Elisa Oyj

OMXH:ELISA

Earnings Call Transcript 2020-Q1

[Vesa Sahivirta, Director of Investor Relations]

Good morning, ladies and gentlemen. And welcome to Elisa's First Quarter 2020 Conference Call.I'm Vesa Sahivirta, Head of Investor Relations, and here together with me is a very familiar team: CEO Veli-Matti Mattila and CFO Jari Kinnunen. We start this meeting with presentations, followed by Q&A. And because we don't have any audience here, so we go straight to the conference call lines.And I think we are ready to start, so I give word to Veli-Matti, please.

[Veli-Matti Johannes Mattila]

Thank you, Vesa, and good morning, everybody, on my behalf as well. And welcome to Elisa's first quarter result review.Let me start by going through the highlights first. Our revenue was growing by 6% during the quarter. Comparable EBITDA was up by 5% as well. Mobile service revenue was growing 2.1%, and we saw churn to come down to 18.9% during the quarter. We had increase in postpaid mobile subscriptions over 20,000. In the fixed broadband side, the development was quite flat, slight decrease by 400 subscriptions. We continue actively to deploy 5G services and 5G network. Now we are almost in 20 cities. Our population coverage is above 13%, and we have thousands of customers using the services.Our AGM was held according to the plan, and we also made -- among other decisions, the AGM made decision to the distribution, the dividend of EUR 1.85 per share.And this COVID-19 crisis has impacted to market situation to some extent. For example, roaming revenues going quite much down; usage of network, up; and some other activities or changes to the market situation.Our revenue grew due to Polystar acquisition, partly also due to mobile service revenues growing as well as the equipment sales. Our equipment sales was growing [ percentally ] quite much due to the fact that the comparable quarter 4 equipment sales was maybe a bit lower. Mobile service revenue is growing based on the speed upgrades in 4G network and also the upselling of 5G. And also, we have made some product changes in terms of pricing during the quarter. EBITDA growth, of course, comes with the help of revenue growth but also our continuous long-term development of quality. And through that quality development, improving productivity and profitability creates improved financial result as well. The competition continues to be keen in different segments of the business, and the campaigning seems to be continuing as well as the activities also in different segments of Corporate Customers. When we look at these segments, we see revenue growth by 5% in the Consumer Customers segment and EBITDA by 4%. In the Corporate Customers side, revenue was growing by 9% and EBITDA by 7%. Polystar acquisition is reported in the Corporate Customers side, but there was growth also in the domestic digital services as well as in equipment sales. And in the consumer side, we saw revenue growth both in mobile and domestic digital services, equipment sales, and also the Estonia business is contributing to the growth in consumer customer segment.We continued to execute our 3 focus areas, strategy increasing. And we see great potential to bring results and benefits to our customers and shareholders in all of 3 -- these areas going forward. In the mobile side, the upselling continues. Also, 5G is progressing according to our expectations. We see now 73% of customers who are at least on the 4G speed level. And of those, more and more have higher than 550 megabit per second speed. The lowest speed tier in 4G, i.e., the 50 megabit per second speed, is proportionally going down, and the other higher speed tiers and speed plans are increasing. Also, the change from usage-based subscriptions to data bundles and fixed monthly fee plans is continuing, now the usage-based subscription representing 23% of the customer base at the moment, and that is thus going down.We are successfully deploying 5G in Finland as a leading provider of 5G services. We have now 18 cities where we have launched the network, and also the demand for fixed wireless access service is increasing. That is really enabling 5G to be used as the main home Internet connection. Also positive thing is that even regardless of the COVID-19 developments, the handset deliveries are moving ahead. We got Samsung S20 5G handset and also OnePlus and Xiaomi devices. So the devices market is developing to more and more affordable devices as well, which is, of course, positive for increasing the number of 5G users. In February, we had the Port of Helsinki, one of the first Finnish companies to introduce 5G services in their business for travelers, in this case with a cooperation with us. And also, we have continued the 3G network ramp-down. We announced the take -- ramp-down really to take place by the end of 2023, which is, of course, helpful, freeing up resources for further development of our 4G and 5G services. In April, also, we were chosen as the sole radio network supplier for Finnish government's public safety network called Virve 2.0. It's a 10-year contract, and it was a good proof for Elisa's competitiveness in quality and coverage and with this organization which has done a thorough work to study not only the pricing but also other quality aspects. And Elisa was a clear winner, which is proving our level of competitiveness in these matters.When we look at the development of digital service businesses, a few updates on that. In the domestic side, Elisa Viihde IPTV entertainment services, we continue to have launches of new online series and contents, and we have continued increase in the usage of those, now also this COVID situation impacting customers to take and use these services more. Also, we have brought -- launched -- we have brought forward the new launch window for 6 premiere movies. Now when people cannot go to the movie theaters, we have enabled the new movies to be launched also through our service earlier and brought enjoyment to our customers with the new movies like that. In international services side, our Videra video communications service business have developed according to the -- our plan. And there's a lot of demand, of course, nowadays for different kinds of video solutions; Videra being really focusing on the segment to serve large multinational global organizations who also want to utilize different vendors, different kind of equipments, including room systems. Elisa Automate, which is a leading-edge network automization solutions, they have been recognized by several international reports, by GSMA, by Boston Consulting Group and STL Partners. And the cooperation with customers is moving very nicely ahead. Also, our Polystar is making a -- or made a solid quarter and has double-digit year-on-year growth, and the integration of Polystar and Elisa activities is moving according to plan.In regards to the COVID-19 situation, we have adapted our operations quickly. Majority of Elisa's personnel moved very naturally and immediately to remote working, and safety is also ensured in customer interaction premises. And we are one of the leading company to -- before the COVID-19 for flexible remote working, and this was quite natural move for most of the Elisans to move quickly to remote working. 24/7 monitoring of network capacity and intensive follow-up of customer demand for services have been intensified, and our network capacity has met the growing data usage in Finland and Estonia very well. We, of course, have extensive support now in all virtual services channels to our customers. And we have been helping faster, with faster and faster delivery times, our customers to adjust to the new ways of working with -- under the COVID-19 situation.We have a new mission, sustainable future through digitalization and this is really a good time to deploy our mission. Our connections are supporting safe and remote working, also safe in terms of cyber threats that seem to be now also raising more their head during this COVID-19 situation. Also devices from our web store are very well available to our customers. Our digital solutions and support for medical and education professionals has been well received. We have extended billing periods for some of the customers. We have created free remote solutions for entrepreneurs as well, and we have given digital support for elderly people and young people especially at risk of social marginalization. It's very important, when the remote working and the isolation has been quite extensive, to take care of these special groups as well, and we have taken a step to do our share of that. We have given, for example, free data subscriptions for those young people in the special families that they can continue their studies, in the lower-income families, when this distance learning and remote school is being held. We have also given some free entertainment campaigns in Elisa Viihde IPTV solution, and we have virtual ElisaLive events in social media supporting Finnish artists. So many -- in many respects, while we are doing business, we are also very responsible deploying our sustainable future through digitalization mission. And we believe that working on that brings long-term benefits to our shareholders as well.Then in regards to our outlook and guidance for the rest of the year, the current coronavirus COVID-19 situation may significantly slow down economic growth and create uncertainty in macroeconomic development. Competition in Finnish telecommunications market remains keen. We are having our guidance for 2020 unchanged. We reiterate that. Revenue will be at the same level or slightly higher than 2019. Comparable EBITDA will be at the same level or slightly higher than 2019. Our CapEx maximum will be 12% of revenues.Now I'll leave the words to Jari to continue. Please, Jari?

