Can you just clarify that? Also remind us what proportion of your debt is exposed to floating and kind of what the interest rate assumptions are behind that SEK 1 billion rise in 2023. Then a couple on working capital. First, I'm still a little bit unclear just looking at slide 32 at some of the guidances is to be the same as 2022, which it looks like on slide 32. I think what you said is that you expect it maybe will be neutral or slightly down. Could maybe just clarify that.
Within working capital, I'm kind of curious on the vendor financing picture, and maybe you can help me a little bit here. If you keep vendor financing flat in 2023, given that your CapEx is coming down SEK 2 billion, obviously means that you're gonna be, you know, allocating more of your CapEx and your OpEx is going down towards vendor financing. Is that correct? Then interested to hear about the cost of vendor financing. I mean, historically, it's cost you nothing because suppliers have basically taken a very small haircut to be paid early. Is that still what you're seeing? Is it still costing you practically nothing? Are you relying on your suppliers to take bigger discounts in a rising interest rate environment to be paid early?
Is that the picture, or are you having to share some of the costs? That'd be super helpful. Thanks.
Yes, I'll take those, Allison. On the interest rates, yes, you are correct. The expectation is around SEK 1 billion higher cost following the interest rates that we saw, you know, increasing in 2022 and the expectations, you know, that we have in the market 2023 and beyond. You know, I think we are in that outlook reasonably conservative, you know, so there could be upside if the interest rates start to come down, but it's way too early to speculate on that. The balance between fixed and floating is at the moment and in line with our policy to be 50/50 fixed and floating.
Of course, we have more of our debt is longer term, then we use swaps to kind of get that balance in place. On working capital, I'm not sure I fully understand the question. On total, we expect and target to have a sort of a stable working capital development to avoid it become a big drag on total cash flow. The biggest component of that is to make sure that vendor financing doesn't become a drag. As you talk about, I fully agree, right? There is a, with the higher interest, there is an exposure that we need to mitigate. We are very well on track on that mitigation as I talked about before.
If we're gonna keep that balance, you're also right that if we are ramping down CapEx as we are now guiding on, that means that we need to add some more, let's say, spend of vendors on our CapEx as said. That is a component of it, but we don't. You know, it's not that massive. There are some elements of it here and there. Then you're also right that our. You know, we don't think we should, and we don't think we need to pay for vendor financing. We are. That's the kind of a dialogue between the suppliers and the banks and the discount that they are willing to give to get paid in seven days. That is our preference.
There might be, you know, one odd case where there is a discussion on how to deal with it. In any case, we would definitely not have a downside that is, you know, higher than our alternative cost of borrowing. That is the strong kind of guideline that we are using.
P.C., just to be clear, you're assuming that your suppliers will, you know, instead of taking maybe a 50 basis points or a 100 basis points discount to be paid early, they're now gonna take maybe a 3% discount given where rates have moved in the last 12 months?
Yeah. Because, I mean, the discount was quite small, you know, when interest rates was very low. When interest rate is high now, it has a bigger value, and many of our suppliers are willing to give a bigger discount to get paid early. We also, you know, in this uncertain environment, you know, money in the bank has a bigger value than before.
Yeah, I guess it's gonna hit their margins a bit harder is the downside to them, right?
Yeah, that's on their side, right? It depends on how they look at it if they're looking from a complete financial perspective. When we have... You know, we have some vendors that are really interested and actively pushing for it. We have some vendors that see the concerns that you have, that they don't want to hurt their margin. In those cases, we go into dialogue and find good solutions.
Okay, great. Thanks very much.
We'll take our next question from Keval Khiroya with Deutsche Bank. Please go ahead.
Thank you. Got two questions, please. Firstly, I want to just go back on the dividend. You mentioned that naturally leveraging is a priority, but equally the 22 basis points is still a full payout of free cash flow for 2023 at the midpoint. Then we have the Swedish spectrum auction on top. What will drive the leverage reduction in 2023? Did the board consider any merits of a lower dividend from which it would be easier to grow from? Secondly, I think you suggested rising interest rates have also been a barrier to concluding infra deals. Can you elaborate a bit more on this? We've still seen pretty healthy multiples for infra deals elsewhere in the sector over the past few months, but is there a bit more pressure on the multiple for your potential rooftop transaction?
Thank you.
Thanks, Keval. I'll try and take those questions, and then if there's anything outstanding, I'll pass to P.C. Deleveraging is a priority, absolutely. But you know,
Decided with the board's support, that, whilst we were still able to stay within the two to 2.5 range, you know, out with maybe the odd quarter going out of that, we should stick with our current dividend policy because that supports the strategy. We would not impact our dividend in this period when we have a plan to mitigate all of the structural macro headwinds, that we saw during the last year, and they all hit us during peak investment period. The plan is to deliver over time. You're right.
The dividend might not be fully covered in 2023, but we believe we have the flexibility within our two to 2.5 range to manage that, albeit, you know, we might be at the higher end of that or slightly out of it in any one quarter. You know, we have built in what the speed of spectrum auction might be during the course of this year. We've factored that in. I wouldn't, you know. It's a priority for us to delever. I think the reality in 2023 might be that, you know, we'll be in the upper end of the two to 2.5 range rather than seeing any movement downwards.
Clearly moving out of 2023, and, you know, with a lower CapEx investment, with some of the macro headwinds subsiding, and as I mentioned, you know, some of the pay TV pressure, subsiding as well, we'll be in good shape, for in 2024 for us to start to see a delevering. That's why the board did not want to impact the dividend. In terms of multiples, we've just seen them drift down a bit, and we decided that we want to wait until they drift back up again, for our rooftop transaction. That's not to say that we're not continuing dialogue. We will. We're not going to do deals when we don't believe that it makes financial sense.
