Telia Company reported a drop in underlying results for the first quarter, as the Covid-19 outbreak weighed on its TV and media business. The company said the traditional telco business was stable, with flat service revenues and underlying growth in adjusted EBITDA.
Net sales rose 7.6 percent year-on-year to SEK 22.4 billion due to the acquisition of Bonnier Broadcasting last year. On a like-for-like basis, adjusting for exchange rates, acquisitions and disposals such as Moldcell, net sales fell 2.2 percent. Services revenues were up 10.5 percent on a reported basis, but fell 1.0 percent on an organic basis.
Adjusted EBITDA dropped 1.8 percent to SEK 7.3 billion, for a margin of 32.4 percent. On a like-for-like basis, adjusted EBITDA fell 5.1 percent. The company's net profit was down to SEK 1.1 billion from SEK 1.8 billion a year ago.
Telia estimates the Covid-19 outbreak had a negative impact of SEK 0.1 billion on both services revenues and adjusted EBITDA in the first quarter. This came largely at the TV operations, through lower revenues from pay TV due to reduced prices as a consequence of sport cancellations as well as lower advertising revenues.
In total, the TV and Media division contributed SEK 751 million in revenues and SEK 108 million in adjusted EBITDA in the first full quarter of consolidation after the Bonnier acquisition was completed in December. It ended March with 653,000 SVoD subscribers, up from 503,000 a year earlier.
Telia took an impairment charge of SEK 260 million in Q1 to write off sports rights after matches were cancelled. The company said it expects to obtain compensation for the excess rights costs, with negotiations underway. At the same time, group EBITDA will benefit from the lower production costs.
Operational free cash flow from continuing operations fell to SEK 3.3 billion in Q1 from SEK 4.4 billion a year ago. For the full year, Telia expects operational free cash flow of SEK 9.5-10.5 billion, down from its earlier outlook of SEK 10.5-11.5 billion. It already withdrew its other guidance for the year in March.
Cost-cutting to continue, under new CEO
Acting CEO Christian Luiga, who will revert to CFO from May, said costs were negatively impacted by a lower pension refund, the sport content writedowns and service operations. The group plans to continue its cost-cutting efforts in Q2, reducing resource costs in several markets, amongst other measures, he said.
Several mitigating measures have been developed to offset the impact of the pandemic on the TV & Media unit, where revenues fell 8 percent in Q1, as well as support the traditional telco operation should it also be impacted. "We continue to focus on the execution of our commercial agenda with loyalty and convergence as main tools to increase ARPU and protect our customer base," Luiga said.
