Elisa Oyj

OMXH:ELISA

Earnings Call Transcript 2019-Q1

[Vesa Sahivirta, Director of Investor Relations]

Good morning, everyone, and welcome to Elisa's First Quarter 2019 Conference Call and Analyst Meeting. I'm Vesa Sahivirta, Head of Investor Relations, and here is again a very familiar team, CEO, Veli-Matti Mattila; and CFO, Jari Kinnunen. We start this meeting with a presentation followed by Q&A, and first, we take questions from the audience here and then from the conference call lines.I think we are ready to start, so I give the word to Veli-Matti, please.

[Veli-Matti Johannes Mattila]

Thank you, Vesa, and welcome to Elisa's first quarter 2019 record review on my behalf as well.We had a good quarter. We were executing according to the guidance and plan we have set and had. Revenue was slightly down, especially due to the equipment sales going down a bit. Also, interconnection prices have come down, bringing revenue slightly down. Also with that, did some divestments last year also that impacted on revenues.Our comparable EBITDA was at last year's level, and mobile service revenues were growing 2.1 percentage. There is continuing demand for higher speeds with higher prices, also very good demand for our premium subscriptions. The yield of those higher prices is dependent, of course, of the competitive situation.Our postpaid voice churn was up from previous quarter. We had some business customer cases that we were transforming to the competition this quarter, but overall, last year, we were more than winning -- more winning the customers, so we will see some positive impacts more of that later this year in B2B segment.We had some decline in the postpaid mobile subscriptions, 1,500, and with fixed broadband, 700. We also have gradually started with the 5G rollout. Last week, we were in the city of Turku and our installation is the biggest 5G installation in the whole Nordic countries. So we are excited to have our customers who are willing to learn early on which kind of benefits 5G will bring. So we are making sure that, that is possible very early in Finland, also with the coming handsets and devices during the second quarter, where we will be one of the Europe's first operator to bring 5G smartphones to the market.Our dividend was EUR 1.75 for last year's results.The revenue decreased slightly year-on-year but I'm sure that our development in the connectivity business as well as with our unique set of digital service businesses going forward will bring also good development for revenues. Mobile service revenue is slightly up. Like said, the upselling is working very well, but also we have made some product changes, bringing benefits to mobile service revenues.EBITDA, of course, the IFRS 16 has helped the EBITDA a bit, but the EBITDA percentage would be higher regardless of this IFRS 16. We, of course, continue to do the efficiency productivity improvements, and as said earlier, the accelerated productivity improvements start to take more place after first quarter.When looking at the segments, the Consumer Customer business had revenue decline of 2 percentage really from this already mentioned sources, equipment sales, interconnection divestments. Also, the traditional fixed business continues its decline as it has been doing for several years. The mobile and digital services side, there is positive impact to the revenues. EBITDA was growing 4% in the consumer segment. In the corporate side, we saw a revenue decline of 2% of the same -- basically same -- from the same categories. Also, mobile service businesses were growing in the corporate segment. EBITDA was minus 4% in the corporate segment, but there is a lot of good development to the productivity going on.We continue with our strategy with 3 focus areas, and we believe that the results we have gained also will -- can be continued to the future. We have a lot of potential on each of those focus areas. When we look at the development in the mobile data and the mobile subscription side, the smartphone penetration is going up step-by-step as it has been earlier. Now 83% of our customers have a new type of smartphone. And the proportion of customers having fixed subscriptions is now reaching 69% and of all of our subscribers, 68% are at 4G speeds.We continue to develop our unique set of digital service businesses. In the domestic side, Elisa Viihde, Elisa entertaining IPTV original series are being launched. And also, for example, the Arctic Circle named original series became all-time most watched. And also, the other series, All the Sins, won award for outstanding screenwriting at TV at Göteborg Film Festival. We also have started first of the 5G eSports tour across cities in Finland, and this is streamed with our Elisa Viihde IPTV service, a very good development in our IPTV service overall. Also, the IT business is continuing high-quality services to customers and creating growth opportunities.In the international digital service business areas, the number of Videra's videoconferencing room systems has exceeded 100,000 now, continues its growth especially with the large corporate multinational companies. And Elisa Automate has a lot of customer cases going on. For example, Orange Spain has signed us with a service assurance automation case as an example.Elisa Smart Factory also continues its growth very well and there are a lot of customer cases, and we won our first customer case in pharmaceutical industry, and we have now delivered services in 5 different industry verticals. And as said, the M&A opportunities are also potential for further growing these international digital service businesses.During this quarter, we were also awarded Great Place to Work for the third time, and we are the largest listed company in Finland awarded the Great Place to Work award, now third time in a row. And we have our own concept for ideal work environment, Elisa Ideal Work, and flexible ways of working. Also, the cooperation and good spirit and atmosphere is appreciated by Elisians. And our long-term personnel satisfaction and engagement is improving with our own measurements with Elisa's empowerment index as well.And finally, regarding the outlook and guidance for rest of the year, the positive development of the macroeconomic environment is decelerating in Finland unfortunately. Competition remains challenging. And our guidance will be reiterated. So the revenue will be at the same level or slightly higher than last year and comparable EBITDA will be same level or slightly higher than 2018. CapEx will be maximum 12% of revenues.And then I turn the word to Jari, please.

