TLSNF - Telia Company AB (publ) (TLSNF) Q2 2023 Earnings Call Transcript
2023-07-20 08:25:31 ET
Telia Company AB (publ). (TLSNF)
Q2 2023 Earnings Conference Call
July 20, 2023, 04:00 AM ET
Company Participants
Erik Strandin Pers - Head of Investor Relations
Allison Kirkby - President and Chief Executive Officer
Per Christian Morland - Chief Financial Officer
Conference Call Participants
Andrew Lee - Goldman Sachs
Stefan Gauffin - DNB
Peter Nielsen - ABG
Francesca Schild - BNPP Exane
Terence Tsui - Morgan Stanley
Keval Khiroya - Deutsche Bank
Andreas Joelsson - Danske Bank
Nick Lyall - Societe Generale
Siyi He - Citi Group
Fredrik Lithell - Handelsbanken
Adam Rumley - HSBC
Presentation
Operator
Welcome everyone to Telia Company's Q2 2023 results presentation. And with that, I will hand over to Telia Company's Head of Investor Relations, Erik Strandin Pers. Please go ahead. The floor is yours.
Erik Strandin Pers
Thank you, Sam. And welcome everyone to our Q2 call. With Allison Kirkby, our President and CEO; and Per Christian Mørland our CFO who will take us through our Q2 results and then we’ll go for Q&A.
Allison, please go ahead.
Allison Kirkby
Thanks Erik. So good morning, everyone, and a warm welcome to this second quarter results. So as you have seen that we started this year with a full focus on restoring profitable growth momentum in our telco businesses whilst taking decisive action on capital allocation. And this focus continues and is clearly evident in the quarter. The solid telco trends we started the year with have persisted and in many cases strengthened further, resulting in a second consecutive quarter of improvement to service revenue and EBITDA. Telco service revenues improved to 3.2% growth, supported by growth in all markets, all segments and with consistent growth of about 3% in both mobile and fixed services.
On EBITDA the strong telco service revenue growth was more than compensated for a higher cost level in the quarter and resulted in a growth rate just shy of 5% with all markets back to growth. The solid telco performance was however offset by recessionary fears triggering challenging times for our advertising in our TV and media business unit, resulting in a neutral EBITDA for the full group. But as expected or operational free cash flow for the quarter was muted. This is in line with our plan for the year, with cash flow turning positive in the second half, and especially Q4 driven by higher EBITDA, lower CapEx and working capital phasing.
Leverage increased to 2.66 times primarily on the back of the cash flow phasing and a weakening of the Swedish and Norwegian currencies. And as cash flow turns positive in the second half leverage will decline and will be further reduced by the Danish sale proceeds. Strategy execution as I said continues at pace with our network technology and security leadership most evident this quarter, 5G rollout and network modernization is progressing well reaching 84% 5G Pop coverage by the end of the quarter and well ahead of key competition. We're seeing strong growth in enterprise digital services including increasing momentum in areas such as security enterprise mobile networks, and IoT, contributing to a double digit growth and what we call beyond connectivity digital services in the quarter. And our strategy to always be the highest quality and the most trusted partner to the most demanding customers was confirmed as we were selected as the sole connectivity provider to the NATO summit in Vilnius just last week.
Finally, the Danish transaction remains on track and expected to close in Q1 next year at the latest. And our outlook metrics all remain unchanged. In the interest of time, I don't intend to run through our key priorities again. But here, as I said at the beginning of the year is our four pronged approach to building a better Telia and which guides us every day. So let's now look at the progress made against each of these priorities in the quarter in each of our business units starting with Sweden.
In Sweden we sustain our 5G leadership with a pop coverage of 73%, up from 63% last quarter. And according to the most comprehensive tests in the market, we have clearly the best network, and we believe that we've extended that leadership during this year. This helped drive further improvement in revenue growing just shy of 2% as pricing activities and customer experience improvements are starting to yield visible results. Enterprise was especially strong in the back of an unparalleled level of trust and a superior breadth of digital services.
Our ICT business Telia Cygate in particular accelerated revenue growth further to 18% and IoT services in Sweden also grew to 14% in the quarter. Like last quarter the growth was broad based with all major product areas growing and broadband in particular improving very positively on the back of fiber price increases. Excluding the impact from legacy and roaming, underlying service revenue growth was 4.1% a clear improvement compared to the last few quarters and confirming that we are moving in the right direction.
Sweden also move back into gross territory on EBITDA as service revenue growth more than compensated for salary inflation and higher content costs, but with pricing fully established and good visibility on the cost base for the balance of the year we are aiming for an improving EBITDA momentum in the second half.
Moving on to the operational KPIs, despite the weaker retail environment, mobile subs grew in both consumer and enterprise supported by the lowest churn we've seen since the pandemic. ARPU remained fairly unchanged, owing to the popularity of our family tariffs on the Telia brand, and the fellow brand for price sensitive consumers. Our broadband subscriber base remains stable in the quarter despite significant pricing, as growth in fiber and fixed wireless access pretty much compensated for the on-going decline in DSL subs, of which we now only have 70,000 remaining.
