Earnings call transcript: Telia Q2 2025 shows steady growth and strategic moves

Telia Company AB reported its Q2 2025 earnings, highlighting a steady increase in service revenue and EBITDA growth. The company also announced strategic initiatives, including its acquisition of Breband Two and expansion of its 5G capabilities. Telia’s financial performance showed resilience, with current stock price at $3.59 and impressive year-to-date returns of 12.14%. According to InvestingPro analysis, the stock appears slightly undervalued based on their proprietary Fair Value model, with a robust dividend yield of 5.99%. The company’s stock performance reflects cautious but optimistic investor sentiment.

Key Takeaways

• Service revenue grew by 1.4% year-to-date.
• EBITDA increased by 6.2%, with a 200 basis point margin expansion.
• Acquisition of Breband Two aims to boost market share in Sweden.
• Net debt reduced by €1.5 billion, improving leverage to 2.09x.

Company Performance

Telia demonstrated solid performance in Q2 2025, with significant year-to-date service revenue growth of 4.15%. The company’s focus on efficiency and innovation, such as its 5G installation in Lithuania and new mobile portfolio in Sweden, positions it well in the competitive Nordic market. InvestingPro data shows the company maintains a GOOD Financial Health Score of 2.6, supported by strong EBITDA of $2.76 billion. While challenges persist in Norway, Telia’s strategic moves are expected to drive long-term growth. For deeper insights into Telia’s competitive position and growth potential, investors can access comprehensive Pro Research Reports available on InvestingPro.

Financial Highlights

• Service Revenue Growth: 1.4% year-to-date
• EBITDA Growth: 6.2%
• EBITDA Margin: Expanded by 200 basis points
• Operating Expenses: Declined by 5.1%
• Free Cash Flow: Improved by SEK 400 million
• Net Debt: Decreased by €1.5 billion

Outlook & Guidance

Telia maintains its full-year outlook, anticipating service revenue improvement in the second half of the year. The company targets a free cash flow above €10 billion by 2027 and expects potential CapEx increases later in the year. Telia continues to focus on efficiency and portfolio management to sustain growth.

Executive Commentary

CEO Patrick Hoffbauer remarked, "We continue to perform in line with our plans overall," underscoring confidence in Telia’s strategic direction. He emphasized the company’s ongoing efficiency agenda. CFO Erik Hagmann highlighted the Breband Two acquisition, stating, "This transaction ticks many boxes," reflecting its strategic importance.

Risks and Challenges

• Regulatory approvals for acquisitions could pose delays.
• Market competition, particularly in Norway, remains a challenge.
• Economic uncertainties may impact consumer spending and service demand.
• Potential increase in CapEx might pressure short-term financials.

Q&A

During the earnings call, analysts queried the regulatory landscape for the Breband Two acquisition, to which management expressed confidence in approval. Questions also focused on Telia’s sales channels and the potential for pricing increases in the mobile market. The company reiterated its focus on leveraging its own sales channels to drive growth. With an EV/EBITDA ratio of 7.7x and P/E ratio of 27.7x, InvestingPro subscribers can access detailed valuation metrics and expert analysis through the platform’s exclusive Pro Research Reports, which provide comprehensive insights into Telia’s market position and growth prospects.

Full transcript - Telia Company AB S (TELIA) Q2 2025:

Conference Moderator: Q2 ’20 twenty ’5 Results Presentation. And with that, I will now hand over to TVA Companies’ Head of Investor Relations, Erik Strandenpears. Please go ahead. The floor is yours.

Erik, Head of Investor Relations, Telia: Thank you, Michael. Welcome everyone to the call on this busy morning. We have a presentation ahead of us. We have Patrick Hoffbauer, our CEO and Erik Hagmann, our CFO, to present the results. And after that, we’ll go to Q and A.

And we’ll try this time to make sure everyone has a chance to ask questions. So we’ll do two questions each this time, please. But before that, we have lots to present. So Patrick, please go ahead.

Patrick Hoffbauer, CEO, Telia: Thank you, Erik, and good morning, everyone. Let me go through what I believe was a very eventful quarter that shows that we are on the right track with our strategic agenda. I’m glad to see that the new organization is delivering efficiencies according to plan and that we continue to execute well on our ambitions to strengthen our core and make Telia more robust. Financially and as a group, we continue to track according to our overall plan, even though the picture is a bit mixed with an EBITDA overperformance in Sweden and Finland, but somewhat weaker development in Norway. As I said, it was an eventful quarter, and our M and A team has been working around the clock: firstly, to close the TV and media transaction secondly, for the signing of the Memorandum of Understanding with our partner in Latvia that will see us fully exit from Latvia in 2026 and thirdly, you saw today a public tender for all outstanding shares of Breaban Tor, which will strengthen our consumer business in Sweden.

Innovation also remains a key strategic priority, and we are proud to have extended the North Star innovation program by welcoming the Swedish Armed Forced aboard. We are excited to work with them and our other partners to make sure that Sweden stays in the front line when it comes to secure communication and advanced five gs applications. And finally, we keep the full year outlook unchanged since first half financials for the group are largely as expected. On the next page, I will comment on the financial highlights. Service revenues growth was strong in Sweden and The Baltics, which was partly offset by the expected slowdown in Norway, meaning that overall growth was somewhat below the full year ambition.

