Telia Company AB (publ) (OTCPK:TLSNF) Q2 2022 Earnings Conference Call July 20, 2022 3:30 AM ET
Company Participants
Erik Strandin Pers – Head of Investor Relations
Allison Kirkby – President and Chief Executive Officer
Per Christian Mørland – Chief Financial Officer
Conference Call Participants
Andrew Lee – Goldman Sachs
Peter Nielsen – ABG
Ondrej Cabejsek – UBS
Ulrich Rathe – Jefferies
Nick Lyall – Soc Gén
Keval Khiroya – Deutsche Bank
Stefan Gauffin – DNB
Francesca Schild – BNP Paribas
Adam Fox-Rumley – HSBC
Erik Strandin Pers
Thank you. Hello, and welcome, everyone, to the call. We will do a presentation followed by the Q&A as usual, and we have with us our President and CEO, Allison Kirkby; our CFO, Per Christian Mørland; and my IR colleague, Anders Nilsson. Allison, please go ahead.
Allison Kirkby
Good morning everyone and welcome to our Q2 report live from sunny Solna this morning, much more pleasant place to be than London yesterday. I do feel for all of you. I hope it’s a bit fresher in London today. Anyway back to our quarter, I’m happy to say that the trends we started the year with have continued into Q2 with strong financial performance underpinned by strong operational and transformation progress. Growth momentum continued with service revenues growing a solid 2.4% supported by all units; and Finland, again, relatively stable. Like last quarter, the growth was broad based with mobile growing in all markets and we also had growth in fixed services in all markets, except for Finland. Efficiencies are continuing to come through as we transform Telia and in the quarter we managed to reduce OpEx by 1.6% and excluding SEK100 million hit from higher energy cost, OpEx was down 3.2%.
Core Telco was again strong with 2.4% service revenue growth flowing through to 4.3% EBITDA growth pretty much in line with what we saw in Q1 and this growth as expected was more than offset, more than offset the cost of content investments in TV and media with group EBITDA growing 0.8% this quarter. Operational free cash flow of SEK1.1 billion is lower than in the same period last year, driven almost all by working capital facing. However, the structural part of our cash flow is fairly unchanged compared to last year Q2 at SEK1.5 billion. Our balance sheet has also strengthened further, now it’s a leverage of 2.01x and this is a material reduction compared to Q2 last year as a result of our strategy to crystallize infrastructure asset value. As you know, we closed the Swedish tower transaction this quarter, the net proceeds of which more than offset this year’s first dividend tranche of SEK4.1 billion, which we made in April, and in June we started our buyback program, buyback share for around SEK4 million in the month. And in total, we’ll be buying back shares worth SEK5.4 billion between June and February next year at the latest.
Moving to strategy progress in the quarter, as mentioned, all our markets are delivering growth in mobile, largely driven by ARPU growth from a customer value enhancing focus higher pricing and rolling. I’m particularly proud of the progress we’re making in the enterprise segment, thanks to the unique breadth of connectivity and digital services that in some cases only Telia can provide and the increasing demand for them from our customers. Growth is increasingly driven by our corporate customers needing to digitalize their operations by moving to cloud, deploying digital networking and IoT solutions and enhancing the security of their communication infrastructure. Our unparalleled digital infrastructure with the highest levels of independence and redundancy combined with our digital services, our ITT businesses, especially in Sweden, Finland and the Baltics, make us their partner of choice. In our broadcast TV advertising funded businesses in Sweden and Finland, we’ve now fully recovered from the pandemic as revenue in TV4 was the highest ever for a second quarter, including digital revenue growing again by more than 20%. Network modernization remains on track with 5G coverage ramping up a lot this quarter.
We now reach just shy of 50% of the population across our footprint with the widest coverage in Norway and Finland at around 70%. Sweden, as you know, started from behind due to the late frequency options, but they doubled the coverage in the quarter and we now reach a third of the Swedish population. And at this time, we reckon we are clearly ahead of all our competition on 5G rollout here in Sweden. This means that we are able and are taking a leading role in private networks or enterprise mobile networks. We have a double digit number of running EMN customers and five plus new contracts signed during the last quarter with a steady line of customer dialogue.
We have EMN services available in Sweden, Finland and Norway and we see that corporates are now starting to demand private 5G networks for critical operations. During the quarter, we won an agreement with Posiva, which is building the first of its kind final disposal facility for nuclear waste in Finland and with forestry company SCA for a dedicated network at their Munksund site in Sweden. Two great examples of how Telia is enabling the digitalization of and the green transition of our region. As we ramp up in 5G, we’re also ramping up legacy shutdown and have now dismantled almost 40% of the Swedish 3G network and 70% of the fixed corporate network.