[Jari Kinnunen, CFO & Member of Executive Board]

Yes, thank you. Let's start with profit and loss and comparison to last year. Revenue was EUR 10 million negative. So decrease coming from 3 main areas. Divestments impacted EUR 2 million, equipment sales were down EUR 5 million and interconnection, of course, very much impacted and driven by interconnection price change. Last year's December was EUR 3 million lower than a year ago.In EBITDA, excluding one-off items or comparable EBITDA, EUR 158 million. So according to guidance, same level as last year. We had in reported EBITDA EUR 2.5 million restructuring expenses relating to personnel reductions. And as said by Veli-Matti, we will continue with accelerated productivity improvements going forward.IFRS 16 change, which relates to these standard and operating leases accounted as financial leases from the beginning of the year, had EUR 4 million impacting EBITDA. So operating lease expense moved away from EBITDA and booked as a depreciation and a small part of that in financial expenses. So depreciations were increasing from last year, EUR 6.8 million. Out of that, EUR 4.5 million comes from this accounting change, approximately EUR 0.5 million coming from license, 5G license depreciations beginning now. And the rest is approximately EUR 2 million, relates to run rate end of last year being EUR 2 million higher than beginning of 2018.In financial expenses, there was an increase, EUR 1.6 million and EUR 0.3 million, coming from this accounting change. Lease agreement standard change at EUR 0.8 million relates to a bond issue and bond exchange transaction that we made in February. I'll come back to that later.Then moving to Estonia, Estonia revenue was minus 3% down, purely coming from lower equipment sales. Mobile and fixed services were positive and growing. EBITDA remained same level, EUR 13.7 million as year before. And EBITDA percentage increased to 33.9%.Postpaid -- postpaid churn -- voice churn continued to be fairly low at 7.7% and postpaid subscription base flat. Prepaid was negative 7,000.Total CapEx was EUR 57 million, and excluding IFRS 16 change, EUR 51 million, in line with 12% CapEx to sales guidance. Total CapEx in segments: consumer segment, EUR 37 million; and corporate segment, EUR 19 million. And main CapEx was in 4G network, capacity and coverage as well as other network and IT investments.Cash flow was growing strongly from EUR 52 million last year to EUR 68 million, so 30% change. Main positive impact coming from net working capital change. So change of -- change in net working capital was EUR 20 million and the main driver inside net working capital was accounting -- accounts payable change. Comparison year 2018 was very, very negative and now that was less negative in current quarter.Other positive impacts from CapEx and EBITDA, also IFRS 16 change effect was positive. And cash conversion remains high. EBITDA cash conversion was 68% in Q1.Then moving to balance sheet and capital structure KPIs according to target. Net debt-to-EBITDA, 1.7; equity ratio, 41.9%. And there was impact of EUR 63 million from IFRS 16 to net debt, and net debt-to-EBITDA impact was 0.1. We did in February a liability management transaction, issued EUR 300 million, 7-year bond which was very well taking 7x oversubscribed and coupon for this bond came to 1.125%. At the same time, we bought back or exchanged the 2021 bonds at coupon 2.75%, worth of EUR 126 million, and improved interest expenses, a few of them. Return ratios, return on equity and return on investment remained at good level, 28.4% and 17.5%.And beginning of April, 3rd of April, there was AGM, which decided EUR 1.75 dividend, 6% growth to previous year, and the total amount, EUR 280 million was paid yesterday. Also, AGM decided authorization for 5 million shares buyback to the Board of Directors. And this distribution again showing strong commitment to continuing competitive shareholder remuneration.Now I give to Vesa, please.

