• Telco group “lost control” of previous transformation project to centralise service and product development, according to Patrik Hofbauer, CEO of Telia
• He underlined the company’s commitment to decentralisation during its “investor update”
• And doubled down on the aim to nearly half the group functions headcount by the end of the year

Telia Group CEO Patrik Hofbauer seems to be a man in a hurry. Since taking the helm at the Nordic and Baltic operator in February, he has instigated far-reaching change, including a radical plan, announced earlier this month, to axe some 3,000 jobs by the end of this year as part of an effort to “decentralise” and “simplify” group operations and become more responsive to local requirements.  

Fielding questions from financial analysts at Telia’s investor update today, where the company unveiled its ‘value creation plan’ for 2025-27, Hofbauer explained the reasoning behind the strategic shift. He didn’t mince his words, appearing to tacitly criticise his predecessors (which include Allison Kirkby, now BT’s CEO) for clinging on too long to an organisational structure which, in his view, was hamstrung by bureaucracy and unable to get things done quickly.

“During the last [few] years, we tried to centralise the operating model to develop products, services and platforms and then scale them up [to national] markets,” he said. “What we have seen now is that it doesn't work. It's theoretically very correct but in reality it is very difficult – it's costly and it takes too much time.” Markets, he added, develop at different paces, which made it impossible for Telia to “scale up centralised products to the maximum”.

His scathing assessment was that Telia “lost control” of the centralised transformation project, mainly because it was too big. “We now need to back off from [that] and [become] much more localised,” said Hofbauer.

The CEO also noted that the targeted 3,000 headcount reduction, subject to union negotiations, will have a proportionally higher impact on group and common functions and a proportionally lower impact on country units. “If you combine all the [group] central functions, there are more than 5,100 people, so one in four employees have been working centrally,” he explained. “In our new organisation, that number will be halved.”

The Sweden-headquartered group reckons it will take a restructuring hit of around 1.4bn Swedish krona (SEK) but does expect to make annual savings of at least SEK 2.6bn as a consequence. Of that sum, SEK 2.3bn is operating expenditure and the rest is capital expenditure.

Of the people staying at the group, Hofbauer – in again what seemed like a sideswipe at his predecessors – indicated there was enormous room for improvement in ways of working. Shortly after taking on the CEO role, Hofbauer said he had individual chats with around 300 employees and went on to sum up their feedback. “[They told me] it’s very difficult to work here at Telia and to get things done,” he said. “Every time I need to do something, I need to ask at least five stakeholders or five other people, which hinders me and slows me down in my work.”

By moving decision-making closer to customers, and reducing the amount of line managers, Hofbauer thinks Telia will be in a much better position to “execute” strategic plans.

Modest growth targets; doubling down on cash flow

Over the three-year group forecast period (2025-27), Telia is aiming for 2% compound annual growth (CAGR) in service revenue. “We think that 2% CAGR going forward is reasonable and has been our speed lately, so we know that we can do it if we get things right,” said Hofbauer.

A 4% CAGR target is set for adjusted EBITDA, while Telia has an annual free cash flow goal of at least SEK 10bn by 2027.

“We’re very comfortable with targets, particularly as you always have to cater for unknowns,” said Eric Hageman, Telia Group CFO.

- Ken Wieland, Contributing Editor, TelecomTV