Interconnected with network modernization is our digital transformation, and we’ve now closed more than a third of both our legacy products and legacy IT systems and increasingly launched new products on the new common technology platform. We’re also improving processes and achieving both structural cost savings and a smoother experience for our customers with the need for manual interactions reducing in some cases significantly.
Incoming contract for our B2C contact center declined across all our markets with volumes in Sweden down almost 30% year-on-year. And in addition, we’re transforming our channel mix with Finland, for example, now seeing 80% of all incoming contacts going through our own digital channels. These efforts contribute to our lower OpEx and keep us on track towards our SEK 2 billion of net reduction by 2023. Although now as forward-looking rates are no longer indicated in our reversal of energy prices, we’re building a stronger energy headwind into our forward-looking assumptions.
We now expect to reach at least SEK 2 billion of reductions in OpEx, excluding energy and mitigate the energy headwinds through a combination of both cost and pricing initiatives to meet our short- and midterm EBITDA targets, which are unchanged. And PC will touch on this a bit more later.
Finally, seeing great progress in our sustainability agenda, we made two significant long-term agreements to purchase wind and solar power in Denmark and Estonia, which will cover most of the energy needs there. Positive news, both for the advancement of Green Energy and society and for the longer-term resilience of our cost base. And in another report of sustainability, we’re stepping up our efforts to protect our customers online, a great example of which is the new security service for Swedish household.
Moving now to the market. As you can see here, Sweden again delivered a very solid quarter. Service revenues increased 1.2% despite legacy headwinds. And like last quarter, the growth was broad-based with mobile growing 2.7% from a continued positive ARPU development, broadband growth of 4.1% from pricing initiatives as again, a stellar performance in the TV business displaying a 16% growth. Sequentially, Service revenue growth was slightly lower, driven mainly by lower fiber installation fees and lower copper wholesale revenues.
Our enterprise business continued to show a solid development and grew 1.1%, confirming the trend shift initiated one year ago. We saw solid momentum in all Enterprise segments with even growth in the SME segment for the first time in many, many years. And we have a healthy pipeline of customer deals, including this quarter, the win of an agreement to continue to deliver network services to the Swedish Public Employment Agency, including new advanced security solutions. The combination of our security potentials, combined with our breadth of digital services is proving to be a real sweet spot for us, particularly in the public and TV segment.
Excluding the impact from legacy and the recovery of rolling revenue, underlying Service revenue growth was again strong, coming in at 6.3% with a headwind from copper being stable SEK 170 million. So the pivot to growth continues in Sweden and also on EBITDA, which grew 2.8%, benefiting from revenue growth and from unlocking productivity gains from transformation. Specifically, this quarter, we saw OpEx declined 7% versus last year.
Moving on to the operational KPIs. We see a continued growth in mobile ARPU, supported by pricing initiatives and the return of roaming and also a growing subscriber base equally in consumer and enterprise. Our broadband subscriber base was fairly stable as growth in fiber and fixed wireless access are more or less offsetting the organic decline in xDSL subscriptions. And like previous quarters, the ARPU continues to grow nicely, supported by pricing.
In TV, we again saw a strong subscriber base development driven by growth in both SDUs and MDUs. And importantly, we saw another strong ARPU development supported by pricing and a higher share of premium sports packages in the base.
Turning to Finland, we had another relative quarter of relatively stable Service revenue development and improved growth momentum for mobile despite interconnect headwinds was offset by lower fixed revenues, predominantly driven by the acceleration and the loss of legacy copper revenues.
We are continuing to see positive results in brand, value and network perception among our customers and the turnaround is materializing step-by-step. The transformation of Finland continues at pace, albeit with some temporary cost tailwinds. So Q2 last year carried extra cost for software licenses and this quarter being positively impacted by industrial action. However, OpEx was reduced by 6%, and this is despite the SEK 35 million energy headwind.
So in summary, a stable Service revenue development; Mobile growth of 3%, excluding interconnect; and a substantially reduced cost base, albeit not all structural, drove an EBITDA improvement of 5.3% in the quarter. The subscriber base was stable and a slight loss in consumer was compensated by a gain in Enterprise. And the ARPU stabilized after several quarters of negative development, despite the aforementioned interconnect productions.
Consumer mobile ARPU development improved to 3% versus the 1% result last quarter. And in Enterprise, we’re starting to see the pressure on ARPU easing. So given these positive trends, continued network modernization, 5G migrations and other roaming initiatives, we remain on track for a more structural turnaround in the second half of the year.