EBITDA growth of 6.2% was not that different versus Q1, and this was slightly ahead of our own expectations, but we still foresee a somewhat softer Q3 before it picks up again in Q4. CapEx spend remained well within our frame of less than SEK 14,000,000,000 per year, and free cash flow of SEK 2,300,000,000.0 was strong, following positive development on several line items, including a dividend from TET in Latvia late in the quarter. This cash flow, together with the growth in EBITDA and proceeds from the Marshall investment, mean that our balance sheet continued to improve and the leverage is now at 2.09x. Moving then to Sweden that continue to track that commercial plan well, leveraging on its premium infrastructure position, improving customer satisfaction and further expanding the NorthStar innovation program. Our net mobile subscriber intake this quarter was the best for over five years, driven by consumer customer, and we launched a new mobile consumer portfolio with improved streaming bundling.

Meanwhile, TV continued to perform strongly, which was the main reason behind the consumer segment growing 2.3%. Enterprise also had a good quarter despite the poor macroeconomic growth, with strong demand for advanced connectivity, ICT and security services. Part of the growth also came from project and licensing revenue, which will fluctuate from one quarter to the next. EBITDA growth remained strong at around 8%, supported by profitable growth and continued tailwind from the change program. One important reason why we are doing well in Sweden is our focus on the overall household.

I would like to talk about the development of convergence on the next slide. We’ve had a long term focus to slowly but surely drive increased convergence in the consumer base and to do this without providing much monetary discounts. The share of the convergent customer is growing steadily, about two percentage points per year, and we are now at the level of 57%. In the second graph, you can see that their average revenue per household grows by more than 5% per year and now exceeds SEK 600. Churn is also drastically reduced for converged customers.

And somewhat simplified, you can see that household churn decreased by about half for each extra service added. To drive convergence, we naturally leveraged our award winning networks. And as you can see, we are now at an unlimited share of 65%. So why is this important? When you get the critical mass on unlimited, you can start to look at the customer base the same way as you do with a fixed base, with simpler and more recurring pricing cycles, with annual and predictable price increases as we have had in the fixed business.

Let me now comment briefly on why we have announced a tender to offer all the shares in Breaban two. As I said, we have placed a bid for all outstanding shares of Breband two. The bid is recommended by its Board and supported by its top five shareholders, representing over 50% of Breband two shares. It is a transaction for around SEK 3,000,000,000 in enterprise value, which requires over 90% acceptance as well as local competition clearance. This is a very complementary asset to Telia, operating in a segment where we are hardly present today since we lack the tools to compete effectively in the value segment of the fixed broadband market with our premium brand.

In addition, Brevant two operates in open networks, where our market share is very low. We have a solid case for synergies, amounting to over SEK 200,000,000 within three years and with more potential after that. This transaction profile meets our requirement on executing risk and returns on capital employed. So let’s now leave Sweden and go to Finland. In Finland, we saw flat service revenue development as we continue to trim our portfolio to drive simplification.

The mobile consumer trends are mostly healthy, with a continued increase in gross customer intake and ARPU growth of 4%. In broadband, the number of consumer fiber customers also continued to grow. In Enterprise, we ported out 35,000 subscriptions related to one large public contract lost more than a year ago, which explains the negative net adds in the chart and the reported churn increase this quarter. Ongoing simplification of the business as we shut down noncore activities and the strong execution of the change program resulted in EBITDA growth of 10%. It can be noted that without the ramp down of the e invoicing business, Service revenue growth would also have been slightly positive.

At this time, I would like to comment on what we are doing to improve our business in Finland going forward. At the investor update we laid in September, we laid out the ambition of Finland getting back to growth with improved profitability. And with Holger now in place, that work is now moving into a new phase. We set out ambitions to stabilize our mobile market share, to strengthen the smear business and to improve profitability. After the first three quarters, we are making progress on profitability and simplification, as we saw on the previous slide.

We have increased the customer intake in both SME and mobile consumer, and the fiber market remains healthy. Meanwhile, there have been strong headwinds in enterprise, and the macroeconomic growth remains low, so we have much more work to do. Still, we believe that we are on the right track. Product portfolio simplification and the profitability focus will continue. The efficiencies we have created in the center part of the organization have enabled deployment of selected new customer facing headcounts into our sales organization, and this is giving visible results.

We also have new five gs capabilities that our enterprise customers are keen to explore and have already sold well over 10 private networks with more to come. And we will continue to invest in a healthy fiber market where value is being created. And we see that all of this moves us towards the target we set out last September, moving now west to Norway, which, as expected, had challenging quarter with both service revenue and EBITDA turning down due to lower mobile wholesale revenue and headwinds in broadband and TV. The challenges in fixed can be seen in the KPIs that were also impacted by the black screen with TV2, which lasted until the end of the quarter when a new multiyear agreement was signed. This development does not come as a surprise, and next quarter you will see that the headwind will become worse before they start to get better, as we have said before.

Let’s not forget that we have a strong brand portfolio and growing mobile end user service revenue in Norway, but I know you all want to know how we plan to turn the current trends around. So let’s go to the next page. In fact, when it comes to Norway, I’m a lot more confident about our way forward than I was six months ago. We know that we need what we need to do and how to sort out the fixed business. Some of it we can share now and some in the future quarters.

Our plan remains to continue to grow with best in class profitability. Obviously, we lost a wholesale contract and we have headwinds in fixed, with the Black Spring situation on top of them. But we have now completed a string of important management recruitments, sorted out the Black Screen situation in a good way, and we have launched a new organization this quarter, where we have separate the vision to focus on the fixed consumer business. Our back to growth plan in fixed includes having a focused team, upgrading Kowax customers to fiber, replacing a fragmented customer equipment landscape with upgraded and standardized CPEs and to grow outside our network using fixed wireless access and open networks. Our foundation for this work has been laid as fixed network quality has already improved dramatically and well within our group CapEx targets.

