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Edited Transcript of ELISA.HE earnings conference call or presentation 20-Apr-17 9:00am GMT

Thomson Reuters StreetEvents

Q1 2017 Elisa Oyj Earnings Call

Helsinki May 4, 2017 (Thomson StreetEvents) -- Edited Transcript of Elisa Oyj earnings conference call or presentation Thursday, April 20, 2017 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Jari Kinnunen

Elisa Oyj - CFO and Member of Executive Board

* Veli-Matti Johannes Mattila

Elisa Oyj - CEO, President and Member of Executive Board

* Vesa Sahivirta

Elisa Oyj - Director of IR and Financial Communication

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Conference Call Participants

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* Artem Beletski

SEB, Research Division - Analyst

* Irina Idrissova

RBC Capital Markets, LLC, Research Division - Assistant VP

* Jakob Bluestone

Crédit Suisse AG, Research Division - Research Analyst

* Matti Riikonen

Carnegie Investment Bank AB, Research Division - Financial Analyst

* Peter Kurt Nielsen

ABG Sundal Collier Holding ASA, Research Division - Analyst

* Robert Slorach

Handelsbanken Capital Markets AB, Research Division - Research Analyst

* Sami Sarkamies

Nordea Markets, Research Division - Senior Analyst, Technology

* Simon Coles

Barclays PLC, Research Division - Research Analyst

* Sunil Praful Patel

BofA Merrill Lynch, Research Division - VP

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Presentation

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Vesa Sahivirta, Elisa Oyj - Director of IR and Financial Communication [1]

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Hello everyone, and welcome to Elisa's First Quarter 2017 Conference Call. Sorry about this small delay in the beginning. We have had some small technical problems here, but now we are ready to start. My name is Vesa Sahivirta, I'm Head of Investor Relations. And here together with me is a very familiar team for you, CEO, Veli-Matti Mattila, and CFO, Jari Kinnunen, as well as some audience. So we start this meeting with a presentation followed by Q&A. And in Q&A we take first questions from the floor here and then from the conference call lines. So we are ready to start. So now I give word to Veli-Matti. Please.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [2]