[Jari Kinnunen, CFO & Member of Executive Board]

Okay. Thank you.Q1 was, both in terms of the revenue growth and earnings growth, a strong quarter, 6.5% revenue growth, service revenues growing both in consumer segment and corporate segment, in consumer segment mobile and digital services growing negative impact in service revenues from fixed line analog telephone. In corporate segment, EUR 11 million growth was largely coming from Polystar first consolidation impact. So Polystar revenue was EUR 12 million. And in mobile services and fixed services, there was a decrease in corporate segment. Equipment sales was growing with EUR 11 million, and interconnection and roaming was flat. And this 6.5% total growth, excluding Polystar first consolidation impact, gives organic growth 3.6%.Comparable EBITDA growth was 5% or EUR 8 million, revenue growth contributing as well as cost efficiency measures. EBIT growth was EUR 6.5 million, 7% growth. Depreciations, same level as Q4, excluding Q4 one-off cleaning EUR 1 million. Financial expenses improved clearly. So now EUR 4 million versus EUR 7 million interest expenses net due to refinancing that we did last year. And as a result of these changes, EPS growth was 10%.And Estonia continued to grow revenue 10%; and EBIT growth -- EBITDA growth, 5%. Service revenues, both mobile and fixed services, and equipment sales contributing to revenue growth. Churn was 9.9%, so continuing at fairly low level.CapEx was, excluding IFRS 16, EUR 48 million. So it was a bit lower than previous year and 10% from the sales. There are -- different quarters have different CapEx, and whole year guidance, 12%, is unchanged. Between segments, consumer segment CapEx was EUR 32 million; and Corporate Customers segment, EUR 18 million. And main CapEx was in 5G and 4G capacity and coverage as well as fixed network and IT investments.Then cash flow. Solid growth continued with cash flow, 7.3% to EUR 73 million in Q1. EBITDA growth and lower CapEx as well as lower paid interest and taxes contributed positively, negative impact from less-positive change in net working capital and higher license fees. Cash conversion, operating cash flow conversion was growing to 71% from 68% last year.Then balance sheet KPIs. And net debt-to-EBITDA reduced from Q4 to 1.7, and the equity ratio was also in target at 42%. And return ratios remained at good level, return on equity at 28.6% and return on investment 16.9%. In terms of financing and debt maturities, this year, there are no maturing long-term debts. Next one is due to next year, EUR 174 million. And so financing is in a good situation. Also, in terms of the interest rates and recent changes in interest rates, 77% of interest-bearing debt is at fixed rates.And AGM was held 2nd of April as planned. And as a -- as after that, dividend was also paid, as planned, a week ago, EUR 1.85 per share and continuing strong commitment to competitive shareholder remuneration.Now I give the word to Vesa, please.