[Vesa Sahivirta, Director of Investor Relations]

Thank you, Jari. And now we move onto Q&A part, and the first question comes from the audience, please.

[Matti Riikonen, Financial Analyst]

It's Matti Riikonen, Carnegie. Couple of questions related to the competitive situation first. Quite firstly, would you describe a bit about the competitive methods and tactics in the markets done by your competition and you? Has there been any change to these? And what are the mostly used measures? Then secondly, if we think about the competition in the first quarter, do you see any reason to expect any changes in the competitive environment in the coming quarters, be it in mobile, fixed, consumer or corporate in Finland?

[Veli-Matti Johannes Mattila]

Right. Thank you for the question. Not a big surprise that there are questions regarding the competitive situation. Maybe we haven't seen quite as aggressive campaigning as we saw some of the campaigns in the second half of last year. Other than that, there has not been many -- any major changes in the competitive landscape. We see campaigning still continuing in the consumer side, also different promotions time to time in the corporate side. Both in the SME and the large corporate segment, we continue to see similar type of competitive intensity, as we have seen earlier. So no major changes and the usual measures and tools have been utilized. Nothing special there in that front either.Going forward, like said, our strategy is to provide value to customers. And also, our strategy is to capture the relevant value also to our shareholders of the value we deliver to our customer base. We are defending our market position if needed in regards to what the competitive situation might be in the future, is very much dependent on how our competition sees their strategy continuing.

[Vesa Sahivirta, Director of Investor Relations]

Sami, please?

[Sami Sarkamies, Senior Analyst of TMT]

Sami Sarkamies, Nordea Markets. I have 2 questions. Firstly, looking at the bigger picture for the last year or so, the underlying growth you have in 4G migration that is driving mobile service revenue growth has been pretty much diluted by interest campaigning. Do you think you have made any progress in order to be able to be back at this 3% to 5% range at some point in the future? And can you elaborate on any of the means you've been using in order to sort of move in that direction?

[Veli-Matti Johannes Mattila]

Well, in regards to the mobile service revenue growth, clearly, the demand for higher speed exists by our customer base. There's a lot of customers willing to move forward, not only to this max 50 megabit per second speed, but even further levels. And we are launching the 5G speeds as we speak. Clearly, there are benefits and relevant value to the customers. Like said, the competitive intensity as diluting the benefits of that. Sometimes a bit more, sometimes less. We, of course, have other many competitive advantages that we have and we are further developing. For example, the network quality. We know that we have the best network quality and that is relevant for some customers and they choose us maybe sometimes a bit with a higher price instead of going to the campaigning. Of course, we -- price is so relevant for all the customers that we have to be tactical also and respond to some places -- some instances. But overall, we are relying on developing other value elements than just the price for customers. But price is important. We are utilizing then pricing, if needed, to protect our customer base. In relation to a bit longer term, to the future about the mobile service revenue growth, I see that there is a very big potential for improved mobile service revenue growth, but it is heavily dependent on the competitive intensity.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. And then secondly, I would like to ask about the Telenor transaction. Are you able to elaborate on any potential read across to Elisa? We know that you've been, for example, cooperating with Telenor in the area of roaming, so potentially changes there. Also, they have mentioned the Finnish corporate market. That's an area where they could see DNA taking bigger share in the future.