It was, you know, it just became a little bit too marginal for us at that point in time. I do expect that once there's more stability in the market, once we've gathered actually a little bit more information on the value of those rooftops, that it will be an asset that will be available to consolidate into our tower platform at a future date. We're not going to do deals if we don't believe it makes good economic sense.
That's clear. Thank you.
We'll go next to Nick Lyall with SEB. Please go ahead.
Hello, guys. I hope you can hear me. It was a couple of questions, please, Allison. Firstly, one on Norway and on cable, please. Your subs look pretty solid, your broadband subs, but could you give us an update on how much of the network has been overbuilt by fiber providers in the Norwegian market? From your comments on CapEx, it doesn't sound like you've got any plans to overlay with fiber. Could you correct me if that's wrong, if you're thinking you might be doing something on the network technology there? Then second, just to come back to Keval's point on the dividend in that last question.
If you're out of that range, the 2x-2.5x range at the end of the year, is that sort of that's the sort of red light for the dividend, the sort of warning sign for the board, is it? Or would you be given sort of credit that changes were coming potentially in TV and media as you see? Is, is that the sort of be all and end all? If you're out with the range at full year, that's the end of the dividend policy, too. Thanks very much.
Thanks, Nick. On Norway, we have no intention to roll out fiber. I think there's enough fiber being rolled out. Our broadband business, from a cable point of view, holding up pretty well. Rainer, you know, picked on the growth that we're seeing in fixed wireless access as well. No intention to get into any fiber sort of investment in Norway. Happy with how fixed wireless access is now complementing our cable business. What we're doing a very good job, you know, building the number of partners that we sell our full range of connectivity services into in Norway. In terms of the dividend, you know, clearly, I can't comment for what the board might want to consider this time next year.
You know, we made the decision at the board meeting yesterday looking at how our leverage will evolve over the course of the next year and into next year, with the range of sensitivities around that. They got comfortable that SEK 2 was still the right level, and that we would be moving into 2024 in a stronger position from a cash generation point of view.
Okay. Thanks very much, Allison.
We'll take our next question from Adam Fox-Rumley with HSBC. Please go ahead.
Thank you very much. Hello, everyone. I have two quick questions on the modernization program, please. As was outlined, the narrative's very ambitious, remains so. I was wondering if you have any details on benchmarking versus competitors, where you are now and where you think you'll end up, at the end, at the end of next year, I suppose, or this year rather. Then the second question was on workforce engagement and whether or not you've had any recent surveys internally, and there's anything you can say about the moving around of the staff at the moment. Thanks.
Let me take the workforce engagement. I'll pass the first question to Rainer Deutschmann. Workforce engagement, we have a highly engaged workforce. We score at the in the upper end of any of companies that we compete against. we were at an engagement level of 78% before we went into the transformation. We've gone down to 77%. Engagement remains really, really high. And we've actually, that's not to say that there's no impact from the ongoing transformation and workforce reduction, and we monitor that very closely. Overall engagement is good. We're actually going through a big refresh of our values and our culture at the moment. We're doing it from the ground up, we've got our organization telling us how we could better bring our values and our culture to life.
Overall, I'm super proud of how engaged and passionate our people are, despite the many headwinds and, you know, it's our role to keep those high levels of engagement. Now I'm passing to P.C., on the first question.
Yeah. Maybe just start, you know, there's a dimension to your question. If you take it from a cost and efficiency perspective, we did a very comprehensive benchmark two years ago, that we are, you know, to set the scene and identify the areas that we really need to address with our transformation program. It was cut across the cost agenda, but also the investment agenda, where there was, you know, clearly inefficiencies in the group as a whole, and a lot in Sweden, a lot in our kind of product tech area. Fast-forward where we are now, we start to see that the efficiencies that we take out for the CapEx and OpEx, is sort of closing in on those gaps.
Both the good and the bad thing is that we still have a lot of more work to do, but I see that as more opportunities becoming even more efficient and reduce our cost and our investment going forward. Maybe, Rainer, you can elaborate a little bit from your perspective.
Just to complement. The benchmarking is obviously the driver for looking at the right areas. If I look at the transformation from an approach and addition perspective, a bit more comparing other telcos from my own experience, as well as what we hear from some of our partners and peers, we are fairly, I would say, on the forefront of the addition, especially also looking at the structural change we have made when we started to consolidate all the tech into a common team that gives us that leverage of creating synergy and scale. That clearly we see coming through. The common technology cost, for example, which represents a fair share of the total OpEx and CapEx agenda, has delivered meaningful and net savings both on OpEx and CapEx.
Specifically, when we see that we take in, either a platform, a product, or even a team into, a common delivery, we realize between 10%-20% savings on that particular area. One of the examples that we have very vividly here in Telia is that we have a common single operations team, where we're operating all our networks, which already are harmonized on RAN as well as down to the core network. That has proven exactly that method that we have had separate teams before. We are consolidating and realize those 10%-20% savings. As P.C. says, this is far from done. We have those elements and the foundation, that we outlined earlier yet to scale to full potential.
That is exactly now what we are doing in 2023, 2024, and 2025, which is our horizon of the transformation.
Thank you. I think on that final comment from Rainer, we should probably end the call. I just wanna say, you know, clearly 2022 was not the year we expected. We did make good strategic progress, but we were thrown a few extra challenges along the way. We've taken steps to strengthen our strategy to mitigate those headwinds. We're now stepping up the pace of our transformation agenda so that, you know, as we look forward, we get back to our original value creation plan and get back to the top, bottom line and cash flow growth that we always imagined and still believe in. Thank you all for your questions today. Look forward to seeing many of you in the coming days and weeks. Thank you.
Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.