Like in Finland, we have an existing exciting opportunity to grow in advanced five gs services as well as within Saiget ICT portfolio. Our brand portfolio is strong, and there is plenty of potential in security services for both consumers and enterprises. And in tandem with the commercial activities, we continue to pursue additional cost opportunities. Turning now east and starting with Lithuania. Lithuania goes from strength to strength financially after delivering another quarter of very healthy service revenues growth, supported by both mobile and fixed.

New tools for smart personalized pricing have enabled ARPU growth, as you see on this slide, without adverse effects in churn or dissatisfaction. Innovation is also happening together with customers, and this quarter, we initiated testing of the first stand alone five gs ESE installation in the port of Klaipeda. Together with additional efficiencies generated, this all resulted in EBITDA growth of 11% and EBITDA minus CapEx that remained at record high level of SEK 1,600,000,000.0. Moving on to Estonia, which signed an agreement to acquire its long term IT partner, IGLER, this quarter, a small but a creative transaction that also strengthened Telia, Estonia’s ICT proposition in the large enterprise segment. On the financials, development was steady with both service revenue and EBITDA growth growing by 3% to 4%, as you can see, with good cash flow conversion.

And with that, I hand over to Erik before I come back and summarize the quarter at the end.

Erik Hagmann, CFO, Telia: Thank you, Patrick. Let me now go through the financial development of Q2, starting as usual with Service revenue and EBITDA development. As we flagged last quarter, service revenue growth slowed in the second quarter as stable or improved performance in Sweden, Finland and The Baltics was offset by revenue decline in Norway and the lapsing tailwind from the Norless TSA. Year to date, we are at a service revenue growth of 1.4%. And looking into the second half of the year, we expect an improvement due to mainly phasing of pricing and growth coming from enterprise and public sector contracts.

Turning to EBITDA, we see that growth remained above 6% supported by all markets except Norway with cost efficiencies resulting from the change program being a key driver. We’re also encouraged to see that our EBITDA margin expanded by 200 basis points, in line with our margin expansion promise at the Investor Update September. Including TV and Media, which was originally part of our full year guidance, EBITDA growth would have been 11% this quarter. EBITDA this quarter was a bit better than we estimated three months ago and is partly a result of phasing between quarters as well as better savings on ancillary costs following our change program. Because of that, we still expect that Q3 will see growth below our full year ambition of more than 5% before reaccelerating again in Q4.

Moving to OpEx and CapEx. As you see, the change program continues to yield good results and is the key reason why our operating expenses declined by 5.1% in the quarter, more than compensating for an increased level of marketing spend and somewhat higher IT costs. The combination of service revenue growth and lower OpEx resulted in OpEx as a percentage of service revenue continuing down, this quarter by almost 200 basis points to 30.4%. We also stay committed to maintaining CapEx discipline. And as you can see from the middle graph, we are now at €12,600,000,000 on a twelve month rolling basis, showing how clear priorities result in better efficiency.

We reserve the flexibility to potentially increase the CapEx run rate somewhat in the second half, but we will stay comfortably in line with our guidance of below €14,000,000,000 for the full year. As you can see on the right hand side, EBITDA less CapEx as a simple proxy for free cash flow reached SEK19 billion on a twelve month basis, up more than a third over two years or SEK5 billion in absolute terms. The winning combination of higher EBITDA and lower CapEx resulted in a much improved cash conversion now at 60% on a rolling twelve month basis, up from 58% a year ago and materially up from forty seven percent two years ago when we were coming out of a peak investment cycle. Let’s now look at the free cash flow for the quarter. Here we can see that there is an improvement in free cash flow of CHF 400,000,000 compared to the same quarter last year.

And as for several quarters now, the primary building block is again our continued profitable growth. Cash CapEx decreased by €300,000,000 versus last year to a large extent driven by lower booked CapEx and some phasing. Interest payments however went the opposite direction as last year, but as you might remember that quarter contained an unusually low level due to phasing of interest into Q3 of twenty twenty four. We had a positive impact of €200,000,000 relating to dividends from TET, the fixed business in Latvia where we are a minority owner, following the agreement with our partner there. The mobile business in Latvia, LMT, which we consolidate, will pay dividends in early Q3, which will result in a minority dividend outflow of a similar size in our cash flow statement.

So a bit of phasing here that worked in our favor this quarter. Other items were somewhat less negative versus Q2 last year as outgoing payments related to the change program was offset by primarily higher pension refund. Let’s now briefly look at our net debt and leverage development. As you can see on the right hand side, our net debt decreased by €1,500,000,000 in the quarter as free cash flow more than covered our quarterly dividend payment. And in addition, we had proceeds from divesting our ownership in the Marshall Group.

The combination of a reduction in net debt and increased EBITDA reduced our leverage to just below 2.1 times compared to 2.18 times at the end of last quarter. Looking at the longer term trend, we can see that leverage has come down over the last years and we have grown EBITDA while using proceeds from divestments to reduce our debt levels. Including the TV and media proceeds that we received at the July, leverage has now come down even further. Before I hand over back to Patrick, a few words on some of the financial milestones we have achieved this quarter and how that resonates with our ambitions as laid out at the investor update last year. At this Capital Market update, we laid out a clear agenda how we aim to create shareholder value.

And in this quarter, we continue to make good progress on this agenda. EBITDA continues to grow and CapEx has come down since new management took over. And both are key building blocks for our ambition to grow free cash flow and dividend per share over time. On active portfolio management, you have heard us talk today about the closing of the sale of the TV and media business, making a Bolden acquisition that further supports our core business in Sweden and the signing of an MOU for the planned exit from Latvia. Also our balance sheet continues to strengthen.