[Veli-Matti Johannes Mattila]

Well, of course, now when the Norwegians are coming to own DNA, it will make a change in the market, which kind of remains to be seen. And it's better to ask from the Norwegians' that -- what they have plans for this company. Well, we have had a cooperation with Telenor, and we know their capabilities pretty well. And we are also very comfortable that we cannot be competitive going forward, even if we are not partnered with them. DNA itself, of course, has been a very capable competition in the marketplace. We have been competing with an international Swedish-based operator in Finland as well. So if we will have now Norwegian-owned operator to compete with that, that's a new situation, but we are comfortable of our competitive capabilities in terms of the highest quality and also widest portfolio of digital service businesses. In terms of the B2B market, of course, that market or the competition there is always evolving. We have had there in different segments of B2B market competitive dynamics that has not been very easy. So it's just a bit different but same kind of competitive intensity. We are comfortable with our capabilities going forward.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. And then finally, I'll ask about terminal sales that we are at the lower level than a year ago. Is this something that could sort of prevail also in the coming quarters? Or was it driven by, for example, launches by certain manufacturers?

[Veli-Matti Johannes Mattila]

Well, we have seen -- in the handset market, we have seen lower average price levels. So for reason or another, the customer base on average have been going for a bit lower-priced device portfolio. Of course, very dependent on -- the future is very dependent on which kind of and how competitive -- how effective handsets and devices the manufacturers are launching to the market. So -- but our position as a very strong handset channel to the customers continues and further strengthens.

[Artem Beletski, Analyst]

Artem Beletski from SEB. Three questions from my side. So the first one is relating to this cost initiative, so efficiency initiatives, what you mentioned first time in Q4. So is it still the case that there hasn't been any impact in Q1, and Veli, you are going to provide any color on what type of magnitude we could be talking about going further into 2019?

[Veli-Matti Johannes Mattila]

Yes. As we have discussed earlier many times, we have a very strong Elisa culture for continuous productivity improvement where we, from the customer experience and quality kind of point of view, developed also our productivity leading to improvement in profitability gradually. Now when we saw that we will have a bit tougher beginning of the year, we accelerated some of the productivity improvements. And like said, this quarter went according to plan. And also, we see that this accelerated productivity improvement will start to impact more after this first quarter.

[Artem Beletski, Analyst]

Okay. And then maybe 2 smaller questions. So the first one is relating to churn in Q1. As I understand it, there also has been some price changes, what you have done, which have been impacting the number or increasing the number. And also, there has been some shift in terms of corporate customers, so some new contract and one expiring. Was the underlying churn in Q1 actually lower than this kind of trend, what you have seen in previous quarters? And the other detail question is to Jari relating to depreciation in Q1, which was also a bit higher. What was the magnitude of these kind of one-off items impacting the quarter?

[Veli-Matti Johannes Mattila]

All right. The churn, we have still kind of extra churn coming from customers losing -- leaving the passive subscriptions. It's a relatively substantial part of the churn. Now we had a bit extra churn this quarter, which came from the B2B segment when we had actually 2 customers, larger customers transforming this quarter. We won more large customers last year than we lost these 2, so the net impact for us going forward this year will be positive. But it just was maybe 1 percentage point or so higher than normal from the B2B side. But overall, how the churn trend would look like going forward, it is very dependent on the competitive landscape. But we are ready to defend our position also that I don't expect any major changes in the churn. But of course, the target for us is to get it to a more normal levels, around 15%, some point in time.

[Jari Kinnunen, CFO & Member of Executive Board]

And to your question relating to depreciation, so there was 3 items. This accounting change, 4.5% -- EUR 4.5 million. More depreciations as a result of that. 5G license that was acquired end of last year, started to depreciate that and that is approximately EUR 0.5 million. And then already end of last year in Q4, the run rate depreciations, they were at EUR 60 million level compared to EUR 58 million beginning of last year as a result of normal CapEx during the year.

[Matti Riikonen, Financial Analyst]

Matti Riikonen, Carnegie. Related to IFRS 16 changes, mostly technical. You had the positive impact now in Q1 for EUR 4.3 million in the quarter. So would that be the same amount in all quarters in '19, which would then mean that the positive technical impact would be positive EUR 17 million versus the EUR 13 million that you talked about at your CMD last fall? So that's first. And then secondly, when you showed the numbers on cash conversion, which relate to the operating cash flow, which is positively impacted by IFRS 16, what would be the cash conversion kind of trend without the kind of technical IFRS 16 positive change?