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Thank you, Vesa, and welcome on my behalf as well to our 2017 first quarter interim report result review. Let me begin by introducing the financial and operational highlights for the first quarter, followed by segment reviews, and then we go through the strategy execution and the potential for our strategy. And finally, I will walk you through with the outlook and the guidance for 2017. We had a strong start for 2017. Q1'17 is the best-ever first quarter for us, revenue increasing 7% and EBITDA by 5%. We have made also 2 major acquisitions during the quarter, Starman and Santa Monica Networks. Acquisitions are approved -- were approved by competition authorities in Finland and Estonia, and also the companies are expected to be consolidated into Elisa during second quarter 2017. Our mobile service revenue growth was strong, 5.5%. And we saw mobile postpaid subscription base to be unchanged, whereas prepaid was decreasing somewhat. Consumer Customer segment's profit continued to grow strongly and we saw solid profit improvement in Corporate Customer segment as well. The demand for faster data speeds with slightly higher prices continues and smartphone penetration is reaching 75%. We have upgraded also our guidance for 2017, and we will come back to that a bit later. Our revenue grew to EUR 416 million. EBITDA was increasing to EUR 144 million. EBIT was EUR 89 million, and EPS was EUR 0.43. Net debt to EBITDA 1.9, meaning -- which is inside our guidance, 1.5 to 2x. And capital expenditures was EUR 53 million. We saw mobile service revenue growing very much by up-selling efforts to higher speeds. It seems that the up-selling is really continuing as expected. And there's still very good prospect for up-selling to continue in the next coming quarters as well. We also have sold more smartphones and data-bundle subscriptions and we have done some pricing changes impacting this quarter which we did in November, but also we have announced some changes in the [bill] charges, taking into effect in May this year. Blended ARPU was going up to EUR 17.2. And if we look more in details for the postpaid voice ARPU, it was EUR 18.3, both growing up. Mobile postpaid subscription base was quite unchanged, and we saw some decrease in prepaid because there has been some more intensive price competition in the prepaid which we have not taken so aggressively part in. However, that has not meant anything serious for the revenues in mobile side of course. Fixed broadband base was decreasing by 1,500, almost flat, and churn was almost the same level as previous quarter, 18.5%, whereas it was 18.2% in fourth quarter last year. Postpaid voice churn was 16.1%. We then look at the business segments and consumer side. First revenues -- revenue was growing to EUR 261 million, growth coming from the mobile service revenue growth as well as from the Anvia consolidation. Also the digital services and equipment sales was increasing in revenue. The negative impact for the revenue was coming from traditional fixed, interconnection roaming revenue decreases as in the previous quarters it has been the same trend as well. EBITDA was growing to EUR 92 million based on revenue growth as well as our continued productivity improvements. Capital expenditures for consumer customer business was EUR 35 million. In the corporate side, revenue was also growing and it was EUR 155 million, very much the same kind of drivers for positive impacts to revenues growth in mobile service revenue as well as Anvia consolidation. Also digital services including our Videra visual communication business contributing positively and equipment sales increasing as well. And the same negative impacts coming from traditional fixed, interconnection roaming revenue decreases. EBITDA was growing to EUR 52 million, fueled by revenue growth and productivity improvements, and capital expenditures was EUR 18 million. We continue to execute our strategy very determinedly. We have of course gained some results by focusing on the 3 main focus areas, but we see very much potential on everyone and each one of these 3 focus areas in the future. The number of percentage of customers using smartphone is reaching to 75%, and the majority clearly of those smartphones are 4G-capable, and almost all the handsets we are selling are these new types of smartphones which of course creates increasing base for up-selling higher speeds -- higher data speeds to our customers. The proportion of fixed monthly fee based data bundles continues to grow as well, and it's reaching now 60%, so the business model change we have been pursuing in the past couple of years from the usage space to fixed monthly fee based subscriptions is continuing very well. And we still have a very good potential for up-selling, still we have more than half of the customers below 4G speeds. So that creates great up-selling potential for the coming quarters as well. In our digital service businesses, for example, Elisa Viihde continues to grow very nicely. We also have been bringing new content to Elisa Viihde like the new original series Country which is the original The Office and we have seen more viewers during the first week than any other series or movie in our Elisa Viihde content library deal. And also the second season of Downshifters original series tripled its viewers from the first season and we also will bring more original co-produced content going forward. Also we have brought more and more sports content like Finnish basketball and football content to Elisa Viihde. We also have been first to test commercial video call in the Nordic countries for the 700 megahertz frequency band in 4G, and of course with this new 700 megahertz frequency band we can continuously expand our 4G network's coverage as well as capacity and also provide better in-door coverage. And Elisa has been also first in Finland to test technology to take base stations to the cloud, which of course creates flexibility to shift capacity based on the demand we see in the network. And also that creates possibilities to have faster, more reliable mobile connections for our customers. During the quarter we have also been selected as one of the greatest place to work in Finland. Elisa is actually the largest listed company ever in Finland awarded to be in this list and we came number 3 in the large company, large organization category. And of course there are many ways we have been able to empower and engage our employees to create a great place to work. For example, by daily management practices and coaching practices. We also are hiring 250 young people for summer jobs, so there is a lot of new talent available for Elisa during this summer as well. And then for the outlook and guidance, unfortunately macroeconomic environment still is quite weak in spite of some positive signs that we can see in the Finnish economy still, the overall thing is quiet weak and competition in the market remains challenging, however we have seen no major changes in the competitive situation, but it's challenging. So we have been upgrading our guidance to show that the revenue we see will be higher than 2016 and comparable EBITDA will be higher than in 2016. And of course these upgrades are coming based on the fact that the mobile service revenue will be growing, also digital service business, as well as the acquisitions we made are included in the guidance now. And capital expenditures will be maximum 13% of