Telia Company AB Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Lee - Goldman Sachs - Analyst : Thanks, good morning, everyone. I just wanted to talk about your EBITDA growth outlook for the rest of the year. Obviously, a strong posting today at close to 7%. Eric, in your kind of talking points, you mentioned 2Q will be slower. So just a couple of questions around that and the outlook for the year. First of all, when you say slower, do you mean slower than the kind of near 7% in the first quarter or slower than the 5% guide? Then within your comments, you mentioned that price actions will help boost growth in the fourth quarter. Why did price actions not boost before then, given I think there's quite a lot of questions happening -- sorry, quite a lot of price actions happening now from what we can understand? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call And then finally, is it possible for you guys to give us a sense of the size of the headwind from the ICE wholesale contract loss for the group EBITDA growth for the second quarter and the third quarter? Thank you.

Question: Andrew Lee - Goldman Sachs - Analyst : That's really helpful.

Question: Andrew Lee - Goldman Sachs - Analyst : Yes, exactly. It's pricing actions, I think, were mentioned as boosting in the fourth quarter. But from what we can see, there's been quite a lot of positive pricing action in the first quarter moving into the second quarter. So I guess, is there scope for that to be of help sooner than the fourth quarter?

Question: Andrew Lee - Goldman Sachs - Analyst : Thank you.

Question: Oscar Ronnkvist - - Analyst : Thank you, good morning and thanks for taking my questions. So the first one would just be on the CapEx. So you still guide for below SEK14 billion. I think consensus is looking for around SEK13.5 billion in 2025. And the last 12 months, you have around SEK13.1 billion. So just wondered if you could give any color on the below SEK14 billion since you are closer to SEK13 billion at the moment. Or should we expect that to come up a little bit closer to the SEK14 billion level? Thanks.

Question: Oscar Ronnkvist - - Analyst : Got it. Thank you. Then just a question on the TV growth in Sweden, which has accounted for a pretty large part of the total growth over the last couple of quarters. So we saw TV ARPU slowing down a little bit in Q1, but subscription growth seems to be tracking at a quite good pace. So just wondered if you could give any color on the outlook. I mean it's growing 15% year-over-year at the moment, and it's grown around 20% over the last year. So do you expect pricing to continue to support the ARPU growth in this segment? And if you could give any color on the sort of pace of the subscription growth trend at the moment.

Question: Oscar Ronnkvist - - Analyst : Perfect. Thank you. Then just a final question on the free cash flow outlook in 2027. You still have the ambition of exceeding SEK10 billion. So after, I think, you initially announced it, you lost the lease contract. I mean you were expecting it to decline a little bit, but still a headwind, I suppose. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call And then you divested the TV and Media segment, which should have been free cash flow positive, I suppose, in your 2027 outlook. And also, I think that you have had some minor FX headwinds since then. So given the reiteration of the above SEK10 billion free cash flow in 2027, is there anything in particular that you want to highlight as positive things that have changed since you initially announced the guidance?

Question: Oscar Ronnkvist - - Analyst : Yes. Perfect. Just -- sorry, just a small clarification. You said the ICE loss in Q2 will -- or started ramping down in March, but it will have a limited impact on Q2. Just clarify that, please?

Question: Oscar Ronnkvist - - Analyst : Yes. No, perfect. I just interpreted that the impact would be limited in Q2, but that clarifies it. Perfect. Thank you.

Question: Andreas Joelsson - Carnegie Investment Bank - Analyst : Thank you and good morning everyone. So cost seems to be well under control to say the least. So looking at service revenue, it's the Baltic and as we concluded in the last question session, TV in Sweden that is driving the service revenue growth. So looking at the other products in Sweden and adding Finland and Norway, what can you do? You said you had plans to turn Norway around. Can you describe those plans a little bit more? You also said that you will take some additional cost measures in Norway. Can you sort of quantify that in some way? Just to understand the trends that we see and how we can turn those trends around. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call

Question: Andreas Joelsson - Carnegie Investment Bank - Analyst : Very clear. And the cost initiatives in Norway, what is that?

Question: Andreas Joelsson - Carnegie Investment Bank - Analyst : Perfect. Thank you. Now I'll read note 4. (Laughter)

Question: Fredrik Lithell - Handelsbanken Capital Markets - Analyst : Thank you for taking my question as well. I want to come back to the mobile side of things. And I looked at the numbers here and I can see that in Sweden, it's the third quarter with postpaid net adds losses. And in Finland, you're up to seven quarters, in Norway, it's two quarters in a row. What is your plan with this? Are you comfortable with sort of tapping out a little bit on your subscriber base as long as your price hikes are biting on the remaining base? Or is there another thinking here that you want to turn these things around and make net adds grow again? Some discussion around that would be interesting to hear.

Question: Fredrik Lithell - Handelsbanken Capital Markets - Analyst : Just a quick follow-up then on Finland. There have been some talks about an MVNO signed up in Finland. Is that something you can comment about? Or have you seen or have you evaluated?

Question: Stefan Gauffin - DNB Markets - Analyst : Yes, hello, A couple of a bit more detailed questions, one for Sweden and one for Finland. First, for Sweden, the fixed broadband subscriber intake looks a bit weaker than previous quarter, and that's despite that you're approaching the end of the XDSL subscriber base. Is this an effect of price increases? Or is it anything else like market competition or anything that we should be aware of? And then for Finland, Elisa was fairly positive on the mobile service revenue trends, and it seemed like they were positive on value-added services making an impact where they are including the mobile ID as part of the mobile bundle and will charge extra for that. Is this in your plans as well regarding mobile ID? I believe this was an industry-wide -- the mobile ID is something that you also take part of. So is it a plan to charge for this? And how much? And when will we see the effect of that? Thanks.

