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Telia Q2 Results; Ahead Of Consensus Though Pressure On FCF To Meet FY Guidance

COMMUNICATIONS

Baa1/BBB+ EUR Spreads Muted

  • Slight credit positive on results that put the company on track to meet FY operating guidance while TV & Media makes any potential sale easier.
  • Equity analyst takes point to FCF being the biggest concern about FY guidance; H1 came in at just SEK2bn against FY guidance of SEK7-8bn. That said, H2 is typically much more cash generative and FY consensus is at SEK 7.4bn with management confirming on the call that FCF would be towards the lower end of the range on the back of challenges in Norway and Finland.

  • Q2 revenue +2.3% (+0.9% vs. BBG consensus) with L4L service revenue +2.5% and L4L telco service revenue +2.6%. Adj-EBITDA +6.4% (+1.8% vs. BBG consensus) with L4L EBITDA +5.3% and L4L telco EBITDA +4.1%. EBITDA growth was driven by all units but with Sweden (+3.9% L4L), Norway (+3% L4L) and TV & Media (returned to growth after weak Q1).
  • Credit metrics stable; opFCF of SEK 2760mn from SEK -74mn in Q223 with the structural part improving to SEK 1652mn from SEK 651mn driven by favourable WC changes.
  • Leverage fell to 2.21x from 2.43x against the 2-2.5x target helped by proceeds from the Demark exit.
  • FY guidance confirmed.
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