Moving on to Norway. We saw another quarter of really great top line momentum. Service revenue increased 6.8%, mainly driven by an 8.9% increase in Mobile, driven by a growing subscriber base and core ARPU expansion in both the Consumer and Enterprise segments, combined with higher wholesale revenue.
Enterprise grew by an impressive 11% in the quarter, continuing a long trend of excellent performance. And as you might already seen, the Norwegian regulator recently confirmed in its annual market report that Telia grew more in the Norwegian enterprise market than all the other players combined last year. And as we continue to win new customers on quality and service credentials, we expect this trend to continue.
Broadband also continued to develop very positively at 8.1%, driven by both customer and ARPU growth. And the ARPU growth is very much driven by price increases through our CPI-led collective agreements as well as on individual agreements. EBITDA grew 2% as higher service revenue was partly offset by higher content and marketing costs as well as from a lower equipment margin in the quarter. And the Mobile subbase continued on its positive trajectory with a stable consumer development and growth in the Enterprise, where we grew our base in all subsegments: SME, large and public as well for both brands, Telia and Phonero. ARPU was again strong, driven partly by core ARPU, but to a large extent also by the VAS protection change as well as roaming recovering.
Moving to the LED market. It’s a second consecutive quarter of a beautiful page for these markets. In Lithuania, we continue to see broad great service revenue growth with mobile growing double digits and fixed by 5.1%. The flow-through to EBITDA from higher service revenues was, as you can see, excellent this quarter despite significant headwinds from higher energy costs. In Estonia, performance was again strong with Service revenues growing to 4.7%, unlike in Lithuania, it was broad-based with Mobile growing 5.9% and Fixed growing 4.3%, supported by all services, except for TV and fixed telephony. And as you can see, EBITDA grew in line with service revenues despite the inflationary headwinds.
Finally, in Denmark, result in continued good progress driven by Mobile growth of 3%, which more than compensated for a slight softness on the tech sites. This combined with continued good momentum on the cost transformation resulted in Denmark delivering an excellent 9.5% EBITDA growth for the quarter.
Finally, moving to TV and Media, and we can see that Service revenues increased by 2% from a strong performance in advertising growth, 4.2%, partly offset by weaker performance in the key business. Ad revenues in Sweden and Finland remained strong despite a tough comparison with the euro last year and digitalization of advertising is continuing that suite. So far, we are not seeing any signs of deteriorating demand from advertisers due to the macro situation.
Pay TV had a softer quarter growth in Sweden was offset mainly by loss Formula One race in Finland and an expiring BTV agreement in Denmark. As expected, our EBITDA declined by SEK 271 million year-over-year, reflecting the higher content costs, mainly from Champions League as well as higher OpEx relating predominantly to the return of live events, higher resources as a result of that and marketing spend.
Looking at the Pay TV customer base, we saw a decline of 41,000 in the quarter, driven mainly by normal sports seasonality as predominantly Champions League and the Swedish hockey season ended towards the end of the quarter. But we did see a slight growth in ARPU year-over-year, driven by an increased share of sports subscriptions and price increases in Sweden.
Looking ahead, we have now annualized the Champions League investment and will no longer carry that as a headwind on a year-on-year comparison from next quarter onwards. However, clearly, the TV market is going through a period of significant change and now especially in the market, it’s very competitive, as you all know. With this backdrop, and as you would expect, we are now looking at how best to position Telia’s assets in the future, leveraging our strength in aggregation and our Core Telco-based business and a reach in our broadcast TV business.
So with that, I’ll hand you over to PC for a run-through of the financials.
Per Christian Mørland
Thank you, Allison. Let me quickly take you through the Q2 financials. As Allison has gone through, we have a solid growth at 2.4%, with Finland stabilized and all other units with good growth momentum, partly on the back of a continued roaming rebound. The Service revenue growth is broad-based, like in Q1 with telco growth, both in the Consumer segment of 2.7% and in the Enterprise segment of 2.1% on top of the mentioned TV and Media growth of 2.0%. We have a good momentum with several quarters of low single-digit growth and are well on track to deliver on the outlook for 2022 and 2023.
Let’s move to OpEx. Total OpEx is reduced by 1.6% or SEK104 million in the quarter. The reduction is driven by lower resource costs of SEK123 million from more than 1,200 productions in SEE and SEC this Q2 last year. Marketing spend is reduced by SEK50 million in the quarter, where underlying growth in spend and activities was offset by efficiencies from media expense consolidation, more target communications and a more cost-efficient channel mix.