revenues, although the mid-term target, maximum 12% of CapEx is still valid. Now I turn to Jari please. Jari Kinnunen^ Thank you. Year started well and we continued with series of best-ever quarters. And in terms of revenue and earnings this was best-ever Q1 revenue growth, being rounded percent it is 7%. Anvia consolidation and service revenue growth impacting positively. EBITDA growth was 5%. Productivity improvement measures contributing and as well as revenue growth contributing to EBITDA. EBIT growth was 5% to EUR 89 million. And we continued to lower our net financial costs by lower interest costs as a result of refinancing that we did in the second half last year. Among the others also positive impact coming from negative contribution from associated companies in 2016 that does not exist anymore. In profit and loss, taxes change was in line with change in profit before tax and all that resulted to 9% EPS growth to EUR 0.43. Then if you look to the revenue change total change was EUR 26 million. There was negative impact from interconnection and roaming EUR 4 million mainly due to lower volumes in interconnection. Equipment sales were growing EUR 5 million and service revenue in both customer segments was growing, corporate segment EUR 7 million, consumer segment EUR 15 million, and positive contribution of course from Anvia consolidation as well as mobile service revenue growth and digital services revenue growth decreasing impact from traditional fixed line services. Also Estonia continued to develop well and revenue growth was 4.1% to EUR 23.8 million driven by mobile service revenue growth as well as equipment sales. Also EBITDA was growing and improving to EUR 7.9 million driven by productivity improvement measures and revenue growth. This quarter we had somewhat higher investments EUR 4 million in Estonia, 16.6% from revenue. There are changes between quarter, so this is not necessarily the level that we continue every quarter, but there was somewhat higher investments in this quarter. If we then look to OpEx development, total OpEx was EUR 273 million. There was 7.5% increase compared to what it was a year ago and of course Anvia consolidation having a bigger impact on that change. Also equipment purchase costs were higher due to higher sales of equipments. Personnel expenses were higher due to Anvia consolidation. There was also included in personnel expenses some restructuring costs regarding Anvia integration approximately EUR 1.5 million of those expenses. Decreasing impact in OpEx coming from interconnection and roaming as well as several places through continuous productivity improvement measures. The depreciations were stable at EUR 55 million. Total CapEx was EUR 53 million, consumer segment out of that EUR 35 million, corporate segment EUR 18 million and that was in line with the guidance there 12.8% from total revenue. Also cash flow was solid and stable, EUR 63 million positive impact to cash flow coming from EBITDA growth, lower share purchases, negative impact higher CapEx, and net working capital changed, although net working capital change in this quarter was 0, but compared to last year there was some EUR 3 million negative impact from that. Then if we look to liquidity position and cash and undrawn committed facilities were EUR 436 million. We did new bond issue in Q1 and issued 7-year fixed rate EUR 300 million bond at mid-swap plus 53 basis points meaning 0.875% interest coupon for 7-year fixed rate. Also we -- at the same time we tendered EUR 120 million of 2019 maturing bonds. So the refinancing is lower regarding that loan going -- refinancing need is lower regarding that loan going forward. Average maturity was extended to 4.5 years and currently average interest rate for interest bearing debt is 1.6%. The remaining amount of the issued bond will be used to refinance short-term finance in commercial -- outstanding commercial papers and undrawn or committed credit facility usage. Capital structure was well in line with targets, net debt to EBITDA 1.9, equity ratio 39%, gearing was 101%, and positive development continued in return ratios, return on equity 28%, return on investments was 16.8%. There was some temporary negative impact of the refinancing amounts or the bond issue amount being in the bank account end of March. And without these amounts, return on investment would have been slightly higher than 17%. So going forward we expect that to improve further. We continued with strong track record with distributions. Yesterday dividend payment was made EUR 1.5 per share, total amount EUR 240 million which is 7.1% growth against last year and payout ratio 93% and representing dividend yield 4.8% against the share price end of last year. Then briefly about the acquisitions and coming consolidations of those recent acquisitions, so Starman -- both Starman and Santa Monica, we received approval from competition authorities in Q1 and Starman, as is communicated earlier is the leading pay TV and fixed broadband service provider in Estonia and Santa Monica is an IT company specializing to maintenance and operations of data networks, corporate data networks, and data center networks in Finland and Estonia. And now that we start to integrate in this second quarter those acquisitions in Estonia, we will form new integrated service provider offering full services of mobile and fixed broadband TV services and also incorporate segment new position offering fixed network services. And Estonian pro forma figures based on 2016 figures, so that revenue is EUR 151 million which means that there is 53% growth to our existing Estonian business, EBITDA EUR 50 million, 56% growth EBIT, EUR 29 million 35% growth and CapEx EUR 21 million, 99% growth. And we will start consolidating those, both of Starman and Santa Monica in the second quarter. And 2016 Starman revenue was EUR 40 million, EBITDA EUR 17 million, and as communicated earlier, synergy estimate is between EUR 4 and EUR 6 million by the end of 2019. Acquisition price was EUR 150 million and that we did already have in our balance sheet and the net debt end of last year. Santa Monica 2016 Finland and Estonia business together revenue was EUR 44 million, EBITDA EUR 3.3 million, and synergy estimate EBITDA level between EUR 4 million and EUR 5 million by end of 2019 and acquisition price for Santa Monica is EUR 28 million and will be paid now in the second quarter. And as mentioned both of these will start -- we will start consolidating now in the second quarter. Relating these acquisitions, we will book one-off costs approximately EUR 3 million in the second quarter relating to advisory fees and professional services fees. Another thing that will be booked in the second quarter relating to Comptel shares, we did own 13% of Comptel shares, and beginning of this month we did sell our shares, sales price EUR 43.5 million and this will be booked in the second quarter in financial items as one-off item. And then in AGM there was a decision regarding former Yomi company owners' right to have Elisa shares, so this right is forfeited now and that means that approximately 250,000 outstanding shares. We will decrease outstanding Elisa shares by 250,000 and they will be transformed to treasury shares. Most of that 250,000 shares will be transferred already in the second quarter and final sales in the last quarter this year. There will be no profit and loss impact from this transfer. And now I will give word to Vesa please.

