Telia Earnings: Consensus Beat and Divestment of Denmark Business Send Shares Up

Telia’s TELIA shares are on the rise (up 7%) as the company beat revenue and adjusted EBITDA consensus expectations (company-provided) and announced the sale of its Danish business. Service revenue came in at SEK 19.4 billion (consensus of SEK 19.2 billion) while adjusted EBITDA reached SEK 7.26 billion (consensus of SEK 7.17 billion). The adjusted EBITDA growth trend has improved compared with last quarter, only declining by 0.8% year on year compared with a 2.0% decline in the fourth quarter of 2022. The easing in energy prices together with slight personnel reductions have helped EBITDA this quarter. We are maintaining our SEK 29 fair value estimate, with shares being fairly priced after the April 26 increases.

We believe the market is also pleased by Telia’s announcement to sell its Danish operations and networks to Norlys for SEK 9.5 billion at an enterprise value/EBITDA multiple of 8.9 times, which seems fair to us. Back in 2015, Telia tried to merge its Danish business with that of Telenor in pursuit of larger scale, a merger that was blocked by the European Commission. We support Telia’s decision to divest its Danish business, as Denmark was a weak, noncore market for Telia with low EBITDA margins and returns on invested capital due to the lack of scale. Proceeds will be used for deleveraging, something we support as Telia just reached the upper part of its guided leverage range this quarter (2.49 times net debt/EBITDA compared with a guided range of 2.0 to 2.5 times).

By geography, Sweden’s service revenue and EBITDA remained flattish. Norway and Finland continued with the healthy trend seen last quarter, with 3.8% and 2.3% respective increases in service revenue. Lithuania and Estonia grew at 9.9% and 5.8%, respectively, similar growth rates to those reported by Tele2 last week and with EBITDA growing at a faster pace thanks to operating leverage.