Telia returns to EBITDA growth

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Telia company, the Nordics telco, has reported its Q1 results. Net sales declined 2.7 per cent to SEK 21,814 million (€21.m) and like for like, net sales remained unchanged.

Service revenues decreased 4.9 per cent to SEK 18,747 million and like for like, service revenues declined 2.3 per cent. The outlook for 2021 remains unchanged.

Allison Kirkby, President & CEO, commented: “The first quarter of 2021 saw Telia return to EBITDA growth, a positive start on our journey to create a Better Telia, despite the pandemic continuing to impact our customers and our colleagues. It gives me great pride that Telia is continuing to play such a vital role in keeping our region secure and connected, while delivering on an ambitious turnaround. Strategy execution is underway, and our transformation programme is ramping up, laying the foundation for us to return Telia to sustainable and profitable growth.

Service revenue for the quarter was SEK 18.7 billion, a decline of 2.3 per cent, compared to the previous year. EBITDA grew 2.2 per cent to SEK 7.2 billion versus the first quarter of 2020, while operational free cash flow was very strong at SEK 4 billion, a similar level to last year, excluding the positive contribution from working capital during the quarter.

Across all our markets, we saw increased Covid-19 restrictions, including store closures, versus the prior quarter. Despite this backdrop, we remained relatively resilient.

In our market leading operations of Sweden and the Baltics, Sweden suffered from lower roaming and an acceleration of legacy declines. Underlying growth in Consumer Mobile, Broadband and TV, and a 3 per cent operational expenses reduction, were not enough to offset the roaming and legacy headwinds, and so EBITDA declined 5 per cent. Looking ahead, we expect positive trends in the second part of 2021, driven by both commercial activities and increased efficiency. Our Baltic markets, however, were able to offset all the headwinds, with Lithuania and Estonia EBITDA up 4 per cent and 6 per cent respectively.

In our challenger markets, Norway had a strong quarter with an encouragingly stable consumer mobile segment paired with continued momentum in the SME segment. Operational expenses reduction and special items resulted in EBITDA growing 16 per cent. Denmark was heavily impacted by Covid-19 restrictions and product portfolio rationalization, but transformation towards a simpler digital operator enabled EBITDA to be relatively stable. Finland had a particularly tough start to the year with sizable roaming impacts, weaker ICT and professional services. On the positive side, customer perception is improving on the back of 5G and new TV packages, and continued headcount reduction minimised the EBITDA decline to 2 per cent.

TV & Media had an excellent quarter, with a return to revenue growth (+3 per cent), with Pay/OTT up 10% and Ad only slightly down (-1 per cent). Revenue growth combined with a 3 per cent reduction in operational expenses resulted in positive EBITDA for the quarter versus a small loss last year.

At the beginning of the quarter, we launched our updated strategy to transform Telia and return it to growth. We have only just started, and I am happy to see the initial effects coming through. Convergence is a key value lever to “Inspire our customers”, and our multiyear deal with the Swedish housing developer Familjebostäder – containing a unique combination of solutions, including broadband, TV and IoT – reflects the depth of our convergence capabilities for both the enterprise and consumer segment. We continued to add converged households in Sweden with a further 38,000 added to our converged consumer proposition Telia Life. And Telia Samlet, our Norwegian converged proposition, already has 23,000 customers. TV is a clear growth lever, and we are seeing an excellent increase in share of viewing on both linear and digital platforms in Sweden as well as Finland. Commercial share of viewing increased to 49.8 per cent in Sweden, and time spent on our TV4 Play AVoD platform grew by 36 per cent, providing confidence in our ability to sustain and grow our linear TV business in digital channels. TV content such as Talang, Let’s Dance and Masked Singer are proving to be very popular with our viewers with Masked Singer, specifically, attracting more than 2 million Swedish viewers per episode in its first weeks. March advertising revenues were particularly strong, as a result.

Having secured 5G spectrum at attractive investment levels in both Sweden and Denmark we are well positioned to accelerate the 5G network roll-out to implement our “Connect Everyone” strategic priority. We are now actively modernizing all our mobile networks and as a result strengthening our leading 5G positions in Sweden, Norway and Estonia while catching up in Finland. 5G enabled handset uptake is increasing – in Sweden now representing up to 55% of new handsets sold – providing momentum ahead of wider service launches across the footprint. During the quarter we became the first operator in Norway to launch an Enterprise Mobile Network (EMN), enabling us to dedicate mobile networks for new industrial services. With continued network roll-out as well as handset migration underway, 5G monetisation opportunities across segments will accrue in the second half of the year. Our strong network provider position more generally was emphasized by our global network service capabilities yet again being included in Gartner’s Magic Quadrant, and the Ministries of Foreign Affairs in both Sweden and Norway choosing us as the provider to connect their embassies around the world. And, Telia Asset Management is now fully operational and actively reviewing our tower assets, in Norway and Finland.

“Transform to Digital”, our multifaceted effort targeting product portfolio as well as IT infrastructure simplification and process automation, is also progressing to plan. Legacy migration and organisational streamlining have yielded network cost reductions in Sweden. Overall, we saw an operational expense reduction of 3 per cent in the quarter and with slightly more than 400 FTE/FTC reductions implemented by March 31st, we are well on track to deliver a 1,000 FTE/FTC reduction by the end of this year.

In line with our commitment to “Deliver Sustainably”, both to ourselves and towards all stakeholders, I am pleased that we are now climate neutral in our own operations. We only use renewable electricity, so emissions have gone down substantially the past few years, and to achieve climate neutrality we offset the remaining emissions from other energy sources and from our business travels. Our efforts to integrate sustainability in all our material processes continues at pace, exemplified by our SEK 100 million investment in a gender equality and health focused bond launched by the World Bank. Meanwhile consumers’ appreciation for our bold sustainability work was illustrated by the latest Sustainable Brand Index ranking us number one in Sweden and the Baltics and number two in Finland and Norway.

Based on the performance in the quarter we reiterate our full year outlook of service revenues and EBITDA, excluding Telia Carrier and FX, at flat to low single digit growth, while cash CAPEX is expected to be in the range of SEK 14.5 to 15.5 billion and cash generation more than covering our minimum dividend level of SEK 2 per share. Additionally, we have now received all approvals necessary for the sale of Telia Carrier and will be closing the transaction on June 1st 2021.

To conclude, having launched our updated strategy to create a better Telia, we are now firmly in execution mode and our transformation program is fully under way. Achieving the guidance given for 2021-23 (low single digit growth in sales, low to mid-single digit growth in adjusted EBITDA and 15 per cent cash CAPEX to net sales) should provide investors with a clear route to value creation. Our efforts are focused fully on delivering on the roadmap that will enable growth, develop our asset base, allowing us to reinvent better, for our customers, employees, and shareholders, while contributing our part to enabling the development and digitalization of the societies of the Nordics and the Baltics.”

 


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