New fiber pricing taken in Q1 resulted in good ARPU growth and another quarter of double digit fiber revenue growth. In TV are continuing to grow in both the SDU and MTU segments. ARPU, however, remained mostly unchanged due to a somewhat negative mix shift. But we expect this to improve in the second half as we've just announced price increases ranging from 16% to 25% on our basic TV packages.
Moving to Finland, our 5G network reached 86% population coverage and our strengthening network credentials help secure new enterprise mobile network contracts and the quarter. We're also proud that our Helsinki data center became even more eco-friendly as its waste heat is now being transferred to the city's district heating and overtime this will provide heating to 20,000 homes and businesses in the local area. As you know, we've been working hard establishing Telia as the most trusted network. And it continues to help our growth momentum with service revenue improving to 2% year-on-year.
Mobile growth picked up and reach 2% despite materially lower interconnect revenues, driven by a 3% growth in consumer, while enterprise did see a slight decline in mobile revenues, but overall had a strong quarter with strong demand for ICT and professional services as we are also seeing in Sweden. EBITDA grew despite headwinds in the shape of savings from industrial action in Q2 last year, versus a onetime wage settlement of the same amount in Q2 this year, and our subscriber base was relatively stable even though we have moved away from offering unprofitable cheap subscriptions. ARPU grew by 4% supported by a solid 9% growth in consumer ARPU.
Moving to Norway, our 5G leadership continues and we now reach 92% of the Norwegian population, underpinning improved customer satisfaction and growth momentum. This network strength is also enabling growth in wholesale with the migration of Fjordkraft’s mobile customers now completed mid quarter. Consumer enterprise and wholesale all contributed materially to our 5% service revenue gross. EBITDA growth was very strong at 14% supported by the solid service revenue development, lower marketing expenses, some FX and one item one-off items around 50 million also held but even considering that Norway really did have an impressive quarter. The mobile subscriber base was stable as a slight growth in enterprise was offset by a slight reduction in consumer. And as you can see, ARPU increased nicely supported by the consumer segment where we saw an 8% ARPU increase on the back of pricing and a positive mix shift.
And the good news continues as we move on to our lead markets, which as you can see had another great quarter with double digit EBITDA growth across all three markets, enabled by the same network and technology strengths, combined with customer experience focus that you're seeing throughout Telia.
In Lithuania, we finalize the network swapped to Ericsson and the 5G rollout after reaching 99% Pop coverage way ahead of competition. Service revenue grew 6.5% with both mobile and fixed contributing at a similar rate and despite inflation the flow through to EBITDA was again strong.
Estonia was also strong with service revenue growing 8% and like in Lithuania, it was broad base with mobile growing 10% and fixed growing 7% supported by all services except for a slight headwind from fixed telephony. And EBITDA growth clearly outpaced service revenue growth despite inflationary headwinds.
Finally in Denmark we saw service revenue returning to positive territory held by underlying mobile ARPU growth driven by pricing and growth from fixed wireless access, and great work on structural cost reduction leading to another very strong EBITDA quarter. With the relaunch and rebranding of our fighter brand Call Me happening towards quarter end, we expect to see commercial momentum build further during the coming months.
Finally, moving to TV and media. As I said in my intro, we've seen the advertising market; especially in Sweden deteriorate further in the quarter, leading to advertising revenues falling by 14%. Pay however, did have a better quarter with revenue improving by 4% fully supported by price increases.
EBITDA deteriorated to a slight negative for the quarter driven by both lower service revenues and higher content costs. And also IT and general admin did increase largely driven by the on-going work to consolidate C More under TV4 and MTV. But with more visibility on the C More consolidation and an accelerating shift to digital, we did announce a further efficiency program that will impact the entire organization during this quarter. We expect the benefits to accrue from this as we move into next year.
Looking at the subscriber base, we saw a decrease driven by a challenging streaming environment and normal seasonality as sports seasons are either coming to an end or taking a break for the summer. Additionally, with more focus on restoring profitability, pricing is no doubt having an impact on our subscriber base and as you can see ARPU here increased by 14%. The actions we took this time last year to refocus the TV and media unit around the TV 4 and MTV platforms with a much more focused premium sports offering a leaner cost base and even better digital capabilities were exactly the right things to do, especially now considering the major shifts we are seeing in the sector.
We’re therefore looking forward to launching our new TV 4 Play service in August, which will be the first public milestone of our new, more digitally focused future. And now I'll pass over to PC.
Per Christian Morland
Thank you, Allison. Let me quickly summarize the Q2 financials. As Allison has gone through we have service revenue growth at 1.9% with telco growth of 3.2%. All our telco units are growing nicely. Telco service revenue growth is driven by growth both in the consumer segment of 2.4% and a solid enterprise segment growth of 3.1%.
