Earnings call transcript: Telia Q2 2025 shows steady growth and strategic moves

Telia Company AB reported robust Q2 2025 results, with service revenue up 1.4% year-to-date and EBITDA growing 6.2%, driven by efficiency gains and margin expansion. The company reduced net debt by €1.5 billion, lowering leverage to 2.09x, and reaffirmed its full-year outlook, targeting over €10 billion in free cash flow by 2027. Strategically, Telia announced the acquisition of Breband Two to bolster its Swedish market share in the value segment and open networks, while continuing its portfolio optimization with the planned exit from Latvia, despite ongoing challenges in the Norwegian market.

Analysis

Telia Company AB's Q2 2025 results demonstrate solid operational execution and strategic repositioning, characterized by a 6.2% increase in EBITDA and a 200 basis point margin expansion, driven by a 5.1% reduction in operating expenses. The company is actively reshaping its portfolio by announcing a tender offer for Breband Two to capture the value segment in the Swedish broadband market—a move expected to yield over SEK 200 million in synergies—while simplifying its structure through the planned exit from Latvia. This financial discipline is further evidenced by a €1.5 billion reduction in net debt, lowering leverage to a healthy 2.09x. While the overall picture is positive, performance is mixed across geographies; the core Swedish market is strong, benefiting from a household convergence strategy that has lifted household ARPU by over 5% annually, but the Norwegian segment faces significant headwinds, with management explicitly guiding for a weaker Q3 before a planned recovery. Despite this, Telia has reaffirmed its full-year outlook and its long-term target of achieving over €10 billion in free cash flow by 2027, signaling confidence in its strategic direction.

Key Decisions for Investors

• Given the successful portfolio optimization, disciplined cost control, and deleveraging, investors should view the current strategy as a positive catalyst that enhances Telia's focus and financial stability.
• It is crucial to monitor the execution of the turnaround plan in Norway, as management expects near-term headwinds to worsen in Q3, and to track the regulatory approval for the Breband Two acquisition, a key component of the Swedish growth strategy.
• For income and value-focused investors, Telia's 5.99% dividend yield and ambitious free cash flow target of over €10 billion by 2027 warrant attention, especially as leverage falls to the low end of its target range, which may prompt a revised capital return policy.
• Anticipate near-term share price volatility due to the guided weakness in Q3, which may present a tactical entry point for those confident in management's forecast for a strong Q4 recovery and the achievement of full-year targets.