Other OpEx increased SEK84 million, where continued IT cost reductions from IT simplification, consolidation and modernization are offset by SEK101 million increase in energy costs from increased energy prices. Despite the inflationary pressure, we have six quarters into our transformation journey, reduced our OpEx by SEK0.6 billion or SEK0.9 billion, if we exclude energy costs.
The ongoing digital transformation of our business is fully on track and has enabled a significant reduction in number of resources, marketing efficiencies and lower IT costs. During the last few quarters, the energy prices in our footprint have soared. And during the last quarter, also the market outlook for energy prices, the coming years have increased significantly.
Despite hedging so far this year, the energy cost has increased SEK184 million. And if we use the updated market outlook for energy prices, the total energy cost for 2022 is expected to increase by around SEK300 million versus last year and with a similar increase again in 2023. As stated, our transformation agenda is moving forward, and we are on track to deliver at least SEK2 billion net OpEx reduction by 2023, excluding the energy costs. The energy cost increase will be fully mitigated by a combination of additional cost and pricing initiatives to reflect the higher cost base, and we fully offset on EBITDA level.
Let’s move to EBITDA. Total EBITDA grew 0.8% in the quarter, with growth in all units except TV and Media that, as expected, is impacted by the higher content costs related to Champions League. But total EBITDA is always slightly growing, we have gained a significant growth momentum across all our units in the telco business with EBITDA growth at a solid 4.3% similar to Q1.
The strong growth momentum on the telco side, combined with year-over-year comparison on the TV and Media business in the second half of 2022 onwards, make us well on track towards the outlook for 2022 and 2023.
Moving to cash CapEx. Total cash CapEx in Q2 is SEK3.7 billion, slightly higher than Q2 last year. Mobile and fixed network investments are similar to last year, but we see some high investments related to product development and IT to support our ongoing transformation. This is expected to come down again to the same level going forward.
Despite a challenging global supply chain situation, we are able to stay on track with 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 12-month basis has increased to SEK15.0 billion or 16.9% of net sales. Cash CapEx is expected to reduce on a rolling 12-month basis in the second half, bringing cash CapEx well within the 2022 guidance of SEK14 billion to SEK15 billion and further down in 2023 to be in line with the outlook of 15% of net sales.
On cash flow. Operational free cash flow ended at SEK1.1 billion in Q1, down from SEK2.1 billion in Q2 last year – in Q2, sorry. EBITDA on a reported basis are slightly positive, where negative effect from the Carrier divestment last year is offset by underlying growth and positive FX effects. The decline versus last year is mostly driven by [indiscernible] of working capital in addition to the slightly higher CapEx in the quarter.
Total cash flow on a rolling 12-month basis is, as expected, on a somewhat declining trend due to increased investments and lower contribution from working capital. The structural part of cash flow are expected to improve going forward, mainly driven by the EBITDA growth in the second half of 2022 following the continued growth momentum on telco side and easier comps on the TV and Media business.
This combined with a somewhat lower cash base on a 12-month rolling basis in the second half. Working capital is expected to be positive for a year, but less positive than the SEK3 billion positive that we carried last year. It will secure cash generation, both including and excluding working capital to at least cover the minimum dividend commitment of SEK7.9 billion post our share buyback.
Moving to net debt and leverage. Our total net debt reduced by SEK2.0 billion in the quarter, driven by good capital generation and the SEK5.4 billion proceeds from the Swedish tower transaction. This is partly offset by the distribution of the first installment of dividend of SEK4.1 billion and the first batch of share buybacks was SEK0.4 billion in the quarter. Total net debt-to-EBITDA ended at 2.01 times down from 2.09 times last quarter and are now at the very end – low end of the targeted range of 2.0 times to 2.5 times.
Finally, on the outlook, with a strong first half behind us, in line with our own expectations, combined with a solid plan and execution momentum, we are well on track to deliver our outlook both for 2022 and the period 2021 to 2023.
And with that, I will hand back to Allison to summarize the presentation before going going into Q&A.
Allison Kirkby
So a quick summary. It’s been a strong first half, and we’re continuing to deliver on our plan despite the macro environment we now find ourselves in using both pricing and cost initiatives. Core Telco is solid and growing with broad-based momentum. Finland is on track for a second half turnaround. TV and Media continues to have a particularly solid advertising business, and we’re well-positioned to take advantage of the changes of both in the industry.
Modernization and transformation are on track for a sustainably better and more digital Telia, and our balance sheet is strong and very much supporting the share buyback that is underway. And finally, as I touched on earlier, I was talking about our enterprise business, we have never been more important to society, and we are uniquely placed with the leadership position and breadth of services we have.