Total EBITDA is flat in the quarter with telco growth of 4.7%. All telco units report solid EBITDA growth with Sweden being flattish versus last year. Energy cost in a quarter is SEK 49 million higher thank you to last year. The continuous sequential improvement over the last couple of quarters is driven by improved telco growth and less negative impact from energy cost.
OpEx increased by 2% in the quarter from higher resource and IT cost versus last year, driven by inflationary pressure and tough comp. Significant resource cost reductions from the Q1 redundancies are in the quarter offset by high salary inflation combined with several negative one-off items. IT costs are increasing from low levels last year due to inflationary pressure not fully mitigated this quarter combined with a movement from CapEx to OpEx following the on-going shift towards cloud based solutions.
Despite significant headwinds, we have 2.5 years into a transformation journey reduced our net OpEx by around SEK 1 billion driven by significant reductions in our resource and IT cost. Our cost transformation agenda remains but the higher and extended inflationary pressure makes it more difficult to realize the full potential or SEK 2 billion net cost reductions by end of 2023.
Total CapEx in Q2 is SEK 3.9 billion slightly lower than Q2 last year from low investment in product development and IT. As communicated in Q1 CapEx is to be lower in the second half, especially versus the high Q4 last year. As communicated in Q1, we are on track towards the full year outlook of SEK 13 to SEK 14 billion, with the aim of being in the lower end of the range in stable currency.
Let's move to cash flow, all cash flow items in Q2 landed more or less as we expected three months ago, with the exception of higher accounts receivable balance following the very strong end to the quarter across our B2B business. The structure part of operating free cash flow ended at SEK 0.7 billion in Q2 down to SEK 0.8 billion versus Q2 last year, mainly due to two factors. First, cash CapEx was SEK 0.4 billion higher than last year, mainly due to the phasing of vendor financing in fact, as we expected of SEK 0.5 billion. Second, interest costs was SEK 0.3 billion higher than last year due to the higher interest rates are now starting to kick in.
Changing working capital was negative in the quarter due to dimension higher accounts receivables of SEK 0.4 billion from the good performance in the B2B business but also as we expected, lower accounts payable from vendor financing and facing. This was partly offset in the quarter by improved inventory and other items of SEK 0.5 billion.
On the next slide, I'd like to give a quick reminder of the cash flow evolution during the year as we also discussed three months ago. The low cash flow generation in the first half was as we expected, and we are well on track to deliver on our cash flow outlook for the year. The structural part of cash flow is expected to improve significantly in the second half, mainly from lower CapEx levels and higher EBITDA.
Total operating free cash flow will in addition be supported by positive working capital development, mainly from the facing of vendor financing impact with the biggest impact in Q4. Our vendor financing balance is expected to end the year at a similar level to last year, so the negative impact in the first half is expected to be fully reversed in the coming two quarters.
Our net debt increased by SEK 5.4 billion in the quarter and leverage ratio to 2.66 times EBITDA, above a targeted range of 2.0 times to 2.5 times. This is mainly driven by the limited cash regeneration in the quarter, combined with FX effect on our issued debt in Euro. Proceeds from the sale of Telia Denmark is expected to reduce leverage by 0.2 times. The improved cash generation in the second half combined with proceeds from M&A transaction are expected to secure leverage well within the target range of 2.0 times to 2.5 times.
And with that, I hand over to Allison to summarize the presentation.
Allison Kirkby
Thank you PC. So let’s now conclude starting with our full year outlook. As we said this morning it’s unchanged, we expect to grow both our service revenue and our EBITDA this year, but more so in telco than in TV and media. CapEx are still expected to be in the range of SEK 13 billion to SEK 14 billion. And on cash flow as PC has described, we are well on track with increasing visibility although with lower TV and media contribution and uncertainty around year end advertising market, we are likely to be in the lower half of the SEK 7 billion to SEK 9 billion range if nothing changes versus today. But still, we're expecting all key financial metrics to grow or improve year-on-year despite this challenging environment.
So summarizing the quarter and the outlook, we are successfully executing on the strategy that we set out for this year, and proactively managing our portfolio of assets to improve capital allocation for the future. Telco growth is clearly restored and improving, supported by pricing, improving consumer trends, and continued strong enterprise services beyond connectivity. In fact, it's probably the best telco quarter ever, that Telia has ever recorded.
Network modernization and 5G rollout is on track and well ahead of key competition, strengthening our leadership positions and underpinning our premium market positions, which combined with our leadership and sustainability, security, IoT and Cloud based solutions is enabling the enterprise momentum. Admittedly, we also have a TV media business that is having a more challenging time. But having acted early, restructuring and brand consolidation is well underway in the midst of these considerable market headwinds, putting us in a stronger position for next year and onwards.
And the Denmark sale is progressing and on track to close in Q1 at the latest. We also now have increasing visibility on cash flow, albeit with a lower contribution expected from TV and media. But we're still fully on track for the second half rebound that we've explained since the beginning of this year. And so we're reaffirming our full year outlook. And with that ready to take all your questions.
