Telia exits Latvia, bids for Bredband2 as Q2 EBITDA rises 6.2%

Telia Company reported a robust Q2 2025, with adjusted EBITDA up 6.2% like-for-like and free cash flow rising to SEK 2.3 billion, driven by service revenue growth and cost efficiencies. While net income and EPS declined due to the absence of a prior-year capital gain, the company reduced leverage and maintained stable credit ratings. Telia continues strategic portfolio optimization through recent divestments and a new acquisition offer, reaffirming its positive 2025 guidance for service revenue and EBITDA growth.

Analysis

Telia Company reported a solid second quarter for 2025, demonstrating strong operational momentum. Adjusted EBITDA grew 6.2% on a like-for-like basis, driven by a combination of service revenue growth in core markets like Sweden and the Baltics, and effective cost reductions from its 2024 Change program. The significant drop in net income to SEK 2.2 billion from SEK 4.9 billion is a non-operational artifact, directly attributable to the absence of a large capital gain from the sale of its Danish operations recorded in the prior-year period. More telling fundamental indicators were positive: free cash flow increased to SEK 2.3 billion from SEK 1.9 billion, supported by lower CAPEX, and leverage was successfully reduced to 2.09x. The company is actively reshaping its portfolio through the divestment of its TV/Media business and Latvian holdings, while simultaneously making a SEK 3.1 billion offer for Bredband2, signaling a clear strategy of focusing on core telecom assets. While performance was robust in Sweden and Lithuania, the notable 8.6% decline in Norwegian EBITDA highlights geographic disparities. Management's confidence is underscored by the reiteration of its 2025 outlook, which projects at least 5% EBITDA growth and FCF of around SEK 7.5 billion, supported by stable Baa1/BBB+ credit ratings.

Key Decisions for Investors

• Investors should look past the headline drop in net income, as it is a non-operational distortion, and instead focus on the strong underlying fundamentals, including the 6.2% adjusted EBITDA growth and increased free cash flow.
• The active portfolio management, involving both significant divestments and a new acquisition offer, warrants monitoring as it will sharpen the company's strategic focus and could unlock further value.
• Given the reiterated positive guidance for 2025 and successful deleveraging, the stock may present a stable investment case, but investors should be mindful of the performance divergence between regions, particularly the weakness in Norway.
• Consider the company's ability to meet its full-year guidance for ~SEK 7.5 billion in free cash flow and at least 5% EBITDA growth as a key benchmark for the current strategy's success.