So even with the inflationary headwinds, I remain confident in our outlook, our ambitions and our plans for this year and beyond to ultimately return on Telia to consistent sustainable growth that will benefit all of our stakeholders in the months and years to come.
So with that, it’s time for your questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] And our first question comes from Andrew Lee with Goldman Sachs. Your line is now open.
Andrew Lee
Yes. Good morning, Allison and PC. Just had question on your commentary around price mitigation for energy cost inflation in 2023. Clearly, that’s the crunch time for a lot of telcos when energy cost hedging runs out. Just on your comment to achieve that, particularly from the perspective from an affordability and spin-down risk, how do you get confidence from that perspective? Clearly, competitive environment is fairly rational at the moment. But from a customer affordability perspective, I’d love to hear your comments around why you’re so confident?
Allison Kirkby
Yes. So the mitigation is a combination of both cost initiatives and pricing initiatives. It’s not all pricing. And clearly, we always had a pipeline of cost initiatives that were more than SEK2 billion annually, Andrew. On the pricing mitigation, we have already this year taken 5% on Telia Mobile, 10% on Halebop, we’re taking a number of pricing on our fixed services again on fiber this year.
Our services are relatively good value for money. And we’ve got that wide rate – we’ve got low end if our customers want to trade down, but there is no indication yet in any of our markets that there’s any sort of consumer squeeze. And maybe it’s the media doesn’t make a bigger deal of it in this market than it does in the UK. But certainly, we have seen no impact to date. And the more we invest in our services, upgrade networks, it’s allowing customers to work more from home that saves some money. So we are sensitive to it, but to date we haven’t seen any impact from a consumer timing.
We need to watch our export market, clearly. But on our core business, if anything, we’re seeing our enterprise customers investing more into new advanced security and digital services. And we’ve got a history of running with smart pricing in an inflationary environment in our Baltics markets. And so we have a mechanism that we know how to ensure we’re striking the right balance of recovery of mitigating the cost pressure and passing that through to our customers in a way that it doesn’t go in the wrong direction and trade customers down. So relative to many other services were so great always for money.
Andrew Lee
Thank you. That’s really helpful.
Operator
Thank you. Our next question will come from Peter Nielsen with ABG. Your line is open.
Peter Nielsen
Thank you very much. Good morning guys. I think you may have just partly answered my question, but you have interim – you have marketed your premium network, premium content in [indiscernible] more content, et cetera. My question was, do you feel that you are able to monetize this? Are you happy with the way we’re monetizing these premium services and the investments you’ve made? And do you think the scope for an increase in service revenue growth in Sweden in the coming quarters? And if I may squeeze in a follow-up, your comments on the demand for private industrial 5G networks, I think it appears to be some of the more positively preferred from many of the telcos. Do you think you will be able to monetize this demand that is and make this into a sort of a material revenue stream for you going forward within the addition to the enterprise market? Thank you.
Allison Kirkby
Thank you, Peter, for the questions. So first of all, on Sweden and monetization of premiums for. So clearly, we are seeing the benefits of the investment that we put into converged services in general in our Swedish business. And that is helping us hold up our Telia Mobile and our Telia Fixed businesses. So we’re offsetting all of the accelerating copper decline at the moment in our broadband business with 4% growth in the quarter. And that’s despite the fact we had SEK170 million revenue decline from legacy in the quarter. So I’d say where we’re seeing the monetization is in our ability to still grow our broadband business and transition it to fiber, allowing us to take us into MDUs, where we previously did not have business. And overall, help drive content with access, access with content in general. So I think that’s where you’re really monetizing it.
And our growth in TV, our aggregator business in Sweden, growing 16%, we’re clearly monetizing that revenue development. So – and as I look forward, our pivot to growth continues in Sweden. Roaming is recovering. Migration to 5G hasn’t really started yet in Sweden because we only doubled the coverage in the quarter, we’re now at 30%. So we are fueling the Swedish business with the investments in our network, the investment in our security credentials and digital services and the investment in premium for and the aggregated experience so that we can help sustain and justify 5% on Telia Mobile pricing alone already this quarter and more fiber pricing happening.