Liquidity is strong and after the closing of our TV and media exit, we are now at the lower end of our leverage target range. Finally, we paid another quarterly dividend to our shareholders. We covered the first half year dividend by our free cash flow and we continue to remain as committed as before to deliver free cash flow above €10,000,000,000 by 2027. With that, I hand back to you, Patrick.

Patrick Hoffbauer, CEO, Telia: Thank you for that, Erik, and let me now summarize before we go into Q and A. We continue to perform in line with our plans overall, with Sweden a bit stronger and Norway falling a bit short at the moment. But like I explained earlier, we feel confident in our plans in Norway and Finland. This quarter, we clearly see the efficiencies coming from the change program from last year, but I’m also happy to see that the new organization we have created works well. This is very important as we are on a simplification journey and will continue to generate efficiencies.

Strong progress for the asset portfolio management, with TV and Media now in a new home and for next year, looking forward to the same for our Latvian business, but also to hopefully welcome Breben to Telia. The outlook for the full year is reiterated. And with that, I will now want to open up for questions. Thank

Conference Moderator: you. Our first question today comes from Andrew Lee. Please go ahead.

Andrew Lee, Analyst: Was on your cost cutting outlook in light of what we’ve heard from your peers recently. And then secondly, just on implications on how we should read the Latvian asset sale. Just on the cost cutting, think you’re going through a second benchmarking exercise on cost now. You previously suggested that we shouldn’t expect another big scale cost efficiency program or transformation program like the one you laid out a year ago. We’ve seen your peers really step up at another level in terms of cost efficiencies, most notably Tele 2 yesterday.

So just wondered how you’re now thinking in terms of benchmarking in the scope for cost cutting in light of material improvements and efficiencies from your peers. And then just secondly on Latvia, is that a asset specific, step away from a complex ownership structure, that gives you some simplification? Or should we see it, maybe as suggesting an intention to to more broadly step away from that broader region and simplify the group portfolio further from here? Thank you.

Patrick Hoffbauer, CEO, Telia: Good morning, Andrew. I can start with the second question first. This is not to be seen that we are exiting the Baltics. This is rightly, as you said, this is to reduce the complexity of our organization and company, so continue the simplification journey. So that’s the reason why we are leaving Latvia.

So no other intentions to leave Lithuania or Estonia, where we have strong assets and good management in place as well. So then on the first question regarding cost cutting. Well, we did, as you also stated, the big change program last year. This was to right size the company. And then we were very clear on that we want to continue to drive efficiencies in the group, and that will continue.

Then we are doing benchmarks from time to time to make sure that we are competitive in the different markets, and that will continue. But we will continue to drive efficiencies for the coming years, but it will not be a onetime big off. That is not what we see at the moment. But we are still always evaluating what more we can do. But clearly, we are working on an efficiency agenda.

Andrew Lee, Analyst: Okay. Thank you. That’s helpful.

Conference Moderator: Our next question comes from Victor Hogberg. Please go ahead and ask your question.

Victor Hogberg, Analyst: Good morning. So on the bid on on two, sorry, do you expect any regulatory hurdles, any remedies given the combined 40.5% market share going back to the figures for 2024? The two is at roughly 23%. So let’s ask the first question on on that part. And the second question on this part, what kind of synergies do you see in terms of revenues, cost you talked about?

Second question after that, if I may.

Patrick Hoffbauer, CEO, Telia: Okay. I can start with the regulatory, first of all. So Brevard four, they have a low market share in the SDU market in TLE, open fiber and OCN, etcetera. And today but they are stronger in the MDU market. It makes the potential to improve margins for us on COGS, etcetera.

So we see it more as a complementary. Of course, we have done the regulatory evaluation, and we think that the Swedish competition authorities will, of course, approve this. That’s the reason why we placed this in the bid this morning. So this is actually very short on our view on the regulatory perspective. And then Yes.

Erik Hagmann, CFO, Telia: The second part of that question was on synergies, believe. As per the analyst presentation, we’re saying the run rate cost synergies is about DKK 200,000,000 a year. And the best way to think about it in a split between revenue and cost savings is half and half.

Victor Hogberg, Analyst: Okay. Thank you. Second question on fiber. There was an article yesterday about the capital looking to potentially sell the stake in, the Finnish fiber JV. You have to get a DK.

Would you consider buying the remaining 60% of that? Or does the bid on to acquisition suffice in terms of Nordic fiber M and A? And presentation you said that you want to pursue growth opportunities in fiber in Finland. So is this an asset you would want to consolidate? Thank you.

Patrick Hoffbauer, CEO, Telia: So we are aware of the recent market speculations, but of course, we cannot comment on rumors. If you look at Valakultanen, the asset in Finland that you’re pointing out, this is part of our strategic focus in digital infrastructure, and we remain committed to develop that world. We see continued good growth and value creation in the Finnish fiber market and want to, of course, participate in that going forward. And I mean so basically, that is our view at the moment.

Erik Hagmann, CFO, Telia: Yes. Maybe just to add to it, we have a history on when it comes to co assets to either develop those on our own or with strong partnership. And at the moment, it’s with Catman. But you’ve seen us do other partnerships, for example, on towers. So we are quite open minded about whether we do this on our own or we do this together with a partner.

Victor Hogberg, Analyst: Perfect. Thank you.

Conference Moderator: Our next question comes from Erik Lindem. Please go ahead and ask your question.

Victor Hogberg, Analyst: Yes. Good morning. Two questions from me. You mentioned having really solid or I think even the best net mobile intake on the consumer side in Sweden for over five years on the back of the new consumer mobile portfolio. Was there any introductory offers here?

Or why do you think this drove this very nice acceleration? And then I wanted to ask you as well on the EBITDA growth for the quarter here. So in Q1, you highlighted that you were looking at somewhat lower EBITDA growth compared to the full year guidance in Q2 and Q3, and now you deliver very nicely above the guidance here in Q2. So what were the main surprises that you saw here in Q2 that drove this? Thank you.