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Questions and Answers

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Vesa Sahivirta, Elisa Oyj - Director of IR and Financial Communication [1]

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Thank you, Jari. And now we move on to Q&A part and we start question from the audience and here is the first one. Sami, please.

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Sami Sarkamies, Nordea Markets, Research Division - Senior Analyst, Technology [2]

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Sami Sarkamies, Nordea Markets. I have 3 questions, first 2 on the corporate segment. We have seen substantial volatility in growth rates for this segment between the quarters, what is driving this development? And then secondly, what drove the margin decrease year-on-year in the corporate segment? You already disclosed that there was some restructuring charges, but maybe something else as well. And then thirdly, have you seen any customer traffic following the recent price plans introduced by Telia with EU Roaming included?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [3]

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In terms of your first question, corporate segment volatility in revenues, we don't see any particular reasons for -- or any particular in that there are -- the quarters are a bit different and there are changes. The competitiveness of our corporate businesses is extremely good and we are focusing well also with the digital service businesses now also Videra getting more traction. In terms of the margin, actually the one-off type of cost that we have incurred this quarter are not reported as one-offs, and if you take those into account there are no margin dilution in corporate business. Actually the corporate business is now getting more traction and since we have some reporting change, the numbers for 2015 are not changed based on the new. So if you look at the trend, the trend looks slightly getting better and better in corporate segment actually. In terms of the roaming change announcements by Telia which basically didn't include the major thing, which is the pricing for existing customers, we have not seen any impact. And for us, we have -- we are preparing our announcements, full announcements including also what the roaming changes will mean for the whole customer base, as well as potential new customers. We will come out due time before the regulation takes impact, and we will have very interesting proposals to our customers.

