Telia : Report Q1 2024

• Adjusted EBITDA increased 3.4% to SEK 7,144 million (6,912) and like for like, adjusted EBITDA increased 4.6%. For the Telco operations, adjusted EBITDA increased 2.1% on a like for like basis.
• Operating income amounted to SEK 2,284 million (1,768).
• Total net income amounted to SEK 757 million (738).
• Total EPS amounted to 0.15 SEK (0.15).
• Operational free cash flow improved to SEK -779 million (-3,620) and the structural part of Operational free cash flow decreased to SEK 413 million (613).
• The leverage ratio was 2.43x at the end of the quarter.
• Dividend of SEK 0.50 per share was paid to shareholders.
• The outlook for 2024 is unchanged.
• After the end of the first quarter the sale of the operations and network assets in Denmark to Norlys at an enterprise value of DKK 6.25 billion, on a cash and debt-free basis, was completed. The proceeds from the transaction will be used to reduce leverage.

18,634

(SEK million)

+2.2% like for like

Adjusted

EBITDA

7,144

(SEK million)

+4.6% like for like

CAPEX4

CEO comment

"Operational momentum continued in the first quarter, with growth in all telco businesses and progress in the TV and Media turnaround. NPS and service revenue trends in the consumer segment have been encouraging. Immediately after the end of the quarter the sale of Telia Denmark closed as expected, which strengthens our balance sheet.

Commercial progress

In Sweden, fixed service revenue drove our growth in the quarter, and in particular Telia's leading TV experience which has enabled pricing opportunities in the past 12 months, while mobile was stable. The consumer business continued its positive trend in both NPS and in service revenue, which grew 5.0%. This was underpinned in part by our work to improve customer service, with a new record low in incoming contacts for B2C being achieved in March, 40% lower level versus three years ago, following improvements in operational efficiency, IT infrastructure and customer experience. Swedish service revenue growth overall accelerated to 3.5% and, excluding the decline in copper related services, the growth was 5.6%.

Our business in Finland reported a steady service revenue growth at around 2%. Positively, this was underpinned by a further improvement in mobile consumer customer satisfaction and a mobile consumer ARPU increase of 12%, as well as nearly 20% revenue growth in our data center business in Helsinki. Partly, this was offset by a lower mobile customer base and steep declines in fixed legacy services.

Norway has a similar momentum, with service revenue also up around 2% in the quarter, driven both by higher consumer ARPU and strong growth in our mobile wholesale business, however partly offset by slight fixed service revenue decline and lower invoicing fees.

Lithuania reported a healthy mid-single digit growth in service revenue, driven mainly by mobile subscriber and ARPU growth. We launched new self-service customer apps in the quarter to drive customer experience, monetization and lower cost to serve. Fixed- line revenue also grew driven by broadband and business solutions. Estonia had a lower revenue momentum this quarter, as a result of the timing of price changes, but launched a commercial 26Ghz 5G FWA service which offers a fiber like experience via the mobile network. We also won the local tender to provide connectivity, devices and security for the European Union parliamentary election.

TV and Media saw a decline in advertising revenue of 6.3% due to weak market conditions, however the decline was lower than in previous quarters and the majority of it was offset by 5.2% growth in pay TV revenue. We are pleased with the progress in our digital transformation, with growth both in streaming consumption, the streaming customer base, and in our digital advertising revenue.

Importantly, our sustainability agenda continues at full speed, with 55% of our supply chain emissions now covered by Science Based Targets, our A- score from CDP being reconfirmed in the quarter, and another 200,000 individuals reached by our digital inclusion initiatives.

Financial development

In the Telco business, service revenue grew 2.7% and EBITDA grew 2.1%. Excluding a time shift in pension refund, Telco EBITDA grew 3.4%. A weak macro and regulatory effects were notable headwinds

in the quarter, but partly offset by a modest energy cost tailwind. Resource cost efficiency improved, despite salary inflation, due to reductions in costs for consultants.

In total, EBITDA for the group grew 4.6%, helped also by lower losses in TV and Media compared to the first quarter last year, as our agenda to return this unit to profitability made further progress with savings on content and broad-based cost reductions.

Phasing effects of interest, pension refund and working capital reduced our cash flow in the quarter, as expected, but most of this effect was absorbed by increasing EBITDA and lower cash capex.

Our balance sheet is healthy, with a net debt to EBITDA at 2.43x at the end of the quarter. The proceeds from the sale of Telia Denmark, which closed on 2 April, will be used to reduce leverage.

Looking ahead

After the first three months, we are comfortable with the full-year outlook we gave in January, which is unchanged, as are our expectations of cash flow generation being tilted towards the second half of the year.