[Vesa Sahivirta, Director of Investor Relations]

Thank you, Jari.And now we move on to Q&A part, and we ask the first question from conference call lines, please.

[Operator]

Our first question comes from the line of Abhilash Mohapatra of Berenberg.

[Abhilash Mohapatra, Analyst]

Yes. I've got 2, please. I've got 1 on fixed and digital services and 1 on B2B. So just on the fixed and digital side, in Q1, you mentioned EUR 12 million revenues from Polystar and -- but if we shift that out, it looks that organic revenue growth in this segment improved materially, [ sort of plus ] 2.5%, if I'm not mistaken, is a significant step-up versus history. So just wondering if this is just a quarterly phasing thing or there's something that we should be sort of thinking about here in terms of the organic trends. And then secondly, just on B2B. Just wondering what your thoughts are here in a sort of COVID context. I guess, if you think about the last crisis, back then, you [ probably had more variable ] usage both on the fixed and mobile side, and there was some impacts from roaming as well. Just would be interested to hear your thoughts on B2B heading into sort of post -- in sort of COVID environment this time around. And then just a final follow-up on B2B, please. Could you maybe remind us? There was a large contract win in B2B last year, which has driven stronger sort of customer numbers, but ARPUs have been declining. Could you maybe just remind us of the phasing impacts of that on the B2B mobile ARPU side?

[Veli-Matti Johannes Mattila]

Thank you for the question. It was very hard to hear your questions properly. I have to ask you a repeat but the first one and maybe the last one. I heard the second one a bit more. If I start from that, that in general, if we think about development on B2B segment -- that's what you asked in terms of the, let's say, learnings from previous financial crisis, for example. Of course, that time, we saw B2B customers and businesses turning very much on cost-effective and cost-cutting mode, meaning that while they still continued to use our services which they need, the more future-oriented developments in terms of developing digital ways of working got more on hold. Now what it would look like with -- in this situation, again, I believe that if any activity is around here in the globe, telecommunication services are needed. So we have demand for our services going forward for the basic services. Then in the terms of the more help in the -- and product services from the digital development of our customers, I have a feeling that customers, some of customers may turn to cost-cutting mode more and then they are not kind of developing for the future. But again, this is the golden time for many businesses to leapfrog with the digital developments and find and innovate new modes of working. So I'm a bit more positive in regards to that. But please, could you repeat the first question? It was related to Polystar impact and something else, but I didn't quite hear well as well as the third question.

[Abhilash Mohapatra, Analyst]

[indiscernible] better now? And then sorry about that. Is it better now?

[Veli-Matti Johannes Mattila]

Yes, you -- it's better...

[Abhilash Mohapatra, Analyst]

Yes. Sorry. I'll just -- I'll be very quick. So just on Polystar. So I think even if we strip out the EUR 12 million of revenues from Polystar, it looks like organic growth improved quite a bit in the fixed and digital services side. So I was just wondering if that's a quarterly phasing thing or there's just better demand and how we should be thinking about that going forward. And the other one was on B2B mobile ARPU, where I think you had a big contract win last year [indiscernible] subscriber numbers, but B2B mobile ARPUs have been falling. Could you maybe just remind us of how we should be thinking about the phasing of B2B mobile ARPU going forward?