Question-and-Answer Session
Operator
[Operator Instructions] We will take our first question from Andrew Lee with Goldman Sachs. Please go ahead.
Andrew Lee
Thank you. Good morning, everyone. I just had a question or two questions related to your free cash flow improvement in the second half of the year. You've been clear on the unwind of the working capital headwinds and obviously the CapEx dropping in the second half. So just wanted to ask around the EBITDA side of things and two questions there. The first was on TV and media obviously macro related pressures in the second quarter. Is the second quarter -- are the second quarter trends that you're seeing in TV and media could guide for what we should expect for the second half? Or should we see improvement or further deterioration kind of any directional health there will be much appreciated.
And then the second question was on your telco operations, where growth clearly accelerated in the quarter. Should we expect that to continue to improve into the second half given price rise benefits continue to do should continue to evolve in the second half? Are there any other headwinds that we should be aware of the wide telco growth trends can't click on? Thank you.
Allison Kirkby
Thanks, Andrew. Yes, so first of all, TV media, we still expect the second half to be from a market point of view fairly challenging, but we don't expect the EBITDA drag to be as significant as what we saw in the first half, because we already started to have some negative trends already towards the end of Q4 last year anyway. And we've made some decisions on certain content that we won't air this year too, so slightly less of a drag than it has been in the first half. On the tech telco operations year, we expect the momentum to accelerate particularly in the bottom line and the second half built on the great trends we've seen in Q1 and Q2. So pricing momentum continuing, energy will move from a headwind to a tailwind in the second half, we you will start to see some of the structural cost tako that you've not yet seen in the first half, because we've carried some extra staffing and call centers in particular, to improve NPS which is now on track again. And all of that gives us confidence that you'll see overall continuing improvements in the second half. And remember, we had quite a tough Q4 in Sweden last year, which we don't expect to have this year because we had the black screen. So overall, really improving telco momentum really drives the EBITDA improvement and not quite as big a drag on TV media.
Andrew Lee
Thank you.
Operator
And we will take our next question from Stefan Gauffin with DNB. Please go ahead.
Stefan Gauffin
Yes, thanks for taking my question. I would like to continue with a problem child TV and media, just so that we can try to understand what to expect going forward. If we look at the cost base for TV media into to how much is this elevate due to costs relating to the reorganization which we can deduct immediately. Obviously, reorganize this and then if you could give us some indication of how much of the cost base is being reduced into 2024. Thank you.
Allison Kirkby
Okay, yes, our problem child, I keep referring to it as noncore these days. We are, this reorganization and restructuring that we're doing will really have any benefits until 2024. Stefan, as you're rightly pointing out, so that it will be a minimal impact in this year. So I think you should expect a similar cost base apart from different content phasing. But the OpEx base will be pretty solid maybe a little bit of less IT towards the end, but it's minimal. But we are aiming for one of the biggest restructuring that TV4 has ever done. And I can't really say the number from a headcount point of view, because we're in discussions with unions. But you're talking in the 10% to 20% range of headcount will probably be impacted as a result of the restructuring that we're doing part of that driven by the discontinuation of C More, and part of that moving, to more digital options on content.
Stefan Gauffin
Thank you.
Operator
And we'll take our next question from Peter Nielsen with ABG. Please go ahead.
Peter Nielsen
Thank you very much. Allison you've spoken about the strong trends in, in service revenues in the telco operation supported again, by your high net worth investments. It seems as if you've got the consumer market going and, and trends in B2B also seen that last quarter, I think you spoke sort of enthusiastically about positive early science in the enterprise market on demand for 5G Private Networks etcetera. Is that something which you're seeing coming through now and are you more confident that you will be able to capitalize on this and on the on the network investments? And then just question follow up PC if I may on the cash flow. PC over the past year and a half, I guess we have seen a sort of continued reduction and in the outlook for the operation of free cash flow. Is it correct? Judging from your comments, you're now looking at the lower half of the 7 billion to 9 billion range for the structure part. It sounds a bit on UNL, listen to comments that you feel confident that this will be achieved, and we shouldn't see any further downgrades to the care flow outlook in the second half. Is that correctly understood? Thank you.
Allison Kirkby
Okay, I'll take the first question. Peter, thank you for the question. Yes really happy with the telco revenue trends. And we are, we are the leader in the enterprise mobile networks across the region. And as you saw, we struck a few more deals in Finland this quarter. Are they materially driving revenue today? No. But when they are combined with our IoT services, with other cloud based services, and particularly with some of our Premium Security Services, then we really see that as a clear opportunity for us to monetize 5G in in the enterprise segment.
And overall, there is great demand from the private and public sector large and small for help with their digitalization agenda. I've mentioned it before we're helping the Swedish energy companies make their grid smarter for the future. We're working with transportation companies, using some of our IoT analytics. We're working with property companies on key [Ph] optimization, too. So overall, really happy with how that business is developing and should enable us to sustain the kind of revenue development we've seen so far this year. And PC on cash flow.