The focus in my first quarter as CEO has been to analyze the business and build our mid-term plan together with our business unit leaders. I have seen a company with an impressive set of assets and an engaged organization, and, building on a strategy which is sound in all material aspects, our goal is to eliminate barriers and complexities, so that Telia can become simpler and faster in decision making and commercial execution. If we succeed with this, we expect that we can grow our cash flow to above our current dividend level in future years. We plan to share more details of our mid-term ambitions after the summer.

I would like to thank all employees for your work in my first quarter as CEO, and our shareholders for your continued support. I very much look forward to the years ahead."

Patrik Hofbauer

President & CEO

In CEO comment, all growth rates disclosed are based on the "like for like" definition and EBITDA refers to adjusted EBITDA, unless otherwise stated. See definitions for more information.

Outlook for 2024 (unchanged)

Service revenue, like for like, is estimated to grow by low single digits.

Adjusted EBITDA, like for like, is estimated to grow by low to mid- single digits.

CAPEX, excluding fees for licenses, spectrum and right of use assets, is estimated to be around SEK 14 billion.

The structural part of Operational free cash flow is estimated to be between SEK 7-8 billion.

Leverage and credit rating target

Telia Company targets a leverage corresponding to Net debt/adjusted EBITDA in the range of 2.0-2.5x and a solid investment grade of A- to BBB+.

Dividend policy

Telia Company intends to follow a progressive dividend policy, with a floor of SEK 2.00 per share and an ambition for low to mid-single digit percentage growth.

Dividend to shareholders for 2023

For 2023, the Annual General Meeting (AGM) on April 10, 2024, decided on a dividend of SEK 2.00 per share (2.00), totaling SEK 7.9 billion (7.9). The dividend will be split and distributed in four tranches of SEK 0.50 per share.

First distribution

The AGM decided that the first distribution of dividend was to be distributed by Euroclear Sweden on April 17, 2024.

Second distribution

The AGM decided that the final day for trading in shares entitling shareholders to dividend be set for July 30, 2024, and that the first day of trading in shares excluding rights to dividend be set for July 31, 2024. The record date at Euroclear Sweden for the right to receive dividend will be August 1, 2024. The dividend is expected to be distributed by Euroclear Sweden on August 6, 2024.

Third distribution

The AGM decided that the final day for trading in shares entitling shareholders to dividend be set for October 29, 2024, and that the first day of trading in shares excluding rights to dividend be set for October 30, 2024. The record date at Euroclear Sweden for the right to receive dividend will be October 31, 2024. The dividend is expected to be distributed by Euroclear Sweden on November 5, 2024.

Fourth distribution

The AGM decided that the final day for trading in shares entitling shareholders to dividend be set for February 5, 2025, and that the first day of trading in shares excluding rights to dividend be set for February 6, 2025. The record date at Euroclear Sweden for the right to receive dividend will be February 7, 2025. The dividend is expected to be distributed by Euroclear Sweden on February 12, 2025.

Review of the group, first quarter 2024

Revenue and earnings

Revenue decreased 2.0% to SEK 21,274 million (21,697) and like for like, revenue decreased 1.3%.

Service revenue increased 1.5% to SEK 18,634 million (18,359) and like for like, service revenue increased 2.2% driven by a positive development for the Telco operations.

Adjusted EBITDA increased 3.4% to SEK 7,144 million (6,912) and the adjusted EBITDA margin increased to 33.6% (31.9). Like for like, adjusted EBITDA increased 4.6% driven mainly by Finland, Norway and TV and Media.

Operating income increased to SEK 2,284 million (1,768).

Adjustment items affecting operating income amounted to SEK -391 million (-578).

Adjusted operating income increased to SEK 2,675 million (2,346).

Financial items totaled SEK -1,261 million (-843) of which SEK -1,143 million (-864) related to net interest expenses. The increase in net interest expenses was mainly due to increased interest rates and foreign exchange rates.

Income taxes amounted to SEK -277 million (-324). The effective tax rate was 27.1% (35.0), mainly impacted by reassessed base for Estonian distribution tax and a non-tax deductible capital loss related to the liquidation of a Turkish subsidiary. Adjusted for these items, the effective tax rate would have been 21.4%.

Net income from continuing operations amounted to SEK 745 million (602) and Net income from discontinued operations amounted to SEK 12 million (136).

Other comprehensive income increased to SEK 2,448 million (-647) mainly due to higher remeasurements of defined benefit pension plans. 2023 was impacted by negative foreign translation differences.

Cash flow, continuing and discontinued operations

Cash flow from operating activities increased to SEK 3,503 million (1,350) mainly as reduced vendor financing levels had a negative impact on the first quarter 2023.

