Telia's Q4 2025: A Tale of Two Markets and the Path to 2027

Telia delivered a solid operational quarter, meeting its 2025 financial targets, but the profit picture was obscured by a significant non-cash charge and a strategic marketing push. The core story is one of concentrated strength in its best markets, which masked broader regional challenges.

Service revenue grew 2.1% like-for-like for the quarter, accelerating notably to 4.8% in Sweden. This momentum was driven by strong performance in Sweden and the Baltics, with the Swedish consumer business posting a record quarter. However, this growth was uneven. Finland reported a weak quarter with declines in service revenue and EBITDA, while Norway saw a partial offset from enterprise growth, though its consumer business faced headwinds.

Profitability was the key area of pressure. Adjusted EBITDA increased 3.7% like-for-like, supported by service revenue growth and lower operational expenses. Yet total EBITDA fell sharply to SEK 3.7 billion, a decline of nearly 44% from the prior year, due to a SEK 3.7 billion non-cash provision increase related to asset retirement obligations in Sweden and Finland. This provision, while not impacting cash flow, dramatically compressed the bottom line. Operating income turned negative at SEK -0.5 billion, and total net income fell to SEK -1.1 billion.

Free cash flow showed a significant improvement, reaching SEK 2.4 billion for the quarter. However, this was partly driven by a higher than usual working capital contribution, which is a one-time contributor to liquidity. The cash flow from operations also rose, but the increase in cash CAPEX related to spectrum spending provided a partial offset.

Assessing the quality of earnings against the 2025 outlook, the quarter confirms Telia's execution on its cost and capital discipline. The company delivered on its EBITDA and cash flow targets for the year, as noted in the CEO's comments. The strategic marketing spend in Norway, while pressuring near-term EBITDA, appears aimed at stabilizing a key market. The real test is whether the underlying service revenue momentum in Sweden and the Baltics can be sustained and expanded to lift the overall portfolio, particularly in Finland and Norway. For now, the earnings quality is mixed: operational performance is sound, but the profit line is distorted by a large, non-cash charge.

The Structural Drivers: Network, Portfolio, and Cost

Telia's path to its 2027 ambitions is being built on three interconnected pillars: a fortified network, a strategically reshaped portfolio, and relentless cost discipline. These are not just quarterly tactics but the long-term levers for sustainable value creation and market leadership.

The most tangible differentiator is its network. Telia's commitment to infrastructure has been formally recognized, as the company was named Sweden's best mobile network for the sixth consecutive year. This accolade, backed by a top score in an independent benchmark, is a direct result of continued investment. It translates into a powerful competitive moat, enhancing customer retention and providing a clear pathway to higher average revenue per user (ARPU). This network excellence is the foundation for the strong service revenue acceleration seen in Sweden and the Baltics, demonstrating how capital expenditure builds brand equity and commercial traction.

Parallel to this investment is a deliberate portfolio overhaul. Telia is actively streamlining its operations, both by acquiring strategic assets and divesting non-core ones. The company has secured regulatory approval for the Bredband2 acquisition from Sweden's Competition Authority, a move that strengthens its broadband footprint in a key market. At the same time, a clear timeline has been established for the Latvia divestment. This dual approach-adding scale in core markets while exiting underperforming ones-aims to sharpen focus, improve capital allocation, and deepen its trusted partner role. The recent broadband base acquisition in Finland further illustrates this bolt-on M&A strategy to consolidate market position.

Underpinning both the network and portfolio moves is a disciplined cost model. The company has demonstrated significant operational efficiency, with OPEX reduced by 4.1% year-to-date. This cost control is not a one-off; it is part of a broader simplified operating model aimed at improving speed and efficiency. The financial results reflect this, with adjusted EBITDA growth outpacing service revenue growth in the quarter. This discipline provides a crucial buffer against market volatility and funds the strategic investments needed for future growth.

Together, these drivers create a reinforcing cycle. Network investment attracts and retains customers, driving revenue. Portfolio moves concentrate resources on higher-growth areas, while cost discipline ensures profitability is maintained. The result is a company building a stronger, more focused balance sheet and a clearer path to its mid-term financial targets. The structural setup is now in place to convert operational momentum into sustained shareholder value.