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Artem Beletski, SEB, Research Division - Analyst [4]

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Artem Beletski from SEB. I actually have only one question, and it relates to mobile service revenue growth development in Q1. So we have seen quite nice acceleration compared to Q4. Has it been purely driven by these price adjustments, what you have been doing at the end of last year? Or have you seen also some acceleration in terms of 4G migration among your customers? So is there any changes on that front? And just to add, so to say, what is your long-term outlook in terms of growth in mobile service revenue development, looking at next couple of years?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [5]

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Okay, well, in terms of the last part of your question, we reiterate the 3% to 5% mobile service revenue growth to the coming quarters. And it's based on the fact like this quarter what we see that the up-selling to higher speed with higher prices, the up-selling is generating mobile service revenue growth, very constant pace, it's clear that that's going to continue because we have a lot of still majority of the voice customers below 4G speeds, and also we believe that the demand for speeds will continue when we get more -- further and further applications. Also we have done some price increases in November that took effect also this -- for this quarter that has helped. But also in the other ways we have also based on our competitiveness and great quality we are getting, let's say, improvement in the customer base overall as well.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [6]

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Matti Riikonen, Carnegie. Two questions related to your subscription base in mobile, you almost managed to stop the bleeding in Finnish postpaid subscriptions, only a small decline there. I just -- I was wondering what kind of measures have you taken to stop the bleeding that has taken place for some quarters now? And the second question is related to the prepaid customer base quality. Could you describe what is a typical prepaid user in Finland, and why -- where there was this sudden change in the prepaid base in this quarter?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [7]

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Well, as many of you know, there has -- there is always changes in the competitive dynamics which we have been quite open to tell our view and our understanding of it. Last year we saw one competition to be very aggressive, trying to gain customers based on heavy investments to the customer acquisition. We said about that, we told about that, and we also said that we will start to respond if we see more of that kind of activity. We have responded now and that has taken also impact. Then the underlying trend we have seen for quite some time now for the passive subscriptions to be disappearing slightly because we do -- we have done certain price increases, that trend still exists and that's maybe one of the biggest reason for us to lose customers still, and it's going to continue still. However, also I want to remind that in terms of the euro it's a positive equation for us to have slight price increases even though we lose some passive subscriptions. Overall then for the prepaid side, as you certainly know the prepaid ARPU was now EUR 7.6. So that's the quality of customers. Our deactivation time is somewhat shorter than some in the industry are showing in this country. So that may also reflect to the different developments of the prepaid customer bases. We use 3-month deactivation rate, it's totally different from something else. Also we have seen somewhat more aggressive campaigning by DNA in the prepaid segments. They may have their reasons to try to have a strong growth in prepaid, even though the revenue side is maybe -- and especially the profitabilities may be not the best. But that's what's going on in the prepaid segment.

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Vesa Sahivirta, Elisa Oyj - Director of IR and Financial Communication [8]

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Okay, any further questions from audience at this point? No, we don't have any questions at the moment. So first question from the conference call lines, please.

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Operator [9]

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(Operator Instructions) Our first question comes from the line of Sunil Patel from Bank of America. Our first question seems to be from Peter Nielsen from ABG, please go ahead.

