Telia H1: “Service revenue sees significant improvement”
July 21, 2021
Telia, the Swedish multinational telco, has reported that net sales declined 1.1 per cent to SEK 43,691 million (€42.5m) and like for like, net sales increased 2.4 per cent in H1.
Service revenues decreased 3.1 per cent to SEK 37,629 million and like for like, service revenues increased 0.4 per cent in the same period.
Allison Kirkby, President & CEO, commented: “As we complete the first half of 2021, we return to service revenue growth and continue to deliver EBITDA growth, execute on our strategy, and solidify progress towards our 2021 outlook as well as our long-term ambition. With societies increasingly opening up, I am excited to start meeting both my fellow Telia colleagues and customers across our footprint, in person, to hear first-hand their reflections on our services and products. It is by listening to our customers and acting on their insights that we will reinvent a Better Telia, return to consistent and sustainable growth, while contributing to the digitalisation of the societies of the Nordics and the Baltics.
Service revenue grew 3.2 per cent in the quarter reaching SEK 18.9 billion – a significant improvement from the Q1 decline of 2.3 per cent – driven primarily by the TV & Media unit but also, most encouragingly, growth in mobile. EBITDA grew 1.9 per cent to SEK 7.7 billion, while operational free cash flow reached SEK 2.1 billion, with SEK 6.1 billion now generated year-to-date.
We continue to be the undisputed market leader in Sweden and the Baltics. In Sweden we saw a broad-based positive development on all leading indicator KPIs such as subscriber base, ARPU, and churn during the quarter, in both the enterprise and consumer segments. Excluding legacy products and one-off items Sweden delivered service revenue growth of 2 per cent in the quarter and flat EBITDA, the latter a clear improvement from the 5 per cent decline in Q1. Especially pleasing were the mobile trends, where the enterprise and consumer segments showed mobile subscriber service revenue growth of 2.5 per cent and 2.1 per cent, respectively. The Baltics accelerated prior quarter’s strong performance as we saw less roaming headwind, with service revenues growing mid-single digits and EBITDA growing by 12 per cent and 4 per cent in Estonia and Lithuania, respectively.
Among our challenger markets, our Norwegian business continued to grow its mobile customer base within the enterprise segment, and we saw further stabilisation of the consumer mobile customer base. Mobile subscriber service revenues grew 2.7 per cent and fixed service revenues also accelerated the growth pace from the previous quarter. Our strong enterprise segment capabilities were highlighted in particular by securing the Norwegian postal service – Telia Norway’s largest contract to date – as well as the renewal of our contract with the Norwegian broadcaster NRK. Overall service revenues saw a 1.5 per cent decline due to a negative wholesale impact, with the latter partly masking clear core business progress and improvement from the 3.5 per cent decline in the prior quarter.
In Denmark EBITDA was temporarily weak, but the end of the quarter saw a positive turn in trends, underpinned by good progress on KPIs such as underlying subscriber base and churn development. Finland, again, had a tough quarter. Service revenue decline and an unexpectedly high cost-base led to a clearly unsatisfactory EBITDA decline. While we have made progress on simplifying our portfolio by divesting non-core assets, such as the Alerta alarm business, there is a clear need to accelerate network modernisation and digitalisation to drive improved customer experience and a better brand perception. Concurrently, we continue to review, and have plans to radically reduce, the cost base in the coming months.
TV & Media had another excellent quarter. Our strong market positions in reach and content spurred both Ad and Pay/OTT growth leading to a 45 per cent service revenue increase. Revenue recovery comfortably compensated for higher content costs, with EBITDA growing by SEK 264 million, or 85 per cent. Our market position is further strengthened by increasing commercial share of viewing in both Sweden and Finland and we saw 25 per cent growth in consumption on our advertising-based video on demand platform, in Sweden, clearly demonstrating market share acquisition over other broadcasters’ streaming platforms.
Our ambition to reinvent a Better Telia is progressing. Combining world class mobile networks, high speed broadband and high-quality content allows us to “Inspire our Customers” in the consumer segment with for example an offering including unlimited 5G mobile data, Netflix and C More – we are one of only five operators globally to bundle Netflix. The launch of EcoRating – enabling consumers to assess the environmental footprint of mobile handsets – together with some of Europe’s leading operators, further inspires customers to make more sustainable choices. On the enterprise side, Region Skåne’s choice of Telia for all its digital communications’ needs for another 12 years – the largest ever contract signed by Telia Sweden – serves as a clear proof point of our depth and strength in providing convergence products to public customers, as does the previously mentioned deal with the Norwegian postal service, which includes pan-Nordic services as well as IoT products.
The modernisation of our network and 5G roll-out continues at pace as does our legacy network shutdown. The latter plans always include solutions to ensure no-one is left behind, even in the most remote areas of our footprint. Network quality and leadership is essential to execute on our “Connect Everyone” priority and umlaut’s conclusion, among others, that we maintain our network quality leadership in Sweden, also with regards to 5G, is an encouragement of the same. Across our whole footprint we increased population coverage by more than a third. We now offer 5G in 22 cities in Sweden, while in Finland and Norway our 47 per cent and 25 per cent 5G population coverage respectively includes 95 per cent population coverage in the largest cities, and in Estonia we remain the sole 5G provider. The sale of a minority stake of our towers in Finland and Norway – at a full value of €1,524 million on a cash and debt free basis – to experienced tower owners not only crystalises value but supports further development of our leading infrastructure assets and position.
This quarter saw good progress also in our ‘Transform to Digital’ efforts aimed at transforming customer experience, simplifying the product portfolio, automating processes, increasing usage of data analytics, and removing legacy systems. An extension of our partnership with ServiceNow will further increase the usage of data and analytics, driving acceleration towards becoming a truly customer centric and automated service provider. So far in 2021, we have decommissioned more than 75 legacy systems which resulted in lower IT costs, and we have progressed on our radical reduction of strategic IT suppliers – going from 24 down to 4 – which is expected to make a significant contribution to the overall cost reduction ambition we have until 2025.
Overall market growth is fundamental to “Deliver Sustainably” over the long run. Executing on our ‘more for more’ strategy through convergence, disciplined pricing, and 5G monetization illustrate some of our responsible actions that will help lead the way to restored and sustainable top line growth across our footprint. As we strive to contribute to society and sustainability we were, during the quarter, selected as a European Climate Leader by the Financial Times. Financial sustainability equally progressed with the closing of the Telia Carrier transaction and announcement of our tower partnership, leading to an even stronger balance sheet and overall financial position.
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 sufficient to cover our minimum dividend level of SEK 2 per share.
Finally, I would like to thank all my Telia colleagues for their hard work and commitment to date. I look forward to the second half of 2021 and to us continuing to reinvent better together, for the benefit of our customers, employees, shareholders, and societies.”