Financial Health and Forward Guidance

Telia's financial health is robust, underpinned by a strong balance sheet and a clear commitment to shareholder returns. The company's leverage ratio remained stable at 1.93x, a figure supported by its impressive cash generation. For the first nine months of 2025, free cash flow reached SEK 9.6 billion, comfortably exceeding its full-year outlook. This liquidity provides a solid foundation for both strategic investment and capital return.

The dividend policy reinforces this financial strength. The company paid a dividend of SEK 0.50 per share last quarter, and the Board has proposed a full-year payout of SEK 2.05 per share for 2025. This dividend was well covered by free cash flow, demonstrating that the company's capital return commitment is sustainable and not reliant on one-time working capital benefits.

Looking ahead, the 2026 outlook provides a credible roadmap. The company reaffirms its mid-term ambitions, targeting service revenue growth of around 2% and adjusted EBITDA growth of around 3% for the year. Capital expenditure is expected to remain disciplined, with CAPEX excluding spectrum and leases below SEK 13 billion. The most critical metric, free cash flow, is projected at around SEK 9 billion. This forward view aligns with the company's stated goal of achieving at least SEK 10 billion in free cash flow by 2027, suggesting a steady ramp-up in cash generation.

The path to 2027 is focused on two key areas: increasing CAPEX efficiency and deepening its trusted partner role. The company has already shown it can deliver on its 2025 targets, and the 2026 plan confirms the same disciplined approach. The real test will be converting the operational momentum in Sweden and the Baltics into broader portfolio growth, particularly in Finland and Norway. For now, the financial setup is sound, with a strong balance sheet, a sustainable dividend, and a clear, achievable path to its long-term cash flow target.

Catalysts and Risks for 2026

The transition from a solid operational quarter to sustained value creation hinges on Telia executing its 2026 plan against a backdrop of clear catalysts and persistent risks. The company's strategic pivot is now in motion, but its success will be validated by specific milestones and market reactions.

The most immediate catalyst is the commercial launch of standalone 5G. As noted in the company's recent communications, the only thing I am missing is that our Swedish CSPs finally enable Standalone commercially for consumers. This is not a minor technical upgrade; it is a foundational step for unlocking new service revenue streams. Standalone 5G promises lower latency and higher capacity, which are essential for advanced enterprise services and new consumer applications. Its rollout will directly test the network's commercial payoff, converting the investment that earned Telia Sweden's best mobile network for the sixth consecutive year into tangible top-line growth and improved network economics.

The primary near-term risk, however, is the continued pressure on wholesale revenue. This segment contributed to soft EBITDA growth, particularly in Norway, where EBITDA development remained soft, driven by lower wholesale revenue and higher marketing spend. Wholesale revenue is a key lever for profitability in a competitive market, and its weakness requires a successful conversion of service revenue growth into higher-margin earnings. The company's ability to stabilize and grow its consumer and enterprise segments in Finland and Norway will be critical to offsetting this headwind and validating its cost discipline.

Execution on the 2026 plan will be the ultimate test. This includes the integration of the acquisition of sole control of Bredband2, which strengthens its broadband footprint, and the completion of the clear timeline established for the Latvia divestment. These portfolio moves are designed to sharpen focus and improve capital allocation. Their successful execution will demonstrate that Telia can deliver on its strategic pivot, moving beyond operational improvements to a more concentrated and efficient business model. The company has already shown it can deliver on its 2025 targets; the 2026 outlook, with its focus on increasingly trusted partner role and improved CAPEX efficiency, provides the roadmap.

The balance between these catalysts and risks is delicate. The standalone 5G launch offers a powerful growth catalyst, but its impact is contingent on market adoption and the successful monetization of new services. Meanwhile, the wholesale revenue pressure is a tangible drag that must be overcome by operational execution in underperforming markets. The portfolio transactions provide a structural solution, but their benefits are forward-looking. For now, the setup is one of promising momentum in core markets meeting persistent challenges in others. The coming year will determine whether Telia can leverage its network strength and strategic clarity to turn this tale of two markets into a story of one, consistently growing business.