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Peter Kurt Nielsen, ABG Sundal Collier Holding ASA, Research Division - Analyst [10]

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Just a couple of questions please. Firstly, Veli-Matti, you spoke about the EU roaming price changes you will inform us in due course, so I won't try and preempt that, but just a question. Can you indicate to us whether this will be, whether you will utilize the new sustainability mechanism principle or whether this will be, how shall I say, through other means that you will change your prices? And just secondly, on the acquisitions of Santa Monica Networks, obviously we recently had an Investor Day with focus on Estonia, but can I ask what will the acquisition of Santa Monica Networks mean for the Finnish business, for the Finnish corporate business? Does this give you new capabilities, competencies, that improves your competitiveness in any material sense? And thirdly, if I can just direct the question to Jari please. Jari, would you be so kind as to tell us what the organic revenue and EBITDA growth is in Q1, i.e., so we have an idea roughly how much Anvia contributed to revenues and EBITDA in Q1?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [11]

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First, the EU roaming prices, since we are still discussing with our regulator, we cannot tell too much about how much we might utilize the sustainability mechanism, remains to be seen. But as we have communicated, we have of course very good cooperation with the other operators in order to offer very competitive roaming prices overall. But it remains to be seen. We are still in the discussions, and unfortunately I cannot really tell the final solutions that we will bring, but I know that we have such tools available for us that it will be very interesting to see the prices then when we will come out. And we believe we are able to have flat, or at least flat development with the roaming change. We don't expect to have negative impacts to our profits with the roaming change. It's good to understand that the roaming itself actually is not disappearing to anywhere. For the first outside Europe there will be roaming available, which is very important for customers to know this as well as that the usage-based charging subscriptions by other operators that is continuing outside your home country as well. Nevertheless, that's about that. The Santa Monica acquisition, of course it will also contribute to the competitiveness of our very good and large corporate solution offering we have for our customers. We are the leader for providing large B2B offering from the telco services to the IT and digital services. And of course the Santa Monica will provide many additional elements to be even more competitive towards the future. And then Jari had also a question from you.

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Jari Kinnunen, Elisa Oyj - CFO and Member of Executive Board [12]

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Yes, the revenue totally [growth] was EUR 26 million. So the Anvia contribution is a bit less than 2/3 of that so the organic growth is approximately 2.5%. EBITDA impact approximately EUR 3 million.

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Operator [13]

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Our next question comes from the line of Jakob Bluestone from Credit Suisse.

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Jakob Bluestone, Crédit Suisse AG, Research Division - Research Analyst [14]

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Could you maybe just give us an update just what you're seeing on the competitive dynamics within the contract market? And obviously we saw the Telia price changes and you did your own price adjustments, but is there anything else that's happening below the line?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [15]

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In terms of the competitive dynamics for the postpaid market, if I understood right your question, we have seen some campaigning and especially last year we saw investments to the customer acquisitions in the external channels. And there has been some dynamics now, also other players than DNA to become active in that part of the distribution, and that has of course impacted to the dynamics somewhat. But in terms of the competitive intensity it has been pretty much the same as it was fourth quarter.

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Operator [16]

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Thank you. Our next question comes from the line of Robert Slorach from Handelsbanken.

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Robert Slorach, Handelsbanken Capital Markets AB, Research Division - Research Analyst [17]

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A couple of questions. On the fixed side, maybe if you could comment on what's happening with fixed ARPU. If I calculate that it looks like it's kind of coming down pretty rapidly in last 2-3 quarters. And secondly, consumer ARPU is up about 7% while corporate was up only 2%, is that a kind of a trend you're seeing that these 2 growth rates are diverging. And then lastly, it's also in the report that Tele2 and Estonia is challenging the decision to allow the Starman acquisition, maybe you could just comment on that and what you expect from that?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [18]

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Okay. In regards to the fixed ARPU, the development there is stable or slightly up, but then if we look at the multi-dwelling unit part of the market, there is, as we have told earlier, there is quite heavy price competition which we think is a bit overheated, but that's the main reason for decreasing ARPU in the fixed side, fixed broadband side. Then the corporate ARPU actually overall for the first it's on the higher level overall and the -- from that point of the view, the up-selling is impacting more in the [percentual] wise more in the consumer segment. The competitiveness in corporate segment exists as it has been always, so there is no change for that, but I think that's the main driver for the consumer side to grow a bit faster in the ARPU. Also the price increases we have done, they are more taking effect in the consumer side, that's another reason. Then in regards to the Starman acquisition, we have acceptance from the competition authority and of course there might be somebody who is not happy for that, but we are happy for that.

