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Introduction & Market Context
Portuguese telecommunications provider NOS SGPS SA (LIS:NOS) presented its Q1 2025 results on May 7, 2025, highlighting continued revenue growth despite a challenging competitive environment. The company’s stock closed at €3.60, down 1.77% following the earnings release, as investors reacted to the mixed results that showed operational growth but a decline in reported net income.
NOS maintained its position in the Portuguese telecom market while executing on its strategic expansion into the ICT sector, a market expected to double in value between 2021 and 2027. The company’s presentation emphasized its transformation into a more digitally-focused organization leveraging AI capabilities and 5G leadership.
Quarterly Performance Highlights
NOS reported consolidated revenue of €421.4 million in Q1 2025, representing a 4.5% increase year-over-year. EBITDA grew at a similar pace, rising 4.3% to €192.3 million, demonstrating consistent operational execution. However, net income declined 13.0% to €59.0 million, though the company noted that excluding non-recurrent events, recurring net income actually increased by 20.8%.
As shown in the following comprehensive financial overview from the presentation:
The company’s customer base continued to expand, with total revenue generating units (RGUs) increasing by 1.8% year-over-year to 10.68 million. Fixed RGUs grew by 2.0% while mobile RGUs increased by 2.7%, driven primarily by post-paid subscriptions which added 86.8k customers in the quarter. This growth helped offset a 15.3% decline in pre-paid mobile customers.
NOS maintained its network expansion, with homes passed by its fixed next-generation network increasing to 5.8 million, up 5.7% from Q1 2024. The company also highlighted that 84.1% of these households are now covered with fiber-to-the-home (FTTH) technology, representing a 7.6 percentage point increase year-over-year.
Strategic Initiatives
The most significant strategic development in the quarter was the completion of the Claranet Portugal acquisition in March 2025, strengthening NOS’s position in the rapidly growing ICT market. This acquisition aligns with the company’s strategy to expand beyond traditional telecommunications services into higher-growth technology segments.
The following slide illustrates the strategic rationale behind the Claranet acquisition:
NOS also emphasized its leadership in 5G technology, with 4,787 5G stations providing 99.6% outdoor coverage and 97.1% population coverage across Portugal. The company highlighted being the first to launch 5G+ (standalone 5G) in Portugal and implementing innovative use cases including applications to combat social isolation among the elderly.
Another key strategic focus is the company’s AI implementation program. NOS has identified over 125 AI use cases across customer service, sales, marketing, network operations, and other areas. The company has already trained 250+ employees in generative AI technologies with a target to eventually train 100% of its workforce.
Innovation remains central to NOS’s strategy, with the company maintaining its leadership in Portuguese patent applications in Europe for the second consecutive year. In 2024, NOS Inovação submitted 22 patent applications focused on AI technologies for voice and accessibility, cybersecurity, metaverse, and blockchain applications.
Detailed Financial Analysis
NOS’s financial performance showed strength in several key areas despite the headline net income decline. CAPEX decreased by 1.8% year-over-year to €90.3 million, continuing a downward trajectory as 5G rollout is now complete and fiber expansion continues through a more efficient mix of owned infrastructure, network sharing, and wholesale agreements.
The following chart details the CAPEX evolution:
This CAPEX efficiency, combined with solid operational performance, led to a 12.2% increase in EBITDA After Leases (AL) minus CAPEX, reaching €71.1 million. Free cash flow grew by 5.2% to €83.4 million, or 9.8% excluding non-recurring items, driven by EBITDA growth, lower CAPEX requirements, and reduced interest payments.
The company maintained a strong balance sheet with financial leverage (Net Financial Debt to EBITDA AL) at 1.5x, well below the company’s reference level of approximately 2x. The average cost of debt decreased by 0.29 percentage points quarter-over-quarter to 3.3%, benefiting from the lower interest rate environment. As of March 31, 2025, NOS had a cash and liquidity position of €352.4 million.
Forward-Looking Statements
Looking ahead, NOS expressed confidence in its ability to maintain revenue growth while continuing its operational transformation. The company plans to focus on leveraging its ICT capabilities, enhanced by the Claranet acquisition, to expand its enterprise offerings.
The presentation highlighted NOS’s ongoing commitment to digital transformation through AI implementation and 5G innovation. Management emphasized that the structural decline in expansionary CAPEX will continue to support strong free cash flow generation, providing flexibility for future investments and shareholder returns.
During the earnings call, management addressed concerns about declining ARPU (Average Revenue Per User), with executives stating, "We still have weapons to fight [ARPU decline]," indicating strategic initiatives to manage revenue challenges. They also emphasized stability in the PayTV segment, noting, "We are not seeing anyone disconnecting PayTV."
While the Portuguese telecommunications market remains competitive, NOS appears well-positioned to capitalize on growth opportunities in ICT services and digital transformation, supported by its strong network infrastructure and improving operational efficiency.
Full presentation:
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