Translation: Original published in Finnish on 5/27/2025 at 7:30 am EEST.

The agreement announced yesterday by Tecnotree is significant for the company's scale and should clearly support its growth outlook in the coming years. There are still some unanswered questions about the agreement's specifics, which we will try to clarify in the near future. Once we have a clearer picture, we will evaluate whether changes to our estimates are necessary.

Agreement with a leading South African telecommunications operator

Yesterday, Tecnotree announced that it has signed an agreement with one of South Africa's leading telecommunications operators for a comprehensive digital BSS transformation project. This is apparently a long-standing partnership for Tecnotree, and the newly signed agreement marks a new phase in it. It is not yet clear to us how much of the announced agreement will generate new business and how much will be an extension of an existing collaboration. While there is no certainty about the customer, we suspect it may be MTN, a long-term Tecnotree customer, or an MTN subsidiary. The agreement consists of software licenses, delivery, implementation and maintenance. It gives the customer access to Tecnotree's full digital BSS stack.

Sizeable order backs growth outlook for the coming years

The agreement is worth 39.6 MEUR, making it a very significant one for the company. The contract will run for seven years. If distributed evenly, the agreement would generate an annual revenue of nearly 6 MEUR, so the long-term agreement's annual impact on revenue is reasonable. In any case, it will significantly support the company's growth outlook for the coming years. At the end of Q1'25, the company's order book amounted to 70.3 MEUR, making the contract very large in comparison. The agreement will be reflected in Tecnotree's revenue practically immediately (from Q2'25). However, Tecnotree reiterated its guidance for low to medium single-digit growth this year. Therefore, the impact on revenue will not be particularly large yet this year. On the other hand, Tecnotree's order book declined in Q1, so the new contract may offset softness elsewhere in the order flow for the current year. The extent to which this is new business (as opposed to an extension of an existing agreement) also significantly impacts any changes in estimates.

Currency risks of the agreement not yet fully known

It is not yet clear to us in which currency the agreement was made. This is relevant in Tecnotree's case because the company has incurred substantial FX losses over the years while operating in developed markets. However, the press release stated that the agreement represents a strategic continuation by the company towards reducing its exposure to frontier markets. In any case, we believe the currency of the contract will significantly impact its future reflection in cash flow. If the newly announced agreement were to be fully repatriated into cash flow without significant delays over the next few years, it could positively impact Tecnotree's cash flow profile.