[Jari Kinnunen, CFO & Member of Executive Board]

Yes. The near estimate for the whole year is in the range of EUR 17 million. So the EUR 13 million earlier figure in November, that was estimated at that point of time, as was said. And now, of course, there is more clarity on that, so EUR 17 million is for this year. Then for the cash flow, operating cash flow conversions, so impact is EUR 4 million. So it would be EUR 4 million less with that business.

[Matti Riikonen, Financial Analyst]

All right. Okay. Then you had a EUR 2.5 million restructuring cost in the first quarter, and you are still planning to make these additional cost savings. So do you think that the one-offs will be isolated in Q1? Or do you still expect that there would be more kind of savings-related one-offs going forward in the coming quarters?

[Jari Kinnunen, CFO & Member of Executive Board]

Well, it's possible that there are one-offs also in the coming quarters, yes.

[Vesa Sahivirta, Director of Investor Relations]

Okay. Any further question from audience?Not at the moment. So we'll take the first question from conference call lines. Please.

[Operator]

[Operator Instructions] Our first question comes from the line of Abhilash Mohapatra from Berenberg.

[Abhilash Mohapatra, Analyst]

I just had a question on B2B ARPUs please, whether trends have been weaker than what we've been seeing in the consumer segment for the last sort of 2 or 3 quarters. You obviously have a lot of focus on the consumer side. Just wondering if you could give us your thoughts on how to think about sort of B2B mobile ARPUs for the next sort of 3 or 4 quarters? And what are the key drivers sort of driving that ARPU development?

[Veli-Matti Johannes Mattila]

All right. Thank you for the question. Yes, there has been also in the B2B side a bit more intense price competition we have seen, especially in the last customer segment impacting to the ARPU somewhat. Going forward, remains to be seen what the competition is. We are relying our capability to compete at any price environment but, of course, ARPU might be reflected with these changes. The positive impacts to the corporate ARPU are coming also from the customers willing to pay for higher speeds. There is more and more demand, and of course, also we are gradually seeing the IoT coming as a new element to the mobile side. We have tens of customer cases where we are exploring with our customers the IoT applications. So it is -- some point in time those are turning into revenues as well. So those are the 2 main sources for positive impact to the ARPU. But of course, also in the corporate segment, the price-competitive situation is quite important.

[Operator]

Our next question comes from the line of Peter-Kurt Nielsen from ABG.

[Peter-Kurt Nielsen]

A couple of questions, please. Firstly, on 5G, Veli-Matti, you talked about some initial rollout you've done in certain regions. Is there any way you could talk a bit about your sort of overall 5G strategy, how you intend to proceed with this and when you expect to see accelerated momentum on your own rollout? I'm not asking you to predict the revenue trends. And then just a quick one related to the potential change to the political environment in Finland. I don't imagine there's anything you can tell us about potential impact on lease, I mean, disregarding any impact on the overall macro environment, whether you would see any regulatory or the direct implications for the telecom sector of a change in government. And just lastly quickly, you spoke about some interesting contracts on the digital services businesses which you've gained. Are you generally seeing good interest for these 2 main areas?

[Veli-Matti Johannes Mattila]

