Translation: Original published in Finnish on 10/23/2026 at 8:00 am EEST.

We reiterate our Reduce recommendation for Telia and raise our target price to SEK 43.0 (was SEK 41.0), reflecting minor forecast changes and a lower required rate of return. In terms of figures, Telia's Q3 was even clearly better than expected, and the company narrowed its guidance upwards. In the big picture, confidence in earnings growth and particularly in cash flow has improved over the past couple of years, which has simultaneously reduced the company's risk level. However, the slope of earnings growth is challenging to maintain for longer, and thus, in our view, the valuation picture is tight (2026e adj. EV/EBIT 18x and P/E 20x).

Strong results everywhere in Q3 except in Finland

Telia's 7% revenue growth to 21,306 MSEK clearly exceeded our expectations. The strong growth was partly due to timing, as license and ICT deliveries materialized in Q3, whereas they were expected to take place only in Q4. The strong top line performance fed directly into earnings, and comparable adjusted EBITDA improved by 2.9% to 8,872 MSEK. Growth was driven by an increase in service revenue and a 2.6% decrease in operating expenses. Geographically, earnings growth was driven by the company's primary market, Sweden, as well as Norway and the Baltic countries.

Balance sheet has strengthened, making room for M&A or later additional dividends

Leverage (ND/EBITDA of 2.0x) is at the lower end of the target range (2.0x–2.5x). This, together with strong cash flow that already covers the annual dividend payment, gives the company flexibility for acquisitions or potential additional dividend distributions in the future. We will likely hear more about this at next year's Capital Markets Day in H1.

Earnings stronger than expected led to a guidance upgrade

We expected the company to reiterate its previous outlook (although our forecasts were practically in line with the new guidance), but driven by a stronger-than-expected quarter, Telia raised its guidance for the current year slightly. The company now estimates that comparable adjusted EBITDA for 2026 will grow by "3–4% (previously ~3%)" and that free cash flow will land at "at least 9 billion kronor (previously around 9 billion kronor)". Following the better-than-expected report, we raised our forecasts by 1–4% for the coming years. We forecast revenue and adjusted EBITDA to grow by 4% in 2026. In 2027–2028, we expect revenue to grow by ~2–3% annually and profitability to remain at the 2026e level. Earnings growth is mainly supported by service revenue growth, and geographically this is driven by the gradual recovery of the company's weaker-performing markets (Finland and Norway). In addition, earnings growth and profitability are supported by the gross savings target of 1 BSEK announced in October starting from 2028, which represents a "normal" annual savings level and provides backing for profitability development going forward. We also expect the company to put its balance sheet to work more and make new acquisitions, which will support growth.

Quality has improved, but it comes at a price

In recent years, Telia has clearly improved its operational execution and delivered more of what it has promised. This has then been reflected in strong earnings growth and a clearly improved cash flow. This means that the repeated disappointments of the past 10 years have clearly decreased. The stock prices in (2026e adj. EV/EBIT 18x and P/E 20x) the continuation of strong earnings growth. However, the valuation gap to its closest Nordic peers and Elisa has continued to widen, and the company is now priced at a ~30% premium to them (prev. 19%). Thus, the absolute valuation is tight, and in our view, the relative valuation remains very tight as well, even though the quality gap has narrowed and even turned in Telia's favor. In our view, however, maintaining the current earnings growth slope (+4%) is challenging, as the extensive efficiency measures were largely implemented by the end of 2024. Telia's risk profile has declined with improved focus, but a more positive view on the stock would require signs of faster earnings growth in the coming years than what we forecast (~2%).