[Veli-Matti Johannes Mattila]

Yes. Okay. I'll respond to the third one first, and then I'll leave the second one to Jari. First, in terms of the public sector large contract we achieved already 2018 and we have got customers during 2019, we are leveling off with the increase of those customers for the time being. We have, of course, other public side contracts to come in, but that was quite big. Of course, they were low-ARPU customers, and they have impacted to the ARPU in the mobile business for B2B market. And I cannot give you any guidance for ARPU for B2B side going forward, but we would see that the mobile service revenue will be positive going forward as long as the general economic situation is turning not to very severe situation. But Jari, please, if you can speak on to the first one.

[Jari Kinnunen, CFO & Member of Executive Board]

If we heard you correctly, it was regarding Polystar and Polystar seasonalities, if that was the question. So both Q4 and Q1 are typically strong in terms of revenue and earnings as well. So there is certain seasonality with Polystar quarterly revenues. Another thing regarding service revenue developments excluding Polystar impact and Q4 and now Q1, Q4 was minus -- if I recall right, minus EUR 4 million in corporate segment, excluding Polystar, and now it was better than that with minus 1% -- minus EUR 1 million.

[Operator]

Our next question comes from the line of Terence Tsui of Morgan Stanley.

[Terence Mun-Sion Tsui]

Yes. I just had a question on roaming, please. What sort of margins do you see on your international roaming revenues, please? It seems like there will be a sharper turnoff in Q2. I'm just wondering whether you'll be able to -- your confidence in being able to mitigate this to protect EBITDA. And then secondly, just on 5G. Thank you for sharing that you've got a few thousand customers using 5G. Just wondered whether you can share a bit more information on things like maybe ARPU, where the ARPU uplift is compared to 4G and anything else that you think is interesting on that front.

[Veli-Matti Johannes Mattila]

All right. Thank you very much. In terms of roaming, as we know that the lockdowns in every country are pretty severe, the traveling cross-border is very, very limited, meaning that, of course, we also have been impacted negatively with roaming revenues to come down, and roaming is typically relatively high-margin-level revenue. Not to really disclosing the level or the number, but it is, of course, high-level margin business. We -- of course, as we said, we reiterate our guidance, but of course, we have some developments that are pressuring us like the roaming, but then we have some areas where we do better than before. And then of course, we have also many mitigation activities that we do in this special situation. So that's how we feel comfortable to -- in these, let's say, circumstances, as we see the development now, comfortable to reiterate our guidance. But as we said, there is a high level of uncertainty overall in the general economic situation, and there is a quite wide distance from the positive scenario going forward and negative scenario. And if the -- we will -- if there will be a situation for a negative scenario for general economic situation to develop, Elisa is, of course, not immune to that, and that might have impact to us going forward. However, saying that, we have, of course, proactive plans to mitigate that proactively. So that's, in summary, our view of the future. But just underline that there are, of course, quite heavy uncertainties around us that we cannot kind of mitigate that uncertainty itself. 5G ARPU is higher than what we have 4G. It is promising to the future of going forward with the upgrades to 5G. Maybe a bit too early to say that which level of, let's say, increase leads to 4G, highest 4G prices, but it is promising, I will say.

[Operator]

Our next question comes from the line of Peter Nielsen of ABG Sundal Collier.

[Peter Kurt Nielsen, Lead Analyst]

Well done on a good and strong Q1. Can I just follow up on Terence's question, please? Veli-Matti, do you see any impact on -- obviously, you can't say for certain but anticipating the impact on 5G rollout plans and momentum and speed during the year potentially. I know you've had, as you say, also strong lockdowns in Finland. Any hindrance here in your plans for 5G rollout? And can I also just ask, on the corporate side in Finland, have you seen any change in momentum? Or obviously, there has been a change in ownership in one of your competitors and potentially a change in position on the corporate offers here, et cetera. Have you seen any impact here? Anything you want to share with us on competitiveness on the corporate side in Finland?

[Veli-Matti Johannes Mattila]

All right. In terms of 5G rollout, we deploy 5G as we have planned. And in terms of supply, we haven't got any major challenges in the supply side due to COVID in regards to 5G. And it seems that now the capacity and speeds are on demand, maybe even somewhat more, by our customers both in the consumer and corporate side. So in terms of the demand for 5G services, that's promising. We are moving, however, step by step. And of course, the coverage need to be built out clearly more that we can get, let's say, more significant increases to the numbers of customers, but also the device side developing so that we get more affordable 5G devices, high-quality devices to the market helps. So it is going according to plan. How significant it is really for this year's result, it's maybe more coming to be next year, but we see some positive kind of contribution already this year from 5G. But it is a step-by-step development, but leading the kind of industry and leading the way in Finland for 5G services, we are very much doing as planned. In terms of corporate segment, for changes in momentum, in the competitive landscape we have always had the B2B market in Finland very competitive in entrepreneur, in SME as well as in large Corporate Customers segment. So we haven't really noticed any more or not so much different competitiveness. We are used to have very high competitiveness in that segment. And of course, our long-term development of our competitiveness based on high quality, high availability of our services, good customer care and also wide variety of other than connectivity services to help the different situations in digitalization of our customers' operations, of course, helps us to be competitive. And like said earlier, this big public contract deal that we won this quarter is a good proof of our competitiveness in terms of quality.

