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Investing.com -- UBS Global Research has downgraded Elisa Oyj (HE:ELISA) to “neutral” from “buy,” raising its price target slightly to €49.3 from €48.2.
The decision follows strong share performance, Elisa Oyj closed at €47.86 on June 5, and relatively stronger growth guidance from Nordic peers.
UBS continues to view Elisa as a consistent performer in a well-structured European telecom market, operating with lower leverage than peers. However, recent trends have tempered optimism.
Mobile service revenue (MSR) growth in Finland has decelerated, slipping from around 5% in 2021–2022 to 4% in 2023 and an underlying 3% in 2024.
This trend coincides with a rise in postpaid churn, a slowdown in Estonia, and the first year-over-year decline in mobile data consumption.
Leverage has increased to 1.9x by end-2024 from 1.7x during 2021–2023, driven by high shareholder payouts and bolt-on acquisitions intended to support growth.
While not alarming in isolation, UBS cites this in conjunction with weaker relative growth expectations as a reason for caution.
UBS also notes that Elisa’s equity free cash flow yield looks elevated compared to Nordic peers, many of whom now offer higher expected EBITDA growth and more attractive cash flow profiles.
UBS forecasts Elisa’s revenue and EBITDA compound annual growth rates (CAGR) at 3.3% and 3.6% respectively, below the company’s guidance of over 4% CAGR from 2024 to 2027.
The downgrade reflects four key investor concerns: MSR slowdown, declining mobile data consumption, increased churn, and heightened competition in Finland’s Fiber-to-the-Home (FTTH) market.
While UBS sees no single issue as a material risk, the combination informs its more cautious outlook.
On MSR, Elisa is increasingly reliant on 5G upselling, with 4G repricing no longer a growth driver. Despite slower data growth, upgrades to higher-speed plans remain steady.
Churn, having returned to historical norms after years of low volatility, appears driven by market-wide shifts toward fixed-line services and greater price sensitivity among Finnish consumers.
UBS sees FTTH competition as a marginal, not structural, concern. Finland’s FTTH penetration was around 68% by Q3 2024, leaving room for growth.
While pricing pressure is more acute in multi-dwelling units due to overbuild, healthy expansion is occurring in single-dwelling units.
Moreover, Elisa is now past peak 5G capex, and its international software services (ISS) business, less capital-intensive, is becoming a larger share of revenue.