All right. Thank you, Peter-Kurt, for your questions. In terms of the 5G, we, of course, have several thoughts in terms of how we are capitalizing the 5G momentum. Now we are bringing the 5G to customers in certain cities where we see and feel that there will be demand. We also are bringing 5G to Corporate Customers on their sites for IoT usage. There is, of course, the fixed wireless is one potential area. However, the normal, let's say, grid with what we have and the normal mobile broadband solutions are very competitive without the extra hassle with the fixed wireless, which it will bring. But nevertheless, there are several kind of spearheads that we're going to at the same time testing. In terms of the momentum, even if we are talking quite much about 5G, also our sales, the importance is that we are exploring and learning the momentum and the volumes even for network rollout will start to take place next year or year after that, I believe, at the moment.In terms of the elections that we had and then the potential changes in, let's say, the political environment, well, I'm not the right person really to predict what -- which kind of government we will have. It was quite interesting situation that we got so many parties to get almost the same result as the 3 largest parties and how it will be unfolded remains to be seen. However, normally, independently of the color of our government in Finland, the regulation and the regulatory regime in Finland and for that matter also what I've seen in Estonia, even though this Finnish election is not impacting Estonia, they have their own quite recently. But in both countries, let's say the predictability and continuity of the regulatory thinking and activity is quite good. So I'm not expecting any major changes impacting on us regardless of the color of the government that we will finally have in Finland.And your third question regarding the digital service businesses, we have very good customer cases, several customer cases and businesses developing both in Elisa Automate, also in Elisa Smart Factory Management and also in Elisa Viihde's side. In addition to that, in the Finnish digital service businesses, our IPTV continues its growth. Our streaming service within our IPTV had its all-time high number of paying customers, underline paying customers, not just customers who are visiting the service. Also, the IT is making good progress. Just as an example, the Elisa Automate, we had in the second quarter participation in the Mobile World Conference in Barcelona and we had 30 prebook meeting with different operators there. And our people, they actually met 10 more operators. And almost with all of them, there was further activities and actions agreed, so there are tens of customers really, for example, just on -- based on this event with whom we are discussing. And so that looks really promising. But of course, time will tell how successful every one of those 3 international digital service business domains will be for us.

[Operator]

Our next question comes from the line of Stefan Gauffin from the DNB.

[Stefan Gauffin, Analyst]

First of all, some financial technical questions. The financial income and financial expense were both higher than at least I had expected. Can you give some more details to help us understand these? Also, on the CapEx impact from IFRS 16, it was EUR 6.2 million, of which EUR 5.1 million from indexation of leases. Can you give some indication on CapEx impact for the full year? And then finally, a follow-up relating to the Telenor acquisition of DNA. How much of your business is done in cooperation with Telenor that perhaps you need to replace with other partnerships?

[Veli-Matti Johannes Mattila]

All right. If I start with your last question to respond to that and then ask Jari to respond to the 2 first ones. We are, of course, not disclosing which kind of level of business we have with our different partners. But I would say that in the big scheme, the business we have together with Telenor is quite, let's say, marginal in the total scheme of our businesses. Also, the partnership with Telenor can be replaced with some other international partners. And looking at our international partners, Vodafone is by far the most important partner, has been for us in the international domain anyhow.

[Jari Kinnunen, CFO & Member of Executive Board]

And relating to your question regarding financial expenses and financial income, yes, there was, in both of those, change against last year and that relates to this transaction that we did in February, so we issued EUR 300 million 7-year bond, and we did buy back EUR 126 million of 2021 bonds and exchanged -- partly purchased back and partly exchanged that to the new debt. And as a result of that transaction, there is financial income and there's also financial expense. And net of those is this EUR 0.8 million that I mentioned in my presentation. And this is to be regarded as one of net expense which is not repeating in following quarters.And to your question regarding CapEx, as a result of this IFRS 16 change, there was EUR 6.2 million CapEx amount. And correctly, as you said, out of that, EUR 5.1 million relates to indexation of lease agreements. And this CapEx amount is not necessarily repeating in following quarters. So it is this change that means that when there's a new lease agreement, the total amount of the lease agreement will be capitalized in assets and liabilities. And this goes through CapEx when the new agreement is signed. But this is more -- the EUR 6 million relates to now for the change of the accounting methods rather than continuing with the same amounts going forward.

[Operator]

Our next question comes from the line of Panu Laitinmäki from Danske Bank.

[Panu Laitinmäki, Senior Analyst]

I have 3 questions. First one is on the revenue guidance. You expect the full year revenue to be around the same level or slightly higher but Q1 was down 2.2%. So the question is, what are the main drivers for that accelerating or improving growth in the coming quarters? Then the second question is more specifically on the revenues in the fixed and digital services, which were down 4% in Q1, and even excluding the M&A impact, I think it was maybe 3%, which is more than previously. So the question is, what is driving this? And what do you expect for the trend going forward there? And finally, the third question is on the corporate segment where the EBITDA development was negative, even more excluding the IFRS impact. So what is kind of the outlook in that business? And is it there where you see that kind of cost savings impacting after Q1?

[Veli-Matti Johannes Mattila]

All right. In terms of the revenue guidance, the drivers are, of course, the mobile service revenues as well as our digital service businesses both in Finland as well as in international domain. I missed some part of your second question, so you can -- if you can ask again so that I can answer that.