Patrick Hoffbauer, CEO, Telia: Good morning, Erik. I can start with the first one. We have no special campaigns in the new portfolio. This is just good work from the team and a broad perspective. So no special campaigns that actually managed us to grow our consumer business.

We had some good trends for one now, and this is just accelerating those trends. So it looks I think, no special campaigns.

Erik, Head of Investor Relations, Telia: Perhaps we can add, Patrick, that all of the three brands actually contributed positively. So there wasn’t one single one.

Erik Hagmann, CFO, Telia: And on the Eric, on the second question, EBITDA, where indeed a quarter ago our expectation was we’re going to land for Q2 below 5% and we did a very encouraging 6.2%. It’s quite simple. Both Finland and Sweden over performed somewhat on cost. I think the other one that we clearly see is on central functions. The ancillary cost that we save by having fewer employees following the change program, those costs are down.

Things like travel expenses, etcetera, all of those are down and helping us. If you then look at our guidance for Q3, why then are we guiding below 5% there? That is all attributable to Norway. But let’s see what that quarter brings when we get through the coming months.

Victor Hogberg, Analyst: All right. Perfect. Thank you for the color.

Conference Moderator: Our next question comes from Andreas Jalsson. Please go ahead and ask your question.

Andreas Jalsson, Analyst: Thanks a lot and good morning everyone. I would like to start with the convergence discussion that you had in the presentation. Obviously, Thiela has talked about convergence for many, many years and you show steady progress. When do you think we can see this in the actual numbers that that Sweden presents as well that this can trigger an underlying growth on the service revenue and on EBITDA? And secondly, following up on Erik’s EBITDA question, you continue to say that Q3 will be a little bit weaker and then recover again in Q4.

Can you give some concrete examples of what you see in Q4 that will improve the trend and accelerate the EBITDA growth again in Q4 and maybe into 2026 as well? Thanks.

Patrick Hoffbauer, CEO, Telia: Good morning, Anders. Yes, Andreas, I mean, I can start with your first question regarding convergence. We wanted to highlight this a bit more because we are talking about it, but we didn’t show any facts and figures in the past, but now we are doing that. So and we are continuously growing, as you saw, above 5% on the household perspective, and this strategy really works. On your question then, when you can translate it, well, we have some headwind, as you know, in the copper, the legacy.

If you exclude that, we are at 4%, and the majority of that is from the consumer side. So if we exclude that, the growth is actually is there and will continue for the coming years. So we feel very comfortable on those figures going forward.

Erik Hagmann, CFO, Telia: Yes. And on the second question, in October, we signaled this sort of H1 being below what our medium term guidance is on top line, around 2%, and that more weighted towards the second half. We clearly see that also from an EBITDA perspective a better Q4 than Q3 as just a signal. Why is that? Why is that top line better in the second half?

I think one is the continued good momentum that we expect in Sweden where clearly we see visibility or better visibility on larger customer projects in the enterprise segment and also the public sector. And secondly, the impact that we will see from pricing in several markets, but mainly also in Sweden. I think lastly, what we expect for Finland. Finland at the moment is a small negative on service revenue and that is mainly because of the drag that we have from the ramp down of our invoicing business. It was €4,400,000 impact this quarter.

We expect that drag to become less and less as we progress through the year. So improvement in EBITDA towards the end of the year driven by increased service revenue because H2 is better than H1 from a service revenue growth perspective.

Andreas Jalsson, Analyst: Very clear and helpful. Thanks a lot.

Conference Moderator: Our next question comes from Maurice Patrick. Please go ahead and ask your question.

Maurice Patrick, Analyst: Yeah, morning guys. Thanks for taking the question. Just on the Breadband acquisition you’ve announced today, mean you talk about the nationwide market share goes from 32% to 44%. You discussed that earlier and you suggest that there was supposed to be low overlap due to broadband having a low market share in the SDUs and higher MDUs. Could you just help us understand in the broadband footprint what you think your sort of pre and post market share program would be?

And thus why you would expect to get competition of authority approval? It’s generally been my sense talking to Telia management teams over the years that the company has been fairly, I’d say, pessimistic on the ability of Telia to pursue in market consolidation like that? And then a very quick follow-up on numbers. On your guidance for the year on free cash flow, the more than 7,000,000,000 to $05,000,000,000 cash flow, I think your spectrum assumption is SEK $650,000,000. Could you just confirm that is the case given that, I think Sweden alone, four key payments, I think it’ll be SEK $780,000,000.

There’s going to be a further auction in Q4 for 1,800 megahertz. I think there was some spectrum payments in Q1 also. Thank you.

Erik, Head of Investor Relations, Telia: Thank you, Maurice. It’s Erik here at IR. I’ll take those questions. So on Breoban two, so this will be based on previous regulatory reviews, and we’ve certainly done our analysis, this will be analyzed most likely on a segment basis. We are, as you noted, strong in SDUs.

Rio Grande two are very strong in MDUs and in open networks, where we have a very low presence. And in addition, you might note that we have a premium position, they have a more value position. So it’s a very complementary asset. And yes, there are, of course, limitations to how much you can consolidate the market, but this asset in particular is one that we think there isn’t really one like it, but this one, we think, is a very complementary fit. So we’re quite optimistic about it.

On the free cash flow, yes, we expect more spectrum CapEx in the fourth quarter. We have a second installment of about SEK $780,000,000 from memory. On the free cash flow guidance we have for the full year, we use a normalized spectrum CapEx number, as you may recall, of SEK $650,000,000. This is because we always want to guide on the bottom line free cash flow, which should include our spectrum CapEx, although we can’t guide on that specifically. So that’s why we put in the SEK $650,000,000 normalized number when we calculate our full year free cash flow guidance.