Per Christian Morland
Yes. Hi, Peter. Yes, so it's been a, it's been a rocky ride on the cash flow over the last year or so. We are very confident on the outlook that we're now given. And the reason for that is, the main discussion we've had over the last year was following the big changes in the second half on both the interest and energy cost. It takes time to mitigate both on pricing. And we see now that coming through. Energy is sort of stabilizing, and actually going down a little bit, which is we're just good. And then we had our big challenge on the vendor financing being heavily impacted by the high interest rates.
So when we discussed in the second half last year, we were still kind of looking at how we're going to mitigate this. And we're very happy now as we also did in Q1 to confirm that we are able to mitigate this on a yearly level in 2023. But there is this facing effect that we have talked about now in presentation both this time and also last time. But this is now secured. These are agreements in motions, and there are very limited risks on the outlook in the second half.
Allison Kirkby
It's just the TV media piece that takes us to the lower hand.
Per Christian Morland
And then in addition, one day sort of macro effects hitting us we were at peak CapEx levels. So we got really burned from that from a cash generation. And as planned, we are staring down to CapEx spend a quarter by quarter now. And then of course, what is in a way that new is the TV media uncertainty hitting us. But we are able to set with a strong telco momentum.
Peter Nielsen
Yes. Fully understood. Very good, thank you.
Operator
Thank you. We’ll take our next question from Francesca Schild with BNPP Exane. Please go ahead.
Francesca Schild
Great, thanks very much for taking questions. I have two please. Alright. So my first question is from lead shaping and finance be an issue based on recent reports. Some questions is that are similar issue and you’re -- Nordic markets operating with cabling used with lead cabling in Telia’s network, and has just been replaced over time.
And then second question, if I may, is just on diverse dividend coverage and your thoughts on that? Thanks very much.
Allison Kirkby
Thank you, Francesca. So yes, Telia, Sweden, like all utilities did use lead sheeted cables from the 1800s and up until 1968. And we're well aware of no, there's current interest in the topic. But we've been conducting responsible dismantling of our corporate network for many years already, following all the rules and regulations and always in dialogue with authorities. And honestly, leak lead leakage from cables is limited and not known to be a health issue. But let me just give you some facts for Sweden. 70% of the cables that are in the air and underwater have already been removed. And we follow a structured process for this which is expected to be finalized in the next five to six years. Cables in the ground are generally best to leave in the ground to limit any environmental impact. We know where they are, and we remove them when needed. For example, when there's new construction projects, and all of the ingrown cables, only around 10% of them are Lead [Ph] sheeted, and the other 90% coated in plastic or other materials, and of that 10% some of those are actually in ducts or tunnels.
So all in all, aware of the issue. We don't see it as an issue really today, but we're following developments because we've been approaching responsible dismantling for many, many years. And it's a small amount of cables that are left with Lead sheathing in Sweden. And our other markets have some but to a much smaller expense standard in Sweden.
And on dividend coverage, we are still within our outlook range for the year that was discussed with the board when they set the dividend for the year. We always knew there was a risk, we would be outside of that dividend coverage this year. And the board decided that we didn't want to punish the shareholders for short term, macro patch pressures on the cash flow of the business considering they were still very fully supportive as a strategy. So that still stands. We are willing to go outside of dividend cover this year and carry a little bit of higher leverage for a couple of quarters. But we'll be back within both our leverage range. And hopefully, we'll have dividend coverage in the coming years.
Francesca Schild
Great, thanks very much.
Operator
We'll take our next question from Terence Tsui with Morgan Stanley. Please go ahead.
Terence Tsui
On -- just picking up on some of the earlier topics, just wondering whether you're seeing any inflationary pressure on CapEx and then separately, what did you make of the Tele2 announcements or raise their CapEx guidance? Does that have any implications for you in terms of you looking at accelerating investments in order to maintain your network advantage that you enjoyed today?
And then secondly, just on TV and media, once you've completed the restructuring process, you mentioned its long call, what do you see as the who do you see as the longer term owners of TV and media and what sort of partner do they need in order for this business to thrive in the longer term? Thank you.
Allison Kirkby
Thanks for the questions, Terence. We've seen a bit of inflationary pressure on CapEx, but that was all built into our, our forecast and guidance for the year. Maybe seeing a little bit more foreign currency impacts, because we've had a weaker Swedish and Norwegian kroner recently. But overall, we're, we're still very comfortable with the 13 to 14 that we set out with at the beginning of this year, Terence. In terms of what our key competitor mentioned the other day, it has no implications for us, we had already accelerated 5G rollout. What at 99% we've actually swapped and build out a full 5G network and modernized our 4G network in Lithuania already, with at 92% in Norway, with an 86% in Finland, we are at 73% in Sweden, so we are way ahead of, of Tele2. Clearly, we're seeing that in brand consideration in network performance and so later announcement has no impact on us at all.
