- Service Revenue Growth: 1.2% increase, driven by telco and TV and Media.
- Consumer Segment Growth: 2.6% increase.
- Enterprise Segment Decline: 1.7% decrease.
- Mobile Revenue Growth: 1.6% increase.
- Fixed Revenue Growth: 0.6% increase.
- EBITDA Growth: 1.7% increase, mainly driven by Sweden, TV and Media, and Finland.
- Structural OFCF Decline: From SEK 3.7 billion to SEK 3.1 billion.
- Leverage Ratio: Declined to 2.17x.
- Sweden Consumer Growth: 3.9% increase, driven by broadband and TV.
- Sweden Enterprise Decline: 3.9% decrease.
- Sweden Mobile ARPU Increase: 1% increase.
- Sweden Broadband Subscriber Growth: 6,000 increase.
- Sweden TV Subscriber Growth: 14,000 increase, with ARPU up 16%.
- Finland Mobile Revenue Growth: 1.4% increase.
- Finland Fixed Revenue Decline: 3.5% decrease.
- Finland EBITDA Growth: 2.1% increase.
- Finland Mobile ARPU Increase: 5% increase.
- Norway Mobile Revenue Growth: Supported by wholesale.
- Lithuania Service Revenue Growth: 3% increase.
- Lithuania Mobile Revenue Growth: 7% increase.
- Estonia Service Revenue Growth: 1% increase.
- TV and Media Service Revenue Growth: 2% increase.
- Group EBITDA Margin: 39%, highest in the last 5 years.
- OpEx Reduction: 1% decrease, mainly due to lower resource and energy costs.
- Book CapEx: SEK 2.9 billion, in line with the previous year.
- Net Debt Leverage: 2.17x, comfortably in the lower half of the target range.
Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Telia Company AB (TLSNF, Financial) is on track with its change program, aiming to transform into a more customer-focused and efficient operator, with expected efficiencies of at least SEK 2.6 billion.
- Consumer NPS scores have increased both quarter-on-quarter and year-on-year, indicating improved customer satisfaction.
- Service revenue continued to grow, supported by both telco and TV and Media, with a 1.2% growth rate this quarter.
- The company upgraded its EBIT outlook to mid-single-digit growth for the year and its CapEx outlook to be below SEK 14 billion.
- Telia Sweden's growth was driven by consumer segments, with broadband and TV contributing significantly to revenue uplift.
Negative Points
- Enterprise revenue declined by 1.7%, with a notable decline in Sweden's enterprise segment by 3.9%.
- Structural OFCF declined from SEK 3.7 billion to SEK 3.1 billion due to increased interest payments.
- Service revenue growth pace slowed to 1.2%, partly due to elevated revenue in Business Solutions in the previous year.
- The mobile subscriber base in Finland declined by around 10,000, focusing more on value and ARPU rather than volume.
- Norway faced lower revenues from business solutions and paper invoicing fees due to new regulations.
Q & A Highlights
Q: Why hasn't the strong delivery on EBITDA and CapEx translated into an upgrade in structural operating free cash flow guidance?
A: Eric Hageman, CFO, explained that while they are happy with the discipline around OpEx, taxes and leasing costs have been higher than anticipated. Additionally, more restructuring has been done than initially planned, with about 500 of the 3,000 positions as part of the change program already addressed. These factors contribute to the expectation of being at the lower end of the 7% to 8% range for structural operating free cash flow.
Q: How does Telia plan to balance ARPU and subscriber growth, particularly in the Finnish market?
A: Patrik Hofbauer, CEO, stated that the focus is on selling more products to existing customers, which has been successful. While ARPU has been flat, there are opportunities to increase it. The strategy involves selling more family cards and services like broadband and TV, which impacts ARPU but is expected to grow in the future.
Q: What are the expectations for service revenue growth in the second half of next year, given the anticipated loss of ICE revenues?
A: Patrik Hofbauer, CEO, mentioned that regulatory headwinds in Norway and Finland will annualize, and legacy pressures will decrease. Pricing initiatives are ongoing across all markets, and the resolution of the Estonian governmental IT contract will contribute positively. These factors, along with mission-critical services revenue, are expected to support service revenue growth.
Q: Can you provide more details on the restructuring plans and the discussions with unions?
A: Patrik Hofbauer, CEO, noted that discussions with unions are progressing well, with some markets having already concluded talks. The plan is to implement the change program by December 1, which involves simplifying the organization and reducing headcount by nearly 3,000 positions. The process is on track, although November will be challenging as employees are informed.
Q: What is driving the decline in Norway's fixed service revenue, and when can growth be expected?
A: Eric Hageman, CFO, explained that increased investments in fiber upgrades and the development of the partner model in Norway are expected to have a positive impact over time. Short-term headwinds, such as paper invoicing fees and bank ID messaging fees, will annualize soon, which should improve the situation going forward.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
