Telia's Q3 Performance and Future Growth Potential: Assessing Long-Term Shareholder Value Amid In-Line Results and Evolving Market Dynamics

Telia Company's Q3 2025 results, released on October 23, reflect a blend of steady operational performance and strategic recalibration, positioning the Nordic telecom giant to navigate evolving market dynamics. Revenue for the quarter reached SEK 19.9 billion, a 1.1% like-for-like increase driven by service revenue growth in Sweden and the Baltics, according to the Telia interim report Jan–Sep 2025. Adjusted EBITDA rose 4.4% year-on-year, supported by cost discipline and higher service revenue. Free cash flow surged to SEK 2.9 billion, outpacing the SEK 1.4 billion recorded in the same period in 2024; the interim report also highlights management's revised 2025 outlook-raising free cash flow to SEK 8 billion and trimming CAPEX to SEK 13 billion-underlining a focus on balancing growth with financial prudence.

Strategic Reorientation and Market Positioning

Telia's strategic moves in Q3 underscore its commitment to long-term value creation. The completion of the TV and Media divestment to Schibsted Media and the proposed acquisition of Bredband2 AB for SEK 3 billion signal a sharpened focus on core telecom services. These transactions aim to strengthen Telia's consumer business in Sweden, where 5G coverage now exceeds 99% (as noted in Telia's investor update). Meanwhile, the company's decision to exit the Latvian market by 2026-through a planned sale of its stakes in Tet and LMT-reflects a rationalization of its footprint to prioritize higher-margin opportunities.

The Nordic and Baltic regions remain central to Telia's growth narrative. Denmark, Finland, and Sweden lead Europe in 5G availability, with Sweden's 99% coverage, according to the Telia financial outlook. Fiber expansion, particularly in Norway, is also gaining momentum, driven by government mandates for universal broadband access, according to a Norway telecom report. Telia's CAPEX reduction in Norway, which contributed to lower Q3 spending, suggests a recalibration of priorities amid regional challenges. Analysts note that the company's operational efficiency initiatives, including a decentralized operating model launched in December 2024, are critical to sustaining margins in a competitive market.

Financial Health and Shareholder Value

Telia's financial metrics present a mixed picture. While free cash flow growth and a leverage ratio of 2.09x (as referenced in the Norway telecom report) indicate improved liquidity, the company's dividend policy raises concerns. A 2025 payout ratio of 206.19%-distributing more in dividends than it earns-threatens sustainability, according to consensus estimates. The quarterly dividend of SEK 0.50 per share, paid in four instalments, aligns with Telia's commitment to shareholder returns but risks overleveraging. Conversely, debt management strategies, including a €1.5 billion reduction in net debt described in the investor update, and a share repurchase authorization reported by consensus estimates, demonstrate efforts to balance short-term rewards with long-term stability.

Analysts project Telia's earnings to grow at a 13% annualized rate, with return on equity expected to reach 16.2% in three years, per the investor update. These forecasts hinge on the company's ability to capitalize on 5G and fiber-driven demand, particularly in smart cities and IoT applications, according to a Swedish 5G guide. However, challenges persist in Norway, where declining mobile wholesale traffic has pressured service revenue (noted in the interim report), and in Lithuania, where growth, though robust, faces saturation risks.

Conclusion: Navigating Uncertainty with Strategic Agility

Telia's Q3 performance underscores its resilience in a maturing telecom sector. By aligning its capital allocation with high-growth opportunities-such as 5G expansion and digital inclusion initiatives-and exiting underperforming markets, the company is positioning itself to deliver sustainable shareholder value. Yet, the high payout ratio and regional headwinds necessitate cautious optimism. For investors, the key will be monitoring Telia's execution of its 2025 targets, particularly its ability to convert infrastructure investments into recurring revenue streams. As the Nordic telecom landscape evolves, Telia's agility in adapting to technological and regulatory shifts will remain pivotal to its long-term success.