And then in terms of TV media, listen there's going to be a lot of changes in that business, in the in the sector in the region in the coming years, based on some of the announcements coming out this morning from via play. So I expect there will be lots of changes happening, lots of consolidation opportunities. And for now, we're just focused on the restructuring to get it back to profitable growth and cash generation. So we're in the strongest possible position to either spin it off into a separate vehicle, or to combine it with somebody else's assets at some other time. But at the moment, it's right to just focus on the restructuring for us and get it, get it in good shape for the advertising rebound, that will happen.
Terence Tsui
That’s great, thank you.
Allison Kirkby
Thanks, Terence.
Operator
Thank you. We'll take our next question from Keval Khiroya with Deutsche Bank. Please go ahead.
Keval Khiroya
Thanks. Thank you for taking the questions, and I have two please. So firstly, you've talked about the restructuring. You're doing an interest rate term just saw a 900 million outflow in new structuring to the first half. I think you talked about a 1 billion charge roughly for the full year previously. What are your latest thoughts on restructuring for the full year?
And then secondly, appreciate it. So despite the price increase really saw a 30 plus percent increase in the Swedish mobile, new service revenue growth. And can you talk a bit more about the dynamics here, and your views on the degree to which the mobile prices price rise [Indiscernible] Sweden. Thank you.
Per Christian Morland
Yes, so maybe I can start on the first question, Keval. On the restructuring charges you're right, we are, 900 million in the first half. We will be significantly less than that in the second half, because a big part of that 900 million was the big resource redundancy initiative that we did in Q1. We don't give specific in our outlook. We are slightly above our one billion sort of run rate that we've been running out for this year. But we are not planning or expecting to sort of see a similar cost in the second half as we have seen in the first half.
Allison Kirkby
And then on Swedish mobile ARPUs we’re seeing the pricing is sticking. And there has been some additional movements just recently, we've just taken our family tariffs up by 20 kronor. Clearly Halon [Ph] and Osweth Fello [Ph] have all moved in the low tier more recently, so that the prices are sticking, but you are seeing mix shifts, and so we are seeing a mix shift into family tariffs. That's why we've taken 30 kronor, or sorry, 20 kronor on that. And we are seeing a mix shift into the no frills Fello brand, which we've taken pricing up by between 10 and 30.
So overall, we'd like to see more net impact on our ARPU development. But I think we need to recognize that holding it stable when we've not get any extra uplift from roaming or extra uplift from VAS [Ph] services, because people aren't buying as many handsets at the moment is pretty good. And it's just important now that the pricing that has gone through stays in the market, and we expect there for our pre developments to develop over time.
Keval Khiroya
That’s great, thank you.
Operator
We'll take our next question from Andreas Joelsson with Danske Bank. Please go ahead.
Andreas Joelsson
Good morning, everyone, perhaps sort of an elephant in the room question. But the Champions League writes this approaching an end now with one season left. And given what you've learned so far, and also, from what you alluded to the via play announcement, is there any level on that right where you see it happening, actually a positive business case, either standalone or combined with the telco business.
Allison Kirkby
We'd have to be a lot cheaper than it was last time, Andreas for us to discover that. It would have to be a baby elephant. But at this point in time, it's going to be very interesting to see how that auction plays out considering all of us are recognizing that everybody overpaid four years ago.
Andreas Joelsson
Very good. Thank you, Allison.
Operator
We will take our next question from Andreas [Indiscernible] with GBS. Please go ahead.
Unidentified Analyst
Hi, thank you for the presentation and taking my questions. Just got a couple, please. So one on energy. So you mentioned again, that energy and 2H will be a tailwind. I'm just wondering how the rolling policy of fixing income contracts or hedging over the past couple of months or quarters has been kind of executed on given that the forward curve basically indicates a steep decline in prices. So is there a situation where maybe positive further to look and contracting at lower rates? And how should we think about energy developing as a tailwind potentially even going into the next year? That's one question.
Second question. Just read two quick follow ups. One on questions and choices offers their timeline tend to be option because usually you would have had it in 1Q already in terms of the UFA content. And then the second follow up on cutbacks going forward, so some related to the inflation part of it, because you said recently or have been saying that, in terms of that 13 billion to 14 billion as an absolute number. You're happy with that has basically a level into the outer years as well. So is this something that may now change with inflation and potentially offset by a bit of a stronger top line but it's 13 billion, 14 billion still the level despite some of the inflationary and FX pressures that you mentioned that you will be comfortable with in the next couple of years? Thank you.