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Operator [19]

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Our next question comes from the line of Sunil Patel, Bank of America Merrill Lynch.

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Sunil Praful Patel, BofA Merrill Lynch, Research Division - VP [20]

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I had 2 questions. Just going back to the roaming, one of the things I struggle with is that Telia's move seems to include EU roaming and therefore means they won't be moving in the direction of the sustainability mechanism. Do you think their move makes it much harder now for yourself and DNA to rely on the sustainability mechanism in practice and charge for roaming? The second question I have is, and I apologize if this was asked earlier, but on churn, I mean that's steadily picked up even though I think [MSR] has done very well as results are, but how high are you willing to let churn rise to before you have to increase sort of subscriber retention costs?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [21]

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All right. Since Telia has not provided any information about the roaming prices for the existing customer base, which is the majority of their business I guess in the coming years also it's very difficult to say how they are utilizing sustainability mechanism, so that question is totally open. For us, we will be competitive in terms of the roaming prices when we will come out. I don't know about DNA, that's for them to comment. But we are very comfortable on the situation. In terms of the churn, the -- there's a slight change from the fourth quarter, but from the level of the change it's basically on the same level one could say. So there is no major change in the churn. And as I was explaining, we are kind of accepting a bit higher churn based on the churn coming from the passive subscriptions to be seized based on the price increases we are doing because we will see positive financial impact anyhow for those price increases. Otherwise, of course as we have said in the past couple of quarters, there is a bit higher intensity in the market now for competition, especially in the channels as we discussed. But overall there has been no change and our offering, we have very competitive offering both in the consumer side and in the corporate, and especially our quality for corporate customers is very, very competitive compared to others.

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Operator [22]

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

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Simon Coles, Barclays PLC, Research Division - Research Analyst [23]

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I was just wondering on pay TV usage in Estonia and -- sorry, in Finland and for you guys do you see it like 15 gigabytes, 16 gigabytes per month compared to the European average of 1 to 2. I was just wondering where you are still seeing the growth and what's driving that growth, is it video? Are you seeing customer usage in home as well? What's driving the growth there? And then I was -- just on Elisa Viihde, I was just wondering how the traction and momentum is still going for that product? And are you able to maybe cross-sell or use the Starman acquisition to increase the content in that product?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [24]

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Well, the data usage has been growing approximately 45% year-on-year. And of course it is very much created by the video usage and increased video usage. But we start to see more and more applications like augmented reality applications, the video, higher and higher quality video, 4k and even higher level videos to be used. So we are expecting the data usage and we are happy to see the data usage growing. However, we are not making more money by the usage itself. It's the customer who is of course experiencing more value when they are using more. But of course there are also more value to customers when they have higher speeds and they have lower delay and so forth. So we are aiming to provide more value to customers, but also be able to monetize the value increase for the customers to us as we have been able to do with the speed-based up-selling, which is unique in the industry as you know. So we see the data usage growing, but for more importantly with higher speeds and with higher ARPUs to us. In terms of Videra, I assume you asked that Videra which is our videoconferencing and digital signings business which we are also operating European-wide based -- for the European customer base but also with a global solutions for videoconferencing. Videra is now moving very nicely. The growth rate is good and also the prospects for the future are good for that business.

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Simon Coles, Barclays PLC, Research Division - Research Analyst [25]

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Thank you. Just more on your Elisa Viihde, the TV content, IPTV application that you have?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [26]

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All right. Yes, Elisa Viihde is continuing its growth very nicely also based on the additional content and co-produced original content we are bringing more and more to Elisa Viihde. It's a market-leading IPTV solutions and of course we are cross-selling both fixed broadband, but also mobile data connectivity with that and also other services. So it's – the future for Elisa Viihde also looks very good.

