Telia Company said it is making no change to its outlook for the full year after third quarter net sales fell by 1.2 percent but rose 3.8 percent on a like-for-like basis. Adjusted EBITDA dropped by 4.9 percent year on year, or by 1.9 percent on a like-for-like basis, hit by content spending Telia said the third quarter was another period of service revenue growth for the group, up 2.3 percent like-for-like, with improvements in every business unit but one.
The operator said net sales in the third quarter declined to SEK 21.27 billion from SEK 21.53 billion. Service revenues decreased by 3.2 percent to SEK 18.13 billion from SEK 18.73 billion but like for like, service revenues increased 2.3 percent.
Adjusted EBITDA fell 4.9 percent to SEK 7.81 billion from SEK 8.21 billion and like for like, adjusted EBITDA declined 1.9 percent. Telia said structural cost reductions are going to plan but content investments are hitting overall cost levels, as well as pension phasing, hence the decline in EBITDA.
Total net income amounted to SEK 1.64 billion, down from SEK 2.57 billion in the third quarter of 2020.
Operational free cash flow decreased to SEK 2.94 billion from SEK 3.73 billion. So far this year, SEK 9.0 billion has been generated, putting Telia well above the level needed for the minimum SEK 2 per share dividend. Cash flow from operating activities dropped to 6.67 billion from SEK 7.39 billion.
Telia Sweden had service revenue growth in the third quarter for the first time since the fourth quarter of 2016 after it gained customers for every major product and raised ARPU. Adjusting for legacy products and one-off items from Q3 2020, service revenues grew by 3.5 percent and there was slight growth in Swedish EBITDA.
In the Baltic region, the previous quarter’s strong development continued, operationally and financially, with EBITDA growth of 9 percent and 5 percent in Lithuania and Estonia respectively.
In the challenger markets, results were mixed, Telia said. In Norway, the positive trends of recent quarters continued. Denmark returned to service revenue growth and management changes were made in the quarter to drive further improvements. In Finland, service revenue declined by 1 percent.
TV & Media continued its top line recovery with service revenue growth of 15 percent, with advertising and subscription/OTT revenue streams contributing equally.
Telia said its “Transform to Digital” efforts cut IT costs by more than SEK 65 million in the third quarter, compared with SEK 45 million in reductions in Q2.
The sale of 49 percent of Telia’s tower businesses in Finland and Norway to Brookfield and Alecta is expect in Q4 once final regulatory approval is received, and the European Commission has already cleared it. The leverage ratio based on Q3 and including the tower proceeds is estimated at 2.0x.
Telia reiterated its FY 2021 full year outlook of service revenues and EBITDA at flat to low single digit growth, excluding Telia Carrier and FX. EBITDA is likely to be at the lower end of the range. The cash capex outlook is expected to be between SEK 14.5 billion and SEK 15.5 billion, but most likely in the middle.