Allison Kirkby
Okay let me take the auction and CapEx and then PC can take the energy question, Andreas. So the auction timing, I imagine it's going to be fairly soon, because it has already been delayed. I'm sure they're following market developments and wondering when on earth to do the auction. So, but I would imagine it, it has to be in the next one or two quarters. And I'm not seeing any more than that. And then on CapEx going forward, we are still comfortable with this level that we've now got to at the 13 to 14 level for this year. However, as we look into next year and beyond, we will need to look at where currencies, where inflation rates. And we always had an ambition to get to below 15% CapEx to sales ratio, which is where we ended with the 13 to 14. So as we move into next year, we’ll clearly be looking at the revenue development, the inflationary development and the FX development. And if inflation and FX didn't change much that 13 to 14 is probably fine. But we need to monitor those elements and see how we're getting on from a revenue point of view as well.
But for now, it's good to assume that. And then PC on energy, and if you want to build anything on the CapEx PC?
Per Christian Morland
Yes, on the energy piece, through the sort of last few quarters, we have stick to our hedging policy, where we had on a rolling basis that total hedged for 23 is 50%. That includes solar energy that we get through other parties. And for 24, we had 30%. So that is following sort of similar development, as we have seen in the past quarter. So we are not speculating or making any active choices, depending on how the spot and forward rates are changing. We are happy to see that the forward rates gradually are coming down, and actually now more towards sort of the usual levels that we have seen in the past. But then, of course, one of the reasons why we see a higher energy cost in the second half, even if actually spot prices are down is that we are now hedging on a higher level than what we historically did.
If you look into the second half of this year, we as it looks now with our hedging and the forward rate, it doesn't, look like it’s going to be as high as it was last year. So you can very quickly get 100 million, 200 million positive versus last year, both in Q3 and Q4.
Unidentified Analyst
Thank you PC, just to clarify you said higher in 2H that would have been higher in 2Q rather, just to clarify.
Per Christian Morland
Yes, so the energy cost is higher in Q2 this year versus last year by 50 million. And in the second half is going to be 100 million, 200 million lower by quarter.
Unidentified Analyst
And thank you. And then just in terms out of 2024 if things stay as they are. And of course, you've done some hedging in the meantime, obviously, but 6%, 30% for next year. Is that kind of balanced out? Would you say that 24 as it stands should be roughly neutral. And is there another kind of tailwind potentially?
Per Christian Morland
I'm going to be very careful of not sort of predicting how energy pricing is going to be developing. But if we are using our current hedge decision, and with the current forward rates, it looks to be quite sort of neutral, or quite in line with this year.
Unidentified Analyst
Alright. Thank you very much.
Operator
And we will take our next question from Nick Lyall with Societe Generale. Please go ahead.
Nick Lyall
Good morning everybody. Just a quick one Allison, on the TV and Media as well. So you mentioned, I think in the presentation previously you talked about solid, previous profitability being reached. Now you mentioned cash generation today. Could you so quantify the target now, for that business? What have you expected to do internally with data or cash in future once you've gone through the restructuring plan? And how long does it get to do that before you do this stuff that you mentioned a challenge for them? And you’re thinking right -- or other things? Thanks very much.
Allison Kirkby
Yes, no, I've always been clear, getting EBITDA and cash generation is pretty similar, give or take the odd kind of timing of auctions or content. And it is to get it back north of a billion again. That won't happen next year because we'll still have Champions League, but certainly 25 onwards is our ambition. The target range is one to one and a half and getting to north of a billion by 2025 is still our ambition both so on EBITDA on a cash point of view Nick.
Nick Lyall
Okay, and obviously then obviously, that includes the sort of hit you've just seen in the second quarter expectation for third and fourth. So that's, that's net of everything.
Allison Kirkby
Yes. Yes No that is absolutely I'm talking about absolute EBITDA and cash generation by 2025 being north of a billion. Did I interpret your question properly, Nick?
Nick Lyall
No, no, that was spot on. Okay.
Allison Kirkby
Thanks.
Operator
Thank you. We’ll take our next question from Siyi He with Citi Group. Please go ahead.
Siyi He
Hello, hi. Thank you for taking the questions. I just have two please. The first question is on the cash flow generation charge, you've provided in your presentation. Just looking at this and compare the charter you provided in Q1 for installation. It seems that the working capital recovery has pushed back a bit into Q4 I just wondering what if you can explain what's the reason behind that. And how should we think about the phasing of working capital for the second half?
And secondly, just wondering if you can update us on the on the M&A side and if there has been any discussion on-going with your infrastructure cells? And also, it's interesting that your comments that there could be a lot of consolidation opportunities in TV and media in in Nordics in coming years. And you in the past said that sort of TV is not recording business better than getting the development in the intermediate markets now, do you think that it could be opportunity for you to actually become a consolidator of the in the TV business? Thank you.
Allison Kirkby
Why don't I take the M&A and then you can go back to cash flow PC. So we continue the dialogue on rooftops, getting them ready, providing the valuation as right for a transaction in the first half of next year. And clearly, our priority at the moment from an M&A point of view is getting the Danish deal concluded and closed by the end of the year. So that's the big active ones. In terms of TV media consolidation, don't worry, TV media is non-core, we will not be doubling down in TV media. If consolidation opportunities arise, it'll be much more a route to exit for us so that we can really focus on being the best aggregator of choice, but no longer owning the content ourselves. And PC, if you want to pick up on the working capital phasing.
