Telenor's Valuation Surge: Sustainable Growth or Over-Optimism?

Telenor ASA (OB:TEL) has seen its share price rise by 23.15% over the past 12 months, with a 3.17% gain in the last four weeks despite a 1.43% monthly dip, according to a Telia PE ratio chart. This volatility raises a critical question: Is the recent valuation surge driven by sustainable value creation or over-optimism? To answer this, we must dissect Telenor's financial performance, strategic initiatives, and competitive positioning against its Nordic peers.

Financial Performance and Strategic Shifts

Telenor's Q2 2025 results underscore its operational strength. EBITDA reached NOK 9.3 billion, an 8% year-over-year increase, fueled by a 12.5% organic EBITDA growth in the Nordics, according to Telenor EV/EBITDA data. Strategic investments, such as the NOK 6 billion acquisition of GlobalConnect's Norwegian fiber business, boosted its fiber market share from 22% to 29%, per a Simply Wall St analysis. Meanwhile, Nordic mobile service revenue grew 5.6%, reflecting Telenor's ability to balance cost efficiency with market expansion; the same source also highlights this revenue strength.

Analysts project Telenor's earnings to grow at 9.2% annually, with a Return on Equity (ROE) of 19.4% in three years, according to the Telenor Q2 presentation. That presentation underpins forecasts that rest on Telenor's focus on fiber infrastructure, 5G, and value-added services like secure cloud solutions and IoT subscriptions. However, challenges persist: Asian markets remain volatile, and fiber expansion carries execution risks, as noted in earlier valuations.

Valuation Metrics: A Premium Justified?

Telenor's current P/E ratio of 22.4x exceeds the European telecom average of 19x, as highlighted by Simply Wall St, while its EV/EBITDA stands at 9.04x per the valueinvesting data. This premium reflects investor optimism about its growth trajectory. By comparison, Telia trades at a P/E of 32.51x and EV/EBITDA of 7.1x (see the Gurufocus PE chart referenced above), suggesting a more cautious market view despite Telia's stable Nordic presence. Tele2, with a P/E of 30.34x and EV/EBITDA of 13.71x, commands a higher multiple, partly due to its aggressive digital transformation. Eltel, however, is an outlier, trading at a negative P/E (-17.2x) and an inflated EV/EBITDA of 218.3x, reflecting its current financial struggles.

Telenor's valuation appears balanced. Its P/E is lower than Tele2's and Telia's, while its EV/EBITDA is more attractive than Tele2's but higher than Telia's. This suggests the market values Telenor's growth potential without the extreme optimism seen for Tele2 or the conservatism applied to Telia.

Competitive Positioning and Long-Term Prospects

In the Nordic market, Telenor's strategic investments are paying off. Its fiber expansion in Norway and Finland-such as a NOK 1.4 billion investment to provide all-fiber connectivity in Finland by 2028, noted by Simply Wall St-positions it to capitalize on the region's 6.85% CAGR telecom market growth from 2025 to 2030. Partnerships like the one with Viaplay Group to enhance pay-TV offerings further solidify its market presence.

Financially, Telenor's debt-to-equity ratio of 119.5% is high but a marked improvement from 336.5% five years ago, according to the Simply Wall St review. Its EBIT of NOK 18.5 billion provides an interest coverage ratio of 5.8x, indicating manageable leverage. These metrics suggest Telenor is strengthening its balance sheet while pursuing growth.

Analyst Sentiment and Risks

Analysts are divided. Goldman Sachs raised its target price to NOK 195 (a 17% upside from the October 3 closing price of 164.90 NOK) with a "Buy" rating, according to MarketScreener consensus, while DNB maintained a "Sell" at NOK 140. The consensus price target of NOK 160 aligns with Telenor's current valuation, but the wide range (NOK 130–185) highlights uncertainty.

Key risks include execution delays in fiber projects and underperformance in Asian markets, where Telenor has faced challenges. Additionally, slower revenue growth (projected at 1.0% annually, below the European telecom industry's 2.2% forecast) could temper long-term optimism.

Conclusion: A Nuanced Outlook

Telenor's valuation surge reflects a mix of justified optimism and lingering risks. Its strategic investments in fiber and digital services, coupled with strong EBITDA growth, support a premium over peers like Telia. However, the stock's P/E and EV/EBITDA multiples are not as aggressive as Tele2's, suggesting the market is not over-romanticizing its prospects. For investors, Telenor represents a compelling case of value creation-provided its execution risks in fiber and Asia are mitigated. The coming quarters will test whether this balance holds.