[Peter Kurt Nielsen, Lead Analyst]

And the change in your sort of Nordic alliance partner in terms of Internet and services, that hasn't changed anything for you, has it?

[Veli-Matti Johannes Mattila]

Okay. Yes. Yes. We have now announced our partnership with Tele2 to provide kind of pan-Nordic solutions better. There's no material changes with that change of partner. Tele2 is a very good partner for us now instead of the other one that we used to use. And we have a very good kind of offering together with Tele2 and Vodafone, which is even more important since Finnish companies are not bound to Nordics. Most of the companies, while doing international business, they need international coverage. And with these 2 main partners and a couple of others, we have a very competitive portfolio for international services to our international customers as well.

[Operator]

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

[Panu Laitinmäki, Senior Analyst]

Yes. I have one question on this mobile trends that you mentioned as a result of COVID-19, especially mobile churn. So you mentioned in the market outlook that mobile churn is decreasing and so is mobile sales -- sorry, mobile equipment sales, but we didn't see a significant change yet, like 1 percentage point. The question is that how much more of decrease in churn do you see going forward? And how much impact does that have on your margins?

[Veli-Matti Johannes Mattila]

All right. Well, the mobile churn due to COVID-19, that impact, of course, had kind of impact on March only for this quarter. And if we would have similar impacts throughout the quarter, we would have less churn going forward. Of course, it's always a competitive market. We cannot control the competition. We don't know, but the main driver has been that people are visiting the retail channels less, ours but also our competitors', and that slows down a bit the kind of impact to competitiveness, thus lowering the churn. The churn, of course, impacts our costs, but you shouldn't draw a quite linear kind of correlation between the churn and our costs for customer acquisition costs because, of course, we are then doing customer acquisition with other channels maybe more now, and there are other things that are going on. But of course, it's positive that the churn is coming down, and we can focus more to bring value for the same customers more than just kind of turnaround of the customers from one operator to another.

[Panu Laitinmäki, Senior Analyst]

Can I ask as a follow-up, is it like other channels than physical stores, like, better channels for you for acquiring customers in terms of achieved ARPU for those customers?

[Veli-Matti Johannes Mattila]

They are definitely more cost effective, yes.

[Operator]

Our next question comes from the line of Andrew Lee of Goldman Sachs.

[Andrew J. Lee, Equity Analyst]

Yes. I had a couple of questions. Firstly, just on the mobile run rate. I think you've had a further reduction in promotion -- in the promotional discounts you've seen in mobile into -- or through Q1. And so the question is, did you see an improving run rate through the quarter in terms of revenue growth? And stripping out COVID uncertainty, should we expect Q2 to show further improvement in terms of your revenue trends in consumer mobile versus Q1? And then the second question, I thought that the fixed broadband service -- or fixed service revenues ex Polystar looked a bit weaker this quarter. Just wondering if you can comment on what you're seeing here. Is competition getting tougher? And kind of any insight into the kind of the competitive environment there would be very helpful.

[Veli-Matti Johannes Mattila]

All right. Thank you, Andrew. In terms of the mobile run rate, we, of course, had a notch better mobile service revenue. As we said, it is fluctuating depending on, let's say, of the quarter, of course, but also the competitive intensity. We continue to reiterate that it is positive going forward. Unfortunately, with the even increased uncertainty of the market, we cannot give further numbers on it, but it will be positive as we see. And there are many positive momentums coming also from COVID-19 situation that the capacity and speeds are in demand. So we are working on that. But unfortunately, this is all I can tell about that. In terms of fixed revenues excluding Polystar, now we have certain areas of business like the sports content in pay TV that have, of course, come down because there is no really sports to be provided to customers, and that's why we cannot charge our customers for that. So there are some elements from that, from COVID-19. Other than that, it is a bit sort of a natural variation between the quarters. So nothing especially material is in there more.

[Operator]

Our next question comes from the line of Artem Beletski of SEB.