The actual spectrum CapEx will be what it will be, varying from low numbers to high numbers from one year to the next. So this year, it’s going to be more than $650,000,000 We know that.

Maurice Patrick, Analyst: Super clear. Thank you.

Conference Moderator: Our next question comes from Andre Kabishek. Please go ahead and ask your question.

Andre Kabishek, Analyst: Hi, good morning, everyone. Thank you. Two questions from me, please. One is related to your peers presentation yesterday. So, it’s also basically signaling a gradual exit from third party sales channels.

And this is something they emphasized in the presentation yesterday. Obviously, they need everyone else to kind of follow-up this to work. So I was wondering if there’s something you are also looking to be doing and and from your perspective, what kind of upside is there from the return and commissions in in in the case that does happen? That’s one question, please. The second question, I was wondering also on the presentation around f m sorry, not f m c, but unlimited contract.

You you said a very interesting thing, was that as you get to scale of, say, two thirds of customers on the unlimited, this creates an environment where the kind of pricing strategy moves very much closer to what you do in fiber, so regular annual price rises. So, you know, at the same time, we’re seeing a lot of, I guess, promotional activity and a lot of aggression, especially around, unlimited tariffs. So how do you kind of balance those two aspects in your view that the scale, kind of, elements that you you clearly highlighting as positive for for price increases, but at the same time, a lot of, promotional activity. So do you think kind of this is possible to do, without, kind of, consolidation and speed and even and and what do you think you you kind of have maybe more pricing power from the scale that you’re highlighting? Thank you very much.

Patrick Hoffbauer, CEO, Telia: So I can try to start because there are many questions in your couple of questions. So I will try to see if I spot this right. So the first one on the fixed mobile convergence. As we said, when we see the base is growing and we get more and more customers over to unlimited, that will be a more similar situation as we have with the fixed side, with fiber. We feel fairly comfortable that the profile will be very similar.

So we start doing annual, more predictable price increases, as we have done for many, many years in the fiber, in the broadband side. And we don’t foresee that the number of campaigns, etcetera, will start to increase just because of that. We don’t see that in front of us at the moment. You can just look into the fiber market and see how that actually works with the proposal, etcetera. So it will be quite similar.

So we feel that the model that we have actually works very, very fine. And on the other one, under your first question there, I don’t really understood what you were asking for, but I’ll try to what I think you’re asking for is that if we are focusing more on our own channels. And yes, that is correct. We are not commenting whether we will start or leave an external channels. We have had, for the last years, more and more focus on our internal channels.

We see that in Finland. We have seen it in Sweden because we actually want to control more of the sales, the full process, by ourselves. And as more online we get, as more own channels we have, so this will continue to develop in our own channels going forward. I hope I answered your question on that one. Thank you.

Andre Kabishek, Analyst: Yes, Patrick.

Kevil Kurova, Analyst: Thank you very much.

Conference Moderator: Our next question comes from Fredrik Lihau. Please go ahead and ask your question.

Erik, Head of Investor Relations, Telia0: Thank you very much. Thank you for taking my questions as well. Maybe just a follow-up on Norway. You said it would if I understood you correctly, it would be a little bit weaker in Q3 compared to Q2. Did you still have revenues from ICE in the Q2 period then?

Is that why you will see the weakness in Q3? And on that, will you sort of turn that and get better traction in the Q4? What we changed that would be interesting. The second question is really on the cash flow a little bit if you could dissect the details on net working capital and also if the phasing CapEx, if that means that paid CapEx in the second half will be higher than booked CapEx for example. So would be interesting to hear Erik putting out some details there.

Thanks.

Erik Hagmann, CFO, Telia: Yes. Let me start with the last one. Indeed that will be higher. And the ultimately for the free cash flow overall, it will be neutral. So, where previously we were expecting it the delta between cash and book to be about €1,000,000,000 We’re looking at around €1,500,000,000 at the moment.

But the delta you will see that as a wash in working capital. Overall, for working capital, our view has remained the same that we see this as an inflow similar to what we had last year. So coming back from a period where it was a cash outflow for the group. And it’s one of the building blocks of getting to €7.5 and then growing it to €10,000,000,000 With regards to Norway, just to give you a bit of a sense, we lose about €100,000,000 per quarter. But to be exact, in Q2, the impact was 74,000,000 And for next quarter, we expect it to be a little bit above CHF100 million.

So as I said in one of the previous questions, that’s one of the reasons why we’re guiding for a lower EBITDA in Q3 versus Q2. It’s driven by Norway and it’s mainly driven by this ICE contract. Then when it comes to what do we expect for Q4, Patrick talked through that turnaround slide. Obviously, it’s very early days, but we do expect things to get gradually better while we start to get a better grip on what’s happening on our wholesale business, our mobile business, on the consumer and the enterprise side. But also on the fixed side where the investments that we’re doing on fiber where we are then better competing versus our previous coax offerings at SDUs and MDU levels that that start to have traction.

So we’re expecting to see some green shoots towards the end of the year in our Norwegian business.

Erik, Head of Investor Relations, Telia0: All right. Very helpful. Thank you and have a nice summer.

Conference Moderator: Our next question comes from Kevil Kurova. Please go ahead and ask your question.

Kevil Kurova, Analyst: Thank you for taking the questions. I have two, please. So some of your mobile and user service revenue trends in Sweden and Norway are perhaps still lagging peers. Are you happy with the current development? And what do you see as key to driving improvement?