Per Christian Morland
Yes, on the phasing is more or less intact, as we've shown in Q1. You're right, there is a shift between Q3 and Q4. That is mainly attributed to some phasing on the vendor financing rebound in the second half. So we expect a slightly more in Q4 and slightly less in Q3 versus what we updated you on in the first quarter report.
Operator
And we will take our next question from Fredrik Lithell with Handelsbanken. Please go ahead.
Fredrik Lithell
Thank you very much for taking my question as well. Many questions have been answered. I just wanted to then pick your brain a little bit on the 12 months to 18 months behind us you have been very active in changing prices on numerous of your services, both on consumer mobile and consumer fixed. Do you have any pockets still where you feel you have upside room? Will you be as active in shifting prices upwards in the coming 12 months? Or are there any other details you would like to sort of discuss here for us? Thank you.
Allison Kirkby
No, clearly, with heightened inflation, we have kicked off a whole new approach to pricing discipline in our commercial strategies, and so the ambition would be we'd be starting to do more pricing. Again, starting in Q4 and into Q1 and we're planning for that already. The new pricing that's gone into the market recently I said the family SIM cards there's a bit of mobile broadband pricing, there's some additional TV pricing in them some fellow pricing, but basically no we're just looking at preparing for what kind of inflationary pressure do we expect to see next year, and therefore what level of pricing do we need to be taking in Q4 and Q1 end of this year and into next year to offset that. And then we've got the CPI linkage and most of our new B2B contracts now that will start to kick in and we some of aspects of that and some of our wholesale contracts as well. So more of the same rather than anything majorly new. Frederick, but I think we will we're learning all the time how to be even more disciplined on our pricing and one of the areas we're looking at particularly here in Sweden, is alongside pricing, what do we need to do on reducing the amount of campaigning or the scale of the discounting.
So we're really looking at all of the ARPU levers, because we've learned quite substantially from our Finnish experience, how to drive up ARPU even when you're not taking headline pricing by just being more disciplined from a promotional point of view?
Fredrik Lithell
Can I have a follow up on that? Very good answer. Thank you. But a follow up. I mean, consumers have been quite calm in their action. So they haven't really bought new smartphones in the same fashion they used to do is that the low activity in buying new smartphones, is that something that have benefited you in terms of churn you think?
Allison Kirkby
Well, certainly, it has reduced switching in the market. And definitely, it's why we're seeing low churn, not just in Sweden, though, but also in Finland, where we're not the incumbent. So I think everybody's benefiting from a little bit of lower churn at the moment. And we are using it as an opportunity to really lock in some of our most loyal Telia customers with family tariffs and other convergence benefits. So yes, it's, it's good, that churn has reduced, it just means we'll get lower handset sales and a little bit lower, like insurance and value added services that we hope to get a little bit of uplift, once we move into the Christmas period. But churn is good.
Fredrik Lithell
Thank you. Very good.
Allison Kirkby
Thanks.
Operator
And we will go next to Adam Fox Rumley with HSBC. Please go ahead.
Adam Rumley
Thanks very much. I've actually got a bit of a follow up to that question. And that has to do with the customer service resourcing that you've discussed and released. I hear your comments, that NPS is now back on track, and improving. But if you feel like this is something that's come up in flames over the years, costume person, obviously, that you refer to future price changes to So to what extent are you comfortable with the current levels of your stock, your customer service staffing, or should we think about this as being a material slips essentially very short term scalable, and so quite adaptable to kind of your commercial activities. Thank you.
Allison Kirkby
In Sweden, it's very adaptable to our commercial activities. We work with a range of partners that allows us to dial up and dial down when needed, and there are still significant transformation for us to do on both, the way our calls are handled, the number of calls that come in, and the tools that we give our agents to be able to manage our customer service. So the -- what happened in the first kind of couple of quarters of this year, as we still had quite a backlog from all of the Viaplay dispute. And then straight on the back of the Viaplay dispute we had, we had a lot of pricing all happening at the end of March, which meant that we had to sustain higher levels for a little bit longer than we were expecting. But as we look into the balance of the year, and we look at the availability required to handle future pricing changes, and we're looking at some of the transformation enablers that we're putting into our call centers, then we expect call center staffing to come down in the second half. So we're quite comfortable with the levers we can pull and that we have better visibility now that we've reduced all of that backlog from Viaplay in pricing. And it's one of it is one of the drivers have the Sweden EBITDA improving in the second half that and lower energy costs and pricing momentum.
Operator
And there are no further questions at this time. I will turn the call back over to see you Allison Kirkby for closing remarks.
Allison Kirkby
So thank you all. I wish you all a glorious summer. And look forward to chatting to you again with our third quarter results in October. If I don't see you before, have a great one.
Operator
Thank you
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Telia Company AB (publ) (TLSNF) Q2 2023 Earnings Call Transcript