[Artem Beletski, Analyst]

Yes. This is Artem Beletski from SEB. Still a couple of questions from my side. So first of all, starting with equipment sales and margins on that front. So is it still, so to say, low- or maybe at least single-digit margin business for you? Because I guess, in Q1, trend was still quite strong but could be weakening going forward. Then the second question is relating to 3G networks are down by 2023. And could you elaborate what type of cost savings you will be able to achieve from this shutdown and when it should be visible? And the last one is relating to this interesting public safety network deal win here in Finland, Virve 2.0. Could you maybe elaborate what type of top line implications and maybe net subscriber intake we should be expecting going forward from the deal?

[Veli-Matti Johannes Mattila]

Okay. Thank you, Artem, for your questions. In terms of the equipment sales, it is a low-margin, "single-digit number of margins percentages" business and continues to be like that. And of course, the COVID-19 may have both positive and negatives to that, depends how the scenarios are evolving. 3G cost savings, we haven't really elaborated the cost savings. It's may be not so much on cost savings, but it is really directly, but it is the main thing is that we can release resources from the 3G networks to further develop the capacity in the 4G and 5G side, where the capacity is more efficiently produced to our customers. The public safety contract, why we took that up was not so much on their direct impact to top line even if it's a 10-year contract and relatively big as such, but in Elisa level it's not the major thing in terms of revenue increase. But the main thing was that it is kind of demonstrating very clearly our competitiveness when it comes to quality and service levels when there is a really demanding customer of business -- from business side.

[Operator]

Our next question comes from the line of Sami Sarkamies of Nordea Markets.

[Sami Sarkamies, Senior Analyst of TMT]

I have 3 questions. Firstly, continuing on COVID-19 topic. Could you please open up your thinking on what kind of direct impacts we could see in Q2? For example, still in Q1, did -- you did achieve growing equipment sales as well as interconnection roaming revenues despite of lockdowns impacting the latter part of March negatively.

[Veli-Matti Johannes Mattila]

Okay. We are not giving guidances and per quarter that much. Overall, the uncertainty is quite high how the COVID-19 activities or COVID-19 impacts will be because the -- it's very much also dependent on the government of Finland or, let's say, government of Estonia's decisions to release the restrictions and lockdown kind of decisions they've done, i.e., how then the companies and people are getting step-by-step back to reopening. So there's high uncertainty what the government is doing and then how the companies and people are behaving. But as we see now, we have a very good development on the use of our services, and then many companies, also individuals, are utilizing this time to kind of develop their digital capabilities.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. Then I would continue on the consumer sales channels. Can you help us to understand what share of equipment and subscriptions is moving through online channels and through...

[Veli-Matti Johannes Mattila]

Sorry, I didn't...

[Sami Sarkamies, Senior Analyst of TMT]

Have you noticed any -- yes. So I was asking what share of consumer sales equipment and subscriptions is in place through online channels and how much through traditional retail. And have you noticed any change in consumer behavior on this front?

[Veli-Matti Johannes Mattila]

Well, consumer behavior change is, of course, that we have half of the people and population in the retail channels. So people are, of course, careful and they are not visiting so much the shops. So then the -- well, proportionally, we are doing more sales in other channels. We are not disclosing the amounts of sales we do in online, but I can say that our online sales is very well developed, and our e-commerce offering and, let's say, user experience is even rewarded. So -- and we are very trustful that with this moving towards the more online and e-commerce, also with subscriptions, we have very good capabilities.

[Sami Sarkamies, Senior Analyst of TMT]

Okay. And then finally, on Polystar, could you disclose the EBITDA contribution in Q1? I think it was EUR 1 million in Q4, and you did indicate strong seasonality also in Q1.

[Veli-Matti Johannes Mattila]

All right. Thank you for that. I ask Jari, please, to respond to that, please.

[Jari Kinnunen, CFO & Member of Executive Board]

Yes. EBITDA impact was around EUR 3 million to EUR 4 million.

[Operator]

Our next question comes from the line of Florian Henritzi of Bank of America Merrill Lynch.

[Florian Henritzi, Research Analyst]

Yes. I just wanted to come back on the digital services. So I think they were again pretty strong in the quarter. And I was just wondering, is that something we can also expect for the upcoming quarters? For example, the good demand you flagged for your TV offering and also the international digital services. And maybe also, could you remind us what's the kind of margin you get on these businesses and maybe how that compares to the overall group EBITDA margin?