And then secondly, you’d earmarked about SEK 300,000,000 of CapEx per year for fiber deployment in Norway. How many homes have you rolled out so far this year? And what are your broadband trends like for your cable base in Norway specifically? Thank you.

Patrick Hoffbauer, CEO, Telia: I can start with the first question. Regarding mobile and mobile development, and it varies between the markets. But look, Sweden is our most important market, the home market, and we have much more a household perspective on the consumer side here. And we have said that many, many times, and I think I want to repeat it again, we see that the play that we’re doing with the Convergent is actually working very well. So we have more a focus on the household and how we can generate more services into the household rather than just looking at each one of them.

And we had a clear upside on broadband and especially on TV, where we have the absolute best TV solution in the market, and we want to focus on that to take a bigger share of that market. And that has been our focus for the last year and will continue for a couple of more quarters since we have this advantage on the TV side. So this has been strategically important for us and obviously it works. Then we are not happy with the development that we have seen in Finland. However, we see some improvements, especially on the consumer side, and we are targeting actually to defend the market share, which we have been very explicit on as well, and to grow in the smear segment.

In the smear segment, we are growing with the mobile portfolio as well. Lithuania and Estonia, obviously, know how that is developing. And Norway, we just touched into.

Erik Hagmann, CFO, Telia: Yes. And on Norway, on the deployment of fiber, I think the main takeaway is the update we did on the one page, which is we have made a change in management where there is a clear responsible ahead and a new created division for fixed, which will be responsible for looking at where do we invest, where do we not invest. So that will be deployed. I mean the simple rule of thumb if you want to do a calculation of how much €300,000,000 buys you is, every connection is roughly between 40,000 to NOK 50,000. So that gives you a way of calculating how many homes you can address.

We’re very happy with the billion we’ve earmarked for this. On the new management, we’ve agreed there is no need to up this given what we’re seeing and that should be enough for us to be competitive in the market versus the competition who clearly had a strong set of results today.

Kevil Kurova, Analyst: And so are you just able to say what’s happening to the cable base in Norway specifically? Mean, I know you let the 7,000 broadband decline overall, but I was kind of curious what’s happening to cable within that.

Erik, Head of Investor Relations, Telia: Our cable base, I mean, it works well. The number of network incident has dropped a lot, and we will replace it gradually by fiber. But I don’t have the number exactly how many we have replaced this quarter. We can find out until the next call. But the main actions are, as Erik described, we have created a new organization, replaced lots of CP equipment.

So they’ve got new boxes and routers, and that has made a big difference. But let’s come back to exactly where the time line what the time line will be for their replacements.

Kevil Kurova, Analyst: Sure. That’s clear. Thanks all.

Conference Moderator: Our next question comes from Steve Malcolm. Please go ahead and ask your question.

Erik, Head of Investor Relations, Telia1: Yeah. Good morning, Thanks for taking the questions. I’ll go for two. One on CapEx, Eric, I think you kind of said that there were some moving parts around whether you would step up CapEx in the second half given the current run rate is quite well below the guidance. Can Can you sort of maybe cost a little bit of extra on what those moving parts are and what would make you kind of step up CapEx and what would make you decide not to?

And then just on the balance sheet, I guess, when you bake in TV media closing, the recent acquisition today, the likely sale in Latvia next year, your leverage is gonna be kind of mid high ones, you know, 1.7, 1.8 times. And the capital markets update in September, I think you said you’d be choiceful, you know, the target two to 2.5 times. Can you just give us an idea when you might come back to us and kind of, you know, update us on what you’re thinking on on leverage is and and and how you, you know, how you might take the leverage back up, you know, from from a very low level? Is that for the second half event? Is it a January event or end for your results?

That would be very helpful. Thanks a lot.

Patrick Hoffbauer, CEO, Telia: It’s Patrick here. I can start with your second question on the balance sheet and how to treat that with the leverage, etcetera. We have had a proper discussion with the Board. There are still some jobs to be done on the deal for Latvia to get that in place. We have said that we want to have a Shell agreement in place before year end, and then it will happen next year.

So there is something still job to be done before we know the exact picture on where we are. So we have decided that we will come back as soon as we have had a proper discussion with the Board also and look on the proceeds and where they are when they are coming in, etcetera. So we will come back on that question. We don’t have an answer today, but we understand your question we, of course, will come back on it.

Erik Hagmann, CFO, Telia: Yes. And on CapEx, so it’s a bit more weighted towards the second half. So there was a bit of phasing in there. I think the main thing is the flexibility that I mentioned is we see really good growth opportunities for our business across the various countries, but I would say predominantly in Sweden also because it’s our biggest market. And those customer propositions often require CapEx and they have really, really good return profiles, Really high IRRs, very good return on capital employed opportunities for us.

So we will want to give us the flexibility to do that. Having said that, we do expect to be well below the 14,000,000,000 as we have seen. I think the other one is the point that you made on spectrum, which obviously you have CapEx with or without spectrum, however you want to look at it. It is going to be more than that $6.50 We don’t know exactly how those auctions will go. So let’s see what that does.

So we will be below 14, a bit more CapEx in the second half than the first half as we see it now capturing the growth opportunities that we have across the markets but mainly in Sweden.

Erik, Head of Investor Relations, Telia1: Sorry. Just coming back on that first question, Patrick and Eric, just to be clear, are you saying that when you finalize the Latvian situation, clearly, it’s going be quite tricky. I understand a lot of moving parts, but that’s the point to which you may well come back to the market and kind of give some fresh thoughts on the balance sheet and leverage?

