Telia has decided to cancel its share buyback programme, in order to save cash for investments and a possible economic downturn. While the group's third-quarter results showed a small improvement compared to the first half, acting CEO and former CFO Christian Luiga said service revenue was improving slower than expected and the outlook for operating cash flow in 2020 was less certain.
Telia has delivered faster than expected on working capital changes, limiting upside going forward, Luiga said. By year-end it expects around SEK 200 million in annual savings from its new operating model. This was adopted in Finland from October and will start in Norway, Estonia and Denmark in January 2020.
Furthermore, the company sees little room to reduce capex next year, due to ambitions in fibre expansion and 5G roll-out as well as more customer-driven demand. While the Bonnier Broadcasting acquisition is expected to close this year and contribute to results next year, Telia sees a slower-than-expected recovery in underlying service revenues, "impacting our financial leverage expectations negatively".
Altogether that means the remaining SEK 5 billion authorised in the share buyback programme will not be executed. Telia already spent SEK 10 billion on the programme and said it remains committed to the ordinary dividend "as a strong fundament for creating shareholder value".
Telia maintained its forecast for operational free cash flow of SEK 12-12.5 billion in 2019, after reporting SEK 11.6 billion for the first nine months. An outlook for 2020 will be provided with the Q4 results.
Q3 results show gradual improvement versus H1
For the third quarter, Telia reported net sales up 2.4 percent to SEK 21.2 billion, and adjusted EBITDA rose 18.5 percent to SEK 8.3 billion, helped by the switch to IFRS 16 accounting. On a like for like basis, revenues fell 3.7 percent, and service revenue was down 1.3 percent. EBITDA grew just 1 percent excluding the accounting effects, forex and changes in scope.
Telia said this was still better than the first half, when underlying EBITDA showed a 3 percent decline. Operating costs fell by 4 percent in Q3 compared to a 1 percent increase in the first six months. Service revenue also was slightly better compared to a 2 percent fall in H1, supported by commercial activities on the consumer side, which are expected to have additional positive impacts in the coming quarters, Telia said.
Free cash flow in the first nine months was up 2.2 percent to SEK 10.7 billion. Capex fell 5.3 percent over the same period to SEK 9.9 billion.