[Veli-Matti Johannes Mattila]

Okay. In terms of the digital services, we believe that in many fronts, like the, let's say, exclusive content and the other content that we have in our IPTV entertainment service, there will be more demand for that going forward. It's maybe not a massive kind of change in Elisa's scope, but for Elisa Viihde entertainment IPTV service, there is a positive development going on there. In the international digital service businesses, they are mostly B2B businesses, and we see some of the customers maybe, to some extent, take a bit more time for their decisions, but overall, there is, of course, a need for these digital solutions for our customers also now and then especially when developing for the long term. So the outlook for the international digital service businesses is very good. In terms of the margin, of course, these businesses are not so CapEx heavy, and they have a lower EBITDA margin comparing to our, let's say, average margin at Elisa and comparing to the connectivity services. But overall, they are contributing to the bottom line already now. And of course, while scaling up, there is improvement potential for all of these digital service businesses.

[Florian Henritzi, Research Analyst]

Okay. And just a second question on Estonia. I think Tele2 mentioned on their results call that they see in the current environment less headroom for growth through pricing or price increases. I just wanted to hear what you think about the outlook over the next coming quarters for your Estonian business, which is, at the moment, still doing very well.

[Veli-Matti Johannes Mattila]

Okay. We are not really guiding the Estonian business separately. But of course, this situation in Estonian market is also very much dependent on how the government and the general economic situation is further developing in Estonia. The different scenarios have quite different outcomes, and we have uncertainty now which direction it will go. But so that's the reason I cannot really make a very heavy comment on the how much price increases could be done. Always, the price increases, they are quite limited, but what we maybe have more focus is to make sure that we are serving our customers in Estonia also and also in the new ways that we can take the opportunity of, let's say, these situations where we can provide the solution where something else is not working due to the COVID situation. So the digitalization is moving forward also in Estonia, and we, of course, try to do our best there and take our opportunity there as well.

[Operator]

Our next question comes from the line of Adam Fox-Rumley of HSBC.

[Adam M. Fox-Rumley]

I've got 2 questions, please. I'm sorry if I missed it in your prepared comments, but I wondered if you could talk a little bit more about your mitigation plans if indeed the economy does begin to turn down. I guess, in environment of continuous improvement, you may have to step up things slightly more dramatically, so are there any areas you're thinking about in particular? And then my second question is on Elisa Automate. It seems like a great time to be in that business. So I'm interested to hear if customer interest has stepped up, whether you've signed any new business there. And I guess that -- what kind of lead time does that kind of business have? Because [ my suspicion ] is it's quite complicated to integrate.

[Veli-Matti Johannes Mattila]

All right. Thank you for your questions. In terms of the mitigation plans, of course, we have the continuous improvement improving our productivity and profitability going forward, and we continue long term in mind with those plans and with the culture we have at Elisa focused on quality and creating better results for customers and shareholders. We continue with that very determinedly. Saying that, we, of course, have taken a look of different scenarios of what the different, let's say, demands might -- how they -- the demand for different services, how they might evolve and what we should do in different situations. And without going into any further details: We have made quite kind of elaborate study and review, which we continuously update. But like I said, there is high uncertainty how different things are evolving just based on the general economic situation and then especially to the demand of our various services. So the scenarios are wide apart, but we are working on and we have kind of plans and activities for different outcomes. Elisa Automate, yes, the customer interest for solutions is increasing, and we have very good, let's say, interactions with many customers, hope to report some great achievements there going forward. But also important to understand that we have the family of operator efficiency solutions where Elisa Automate and also the Polystar plays a role. And of course, also other inorganic opportunities to develop that business domain exist, and we are active there. Now of course, the M&A front during the COVID uncertainties is somewhat disturbed, but we still have kind of continuous activities on that front as well.

[Operator]

[Operator Instructions] And we have a question from the line of Siyi He of Citigroup.

[Siyi He, Vice President]

I have 2, please. The first one is on your thoughts on back book price increases. I think, in the past, Elisa has been putting through some back book price increases, especially in Finland, and I wonder what's your view now, especially given COVID-19, about the potential back book price increases for this year.And the second question is on roaming. Sorry that I might have missed this. Would you just remind us what the size of the roaming revenues that you have; and I guess, whether there's still some customers paying for European roaming, the [ out ] bundle European roamings, and whether you get margin on that?

[Veli-Matti Johannes Mattila]

All right. Thank you for your questions. In terms of the back book price increases, of course, it's very important also to -- always, when looking at those, to understand the market developments overall and from the competitive front. We might or we might not have price increases on our way. It is something that we are not too much disclosing, but however, we have, of course, and we are delivering a lot of value with our unlimited plans, for example, so customers are getting a lot of value. Maybe that's for that. In terms of the roaming, for us, the roaming revenue, of course, has less proportionally value than for many other operators, but certainly, it is an important revenue for us. And the margins we are getting, also they are very good margins, without disclosing any numbers. So this is probably all I can tell you, and unfortunately, I won't -- I cannot quantify more. Thank you.