Cash flow from investing activities amounted to SEK 226 million (-7,593).The first quarter of 2024 was mainly impacted by net disposals of short-terminvestments.

Cash flow from financing activities amounted to SEK -11,163million (10,141). The first quarter of 2024 was impacted by higher repayments of borrowings, higher paid dividend as the dividend was divided into four tranches instead of two tranches as in 2023, and lower proceeds from borrowings.

Operational free cash flow, continuing operations

Structural part of Operational free cash flow decreased to SEK 413 million (613) mainly driven by higher paid interest partly offset by decreased Cash CAPEX excluding licenses and spectrum. Furthermore, a rephasing of pension refund of SEK 400 million into the subsequent quarter also had a negative impact.

Operational free cash flow improved to SEK -779 million (-3,620) mainly driven by less negative working capital contribution and decreased Cash CAPEX excluding licenses and spectrum partly offset by higher paid interest.

Financial position

CAPEX excluding right-of-use assets from continuing operations, decreased to SEK 3,095 million (3,491). CAPEX excluding fees for licenses, spectrum and right-of-use assets from continuing operations, decreased to SEK 3,092 million (3,491). Cash CAPEX decreased to SEK 3,367 million (4,157).

Net debt from continuing and discontinued operations was SEK 77,753 million at the end of the first quarter (73,758 at the end of the fourth quarter of 2023). The net debt/adjusted EBITDA ratio increased to 2.43x compared to 2.32x at the end of the fourth quarter 2023. The increase was mainly due to dividend paid to shareholders.

Investments in associates and joint ventures, pension obligation assets and other non-current assets increased to SEK 9,185 million (6,742), mainly due to remeasurements of defined benefit pension plans.

Current interest-bearing receivables decreased to SEK 9,041 million (13,896) mainly due to net divestments of investment bonds.

Current borrowings decreased to SEK 8,795 million (14,069), mainly due to repaid debt, partly offset by new issued debt.

Trade payables and other current liabilities, current tax payables and current provisions decreased to SEK 31,752 million (35,920) mainly due to the last tranche of the dividend being paid out and decrease in liabilities for film and program rights.

Significant events in the first quarter

• On February 28, 2024, Telia Company announced that the sale of Telia Denmark had received regulatory approval from the Danish Competition Council.
• On March 4, 2024, Telia Company announced an invitation to holders of certain outstanding SEK and EUR notes for purchase subject to the conditions and the restrictions described in the tender offer memorandum dated March 4, 2024.
• On March 12, 2024, Telia Company announced that Markus Messerer, Senior Vice President, Chief Strategy & Commercial Officer, will leave the Telia to pursue opportunities outside the company.
• On March 12, 2024, Telia Company announced the results of its tender offer in respect of certain outstanding SEK and EUR notes. Settlement of the aggregate principal amounts of SEK 1,925 million and EUR 350.0 million is expected to take place on March 13, 2024.

Significant events after the end of the first quarter

• On April 2, 2024, Telia Company announced the closing of the sale of its operations and network assets in Denmark to Norlys a.m.b.a. at an enterprise value of DKK 6.25 billion, on a cash and debt-free basis.
• On April 10, 2024, Telia Company announced the resolutions passed at the Annual General Meeting.

Sweden

In the quarter Telia and RISE signed an agreement as a basis for continued joint strategic innovation cooperation with the intention of shortening the lead time from research and innovation to commercialization. Furthermore, Telia again came out on top in the Sustainable Brand Index (SBI), Europe's largest independent brand study on sustainability.

Mobile postpaid subscriptions excluding M2M services increased by ~15,000 in the quarter driven by the consumer segment. TV subscriptions increased by ~16,000 and fixed broadband subscriptions decreased by ~1,000 in the quarter.

Revenue, like for like, decreased 2.0% as increased service revenue was more than offset by lower sales of both mobile and fixed equipment.

Service revenue, like for like, increased 3.5% as mobile service revenue remained rather unchanged and fixed service revenue increased 6.3%. The growth in fixed service revenue was mainly driven by TV following both subscriber base and ARPU expansion, but also from revenue growth for broadband and business solutions. Together this more than compensated for a continued decline in fixed telephony revenue.

Adjusted EBITDA margin increased slightly to 37.0% (36.9) and adjusted EBITDA like for like declined 1.7% as the growth in service revenue was more than offset by around SEK 100 million in lower contribution from pension refund compared to the corresponding period last year, this due to a rephasing of pension refund to the subsequent quarter. Furthermore, a write-down of accounts receivable of around SEK 50 million impacted adjusted EBITDA negatively.