[Panu Laitinmäki, Senior Analyst]

Sure. So it was about fixed and digital services revenue growth, which was minus 4% in Q1, and the question is that it kind of accelerated compared to the previous quarters. What was driving that? And then what do you expect for kind of going forward with this revenue line?

[Veli-Matti Johannes Mattila]

Well, in the fixed business, we had quite much equipment sales as well not taking place as much as earlier. Also, the traditional fixed business is declining and some of the digital service businesses were not growing as far as in the corresponding quarter.Your third question regarding the corporate EBITDA outlook, we are, of course, targeting with the productivity and profitability improvements, both segments, but also includes the Corporate Customer segment where we plan to have improvements in the EBITDA.

[Panu Laitinmäki, Senior Analyst]

Can I just clarify on the first question? So do you expect -- does your guidance kind of imply that you expect the mobile service revenue growth to improve after Q1?

[Veli-Matti Johannes Mattila]

Without giving any numbers, yes.

[Operator]

Our next question comes from the line of Siyi He from Citigroup.

[Siyi He, Vice President]

I have a question on B2B. You're talking about that you have won and lost some B2B contracts last year. I wonder if you can elaborate what are the key drivers behind the contract wins and losses, whether they are more price-driven or ICT competence led. And to follow up on that, the deal that's between Telenor and DNA, clearly they have stated that B2B is a growth area. I was wondering if there is anything that Elisa could plan to do between now and before the integration is completed to ring-fence your existing customer base.

[Veli-Matti Johannes Mattila]

All right. In terms of the B2B side for some losses of big customers main and almost the sole driver is prices -- are prices that some of our competition thinks that the price levels can be sometime quite interesting. So -- but nevertheless, like said, we have the capability to respond and give even more value to customers by decreasing heavily. Sometimes this happens. Last year, for a long time, we saw that kind of, let's say, behavior in large B2B segment. In terms of Telenor coming to be the owner of DNA and its impact to B2B business, certainly, we are continuously -- even without this event improving our competitiveness in the B2B segment, but remains to be seen how Telenor is taking over DNA and which kind of changes they will start to implement in DNA's activity. We, of course, are developing our competitiveness based on our high quality of our services, also the automization capabilities where we are ahead of others. Also, our very good portfolio of digital services we are providing to customers continue to be with those, for example.

[Operator]

Our next question comes from the line of Roman Arbuzov from JPMorgan.

[Roman Arbuzov, Analyst]

I actually had 3 questions, but do you mind, please, if I ask them one by one rather than all in a bundle? So the first one is just a follow-up on one of the earlier questions and relates to the mobile service revenue growth. So you've mentioned that you expect an improvement going forward. If I look at the comparables from last year, the comparables are definitely getting much easier going forward for the mobile service revenue growth. Do you think it's reasonable therefore to expect you to get back within the 3% to 5% MSR growth range that you used to target and used to deliver on? I don't mean in a permanent sense because in a permanent sense, that will be probably be a function of what happens with competition. But do you think you'll end up within this range at some point late in the year is the first question, please.

[Veli-Matti Johannes Mattila]

All right. Well, certainly, our target is to have clearly improved mobile service revenue growth. But to predict what can be achieved with the pricing environment that we cannot totally control ourselves is somewhat difficult. So I wouldn't put any numbers on the mobile service revenue growth which we can achieve. But you are right, of course, that since there are a bit more help from the corresponding quarters last year going forward, so that might give some additional help. But of course, the main thing is to get customers to be really happy for higher speeds and high quality, what we are providing so that they are happy to pay a bit more when they get more speed and better services.

[Roman Arbuzov, Analyst]

And staying on this topic. One of the reasons some investors are skeptical that you will be delivering more growth going forward is your flatlining ARPUs. If you look at the Finnish postpaid voice ARPU, it has been flat for about 6 quarters now at about EUR 20.50, right? And you're talking about upselling and making sure that customers pay more. But the ARPU is flat. And I appreciate there are some technical reasons, and there are reasons to believe that the ARPU is not the best metric to look at your business. But is there anything in particular that you think this ARPU is not capturing? For example, it's faultily measured because of some additional SIM cards that are noncommercial, for example, they're diluting the ARPU or maybe there is growth which is not captured in the ARPU like from M to M or secondary SIM cards which is not reflected there. Is there any reason why there is this discrepancy between basically flat ARPU as it seems but your growth accelerating?