[Operator]

Our next question comes from the line of Abhilash Mohapatra of Berenberg.

[Abhilash Mohapatra, Analyst]

Just maybe a quick follow-up on Andrew's question earlier. Just would be interested to hear any sort of thoughts on the sort of competitive environment in the consumer space and if you're seeing any changes to these sort of below-the-counter offers and then sort of if things have changed in Q2 versus Q1. Just would be interested to hear your thoughts on that.

[Veli-Matti Johannes Mattila]

All right. Thank you for your question. Again, I wish I could help you with your connectivity because it seems to be having some troubles, hearing exactly your questions, but we do everything we can from Elisa, if you like and if we can. But nevertheless, if I understood right your question, it was related to the competitive landscape and the below-the-counter offers and so forth and if there is any difference. If we exclude the March, which has been a bit a special month with the COVID now kicking in, we can say that there's not that much of a change for the fourth quarter, not to worse, let's say, not to more active campaigning and not to less-active campaigning, pretty much on the same level. Ourselves, we are focused on providing rather more value to existing customer base than just trying to chase desperately customers from other operators. However, saying that, we are defending our market position very determinedly if there are players who try to utilize special offers to win customers from us. We will hit back as we have done. But no major changes, if you ask that.

[Operator]

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

[Roman Arbuzov, Analyst]

I just wanted to follow up on the mobile service revenue growth outlook and specifically within the consumer segment which is somewhat less directly impacted perhaps than the B2B side. But there's a few factors at play simultaneously, one of which is the fact that there's a lot of demand, as you say, for your services and usage is higher. On the other hand, there may be some political or social responsibility types of pressure and also low purchasing power of consumers. And if you take the balance of these factors just directionally perhaps, would you be able to comment whether should we expect a step-down in terms of the MSR growth rate? Or do you think that -- as long as competitive environment remains reasonably benign as it seems in the case currently, do you think you can actually monetize some of this increased usage going forwards? That would be the first question. And secondly, I was wondering if you can comment, as one of your competitors, to the extent that you can, but I was looking at Telia postpaid customer intake. And it has been persistently negative over the last 5 quarters. I guess some of these questions are better directed to Telia, but I wouldn't be surprised if that is also concerning to you directly. And the way it seems to be is that it's Telia's consistent loss of market share has potentially one of the biggest risks to the current underlying market competitive environment. So perhaps you could share some thoughts in terms of whether you think this is a concern. And I don't know if you could share anything in terms of the causes of why they continue to lose customers despite the fact that they seem to be more competitive on price compared to yourselves and DNA.

[Veli-Matti Johannes Mattila]

All right. Thank you, Roman, for your questions. I really follow your thinking and analysis in terms of the MSR and appreciate your question, but I have to reiterate that we -- our guidance is that MSR continues to be positive. However, we are not quantifying the number. The, let's say, drivers for how the MSR is developing are quite many and especially the competitive situation being one of the biggest, as discussed earlier. And since we cannot control the competition, it's a bit difficult to give more detailed MSR forecast. But of course, we see a lot of opportunity, as said, of upselling some of the price increases and also 5G, and that's what we're working on. In terms of Telia's postpaid customer base, yes, I do agree with you that they are probably in the best position to explain. But of course, we did win one large public sector contract last -- or 2018 and impacts came in 2019 and even somewhat this quarter that may have impacted to Telia somewhat. Also, we -- I want to remind that Telia was very active to some of their large customers late '18, early '19, creating a negative impact to us. And we have made a bit similar steps forward, which we have gained now from them maybe, and that has maybe had impact. But nevertheless, it's better then that Telia itself responds to your question.

[Roman Arbuzov, Analyst]

Okay. And maybe just one final follow-up, in terms of the mitigation measures. I didn't quite catch whether you're already active on that front and this is something that you're implementing or you're still waiting to see how the situation develop to enact any potential contingency plans.

[Veli-Matti Johannes Mattila]

Well, the continuous improvement and a good, high-quality execution of our continuous development-based plans is vital for us. We have a long-term perspective in our activities, but we tend to be proactive with mitigations.

[Operator]

And we have no further questions on the line. Please go ahead, speakers.

[Vesa Sahivirta, Director of Investor Relations]

Thank you for the questions. And so we stop here. We wish you a very safe future. Take care of yourselves and your families. And have a nice day and rest of the week. Thank you, and bye-bye.

[Veli-Matti Johannes Mattila]

Thank you. Bye.