Talking about private networks. What became obvious to us, I don’t get a way of [indiscernible], which was just a couple of weeks ago here in Sweden, where it’s the gathering of key public sector officials, the key ministries and all of the biggest Swedish customers. And the interest in 5G private networks and how private networks can help them either in their pivot to sustainable digitalization or just on the straight digitalization agenda was very, very obvious. And while they are small project-related revenue streams today, the more we get ahead of competition, and we’ve now got double-digit live private networks across our footprint, we signed up the Finnish new nuclear facility in the quarter, we’re working with the forestry , we’re working with the mining sector and then they’re really interesting now doing a 5G private network for the armed forces in Norway, we are uniquely placed in those areas because of our 5G credentials, but particularly with our security credentials, Peter.
And I think that would definitely be – we’re monetizing now through project revenues, but they will become recurring revenues over time. And it’s just giving us a really different dialogue with our customers because they come to us for the overall how can you help us on our digitalization and it rises us above the scrappy cost of a mobile spend for my employees. And I think that’s super important for us, and it’s a real differentiator for us, Peter.
Peter Nielsen
That’s great. Thanks a lot. Thank you.
Operator
Thank you. Our next question will come from Ondrej Cabejsek with UBS. Your line is now open.
Ondrej Cabejsek
Hi everyone, good morning and thank you for the presentation. I wanted to follow up again on the energy cost communication and the targets that you are emphasizing or reiterating. I just wanted to understand why even mention these headwinds in the first place when you are confident that these can be offset, and therefore, you’re not changing the medium-term guidance? Is this a way to basically emphasize how much upside there is to the externally communicated targets that you have of the SEK 2 billion and SEK4 respectively, in terms of cost-cutting? Or is this more a way to convey that there is some risks to these targets?
Allison Kirkby
Thanks for question Ondrej. Why you even mentioned because we believe in transparency. And we have previously said that we would be able to mitigate totally within the SEK 2 billion. But when we look at the forward-looking rates, it would be unrealistic for us to say we can continue to compensate. So I think it’s just total transparency, but we’re absolutely confident in our outlook. And PC, do you want to build on that?
Per Christian Mørland
No, I think that’s the key message. And I think compared to what we talked about in the past quarter is that the forward-looking rates now in our regions have moved, right, so we cannot – no longer kind of assume that the energy price rate will normalize in 2022 and 2023. So that means that since we’re also hedging our energy costs will continue to go up in line with guided on in my presentation. And you have a solid set of mitigations on the cost side, but there is a risk that the net effect on the OpEx line alone will not be SEK 2 billion, including energy, but we will be able to offset it on an EBITDA level when we also include some effects from pricing.
Ondrej Cabejsek
Thank you. And just to double confirm that the SEK 4 billion target is impact as well, not just the SEK 2 billion, but the SEK 4 billion as well?
Per Christian Mørland
Yes. So the same applies for the SEK 4 billion, we should also look at excluding energy, of course, 2025 is a long way ahead, so we don’t know how the energy prices will develop towards 2025.
Allison Kirkby
And Ondrej, if you look, what you’re seeing so far in our trends, we’re doing a little bit better in our revenue development versus our guidance, and we’re continuing to deliver on our EBITDA development, despite the energy inflation. So basically we’re just aligning that 2 billion and 4 billion with what we’re actually executing on today.
Per Christian Mørland
So we carry 100 million increase in Q2, and we carry 80 million increase in, in Q1. And we are still in line with our EBITDA.
Ondrej Cabejsek
That’s much clear now. Thank you very much.
Operator
Thank you. Our next question will come from Ulrich Rathe from Jefferies. Your line is open.
Ulrich Rathe
Thank you. Just two, maybe if I can. The first one is only free cash flow outlook this year. I realize you’re not guiding. But with the sort of consensus short of almost 50% this quarter might be room to clarify market expectations a little bit. I think market consensus for mind building would you feel comfortable with that? The second question I had is on the strategic agenda, Allison, I think you’re quoted here in various media outlets about talking earlier today about Denmark consolidation opportunity. You didn’t mention that on this call. Could you sort of just frame that a little bit for us, and also, is it fair to say that your comments about a very competitive SVOD market and you now looking how the best position to assets for the future in that context, that this is a bit of a nudge that there might be some considerations in this area as well. Thank you.
Per Christian Mørland
All right. So Ulrich, I can start on the cash flow outlook as you know, we don’t give specific guidance or outlook on cash flow. But what we are very clear on is that we are guiding on that we at least will deliver the 7.9 billion that is necessary to cover our minimum dividend commitment. I think the – we don’t know all the details around the kind of consensus, but I think the 8 billion to 9 billion is not sort of a unreasonable number to assume for 2022.