CAPEX excluding fees for licenses, spectrum and right-of-use assets, remained unchanged at SEK 1,026 million (1,026).

Revenue

Change (%) like for like

of which service revenue (external) change (%) like for like

Adjusted EBITDA

Margin (%)

change (%) like for like Adjusted operating income Operating income

CAPEX excluding fees for licenses, spectrum and right-of-use assets1

Finland

In the quarter Telia announced plans for a programmable 5G network, implemented first in Telia's partly EU-funded Sirius project, as well as launched a cooperation with Danfoss around optimization of energy solutions for landlords and housing associations.

Mobile postpaid subscriptions excluding M2M services decreased by ~25,000 in the quarter driven by the consumer segment. TV subscriptions decreased by ~5,000 and fixed broadband subscriptions decreased by ~2,000 in the quarter.

Revenue, like for like, decreased 1.3% as increased service revenue could not fully compensate for reduced sales of both mobile and fixed equipment.

Service revenue, like for like, increased 1.9% as mobile service revenue increased 4.4% driven by an improved ARPU in the consumer segment. Fixed service revenue declined 1.2% as growth in both TV and broadband, supported by ARPU expansion, was more than offset by lower business solutions revenue as well as increased pressure on fixed telephony revenue due to a change in regulation.

Adjusted EBITDA margin increased to 31.9% (30.2) and adjusted EBITDA, like for like, increased 3.9% from the combination of service revenue growth and a lower cost level compared to the corresponding quarter last year.

CAPEX excluding fees for licenses, spectrum and right-of-use assets, decreased 33.4% to SEK 332 million (498).

Revenue

Change (%) like for like

of which service revenue (external) change (%) like for like

Adjusted EBITDA

Margin (%)

change (%) like for like Adjusted operating income Operating income

CAPEX excluding fees for licenses, spectrum and right-of-use assets1

Norway

In the quarter Telia Norway and Viaplay Group signed a new and expanded, long-term agreement that strengthens co-operation and ensures Telia customers' access to all Viaplay's channels and streaming services. And, following Telia last year modernizing an average of 23 base stations every week with 5G technology and even better 4G, almost 40% of data traffic now goes over 5G.

Mobile postpaid subscriptions excluding M2M services declined by ~2,000 in the quarter. TV subscriptions declined by ~9,000 and fixed broadband subscriptions decreased by ~7,000 in the quarter.

Revenue, like for like, increased 0.6% as growth for service revenue more than compensated for lower equipment sales.

Service revenue, like for like, increased 2.2% as fixed service revenue decreased 1.8%, driven by business solutions, and mobile service revenue increased 4.7%, driven mainly by ARPU expansion in the consumer segment as well as continued growth for wholesale revenue.

Adjusted EBITDA margin increased to 46.9% (44.7) and adjusted EBITDA like for like increased 5.9% driven by the growth in service revenue coupled with lower operational expenses mainly related to resource costs.

CAPEX excluding fees for licenses, spectrum and right-of-use assets, decreased 18.0% to SEK 532 million (648).

Revenue

Change (%) like for like

of which service revenue (external) change (%) like for like

Adjusted EBITDA

Margin (%)

change (%) like for like Adjusted operating income Operating income

CAPEX excluding fees for licenses, spectrum and right-of-use assets1

Lithuania

In the quarter Telia was again recognized as the leader in mobile communications according to a report from the communications regulator and Telia was also awarded as the most sustainable operator in Lithuania according to Sustainable Brand Index (SBI).

Mobile postpaid subscriptions excluding M2M services increased by ~10,000 in the quarter. TV subscriptions decreased by ~1,000 and fixed broadband subscriptions decreased by ~1,000 in the quarter.

Revenue, like for like, increased 0.8% as service revenue growth more than compensated for lower sales of both mobile and fixed equipment.

Service revenue, like for like, increased 4.5% mainly driven by a positive development for mobile service revenue, which increased 7.6%, following an increased number of subscriptions as well as ARPU increasing by 6.2%. Fixed service revenue grew 1.9% driven mainly by increased revenue from broadband and business solutions.

Adjusted EBITDA margin increased to 38.2% (36.5) and adjusted EBITDA like for like increased 5.5% due to continued growth in service revenue.

CAPEX excluding fees for licenses, spectrum and right-of-use assets, increased 5.5% to SEK 185 million (175).

Revenue

Change (%) like for like

of which service revenue (external) change (%) like for like

Adjusted EBITDA

Margin (%)

change (%) like for like Adjusted operating income Operating income

CAPEX excluding fees for licenses, spectrum and right-of-use assets1