Question: Stefan Gauffin - DNB Markets - Analyst : Okay, perfect. Thank you.

Question: Eric Lindholm - - Analyst : Yeah, good morning and thank you for taking my question. So your balance sheet is looking stronger and stronger here. And leverage will come down further, as you said, with the divestment of TV and Media and Marshall. If we think about your sort of capital allocation priorities here, is there any selective M&A that you would look to do? Or is it more so increasing distributions to shareholders? I'll start there. Thank you.

Question: Eric Lindholm - - Analyst : Perfect. That's very clear. You mentioned being a seller of assets. I mean, is there any sort of further divestments that -- or any noncore assets left that you would look to monetize here? You have done a lot of pruning in the portfolio already, but anything to highlight? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call

Question: Eric Lindholm - - Analyst : Perfect. And just a final question for me. So the change program is contributing nicely here in Q1. You have been progressing on your execution of this. But have you been able to sort of identify any new efficiencies or new cost savings as you've been doing this program? Thank you.

Question: Eric Lindholm - - Analyst : Thank you.

Question: Ulrich Rathe - - Analyst : Yeah, thanks very much. I wanted to dig into the comments in the report, in the CEO letter in the report about the macro risks, Telia not being isolated, but obviously in a defensive industry, not directly impacted, but there are things you're saying you're sort of looking at very carefully. So what are the main levers that you're currently touching to alleviate potential issues in the supply chain, the other risks that you highlighted there? What are you -- where do you actually have the freedom to address things? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call And related to that, sort of question 1a, if you want, Tele2 actually commented, I think, yesterday on B2B pressure. They mentioned things like SME bankruptcies going up in Sweden, also that the large enterprise customers are conducting their own cost-cutting exercises. Now you are reporting a relatively strong Q1, talked already about slowing down in Q2, a little bit because it's a lumpy business. But how do you look at the business overall against the backdrop of those macro pressures and highlighted, in particular, by your main competitor? I have a second question, but maybe this one first.

Question: Ulrich Rathe - - Analyst : That's very helpful. Thanks. It sounds like you're in a completely different boat there as Tele2. And the second question would be on Towers. So you're reporting this unit now separately, presumably to bring it a little bit more to the front of people's minds into the valuation and the sum of the parts and all these good things. So could you talk a little bit about what's in store there? What are the levers and plans you have for that? And I'm not talking about strategic plans, I'm talking about operationally what -- how you see this business developing and what you can do to improve performance? Thank you.

Question: Ulrich Rathe - - Analyst : Fantastic. Thank you very much for both answers.

Question: Viktor Hogberg - Danske Markets - Analyst : Good morning. Just on free cash flow in Q1, did it surprise you positively when you added it all up? You reiterate the full year guidance, so it might be the case of some items falling into some other quarters as well. Or instead, I'm thinking partly on the restructuring charges for H1. Just some thinking on the phasing on free cash flow given the Q1 performance. And I have a second question after that.

Question: Viktor Hogberg - Danske Markets - Analyst : And a semi follow-up on that, the SEK7.5 billion because just thinking about the spectrum CapEx, you don't guide specifically for that. You include the SEK650 million in average for these years. But you're comfortable with the SEK7.5 billion, including that as well. But we already know that the spectrum CapEx will be higher this year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call

Question: Viktor Hogberg - Danske Markets - Analyst : A follow-up on the Towers question. I forget why you wanted to highlight it, but what can you do to drive profit growth going forward? You talked about the commercial excellence and that you're very happy with the performance. But just could you help us with what are the drivers for increased EBITDA going forward? What to expect? What do you expect?

Question: Viktor Hogberg - Danske Markets - Analyst : Sorry, if I may, just a quick follow-up on that one, the 25% EBITDA growth. Was that coming from a low base or now up to par with where it should be performing? Or was it already in good shape and outperforming.

Question: Viktor Hogberg - Danske Markets - Analyst : Okay, thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call

Question: Ajay Soni - JPMorgan - Analyst : I have just a couple of quick ones. Firstly, on Sweden EBITDA, so it's pretty strong in Q1. I'm just wondering how you expect this region's EBITDA growth to evolve over the year because I think most of the headwinds you've mentioned were not specific to this region. So is Q1 quite representative of what you expect for the remainder of '25? And then on free cash flow, just a couple of housekeeping ones. Other items you've previously said is underlying would be negative SEK500 million, SEK600 million, plus you have around about SEK1 billion cash out for the change program. So the SEK1.5 billion to SEK1.6 billion seem reasonable for this year for this line? And then just double checking that you said that restructuring for this year will be SEK1 billion for the full year despite only being SEK50 million in Q1. Thank you.

Question: Ajay Soni - JPMorgan - Analyst : And you're still expecting that restructuring to come out mainly in H1, the change program?

Question: Ajay Soni - JPMorgan - Analyst : Yeah, okay, great. Okay, thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 24, 2025 / 7:30AM, TELIA.ST - Q1 2025 Telia Company AB Earnings Call

Question: Keval Khiroya - Deutsche Bank - Analyst : Thanks for taking the question. I have two, please, both of which are Norway. So firstly, can you remind us what percentage of your broadband base is still on cable and the degree to which your planned SEK1 billion of fiber investments will go towards covering these customers with fiber over the next two years? And then just secondly, going back to your comments on the need for additional OpEx cuts in Norway, how quickly do you think these additional measures will come through? Will they mitigate some of the ICE contract loss in Q2 and Q3? Or should we think about that as a full drop-through? Thank you.

Question: Keval Khiroya - Deutsche Bank - Analyst : That's great. Thank you.