Allison Kirkby
And on the strategic agenda. Yes. They asked me the specific question on Bloomberg this morning on where do you see consolidation opportunities? And I said, it would only be in Denmark in our footprint that I see consolidation opportunities and that’s nothing new I’ve said that for a while. Is there anything on the radar? No, there isn’t rate, but I still believe Denmark only to consolidate over time, there’s just too many players for that market, but we are focused on turning around our business there. And we’ve done a good job of that as you can see this quarter and we’re putting ourselves in a strong position for any consolidation that might happen in the years to come.
In terms of the SVOD market. Yes, I do believe there are now – there are now probably too many subscriptions out there and there will have to be consolidation. And we are increasingly clear that what we want to be the best at content aggregation in our telco business. And we want to continue to digitalize our phenomenal reach that we have in our broadcast business. And then I think you will see certainly a change to how we will view our export business over time as a result of that. So again, is there any immediate consolidation opportunity? I don’t believe so. But by focusing on aggregation in telco and digitalizing our reach in advertising, that’s where we’ll put most of our emphasis in the future.
Ulrich Rathe
Very helpful. Thank you very much.
Allison Kirkby
Thank you.
Operator
Thank you. Our next question will come from Nick Lyall with Soc Gén. Your line is now open.
Nick Lyall
Good morning everybody. Allison, just a quick one on the roaming. Could you tell us how much roaming contributed to the second quarter, please? You’re thinking it could be quite a decent summer in terms of return on roaming for mobile. Could you give us a little bit of a sense of scale on that? And just to come back to PC’s comments as well about the cash flow you mentioned, I think working capital to be positive for the year PCs. Is that still including some vendor financing benefits in there? Is that extend you mentioned? Thanks very much.
Per Christian Mørland
Yeah. I can take both of your questions. On the roaming, I mean in Q1 we, I think we said that we saw kind of a 60% rebound from the pre-pandemic. And then now in Q2, we see that had increased to 70% on the revenue and on EBITDA. So on the revenue line, it’s a little bit more than 140 million in Q2 versus last year. On the cash flow and the working capital, yes, the guidance on working capital being positive for the year includes effects on the vendor financing solutions.
Nick Lyall
Okay. That’s great. Thank you.
Operator
Thank you. Our next question will come from Keval Khiroya with Deutsche Bank. Your line is open.
Keval Khiroya
Thank you so much. Two questions, please. So firstly, Allison, you mentioned you’ve not seen any ad spend impact so far. But can you share how you think about how these revenues will develop going forward potentially with the weaker backdrop? Any help on sensitivity here would be appreciated.
And secondly, last quarter, you said the rooftop sites weren’t quite ready, but they do remain a priority for a potential deal. Does that still remain the case? Thank you.
Allison Kirkby
Yes. Thanks for the questions, Keval. Yes, we’re not seeing any ad spend impact. And I think I spent 25 years in consumer goods, consumer goods companies and actually retailers to some extent, actually love inflationary periods because it gives them an opportunity to raise pricing and there’s not the opportunity to do that for many years. And what you’re seeing is when they do that, they have to invest back a bit, and they’re definitely investing in advertising at the moment. So we are seeing no impact on our ad spend.
Now of course, we need to prepare for any potential downside even although there’s no indications yet. And that’s why we’re digitalizing, and we’re digitalizing rapidly, so that increasingly we can shift some of the spend that’s going into Google, YouTube, Facebook and others onto our platforms that are safer from a brand reputation point of view and building on our unique reach gives our advertisers even more premium, targeted, addressable inventory.
So we see the shift to digital and been able to take market share from the big guys as being a way for us to compensate for any downside and weaker macro backdrop that might happen. But clearly, we’re not seeing that yet and very strong demand, particularly from retailers and consumer goods companies.
In terms of rooftop, yes, it continues to remain a priority. Our priority is to crystallize value of our infrastructure. And most other tower companies have rooftops within them, and it’s our intention to put rooftops into our telco as and when we are ready, and we can then start dialoguing with interested parties of which we have.
Keval Khiroya
Perfect. Thanks, Allison.
Allison Kirkby
Thanks, Keval.
Operator
Thank you. Our next question will come from Stefan Gauffin with DNB. Your line is open.
Stefan Gauffin
Yes. Actually, most of my questions have been answered, but perhaps going back to working capital and just look at the – why we saw so much tied up in working capital this quarter seems to be a buildup of inventory and also higher count receivable? Can you talk about the inventory? Yes, that was – it was a deliberate choice to mitigate the impact from supply chain issues. Can you just talk about these issues and what to expect for the coming quarters?