Erik Hagmann, CFO, Telia: Yes. I mean, if you go back to the slide that I presented which has those four buckets of value creation, right, the slide that we introduced at the Capital Markets Day, it clearly sets out how we want to progress things. And today, we gave a great update I think on the progress we’ve made on all three. We need to work our way through both the transaction of the acquisition here in Sweden secondly, finalizing the MoU making that into an SBA, closing that in H1. That will then give us a sense to then say, okay, what are you then going to do in that last bucket?

But we’ve been very clear at the Capital Markets update what our plan is and we know how to create ultimately value for shareholders. So, having that healthy balance sheet gives us that flexibility.

Erik, Head of Investor Relations, Telia1: Great. Thanks very much.

Conference Moderator: Our next question comes from Nick Lyle. Please go ahead and ask your question.

Erik, Head of Investor Relations, Telia1: Yeah. Good morning, guys. Hope you

Erik, Head of Investor Relations, Telia2: can hear me. It was a quick one. Patrick, I’m Sweden first on consumer. I think your point about the, looking at households, but the ARPUs for more port postpaid mobile and for broadband still seem pretty weak given the price rises this quarter. So could you could you comment on what’s holding that back?

I mean, is that because you’re focusing on household and maybe offering more discounts across products? What what’s going on here to discount or to offset the the price rises? And then secondly, just back to Morris’s point on the the broadband two acquisition? Again, take your point that using these businesses are complementary, but does the PTS and the competition authorities take that view as well? Could you tell us what they’ve said in your initial chats at least about whether they are prepared to look at these things on maybe an MDU, SDU basis on open networks or whatever?

Because it seems like quite a chunky market share versus the number two. Thanks very much.

Erik, Head of Investor Relations, Telia: All right. So yes, good question on the ARPU there, Nick. So we did raise prices on the telebrand for consumers, and that had the expected effect, so that came in. But we do have a few drags. And one is that we have prepaid, and that is coming down.

And we have insurance, which is dragging us down a bit. And I think on the ARP side, it’s mostly insurance. And then we have, of course, the usual growth in family sims. So I think it’s between those buckets, fairly evenly distributed, that you see the drag, which takes us back to about flat mobile service revenue growth.

Erik Hagmann, CFO, Telia: But I guess maybe just to add, and I think that was in the previous question that you answered, Patrick, which is do we think we need to do better in mobile across the park? Certainly, also if we compare that to some of our competitors yesterday and today, absolutely. I think we’re pretty clear on that. Maybe on the announced transaction from this morning, it’s a public transaction. We need to let the regulators and everyone, the lawyers mainly do their work.

But let’s be clear, Nick, we would not come to an announcement as we have done if we did not feel comfortable about this. And we think we have a strong case, but ultimately let that the regulators do their work and then we’ll come back to that when there is an update. But we feel confident about this. Again, if not, we would not have done this.

Erik, Head of Investor Relations, Telia2: Great. Thanks very much.

Patrick Hoffbauer, CEO, Telia: Our

Conference Moderator: next question comes from Ulrik Rath. Please go ahead and ask your question.

Erik, Head of Investor Relations, Telia3: Yes, thanks very much. At this point, I have only one question, and it’s sort of slightly bigger picture regarding the B2 acquisition. I mean, ultimately, you’re buying customers really, Is that is that the best use of capital? I mean, structurally, one could argue that Telia’s key weakness in the Swedish market is that it has a very limited ownership of of the full value chain, I. Of the fiber infrastructure.

And and the key thing that sort of, you know, changes in this world, in this in this way versus the prior situation that, you know, in Copop, you had a 100% infrastructure share. Now this has been going on for some time, but if you do acquisitions to preserve change market structure, it’s really the best use of capital to to do that at the market share front. There there is, of course, also this risk always when you buy resellers that you essentially encourage other people to start a reseller in the hope that they get taken out later? Thank you.

Patrick Hoffbauer, CEO, Telia: The last comment I don’t really understand. But I will point out the first one. I mean we have been looking through this and followed this company for many years. Yes, we are buying a customer base. It’s 500,000 customers.

Makes a lot of sense because it’s complementary to our business, and they are strong in markets where we are weak. So that makes a lot. Then I don’t agree. We have a lot of infrastructure in Sweden as well on our assets, so a bit surprised of that comment. But otherwise, I think, strategically, we are buying this customer base.

It’s a well driven and well run company, and we think we can have a good opportunity here to actually cross sell and create more value and give these customers more value from our portfolio. So I think that’s the logic and I think it’s strategically a very good fit. And also the price level we pay is also reasonable.

Erik Hagmann, CFO, Telia: Yes. Maybe my comment will be maybe less around sort of what it does for the market or infrastructure, no infrastructure. I think for us, it ticks many boxes. One is strengthening one of our core markets, which is our home market. It’s not that often that you have an opportunity to do this, so we feel very happy with that.

I think it’s fair value for us as a buyer, them as a seller. I think ultimately through capital allocation, we are very disciplined when it comes to these things. So, we have evaluated many options on buying things. And it’s easier to do that after you’ve divested Lot. We’ve divested Denmark.

We’ve divested Marshall. We’ve divested TVM. So, that gives us the balance sheet flexibility. But even with that flexibility, you want to be very disciplined when it comes to that. So, we evaluated this.

It has, as the slide said, a ROCE which is bigger, substantially bigger than the WACC, free cash flow accretive already in year one. We obviously compare that also to buying back our own shares. And this is a very, very attractive transaction for us as it is for the shareholders of Bred Bantou.

Erik, Head of Investor Relations, Telia3: Great. Thank you very much.

Conference Moderator: There are no further questions at this time, so I’ll hand it back to management.

Erik, Head of Investor Relations, Telia: All right. Thank you very much for listening in and all the good questions on this busy day. And we wish you a very enjoyable summer. Thank you and goodbye.

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