[Veli-Matti Johannes Mattila]

Well, of course, there should be quite a good relationship between the ARPU and MSR. But one thing which is not in MSR is the interconnection charges. And now when we had, for example, interconnection price decline that has decreased ARPU but not MSR as an example. There might be some smaller elements also that are diluting it altogether and making them look like a bit separated. But for the most, these 2 measurements are pretty much aligned.

[Roman Arbuzov, Analyst]

Okay. And just a question on productivity. You've talked about the improvements in the -- going forward basically. Is there any particular evidence that makes you very comfortable? And can you share that evidence with the investment community? Just in terms of the steps that have already been taken and what are those steps, and where are we in terms of the time line of these productivity projects? Have you already implemented some of these programs and we're just awaiting results? Or is there still a lot of heavy lifting to do?

[Veli-Matti Johannes Mattila]

Well, the experience that I have with Elisa and my organization to perform the planned projects and planned accelerations in some of the development areas and looking at the status and execution, what's going on based on what we have planned when we accelerated some of the activities makes me comfortable to say that we are on track and we will deliver as planned after first quarter more accelerated productivity improvements.

[Roman Arbuzov, Analyst]

And can I squeeze in just one final one? On your progressive dividend, how important is it to you? Because if you look at the financial trends, your EPS is down high single digit in Q1. And even if things improve later in the year, it's arguably tough to deliver any meaningful growth of EPS. So if we are looking to -- at flat to declining EPS for 2019, do you think you would be in a position to even consider a growing dividend or that's not -- that wouldn't really be on the table, do you think, in the scenario?

[Veli-Matti Johannes Mattila]

A couple of things. For the first, you are making assumption of flat or declining EPS, which I do not comment but I just raise up that that's your -- one of the base for your assumption. Secondly, we have a very long-term value-creation culture in Elisa. We are not trying to find very short-term benefits, even if it might be good for some shareholders but we are a long-term developer of our capabilities. Our competitiveness also, our capability to deliver total shareholder return for which we have a pretty good track record independently, which how many years you look back, and we have for a long term. So we plan to continue and that's our target. And of course, without committing to anything about the distribution, our policy is intact and we have 5 years now in a row of increasing dividend. So we would be very unsatisfied if we couldn't be able to provide that opportunity for our Board to continue, but that remains also for their -- it's up to their decision also when we come to that, how they decide on the proposal to the AGM.

[Operator]

Our next question comes from the line of Simon Coles from Barclays.

[Simon Alexander Arulraj Coles, Research Analyst]

Simon from Barclays. So you said that the IFRS 16 base is actually slightly higher than previously expected at EUR 17 million versus EUR 13 million. And we knew that 1Q '19 was going to be a little bit tough because the efficiency measures were coming through from 2Q and you say that they are on track and going well. So I'm just wondering other than competition, is there any other headwinds to cost or revenues that are stopping you being more positive on EBITDA growth this year?

[Veli-Matti Johannes Mattila]

Any other headwinds, basically, the only challenge might be if we start to be lazy or so. But no, the answer is no. I don't see any major headwinds.

[Simon Alexander Arulraj Coles, Research Analyst]

Okay. So it's just competition that stopped you increasing the EBITDA guidance to be slightly higher?

[Veli-Matti Johannes Mattila]

Let's say the uncertainty what the competitive landscape is something that, of course, we have to take into account.

[Operator]

And as there are no further questions from the phone lines at this moment, I will hand the word back to the speakers.

[Vesa Sahivirta, Director of Investor Relations]

Thank you very much for the questions, and let's check if there are any further questions from audience.No, there seems to be no questions. So thank you for participating in this conference call and have a nice day. Thank you. Bye-bye.

[Veli-Matti Johannes Mattila]

Thank you.

[Operator]

This now concludes our conference call. Thank you for attending. You may now disconnect.