Per Christian Mørland
Yes. I’ll address that question. Thank you. I think on the outlook, I think I covered it, but I think first of all perspectives on the quarterly working capital development. So compared to Q2 last year, there is an SEK 800 million negative year-over-year change effect. That is coming from SEK 400 million positive effect last year on the back of a positive account payable effect in 2021. Then you have a negative effect this year. So it is a combination of, I would say, increased inventory, and this is actually a deliberate choice that we have made to mitigate some of the pressure that we see from the global supply chain situation.
So we have backed up on a critical element that we – to secure our transformation and also to secure customer delivery. And this should be seen as somewhat sort of a temporary effect. On top of that, there are some phasing on the accounts receivables, and they’re slightly lower accounts payable. But keep in mind, there’s nothing sticking out of the ordinary. This is our kind of normal variation between the quarters that you should expect.
Stefan Gauffin
Yes. Perfect. Thank you.
Operator
Thank you. Our next question will come from Francesca Schild with BNP Paribas. Our line is open.
Francesca Schild
Good morning. Thanks very much taking the question. And so also most of mine has also been answered, but if I could just ask on Enterprise. So the Core Telco enterprise grew 2.1% this quarter. And you also talk about strong interest in 5G private network as another factor for growth. You’ve consistently outperformed your peers [indiscernible] it’s actually improving, are there any structural factors [indiscernible]? Thank you.
Allison Kirkby
Francesca, I missed the final part of that question. Could you just – I hear you were saying we’re outperforming our peers, is there anything structural? Was that the question going on in Core Telco and with enterprise, okay?
Francesca Schild
Yes.
Allison Kirkby
Okay. Yes, as I said earlier, I think we have a very broader range of both connectivity, communication services, ICT services, IoT services and security services in the market by far. And that is really helping us drive our enterprise segment. It’s helping us secure region one, the biggest region in Sweden, its helping us do new advanced security solutions for the employment agency. So – and at the same time, as we’re migrating to 5G, as we are upgrading and pricing our services appropriately, yes, I think we’re in a very strong position there. nobody can really serve the public key and larger enterprises with the range of services that we have at Telia and the credibility we have, particularly in the security and network areas.
Did that answer your question? It was quite difficult to hear you.
Francesca Schild
Yes. Sorry. Thank you, Allison.
Allison Kirkby
Thank you.
Operator
[Operator Instructions] And our next question will come from Adam Fox-Rumley with HSBC. Your line is open.
Adam Fox-Rumley
Thanks very much. I should built directly on that last one, which was just to ask how much of the kind of unique capability that you have , do you think is – has been developed internally as to IP versus something that others in time will be able to catch up with you on. There are obviously other pan Nordic operators? And as a kind of related question how many of your customers are actually buying services across borders? I don’t really to ask for a specific number, but to what proportion is, is that an important part of the proposition on your side? Thank you.
Allison Kirkby
Okay. Let me try and answer that. PC might have answered the last question. Because we invested in Seagate [ph] 15 years ago. And because we have, been supporting some of the most important government agencies with security services for many, many years and it’s not easy for other to catch up at the more advanced end of private network, ICT services and security services without having to partner with ours. So I reckon we get more intellectual property through the combination of our connectivity IT and security services than anybody else does the footprint. Now yes, we’ve got other pan-Nordic players and nobody has been the incumbent in as many markets as we have and nobody has invested in the ICT segment as much as we have.
So we’re number one in ICT and security services in Finland and the Baltics. Our peers are not. And yes maybe Norway, one of our peers has the breadth but they don’t have the breadth outside of that market because they tend to have come from a more challenger mobile-only route, which is where we have not. So that’s what gives me the confidence that we’ve got it. Competition will pressurize us to keep doing better, and that’s why we aim to be the digital partner of choice to the enterprise segment, and we’re investing to retain that and it’s so far working for us and with double-digit private network already being operated by us and almost 3x that in the pipeline, I think we’re well ahead of our Nordic peers. In terms of services across borders, I’ll that to PC.
Per Christian Mørland
Yes, ll give an exact number, but we have a few hundred of really critical multinational customers in our markets and footprint.
Allison Kirkby
And that is effect that’s been growing in the quarter as well. And it’s growing for us.
Adam Fox-Rumley
Great. Very interesting. Thank you.
Allison Kirkby
Thanks, Adam.
Operator
All right. There are no further questions in the queue. I’d like to turn it back to the speakers for any closing remarks.
Erik Strandin Pers
Okay. Thank you very much for joining the call, and thank you for your questions. We are online. If there are any further questions, just give us a call. Have a great summer, everyone.
Allison Kirkby
Have a great summer. Thank you everyone.
Erik Strandin Pers
Bye-bye.
Allison Kirkby
Bye.
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