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Operator [27]

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(Operator Instructions) Our next question comes from the line of Irina Idrissova from RBC Capital Markets.

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Irina Idrissova, RBC Capital Markets, LLC, Research Division - Assistant VP [28]

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Just a couple for me. So on the corporate segment, of course we've seen some positive trends this quarter, and it looked last year as if corporates are finally starting to get less cautious with their spending. Are you seeing this trend continuing into this year? And also do you see any differences in how the small-to-medium business segment is responding as well? And also just to confirm on the full-year guidance, if we exclude the acquisitions impact, can you just confirm for us that the outlook for the remainder of the business has been upgraded from previous guidance?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [29]

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All right. I'm not sure if I understood or heard actually right your question regarding the corporate segment, but the things I was hearing that you were asking if the development -- positive development is to continue there, also including the SME segment, and the simple answer is yes, it is doing very good progress step by step, the corporate business. The breadth of our offering is working very nicely. The cross-selling is working also very nicely for connectivity customers. We can sell more and more IT and digital services. And the customers we have gained starting from the IT side we are selling connectivity. And competitiveness works for large customers as well as to SME side. Then you had another question. Can you remind me what was that?

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Irina Idrissova, RBC Capital Markets, LLC, Research Division - Assistant VP [30]

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Yes. Just to confirm on full-year guidance, if we exclude the impact of acquisitions, can you just confirm that the outlook for the remainder of the business has been upgraded as well from the guidance we saw in Q4?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [31]

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Like Jari was explaining for the first quarter of the acquisition-based growth and profit growth, there is organic growth also, and that's what we see also for the rest of the year that we will have the organic side also growing. And one can say that it's very difficult to say that this upgrade that which elements it really includes from the previous upgrade, but -- previous guidance, but one can say that the positive development is coming from both from the organic development as well as from the acquisitions.

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Irina Idrissova, RBC Capital Markets, LLC, Research Division - Assistant VP [32]

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Okay, great. And just a quick follow-up on the corporate segment. I was trying to ask also whether you're still seeing less caution from corporate clients compared to a year ago with regards to their spending and actually pulling the trigger on getting the contracts?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [33]

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Yes, yes, now I understood your question well. Thank you. Well, clearly we see that the corporate customers are more tuned in for solutions to digitalize their business. There's clearly more evident that the digital transformation is happening business by business and that has been taken more seriously now than let's say 1.5 years ago by the Finnish corporate customers of all sizes. And it means great potential for us since we have the breadth of our offering for various digital solutions to our customers.

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Operator [34]

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As there appear to be no further questions I'll return the conference to the speakers.

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Vesa Sahivirta, Elisa Oyj - Director of IR and Financial Communication [35]

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Thank you. And we have one question from the audience, so Matti, please.

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Matti Riikonen, Carnegie Investment Bank AB, Research Division - Financial Analyst [36]

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Matti Riikonen, Carnegie. One follow-up question to the guidance issue, so I was under the impression that the revised or upgraded guidance in this report was solely based on technical grounds, i.e., taking Starman and Santa Monica Networks into the guidance, but now when you say that it has also elements of the organic growth, so my question is what has changed your view in the last 3 months to basically say that?

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [37]

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Well, we have seen the first 3 months of the year to be executed and from the -- based on the demand in the market and also the, let's say, overall -- well, overall market conditions we can see that the organic growth is continuing very well and it's going to contribute to the guidance upgrade as well.

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Vesa Sahivirta, Elisa Oyj - Director of IR and Financial Communication [38]

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All right. There are no further questions from the audience, so we thank you for participating this conference call and have a nice day. Thank you. Bye-bye.

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Veli-Matti Johannes Mattila, Elisa Oyj - CEO, President and Member of Executive Board [39]

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Thank you.