Telia Interim report January – March 2024

Continued momentum in Telco

First quarter summary

– Revenue decreased 2.0% to SEK 21,274 million (21,697) and like for like, revenue decreased 1.3%.

– Service revenue increased 1.5% to SEK 18,634 million (18,359) and like for like, service revenue increased 2.2%. For the Telco operations, service revenue increased 2.7% on a like for like basis.

– Adjusted EBITDA increased 3.4% to SEK 7,144 million (6,912) and like for like, adjusted EBITDA increased 4.6%. For the Telco operations, adjusted EBITDA increased 2.1% on a like for like basis.

– Operating income amounted to SEK 2,284 million (1,768).

– Total net income amounted to SEK 757 million (738).

– Total EPS amounted to 0.15 SEK (0.15).

– Operational free cash flow improved to SEK -779 million (-3,620) and the structural part of Operational free cash flow decreased to SEK 413 million (613).

– The leverage ratio was 2.43x at the end of the quarter.

– Dividend of SEK 0.50 per share was paid to shareholders.

– The outlook for 2024 is unchanged.

– After the end of the first quarter the sale of the operations and network assets in Denmark to Norlys at an enterprise value of DKK 6.25 billion, on a cash and debt-free basis, was completed. The proceeds from the transaction will be used to reduce leverage.

CEO comment

“Operational momentum continued in the first quarter, with growth in all telco businesses and progress in the TV and Media turnaround. NPS and service revenue trends in the consumer segment have been encouraging. Immediately after the end of the quarter the sale of Telia Denmark closed as expected, which strengthens our balance sheet.

Commercial progress

In Sweden, fixed service revenue drove our growth in the quarter, and in particular Telia’s leading TV experience which has enabled pricing opportunities in the past 12 months, while mobile was stable. The consumer business continued its positive trend in both NPS and in service revenue, which grew 5.0%. This was underpinned in part by our work to improve customer service, with a new record low in incoming contacts for B2C being achieved in March, 40% lower level versus three years ago, following improvements in operational efficiency, IT infrastructure and customer experience. Swedish service revenue growth overall accelerated to 3.5% and, excluding the decline in copper related services, the growth was 5.6%.

Our business in Finland reported a steady service revenue growth at around 2%. Positively, this was underpinned by a further improvement in mobile consumer customer satisfaction and a mobile consumer ARPU increase of 12%, as well as nearly 20% revenue growth in our data center business in Helsinki. Partly, this was offset by a lower mobile customer base and steep declines in fixed legacy services.

Norway has a similar momentum, with service revenue also up around 2% in the quarter, driven both by higher consumer ARPU and strong growth in our mobile wholesale business, however partly offset by slight fixed service revenue decline and lower invoicing fees.

Lithuania reported a healthy mid-single digit growth in service revenue, driven mainly by mobile subscriber and ARPU growth. We launched new self-service customer apps in the quarter to drive customer experience, monetization and lower cost to serve. Fixed-line revenue also grew driven by broadband and business solutions. Estonia had a lower revenue momentum this quarter, as a result of the timing of price changes, but launched a commercial 26Ghz 5G FWA service which offers a fiber like experience via the mobile network. We also won the local tender to provide connectivity, devices and security for the European Union parliamentary election.

TV and Media saw a decline in advertising revenue of 6.3% due to weak market conditions, however the decline was lower than in previous quarters and the majority of it was offset by 5.2% growth in pay TV revenue. We are pleased with the progress in our digital transformation, with growth both in streaming consumption, the streaming customer base, and in our digital advertising revenue.

Importantly, our sustainability agenda continues at full speed, with 55% of our supply chain emissions now covered by Science Based Targets, our A- score from CDP being reconfirmed in the quarter, and another 200,000 individuals reached by our digital inclusion initiatives.

Financial development

In the Telco business, service revenue grew 2.7% and EBITDA grew 2.1%. Excluding a time shift in pension refund, Telco EBITDA grew 3.4%. A weak macro and regulatory effects were notable headwinds in the quarter, but partly offset by a modest energy cost tailwind. Resource cost efficiency improved, despite salary inflation, due to reductions in costs for consultants.

In total, EBITDA for the group grew 4.6%, helped also by lower losses in TV and Media compared to the first quarter last year, as our agenda to return this unit to profitability made further progress with savings on content and broad-based cost reductions.

Phasing effects of interest, pension refund and working capital reduced our cash flow in the quarter, as expected, but most of this effect was absorbed by increasing EBITDA and lower cash capex.

Our balance sheet is healthy, with a net debt to EBITDA at 2.43x at the end of the quarter. The proceeds from the sale of Telia Denmark, which closed on 2 April, will be used to reduce leverage.

Looking ahead

After the first three months, we are comfortable with the full-year outlook we gave in January, which is unchanged, as are our expectations of cash flow generation being tilted towards the second half of the year.

The focus in my first quarter as CEO has been to analyze the business and build our mid-term plan together with our business unit leaders. I have seen a company with an impressive set of assets and an engaged organization, and, building on a strategy which is sound in all material aspects, our goal is to eliminate barriers and complexities, so that Telia can become simpler and faster in decision making and commercial execution. If we succeed with this, we expect that we can grow our cash flow to above our current dividend level in future years. We plan to share more details of our mid-term ambitions after the summer.

I would like to thank all employees for your work in my first quarter as CEO, and our shareholders for your continued support. I very much look forward to the years ahead.”

Patrik Hofbauer

President & CEO

In CEO comment, all growth rates disclosed are based on the “like for like” definition and EBITDA refers to adjusted EBITDA, unless otherwise stated. See definitions for more information.