Telia Q3'25: Seeking better visibility into earnings growth in near term

Translation: Original published in Finnish on 10/24/2025 at 8:00 am EET.

We reiterate our SEK 35.0 target price and Reduce recommendation for Telia’s share. Telia's Q3 figures were in line with our expectations. However, the slight increase in cash flow guidance was a positive surprise. In the big picture, the challenge in the coming years remains how to maintain good earnings growth once the extensive cost-saving program's effects diminish. The stock's valuation (2025e P/E and EV/EBIT 17x and 15x) remains neutral, considering the challenging earnings growth in the coming years.

Comparable revenue grew slightly in Q3

Telia reported Q3 revenue down 1% at 19,861 MSEK, and excluding exchange rate effects and M&A, revenue grew by +1.1%. Revenue (2%) was below our expectations. Comparable service revenue growth was still 1.0% (Q2'25: 1.0%), which is slightly concerning. Geographically, of the largest markets, Finland was in line with our expectations, while operations in Sweden and Norway remained slightly below our forecasts.

EBITDA was in line with our and consensus forecasts

Adjusted EBITDA grew by 4% to 8458 MSEK and was thus in line with our and consensus expectations. The adjusted EBITDA margin was 42.6% and improved by 1.4 percentage points year-on-year, driven by significant cost savings. Geographically, earnings growth was strong in Sweden (8%), good in Finland (5%) and weak in Norway (-13%). The bottom lines were also broadly in line with our and consensus expectations. Also positive was that the company's indebtedness decreased slightly with the sale of TV&Media, and net debt/EBITDA was 1.93x at the end of Q3 (Q2'25: 2.09x).

Telia slightly raised its cash flow guidance for 2025, driven by lower capital expenditures

The company still expects comparable service revenue growth of 2% and comparable EBITDA growth of at least 5%. Telia refined its cash flow guidance for 2025 to roughly 8 BNSEK (was ~7.5 BNSEK) driven by lower investments. The company now expects CAPEX excluding frequencies and leases to be around 13 BNSEK (previously < SEK 14 BNSEK). We only made marginal adjustments to our estimates based on the Q3 report. We forecast service revenue to grow by +1.4% and EBITDA by 5.5% (consensus before Q3 report 1.3% and 5.9%). Profitability is driven by the significant 2.6 BNSEK cost savings implemented in Q4’24 and ongoing annual cost savings of approximately 1 BNSEK.

In our view, it would now be important for the company to be able to demonstrate accelerating growth so that earnings growth would be on a stronger footing in the future, once the effects of the extensive cost-saving program wear off. It appears that Telia has recently become particularly active in Finland and aims to grow more strongly there, as well as increase its market share. This naturally intensifies competition and creates pressure on operators' profitability in said market.

The stock is correctly priced

We forecast Telia's adjusted P/E and EV/EBIT multiples for 2025e to be 17x and 15x, respectively. The multiples are just under 10% below the Nordic peers as well as below the entire peer group. In absolute and relative terms, we believe the valuation is relatively neutral, considering the more challenging earnings growth in the coming years and numerous past disappointments. Dividend yield (~5.5%) partly limits the stock's downside. Regarding the dividend, it is now positive that the cash flow already covers the dividend itself. A positive view on Telia would require a better outlook for earnings growth in the coming years.