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01/11 03:09
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed picture: Telenor shows steady financial growth, including a 2.1% increase in service revenues and a 4% rise in adjusted EPS, despite macro challenges. The dividend payment and free cash flow guidance are positives. However, uncertainties in the Q&A about the VAT case, defense contracts, and competition in Norway and Finland, along with cautious EBITDA guidance, balance the positives. The lack of a clear market cap makes it difficult to predict strong stock movement, leading to a neutral sentiment rating.
Service Revenues SEK 16,100,000,000, up 2.1% year on year. Growth driven by Telenor Nordics, while macro setbacks in Bangladesh weighed on numbers.
EBITDA SEK 8.6 billion, growing 2% year on year. Growth mainly driven by Telenor Nordics, with a slight drag from the VAT case in Norway.
Adjusted EPS NOK 1.96, 4% higher than the same period last year. Growth impacted by the VAT case in Norway and macro headwinds in Grameenphone.
Free Cash Flow SEK 3 billion, a solid start to the year, driven by strong operational performance and positive working capital timing effects.
CapEx to Sales Ratio 12.8%, lower than previous quarters, reflecting a prudent approach to investments in Asia.
Leverage Ratio 2.2x, down from 2.4x in the previous quarter, supported by free cash flow generation and favorable currency movements.
Return on Capital Employed (ROCE) 8% for the last four quarters, down six percentage points from Q4 due to a positive impairment reversal included in the previous quarter.
Nordics Service Revenue Growth 2.3%, which would have been 3.1% without the VAT case provision in Norway.
Nordics EBITDA Growth Close to 6%, which would have been 7.5% excluding the VAT case.
Asia Service Revenues SEK 4.4 billion, representing 1% growth, driven by improvement in Grameenphone and strong performance in Telenor Pakistan.
Asia EBITDA Margin 53%, with EBITDA down 1% year on year.
Telenor Pakistan Revenue Growth 1419%, reflecting a successful monetization strategy.
OpEx Growth 1.9%, mainly driven by increased costs in AMP and Asia, with a 1% decline in The Nordics due to transformation efforts.
New Services: Telenor launched new services such as Split in The Nordics, which have been appreciated by customers.
AI Factory: Telenor's AI factory is the first sovereign and secure platform in Norway that enables AI use cases as a service.
Cloud Storage Merger: Merged Norwegian B2C cloud storage business, MinShi, with JotaCloud to provide a secure, locally controlled alternative.
Defense Communication Solutions: Telenor AMP’s subsidiary KNL signed a contract with Finnish and Swedish defense forces for ultra-secure tactical communication.
Market Positioning: Telenor sees potential for in-market consolidation in Denmark and Sweden due to the need for scale in the telecom sector.
Geopolitical Demand: Increased demand for stable and secure digital infrastructure amid geopolitical turbulence.
Operational Efficiency: Telenor achieved a 1% decline in OpEx in The Nordics due to transformation efforts.
EBITDA Growth: EBITDA growth of 5.8% in The Nordics, driven by mobile service revenue growth of 3.9%.
Strategic Focus: Telenor is focused on enhancing customer experience and operational efficiency while pursuing growth in mission-critical services.
Financial Outlook: Telenor reaffirmed its financial outlook for the year, expecting continued growth despite market challenges.
Geopolitical Turbulence: The company faces risks from geopolitical turbulence and evolving trade and tariff policies, which create a need for stability and security in the telecom sector.
Regulatory Delays: In Pakistan, obtaining necessary regulatory approvals for planned divestments has taken longer than anticipated, which could delay transactions.
Competitive Pressures: In Asia, particularly in Malaysia, Telenor is experiencing tough competition, leading to a softer quarter for Telkom Digi.
Macro Environment Challenges: The macroeconomic situation in Bangladesh remains challenging, with high inflation impacting performance.
VAT Case Impact: A provision related to a VAT case in Norway is negatively affecting service revenue growth and EBITDA.
Subscriber Losses: Telenor has experienced customer losses in Norway and Finland, attributed to higher churn and competitive pressures.
Operational Expenditure (OpEx): While OpEx has seen a decline in some areas, there are ongoing increases in sales and marketing costs, which could impact overall profitability.
Market Dynamics: The potential for consolidation in the Nordic market is complicated by regulatory scrutiny, which may affect future growth opportunities.
Investment Risks: The company is cautious about infrastructure investments, particularly in fiber, due to the competitive landscape and potential overbuild.
Transformation Agenda: Telenor is focused on enhancing the quality and robustness of its critical digital infrastructure, which is a key element of its transformation agenda.
New Services Launch: Telenor launched new services such as Split in The Nordics, which have been well received by customers.
Defense Contracts: Telenor AMP’s subsidiary KNL signed a contract with the Finnish and Swedish defense forces, indicating a strategic move into the defense sector.
AI Factory Expansion: Telenor plans to expand its GPU capacity to support critical AI workloads, responding to increased demand for sovereign and secure solutions.
Consolidation Opportunities: Telenor is exploring potential consolidation opportunities in the Nordic market, particularly in Denmark and Sweden, to achieve scale and improve network investments.
Financial Outlook: Telenor reaffirms its financial outlook for the year, expecting mid-single-digit EBITDA growth in the Nordics.
CapEx to Sales Ratio: The CapEx to sales ratio for the Nordics is expected to be around 12.4% for the full year, with a back-end loaded investment schedule.
Free Cash Flow Guidance: Telenor maintains its free cash flow guidance of approximately SEK 13 billion for the year.
Service Revenue Growth: The group expects service revenue growth to continue, driven by performance in the Nordics and improvements in Asia.
Dividend Expectations: Telenor anticipates receiving dividends from True in the second half of 2025, contributing to overall cash flow.
Quarterly Dividend Payment: Telenor expects to pay a dividend of SEK 6.8 billion in June 2024.
Dividend from True: Telenor anticipates receiving a meaningful dividend from True in the second half of 2025.
Free Cash Flow: Telenor generated free cash flow of SEK 3 billion in Q1.
Free Cash Flow Guidance: Telenor maintains a free cash flow guidance of around SEK 13 billion for the year.
The earnings call indicates strong financial performance with significant growth in AI and energy segments, supported by robust demand trends and operational improvements. Despite some management evasiveness on specifics, the overall sentiment is positive due to high growth forecasts, improved margins, and strategic investments in AI and cloud infrastructure. The positive outlook for fiscal 2025 and strong free cash flow further bolster confidence. However, the absence of specific market cap data limits the ability to predict a stronger positive impact.
The earnings call summary reveals a positive outlook with strong financial performance, strategic acquisitions, and positive market strategies. The Q&A section highlights sustainable margins, effective tariff management, and continued growth in AI and energy sectors. However, there are concerns about transportation growth and management's vague responses on margin targets. Despite these, the overall sentiment is positive with strong cash flow and investment plans, leading to a likely positive stock price movement.
The earnings call presents a mixed picture: Telenor shows steady financial growth, including a 2.1% increase in service revenues and a 4% rise in adjusted EPS, despite macro challenges. The dividend payment and free cash flow guidance are positives. However, uncertainties in the Q&A about the VAT case, defense contracts, and competition in Norway and Finland, along with cautious EBITDA guidance, balance the positives. The lack of a clear market cap makes it difficult to predict strong stock movement, leading to a neutral sentiment rating.
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